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2016 Supreme(P&H) 2248
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Rajesh Bindal, Harinder Singh Sidhu, JJ.
Kaur Sain Spinners Ltd. - Petitioner
Versus
State of Punjab and others - Respondents
CWP No.7453 of 2003 (O&M)
Decided On : 10-11-2016
For the Petitioner: Mr. Sandeep Goyal
For the Respondents: Mr. Piyush Bansal
Government cannot claim immunity from the doctrine of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action.
Headnote:
INDUSTRIAL POLICY - PROMISSORY ESTOPPEL - SALES TAX EXEMPTION - NOTIFICATION - AMENDMENT - ELIGIBILITY - EFFECTIVE STEPS - UNIT COMMENCED PRODUCTION - CLAIM REJECTED - WRIT PETITION - DIRECTIONS.
Fact of the Case:
Petitioner incorporated a company to manufacture acrylic yarn. It purchased land, obtained industrial license, registered under Central and State Acts, obtained NOC from Pollution Control Board, applied for electric connection, placed orders for plant and machinery, and substantially completed construction. Petitioner sought clarification from General Manager, DIC, Ludhiana, who confirmed petitioner's eligibility for sales tax exemption. Petitioner placed orders for machinery and plant, and gave contract for construction of factory building. Petitioner commenced production. Government issued notifications amending eligibility criteria for sales tax exemption, and petitioner's claim was rejected.
Finding of the Court:
Petitioner had made substantial progress towards completion of the project before issuance of later notifications. Petitioner had irretrievably altered its position in pursuance of the promise of the Government and made substantial investment before issuance of the later notifications, they could not operate to its detriment and it could not be denied the promised benefit. Petitioner is entitled to the benefit of sales tax exemption as per the Industrial Policy 1996, Incentives Code, 1996 and the notification dated 30.4.2000 on the ground of promissory estoppel.
Issues: Whether petitioner is entitled to sales tax exemption as per the Industrial Policy 1996, Incentives Code, 1996 and the notification dated 30.4.2000?
Ratio Decidendi: Doctrine of promissory estoppel applies. Government cannot claim immunity from the doctrine of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. Government is required to place before the Court the entire material on account of which it claims to be exempt from liability. Mere claim of change of policy would not be sufficient to exonerate the Government from liability.
Final Decision: Petition allowed. Petitioner is entitled to the benefit of sales tax exemption as per the Industrial Policy 1996, Incentives Code, 1996 and the notification dated 30.4.2000. Letters rejecting petitioner's claim for sales tax exemption are quashed. Respondents are directed to re-consider petitioner's claim for grant of sales tax exemption.
Harinder Singh Sidhu, J.
1. The petition has been filed praying for directions that notifications dated 17.06.2002 and 12.09.2002 (Annexures P-17 and P-20) be treated as inoperative qua the petitioner-Company on the doctrine of promissory estoppel and that the respondent –State of Punjab be restrained from going back on its promise of providing sales-tax exemption to the petitioner Company as per the Industrial Policy, 1996 and subsequent notifications.
2. The petitioner has also prayed for quashing the letters dated 24.09.2002 (Annexure P-19) and 04.12.2002 (Annexure P-21), whereby the petitioner company has been informed that it is ineligible for grant of sales tax exemption.
3. The petitioner is a limited company incorporated with the objective to carry on business as manufacturer, processor, dealer, distributor, agent, buyer, seller, importer and exporter of hosiery goods, knitting yarn and fabrics of various kinds.
4. The Government of Punjab, Department of Industries had notified a Package of Incentives-1992 on 28.09.1992 for attracting fresh investment to boost growth of industries in the State. As these incentives did not yield the desired results, the State on 20.03.1996 notified 'New Industrial Policy, 1996' (for short “Industrial Policy, 1996”) offering fresh incentives to the industries. To implement the scheme of incentives set out in the 'Industrial Policy 1996’, the State Government on 01.06.1996 notified rules known as 'Punjab Industrial Incentives Code under the Industrial Policy 1996' (for short “Incentives Code, 1996”). The eligibility, quantum of entitlement and procedure for grant of sales-tax exemption/deferment is prescribed in this Code as under:-
“3. Commencement and applicability
3.1 These rules shall come into force with effect from 1st April, 1996.
3.2 These rules shall be applicable to such of the units which come into production for the first time, on or after 1st April, 1996 or undertake expansion/modernisation after 1.4.1996.
5. Eligibility for incentives
The Incentives shall be granted to the units set up in ‘A’ and ‘B’ category area, provided that no incentives shall be allowed in ‘B’ category areas to the industrial units that are included in Annexure-II & in ‘A’ category areas to the Industrial Units that are included in Annexure-III.
5.1 Self financed units that are set up without mobilising funds from the Capital market through issue of shares, debentures, bonds, etc. shall not be eligible for any incentive.
However, self financed units which only avail of working capital limits from a scheduled bank shall be eligible for incentives only if their project report is appraised by the bank and the fixed capital investment made by them is certified by it.
5.2 Those units which do not have their own land and building, incentive would be allowed, if such units have lease/rent deed for land/building occupied by them for a period not less than 10 years.
6.3 Interest Subsidy or Sales Tax Exemption or Sales Tax Deferment:
Subject to the provisions of rule 5, a unit shall opt in form III(i) for availing either interest subsidy or Sales tax Exemption or Sales Tax deferment. The option shall be submitted to the District Officer, within six months of commencement of commercial production.
I. Interest Subsidy
x x x
II. Exemption from Sales Tax or Deferment of Sales Tax:
a. Eligibility:
Subject to provision of rule 5, exemption/deferment from Sales-Tax shall be admissible to an industrial unit, registered as a dealer under Punjab General Sales Tax/Central Sales Tax Act, provided the unit has opted to avail Sales Tax exemption or deferment.
Existing Small Scale Unit undergoing expansion in terms of rule 2.5, shall also be subject to provision of rule 5, eligible for Sales Tax exemption or deferment.:
b. Quantum of entitlement:
For calculating the entitlement of the unit to Sales Tax exemption/deferment, Punjab/Sale
