The doctrine of promissory estoppel prevents the State from withdrawing tax exemptions promised under the Industrial Policy, 2004, even after the de-notification of backward areas.

JUDGMENT :

JYOTSNA REWAL DUA, J.

1. All these petitions raise common questions of law and facts, hence are being taken up together for decision. For convenience, documents from CWP No. 9131 of 2013 are being referred to hereinafter.

The core question around which all these petitions are centered, is whether tax incentives granted to the petitioner-industrial units under specific Rules and statutory Notifications framed & issued pursuant to the State Industrial Policy, 2004, could be withdrawn during the currency of the exemption period promised under the Industrial Policy/ Rules/Notifications.

2. Brief reference to facts:

(i) The respondent-State notified Industrial Policy, 2004 on 30.12.2004 (Annexure P-1). The policy aimed to attract entrepreneurs to set up their projects, inter-alia, in backward areas of the State and in return, promised off-setting to some extent capital cost for setting up the units in remote and difficult areas due to locational disadvantages in form of tax concessions.

(i)(a) Clauses 8.1, 8.3 and 8.4 pertaining to ‘Package of Incentives, Concessions and Facilities for Industries under the 2004 Policy’ being relevant, are extracted hereinafter:

“8.1 With a view to encourage investment in our State and to offset the locational disadvantages the State Government has been implementing various Incentive Schemes in tandem with the changing needs and aspirations of Industry. Over a period of time it has been realized that fiscal incentives have invariably led to the creation of inefficient and uncompetitive industry, which has not been able to sustain itself in the long run. In addition, with changes and modifications being introduced in the taxation policy and reforms initiatives like introduction of VAT, incentives to industry need to be looked at afresh. Thus it is imperative that we move towards a policy of gradual phasing out of subsidies. Such initiatives coupled with an increased stress on the provision of quality infrastructure shall help create a conducive environment for industrial growth and attract both foreign and domestic investments.

8.3 A new set of Rules to govern incentives, concessions and facilities will be announced as a part of this Policy which will remain operative till the next Rules governing the incentives, concessions and facilities are announced or these rules amended. It is a conscious attempt of the State Government to phase out all tax-based and offer fiscal incentives (deferrals/exemptions etc.) over a period of time keeping in tune with the changing economic scenario of the country and ground realities. While doing so, efforts will, however, be made to enable existing units to avail of the incentives they are already availing for the periods they are entitled to.

8.4 In order to assure local industry with adequate back-up of Government in international markets and to encourage setting up of innovative industry based on local skills, local raw materials and employing local people, the State Government would give fiscal incentives to Companies set up and having their registered offices in H.P. for patenting their inventions and its commercialization, especially for activities such as drafting the patent application, filing the patent application In India, filing the patent application in Patent Tribunals, prosecution of the patent application outside India, maintenance fee of the granted patent application, and obtaining non-infringement opinion. Fiscal Incentive by the State Government would also be provided to such companies so as to meet with the fees charged by the private lawyers/law firms located within the country having a reference from any Ministry/Deptt. of Government of India of having successfully assisted such Companies in the country.”

(i)(b) Clause 18 of the 2004 Policy pertaining to State Taxes runs as under:

“18 State Taxes:

“18.1. Introduction of VAT at the earliest to