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IN THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
SANJAY KUMAR MEDHI, J.
M/s Ladi Steel Industries Pvt. LTD. and Anr – Appellants
Versus
State Of Assam And Ors – Respondents
WP(C) 4643 of 2014
Decided on : 11-01-2024
Industrial Policy - Denial of Incentives - Assam Industries (Tax Exemption of Pipeline Units) Order, 2005, MSME Act, 2006 - 2008 Industrial Policy, Assam Industries (Tax Exemption) Scheme, 2009 - Chapter 12, Clause 12.6 - Operational Guidelines - Fixed Capital Investment - State Level Committee Meeting - Guidelines vs Policy - Refund Notice - Eligibility Certificate
Fact of the Case:
The petitioners challenged the denial of incentives under the 2008 Industrial Policy, leading to a demand for refund. The petitioners claimed to be entitled to tax exemption and incentives under the Policy, but were categorized incorrectly as a medium scale industry. After a rectification exercise, the petitioners were issued a refund notice for an alleged excess amount.
Finding of the Court:
The court found that the assessment and subsequent denial of incentives were unjustified, as the initial Eligibility Certificate had assessed the incentives amount under a specific head. The court held that the State Level Committee's recommendation to modify the Operational Guidelines did not invalidate the existing guidelines, and the petitioners were entitled to the incentives under the disputed head.
Issues: The issues involved the correct categorization of the petitioners, the validity of the denial of incentives, and the interplay between the Policy and Operational Guidelines.
Ratio Decidendi: The court emphasized that the Operational Guidelines were meant to supplement the Policy and were binding until modified by the competent authority. The court also highlighted that the State Level Committee's recommendation did not nullify the existing guidelines, and the petitioners were entitled to the incentives as per the initial assessment.
Final Decision: The court set aside the refund notice and held the petitioners entitled to the incentives under the disputed head, making the interim order restraining recovery absolute. The writ petition was allowed with no order as to cost.
JUDGMENT :
Heard Ms. M. Hazarika, learned Senior Counsel for the petitioners. Also heard Shri A. Kalita, learned Standing Counsel, Industries & Commerce Department. Shri B. Gogoi, learned Standing Counsel, Finance (Taxation) Department as well as Shri S. Das, learned counsel for the AIDC are also present and heard.
2. The grievance raised in this petition is with regard to denial of incentives under the Industrial Policy of 2008 which culminated in the issuance of a communication dated 22.08.2014 whereby the petitioners has been directed to refund an amount of Rs.13,07,045/- by terming the same to be excess by the Department. The grounds of challenge raised in this petition, amongst others, are that the impugned action is unreasonable, inconsistent and is in violation of the Policy and guidelines holding the field.
3. Before going to the issue which has arisen for adjudication, the basic facts pertaining to this case may be narrated briefly.
4. The Government of Assam had announced an Industrial Policy in the year 2008 to give certain incentives to new as well as existing units which were undertaking substantial expansion. As per the said Policy, such units would be entitled to Sales Tax exemption of 100%. The petitioner no. 1 which is a Private Limited Company claims to have an industry pertaining to manufacture of M.S. Rod and also claims to be a Small Scale Industry. According to the petitioners, since the petitioner no. 1 fulfills all the eligibility criteria, had submitted and they applied for such exemption and incentives. After examination of the credentials and the documents, an Eligibility Certificate was issued on 12.07.2010 for a total amount of Rs. 452.16 lakhs which included an amount of Rs.63,52,117/- being the component under Electricity Installation other than drawal of power line. Since the aforesaid assessment was done by construing the petitioner no. 1 not as an assessee, the petitioner no. 1 had submitted representation for treating the same as an SSI unit and not as a Medium Scale Unit.
5. With regard to the said issue, the petitioners had earlier approached this Court by filing a writ petition WP(C)/5421/2013. This Court vide order dated 19.02.2014, after recording the submissions and on consent of the rival counsel had directed the respondents to do a rectification exercise. For ready reference, the relevant part of the order dated 19.02.2014 is extracted herein below:
The petitioner is an Assam based industry and is eligible for incentives under the State’s Industrial Policy, 2008 and is entitled to tax exemption under the Assam Industries (Tax Exemption of Pipeline Units) Order, 2005. However in the eligibility certificate issued to the industry, they were categorized as medium scale industry.
Ms. M. Hazarika, the learned senior counsel submits that after the Micro, Small and Medium Enterprise Development Act, 2006 (hereinafter referred to as ‘the MSME Act’) was enacted to facilitate promotion and development of small industries, under the new definition, a unit will fall under the category of small enterprise where the investment for the plant and machineries is more than 25 lacs but does not exceed Rs. 5 crore. The senior counsel projects that the total investment of the petitioner in plant and machineries is about Rs. 4,22,43,021/- and accordingly they should be categorized as a small enterprise instead of a medium enterprise.
Mr. M. Phukan, learned counsel appearing for the Industries Department and the AIDC refers to the counter affidavit filed by the Dy. General Manager (Tech), AIDC on 8.1.2014 to project that the plea for rectification of categorization made by the petitioner from medium to small enterprise under the MSME Act, 2006 is in process and the eligibility certificate of the petitioner unit is expected to be rectified with new categorization for the petitioner unit.
In view of the above stand of the concerned respondents and as agreed to by the rival counsel, the case is disposed of
The court established the binding nature of Operational Guidelines as supplements to the Policy, emphasizing that guidelines remain effective until modified by the competent authority.
The State is bound by its promises under the Industrial Policy, and failure to issue enabling notifications for incentives constitutes arbitrary action, invoking the doctrine of promissory estoppel.
The government cannot retroactively change subsidy claims based on later communications that deviate from previously established entitlements, respecting the doctrines of promissory estoppel and legi....
Arbitrary State - State is bound to act fairly, in a transparent manner in its action. This is an elementary requirement of the guarantee against arbitrary state action which Article 14 of the Consti....
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