Patna High Court
BiharversusM/S Essell Lubricants and Chemicals Private Limited
- Decided
- Disposal
- DISMISSED
Holding
The single judge’s order directing reimbursement of 80% VAT is upheld; the State’s attempt to curtail the benefit is barred by promissory estoppel.
Summary
The State of Bihar appealed against a single judge’s order directing it to reimburse 80% of VAT paid by M/S Essell Lubricants for FY 2012-13 to 2014-15 under the 2006 Industrial Incentive Policy. The company had received an eligibility certificate and 80% reimbursement for earlier years, but the State later limited reimbursement to 25% citing the 2011 policy. The court examined whether the State could withdraw the benefit after granting it and whether the single judge’s order contained any legal error. Relying on the principle of promissory estoppel and legitimate expectation, the court held that the State’s earlier assurance could not be withdrawn. Consequently, the appeal was dismissed and the original order upheld.
Issues considered
- Whether the State can deny the 80% VAT reimbursement granted under the 2006 Industrial Incentive Policy by invoking the later 2011 policy.
- Whether the single judge’s order suffers from any error, illegality or perversity warranting interference.
- Whether the doctrine of promissory estoppel/legitimate expectation applies to enforce the reimbursement.
Subjects
- Industrial Incentive Policy
- VAT reimbursement
- Promissory estoppel
- Legitimate expectation
- Intra-court appeal
- Industrial incentives
Judgment
IN THE HIGH COURT OF JUDICATURE AT PATNA
Letters Patent Appeal No.576 of 2024
In
Civil Writ Jurisdiction Case No.10038 of 2020
======================================================
1. The State of Bihar through the Chief Secretary, Government of Bihar, Patna.
2. The Principal Secretary, Department of Industries, Government of Bihar,
Patna.
3. The Commissioner-cum-Secretary, Department of State Taxes, Government
of Bihar, Patna.
4. The Director, Industries, Department of Industry, Government of Bihar,
Patna.
5. The Director (Technical Development), Department of Industry,
Government of Bihar, Patna.
6. The General Manager, District Industries Centre, Aurangabad.
... ... Appellant/s
Versus
M/S Essell Lubricants and Chemicals Private Limited having its office at
Eyhari Road Farm, Aurangabad- 8204101, through its Managing Director,
Laxmi Prasad, aged about-57 years, S/o- Late Gupteshwar Ram, resident of
village- Nawadih Road, near Kali Club, P.S.- Aurangabad, District-
Aurangabad.
... ... Respondent/s
======================================================
Appearance :
For the Appellant/s : Mr. Shankar Kumar, AC to AAG-7
For the Respondent/s : Mr. Abhishek Kumar, Advocate
======================================================
CORAM: HONOURABLE MR. JUSTICE SUDHIR SINGH
and
HONOURABLE MR. JUSTICE RAJESH KUMAR VERMA
ORAL ORDER
(Per: HONOURABLE MR. JUSTICE SUDHIR SINGH)
Patna High Court L.P.A No.576 of 2024(5) dt.26-02-2026
2/8
5 26-02-2026 Heard the parties.
2. The present intra Court appeal is being directed
against the judgment/order dated 22.03.2024 and modified order
dated 16.05.2024 passed in C.W.J.C. No. 10038/2020, passed by
Hon’ble Single Judge, whereby and whereunder the appellants
(writ respondents) were directed to reimburse the 80% of the
VAT amount paid by the respondent (writ petitioner/company)
for the period 2012-13, 2013-14 and 2014-15 after adjusting the
amount which has already been paid.
3. The brief facts leading to filing of the present intra
court appeal are that the Bihar government published 2006
Policy for increasing the industrial growth of the State and to
revive the sick and closed unit by creating favourable
environment to attract domestic and foreign investment. As per
Clause 2 (vi) read with Clause 10 of the Policy, new units which
commence the commercial production within five years from
01.04.2006 were given the incentive of 80% of reimbursement
against the admitted VAT amount deposited by the unit in the
account of the State Government. This facility was made
available for a period of ten years. The petitioner, on the basis of
promise made under the Policy, setup a manufacturing unit of
refined petroleum products for which production commenced on
Patna High Court L.P.A No.576 of 2024(5) dt.26-02-2026
3/8
01.07.2008. Vide letter no. 546, dated 31.07.2010, the petitioner
was issued eligibility certificate under the 2006 Policy by the
General Manager, District Industrial Centre, Aurangabad,
certifying that the petitioner/company is eligible to receive
reimbursement of 80% of VAT paid under the 2006 Policy.
4. The learned Single Judge passed the following
order after hearing the parties and upon consideration of the
materials available on record:
“15. In the present case, under 2006
Policy, the unequivocal promise made by the State
was that the new industrial unit which commences
production within five years from the cut off date
fixed under the Policy i.e.. 01.04.2006, shall be
entitled for VAT reimbursement to the extent of 80%.
In response to the Policy, the petitioner/unit
established an industrial unit for manufacture of
refined petroleum products (lubricants) and
admittedly, commenced production within two years
from the date of coming into force the Industrial
Policy i.e., of 01.07.2008. The State Government
granted eligibility certificate under the 2006 Policy
to the petitioner/company certifying that the
petitioner/unit is eligible to receive reimbursement
of 80% of VAT paid under the Industrial Policy,
2006. The Policy was acted upon and the
petitioner/unit based on the promise, made under
the policy, altered/changed its position by
establishing the manufacturing unit. It invested a lot
of amount also on the basis of promise made in the
Policy. The respondent/State reimbursed 80% of the
Patna High Court L.P.A No.576 of 2024(5) dt.26-02-2026
4/8
VAT paid by the unit for the year 2010-11 and 2011-
12, thereafter. for the financial year 2012-13, 2013-
14 and 2014- 15. it has been denied on the basis of
subsequent Policy of 2011 that the unit is only
entitled for 25% of reimbursement and not 80%. The
decision taken by the Authority in letter no. 649
dated 27.08.2021, which has been challenged by
way of I.A., is arbitrary and whimsical decision.
lacking application of mind inasmuch as the
respondent/state itself granted eligibility certificate
to the petitioner/unit for grant of
incentive/reimbursement of VAT amount and in fact
reimbursed the amount also to the extent of 80% for
two financial years i.e., 2010-11 and 2011-12 and
25% for another financial years upto 2014-15.
Therefore, the plea that the petitioner/unit was not
having the single window clearance by
S.I.P.B./District Committee. is preposterous and is
not acceptable. accordingly, letter No. 649, dated
27.08.2001, is quashed.
16. Considering the aforesaid
submissions of the parties and the law laid down by
the Apex Court. in my opinion, the State, having
made a promise under the Industrial Policy, 2006, to
extend the incentive benefits to the industrial unit
for a period of ten years and the petitioner/company
having acted on the promise made investment,
fulfilled the criteria for grant of incentive, the
respondent/State cannot deny the benefits arising
out of 2006 Policy on the principles of promissory
estoppel/legitimate expectation. accordingly, I direct
respondent/authorities to reimburse the 80% of the
VAT amount paid by the petitioner/company for the
period 2012- 13. 2013-14 and 2014-15 alter
adjusting the amount which has already been paid
Patna High Court L.P.A No.576 of 2024(5) dt.26-02-2026
5/8
by the respondents to the petitioner. The amount
towards incentive arrived at for the aforesaid period
must be paid by the respondents within a period of
two months from the date of receipt/ production of a
copy of this order.”
5. Learned counsel for the appellants submits that
learned Single Judge has not appreciated the fact that earlier the
Commercial Taxes Department used to directly settle the
reimbursement claim of the units under the 2006 and 2011
policy but from FY 2016-17, this process was stopped and the
system of online application was introduced. He further submits
that the writ petitioner (herein respondent) has applied on online
portal on 21.03.2018 and during such processing the unit was
recommended for VAT reimbursement as presently working unit
in terms of the provisions contained under Clause 3 (iii) of the
Industrial Incentive Policy, 2011. He further points out that the
writ petitioner (respondent herein) was not entitled for 80% of
VAT/ Entry Tax Reimbursement as it has failed to take clearance
from District Level Single Window Clearance Committee.
6. Learned counsel for respondent submits that after
the coming into force of the Policy of 2006, the respondent–
company set up a manufacturing unit for refined petroleum and,
in accordance with the said policy, commenced commercial
production on 01.07.2008, i.e., within five years from the cut-off
Patna High Court L.P.A No.576 of 2024(5) dt.26-02-2026
6/8
date of 01.04.2006. It is submitted that the respondent’s unit was
fully covered under the 2006 Policy and, as such, was eligible
for reimbursement of 80% of the VAT.
7. The limited issue that arises for consideration is
whether, in the facts and circumstances of the present case, the
impugned order passed by the learned Single Judge suffers from
any legal infirmity warranting interference by this Court in
exercise of its intra court appellate jurisdiction.
8. Upon perusal of the materials available on record, it
is apparent that under the Industrial Policy of 2006, the State
had clearly assured that any new industrial unit commencing
production within five years from the cut-off date of 01.04.2006
would be entitled to reimbursement of VAT to the extent of
80%. Acting on the said assurance, the respondent established
an industrial unit for the manufacture of refined petroleum
products (lubricants) and commenced commercial production on
01.07.2008, which is well within the period stipulated under the
Policy.
9. Further, it is not in dispute that the State
Government granted an eligibility certificate to the petitioner
under the 2006 Policy, certifying that the petitioner’s unit was
entitled to reimbursement of 80% of the VAT. Moreover, it is
Patna High Court L.P.A No.576 of 2024(5) dt.26-02-2026
7/8
apparent that the appellant reimbursed VAT at the rate of 80%
for the financial years 2010-11 and 2011-12. However, for the
subsequent financial years 2012-13, 2013-14, and 2014-15, the
authorities restricted the reimbursement to 25% by applying the
subsequent Industrial Policy of 2011.
10. In view of the submissions advanced and the
discussion made hereinabove, having once granted an eligibility
certificate under the Industrial Policy of 2006 and, in
furtherance thereof, extended the benefit of reimbursement of
VAT at the rate of 80% for two financial years, the appellant–
State could not have curtailed or withdrawn such benefit by
placing reliance on a subsequent policy. The entitlement of the
respondent, having been duly recognized and acted upon by the
State itself, could not thereafter be denied or restricted, as such
an action would run contrary to the assurances held out under
the 2006 Policy.
11. We, therefore, find that the learned Single Judge
has correctly appreciated the factual matrix as well as the
applicable legal position and there is no error, illegality, or
perversity warranting interference by this Court.
12. Accordingly, the present intra court appeal stands
dismissed.
Patna High Court L.P.A No.576 of 2024(5) dt.26-02-2026
8/8
13. Pending application(s), if any, shall also stand
disposed of.
(Sudhir Singh, J)
(Rajesh Kumar Verma, J)
Sachin/-
U
Checking your session…