Holding

No definite promise was made and the State may lawfully modify or withdraw the sales‑tax exemption; promissory estoppel does not apply, and the appeal is dismissed.

Summary

The appellants, manufacturers of edible oil, set up solvent extraction plants in Gujarat and claimed a five‑year sales‑tax exemption under a Notification dated 11 November 1970, relying on that Notification, a press note and statements by the Chief Minister and Finance Minister. The State later issued a Notification on 17 July 1971 withdrawing the exemption for such industries. The appellants argued that they had changed their position to their detriment and that the doctrine of promissory estoppel barred the State from withdrawing the benefit. The Supreme Court held that the earlier Notification contained no definite promise, that the State is free to modify or withdraw fiscal incentives as part of its industrial policy, and that the appellants failed to establish the factual basis for promissory estoppel. Consequently, the appeals were dismissed without any order as to costs.

Issues considered

The applicability of the doctrine of promissory estoppel to a fiscal exemption granted by a government notification.
Whether the State's subsequent notification withdrawing the sales‑tax exemption is valid under the Gujarat Sales Tax Act.
Whether the appellants were entitled to the exemption based on alleged assurances in a press note and legislative statements.
Whether the government may modify or withdraw fiscal benefits as part of its industrial policy.

Legislation cited

Gujarat Sales Tax Act, 1969s. 49(2), s. 86
Gujarat Sales Tax Rules, 1970s. Rule 42-A

Subjects

sales tax exemptionpromissory estoppelfiscal legislationgovernment notificationindustrial policywithdrawal of benefitsGujarat

Judgment

(
A ARVIND INDUSTRIES AND ORS.
v.
THE STATE OF GUJARAT AND ORS.

AUGUST 23, 1995
B
fA.M. AHMADI, CJ, SUHAS C. SEN AND
K. S. PARIPOORNAN, JJ.]

Gujarat Sales Tax Act, 1969: Sections 49(2) and 86.

c Gujarat Sales Tax Rules, 1970: Rule 42-A.

Sale Tax-Exemption to new i11dust1ies-Notification regarding-Claim
of benefit by assessee-new i11dust0>-Held not available on facts-Held
govemment is entitled to grant e.xemption--But can withdraw or modify fiscal
D benefits from time to time-Held case of promiss01y estoppel was not made
out by assessee.

The appellant established a solvant extraction plant at Junagadh
and claims benefit of exemption from sales tax provided under a Notifica-
tion dated 11th November, 1970 issued by the respondent- State. Under
E this Notification a new industry which was commissioned at any time
between 1st April, 1970 to 31st March, 1975 was entitled to the benefit of
sales tax exemption for a period of five years from the date of commission-
ing of the industry. The assessee was also to obtain an eligibility certificate
from the commissioner of Industries to the effect that the industry has
F been commissioned in the area beyond prescribed municipal limits. The
appellant states that by establishing the plant it had changed its position
to its detriment by relying not only on the said notification but also on the
strength of assurance held out by the Government in a press statement
and the speeches made by the Chief Minister and the Finance Minister on
G the floor by the house. Therefore it was entitled to the benefit of exemption
and the Government was estopped from withdrawing the benefit as has
been done by a subsequent .notification dated 17th July, 1971. In the
connected appeal also, which involves similar facts, the contention of
promissory estoppel was raised. 1

H Dismissing the appeals, this Court
16
ARVIND INDS. v. STATE 17

• HELD : 1. The Government is entitled to grant exemption to in- A
dustries having regard to the industrial policy of the Government. It is
equally free to modify its industrial policy and grant, withdraw or modify
fiscal benefits from time to time. There is nothing in the notification dated
11.11.1970 by which any assurance was held out to any industry. This° was
an usual Government notification relating to purchase and sales tax,
B
granting reliefs to certain industries on fulfilment of the conditions laid
down in the notification. [20-F-G]

2. The appellant has not been able to show that some definite
promise was made by or on behalf of the Government and the appellant
had acted upon that promise to its detriment and thereafter the changes C
effected by the Notification date 17th July, 1971 have caused great
prejudice to the appellant. Therefore, it is not necessary to go into the
question of applicability of the doctrine of promissory estoppel in the field
of fiscal legislation. [21-F -G]

3. The date of commencement of appellant's industry, according to D
., the eligibility certificate obtained by the appellant from the Commissioner
of Industries, is 3rd December, 1970. It is difficult to believe that the
appellant, after the exemption Notification dated 11th November, 1970 was
issued and on the basis of it, set up an oil extraction plant which com-
. menced production with in three weeks' time on 3rd December 1970. No E
particulars have been given as to when the land was purchased, or when
the plant and machinery for the industry were procured. [20-D-E]

4. In the connected appeal the appellant had stated that on 31st
August, 1970, it had set up the factory premises. This was long before the
' exemption Notification dated 11th November, 1970. However, no dates F
have been given for the purchase of machinery and spare-parts. But it has
been stated that the production in the factory started from 31st December,
1970. Thus having regard to the facts of the case and also nature of the
two Notifications issued by the Government dated 11th November, 1970
and 17th July, 1971, the factual basis for a case of promissory estoppel has G
not been made out by the appellant. [22-B-D]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 951 of
1976.

From the Judgment and Order dated 24/25.6.76 of the Gujarat High H
18 SUPREME COURT REPORTS [1995] SUPP. 3 S.C.R.

A Court in S.C.A. No. 468 of 1973.
AND

Civil Appeal No. 1011 of 1977.

B From the Judgment and Order dated 9.7.76 of the Gujarat High
Court in S.C. Application No. 1515 of 1971.

B.K. Mehta and S.C. Patel for the Appellant in C.A. No. 951/76.

B.K. Mehta and Vimal Dave for the Appellant in C.A. No. 1011/77.
c
P.S. Poti, Ms. Hemantika Wahi and Ms. S. Hazarika for the Respon-
dent.

The Judgment of the Court was delivered by

D SEN, J_. Civil Appeal No. 951of1976.

The appellants are manufactures of edible oil and have their own
solvent extraction plants at Junagadh. The case of the appellant is that on
or about September 9, 1969, a press not was issued by the State Govern-
E ment that New Industries will be granted exempted from Sales Tax for a
_Period of five years from the date of commencement of production. The
then Chief Minister as well as the Finance Minister of the State Govern-
ment of Gujarat also made statements on March 3, 1970 on the floor of
the Legislative Assembly that New Industries will be granted exemption
from Sales Tax for a period of five years. The press note has not been
F annexed to the petition. Copies of the alleged statements made by the Chief
Minister and the Finance Minister in the Legislative Assembly have also
not been produced in court.

However, a copy of the Notification dated April 29, 1970, issued
under Section 49(2) of the Gujarat Sales Tax Act, 1969, has been included
G in the paper-book. This Notification contains a recital that the Government
of Gujarat is satisfied that circumstances exist which render it necessary to
take immediate action to amend the Gujarat Sales Tax Rules, 1970 and to
dispense with the previous publication thereof. This Notification does not
make any reference to any previous press not or assurance given by
H anybody on benefit of the Government. It merely provides that in exercise
ARVINDINDS. v. STATE(SEl",J.] 19

of the powers conferred by Section 86 of the Gujarat Sales Tax Act, 1969, A
the rules were being framed to amend the Gujarat Sales Tax Rules, 1970.
Rule 42A was introduced in the Gujarat Sales Tax Rules, 1970, whereby
on fulfilment of certain conditions, a New Industry was granted drawback,
set off or refund of the whole or any part of the tax in respect of the
purchase of raw materials, processing materials and machinery or packing
B
materials used in manufacture of goods for sale. Certain conditions were
laid down which had to be fulfilled before a New Industry could avail of
this benefit of the amended Rule 42A. 'New Industry' was defined to mean
and include an industry which has been commissioned at any time during
the period from 1st April, 1970 to 31st March, 1975. One of the conditions
laid down in the Notification was that the assessee had to obtain an c
eligibility certificate from the Commissioner of Industries, Gujarat State,
to the effect that the new industry had been commissioned in an area
beyond 24 kilometres from the municipal limits of cities of Ahmedabad and
Baroda and 16 kilometres from the municipal limits of Surat, Bhavnagar,
Rajkot and Jamnagar. A new industry would enjoy the benefit of this D
notification for a period of five years from the date of commissioning of
the industry as stated in the eligibility certificate.

On 11th November, 1970, a further notification was issued amending
the earlier notification dated 29th April, 1970. It was specifically provided
that 'New Industry' will not include industries engaged in, inter alia : E
(12) decoraticating expelling, crushing, roasting, paching, frying of
oil seeds and colouring decolouring, scenting of oil;

(13) solvent extraction of oil from oil-seeds and oil-cakes.
F
The contention made on behalf of the appellants is that the solvent
extraction plant at Junagadh was set up by the appellant on the strength
of assurance made out by the Government in the press statement, the
speeches made by the Chief Minister and the Finance Minister on the floor
of the Legislative Assembly, and also the Notification issued on 11.11.1970. G
The appellant would not have set up this industry at Junagadh but for the
aforesaid assurances given by the Government. It is not open to the
Government now to withdraw the benefits of this Notification by sub-
sequent Notification issued on 17.7.1971. Since the appellant had changed
his position to his detriment on the strength of the earlier assurance held
out by the Government, the appellant is entitled to continue to enjoy the H
20 SUPREME COURT REPORTS [1995) SUPP. 3 S.C.R.

A benefits given by Notification dated 11th November, 1970 for a period of .,.
five years from the date of commissioning of its plant. The Government
was estopped from withdrawing the benefits by removing the appellant
from the list of eligible industries by the subsequent Notification dated 17th
July, 1971.
B Elaborate arguments were advanced as to the scope and effect of the
doctrine of promissory estoppel and under what circumstances could this
doctrine be invoked. It was argued that the two Notifications issued by the
Government were not in exercise of legislative power delegated by the
Statute. The Government could not unilaterally withdraw the benefits
c conferred by the earlier Notification from industries which had started
production after the Notification dated 11th November, 1970 came into
force. Having regard to the facts of the case, it is not necessary to go into
this Controversy. The date of commencement of appellant's industry, ac-
cording to the elegibility certificate obtained by the appellant from the
D Commissioner of Industries, is 3rd December, 1970. It is difficult to believe
that the appellant, after the exemption Notification dated 11th November,
1970 was issued and on the basis of it, set up an oil extraction plant which
commenced production within three weeks' time on 3rd December, 1970.
No particulars have been given as to when the land was purchased, or when
the plant and machinery for the industry were procured.
E
Moreover, the Notification dated 11.11.1970 does not contain any
promise that the benefit given to new industries will not be altered from
time to time. The Government is entitled to grant exemption to industries
having regard to the industrial policy of the Government. The Government
is equally free to modify its industrial policy and grant, withdraw or modify
F I -
fiscal benefit from time to time. There is nothing in the notification dated
11.11.1970 by which any assurance was held out to any industry. This was
an usual Government Notification relating to purchase and sales tax,
granting reliefs to certain industries on fulfilment of the conditions laid
down in the notification.
G
Even otherwise, the Notification dated 11th November, 1970 grants
exemption to a New IndQstry which 'has been commissioned on or after
1st April, 1970, in the areas beyond 24 kilometres from the Municipal limits
of cities of Ahmedabad and Baroda and 16 kilometres from the Municipal
H limit of Surat, Bhavnagar, Rajkot and Jamnagar'. In other words; the
ARVIND INDS. v. STATE [SEN. J.] 21

Government wanted to encourage industries set up beyond the specified A
distance from the municipal limits of the aforesaid towns. This cannot be
construed to mean that the Government was contemplating to encourage
industries set up in other cities of Gujarat which were far away from
Ahmedabad, Baroda, Surat, Bhavnagar, Rajkot and Jamnagar. The appel-
lant had set up its industry at Junagadh, which is a large city. It is doubtful B
whether such an industry was at all entitled to any benefit of the Notifica-
tion dated 11th November, 1970. However, we need not express any final
opinion on this aspect of the case, because no argument was advanced on
this issue at the hearing of the case.

There is also a further point to be noted. In the Special Leave c
Petition, it has been stated that some time in April, 1970, the then Chief
Millister and the Finance Minister had announced that the Government
had adopted the policy of giving incentives to establishment of new in-
dustries. It has further been stated that petitioner's total investment in the
oil extraction plant is roughly 23 lakhs out of which about Rs. 14 lakhs was D
for the cost of machinery, about Rs. 8 lakhs was towards erection, construc-
tion of necessary sheds and buildings and about Rs. 68,000 was towards
the cost of land. The appellant is a partnership firm. It has not been stated
at what point of time the partners decided to set up this plant and when
and how the fund required of setting up of the plant was raised. E

The appellant has been entirely unable to make out any factual basis
for a case of promissory estoppel. The appellant cannot claim that merely
because it had set up its industrial unit at junagadh at a certain point of
time, the fiscal laws of the State must remain unaltered from that date. The
appellant has not been able to show that some definite promise was made
F
by or on behalf of the Government and the appellant had acted upon that
promise to its detriment and thereafter the changes effected by the
Notification dated 17th July, 1971 have caused great prejudice to the
appellant.
G
In the premises, it is not necessary to go into the question of
applicability of the doctrine of promissory estoppel in the field of fiscal
legislation.

The appeal is dismissed. There will be no order as to costs. H
22 SUPREME COURT REPORTS (1995] SUPP. 3 S.C.R.

A CWIL APPEAL NO. 1011 OF 1977
The facts of this case are similar to the facts in the case of A1vind
Industfies and other v. The State of Gujarat and Others, (Civil Appeal No.
951 of 1976). Here again, the contention of the promissory estoppel has
been raised.
B
The appellant has set up a factory at Ambavadi Road, Dhoraji. The
industrial undertaking was commissioned on 31.12.1970, i.e., within seven
weeks from the date of the Notification dated 11.11.1970. The appellant _
had stated in the petition that on 31st August, 1970, it had set up the factory
premises at Dhoraji at a cost of Rs.38,000. this was long before the
c exemption Notification dated 11th November, 1970. No dates have been
given for the purpose of Machinery and spare-parts worth Rs. 43,000. But
it has been stated that the production in the factory started from 31st
December, 1970. Having regard to the facts. of the case and also nature of
the two Notifications issued by the Government dated 11th November, 1970
D and 17th July, 1971, we are of the view that the factual basis for a case of
promissory estoppel has not been made out. It is unnecessary to deal with
...
the elaborate arguments advanced on the scope of the doctrine of promis-
sory estoppel in the facts of this case. The appeal is dismissed. There will
be no order as to costs.

T.N.A. Appeal dismissed.