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State cannot deny SEZ unit stamp duty exemption on pre-Ordinance lease:
Division Bench upholds Single Judge's , ruling that earlier SEZ policy and entitle investor to even if the lease deed predates the 2004 Ordinance.
The has dismissed an appeal by the State Government, affirming that – a unit in a Special Economic Zone – cannot be denied and merely because its lease deed was executed on , before the came into force on .
A Division Bench comprising Chief Justice Sunita Agarwal and Justice D.N. Ray held that the State's earlier policy dated , which promised complete exemption from such duties, created a that could not be defeated by a narrow temporal reading of the Ordinance.
Background: Lease before Ordinance, promise before lease
Sahajanand Technologies had obtained a lease of land for its SEZ unit on and paid stamp duty and . Later, the was promulgated, providing under for exemption of all taxes, cess, duties, including stamp duty and on for approved SEZ units.
The company approached the High Court seeking a refund, arguing that the State's SEZ policy – announced on by the – had already held out such exemptions, and that the Ordinance merely gave statutory shape to that promise. The Single Judge allowed the in , directing the State to refund the amounts paid.
State's contention: Strict date of Ordinance governs
The State, represented by Assistant Government Pleader , contended that the Ordinance came into force only on and that its could not apply to a lease executed before that date. It also argued that a lease did not constitute a "" within the meaning of the Ordinance, and that doctrines like could not override statutory provisions.
Court's reasoning: Transfer by lease, and
Rejecting the State's narrow interpretation, the Bench noted that a lease under is a transfer of a right to enjoy property, and thus amounts to a . The court observed:
"The does not necessarily mean that it should be by way of sell only and such a transfer could be by other mode including the lease of agreement, by which, the interest in the land is transferred for the purpose of enjoyment for a duration."
On the timing issue, the Division Bench adopted the Single Judge's reasoning that the policy of had already held out the promise of fiscal incentives, and investors acted on that promise. The court noted that a letter dated from the SEZ authorities confirmed that the policy decision was taken on , and the Ordinance merely formalised it.
"Looking to the intention and promise of the Government which has led to establishment of Special Economic Zone and the investment in the SEZ area, it was opined that merely because a policy framed by the Government culminated into an Ordinance in the year 2004, that by itself cannot be a ground to deny the benefits under the Ordinance to the investors like the petitioners."
The court further highlighted that denying the benefit based on a strict cut-off would create invidious discrimination:
"If we accept the contentions of the learned counsel for the appellant about the strict implementation of the date for grant of exemption being the date of promulgation of the ordinance, it would result in a between two sets of persons who had proceeded to establish their units in a Special Economic Zone even a day prior to 10.02.2004 and those who executed deeds on or after 10.02.2004."
Decision: Appeal dismissed, refund within six weeks
Finding no error in the Single Judge's order, the Division Bench dismissed the State's appeal and directed that the refund of stamp duty and be processed and paid within six weeks. The judgment reinforces the principle that government promises made through policy documents – especially those aimed at boosting industrial investment – cannot be withdrawn arbitrarily once investors have acted upon them.
