Supreme Court of India
STATE OF HARYANA & OTHERSversusM/S. MAHABIR VEGETABLE OILS PVT. LTD.
- Citation
- 2011 INSC 145
- Decided
- 21 February 2011
- Disposal
- Appeal(s) allowed
- Bench
- MUKUNDAKAM SHARMA
Holding
A tax exemption is a discretionary statutory concession that may be withdrawn by the State in bona‑fide public‑interest circumstances, and the doctrine of promissory estoppel does not apply to restrain such withdrawal.
Summary
The State of Haryana withdrew the sales‑tax exemption for solvent‑extraction plants by placing the industry in a negative list on 16‑12‑1996, after Mahabir Vegetable Oils Pvt. Ltd. had invested in setting up such a plant based on an earlier promise of exemption. The respondent claimed entitlement to the exemption on the entire investment, invoking the doctrine of promissory estoppel, while the State argued that the exemption was a discretionary fiscal concession that could be rescinded in public interest. The Supreme Court examined the nature of tax exemptions as statutory concessions, the power of the government to amend delegated legislation, and the equitable limits of promissory estoppel. It held that the exemption could be withdrawn bona‑fide for public‑interest reasons and that the doctrine of promissory estoppel was inapplicable in these facts. Consequently, the Court set aside the High Court judgment and allowed the appeal, leaving the matter of quantum of exemption to be determined by the appropriate authority. The decision underscores that fiscal policy decisions, even when affecting investors, remain within the State's legislative discretion unless proven arbitrary or fraudulent.
Issues considered
- The respondent's entitlement to sales‑tax exemption on the entire investment versus only on investment made up to the amendment date
- Whether the doctrine of promissory estoppel can bind the State to honour a tax‑exemption promise
- Whether a fiscal concession granted under the Haryana General Sales Tax Act can be withdrawn in public interest without violating principles of natural justice
Legislation cited
- Central Sales Tax Act, 1956
- Haryana General Sales Tax Act, 1973s. 13-B, s. 25-A, s. 64
- Haryana General Sales Tax Rules, 1975s. Rule 28-A
Subjects
tax exemptionpromissory estoppelpublic interestfiscal policydelegated legislationnegative listequitable doctrineState discretion
Judgment
[2011] 4 S.C.R. 944
•
A STATE OF HARYANA & OTHERS
v.
M/S. MAHABIR VEGETABLE OILS PVT. LTD.
(Civil Appeal No. 1977 of 2011)
FEBRUARY 21, 2011
B
[DR. MUKUNDAKAM SHARMA AND
ANIL R. DAVE, JJ.]
Sa/es Tax - Haryana General Sales Tax Rules, 1975 -
C r.28A - Haryana General Sales Tax Act, 1973 - Exemption
on investment made for setting up Solvent Extraction plant -
Withdrawal of, by putting the Solvent extraction plant in the
negative list - Challenged - Promissory Estoppe/ -
Applicability of - Held: The principles of promissory estoppel
D were not applicable as the decision to put the Solvent
Extraction Plant in the negative list was taken in public
interest since the industry is in the category of polluting
industry - In cases where the Government on the basis of
material available before it, bona fide, is satisfied that public
E interest would be served by granting, withdrawing, modifying
or rescinding an exemption already granted, it should be
allowed a free hand to do so - The Courts should not normally
interfere with fiscal policy of the government more so when
such decisions are taken in public interest and where no fraud
F nor lack of bona fide is alleged much less established - The
right to exemption or concession is a right that can be taken
away under the very power in exercise of which the exemption
was granted - Furthermore, in the facts of the instant case, it
cannot be said that the Respondent had altered its position
relying on the promise inasmuch as even before steps were
G taken by the Respondent for laying the Solvent Extraction
Plant, the appellant had made its intention clear through its
notice dated 3.1.1996 that it was likely to amend the law/rules
in respect whereof a draft was circulated for information of
H 944
• STATE OF HARYANA v. MAHABIR VEGETABLE OILS 945
PVT. LTD.
persons likely to be affected thereby so as to enable them to A·
file objections and suggestions thereto - Amendments in the
terms of the said draft rules were notified on 16-12-1996
substituting Schedule Ill appended to the Rules whereby and
where under the solvent extraction plant was included therein
- Though investment was made by the Respondent probably B
on the belief that it would 6e entitled to the exemption,
however, the said factor alone, in the absence of any specific
confirmation cannot stop the State to amend the policy and
withdraw the exemption if the same is deemed necessary and
expedient in the Public Interest - Moreover, the said policy, c
which was for the period of 1-4-1988 to 31-3-1997, was nearing
its end - Administrative Law.
Doctrines/Principles - Doctrine of Promissory estoppel
- Applicability of -Held: The doctrine of Promissory Estoppel D
is an equitable remedy and has to be moulded depending
on the facts of each case - No hard and fast rule for applying
the doctrine of Promissory Estoppel but the doctrine has to
do justice between the parties and ensure equity between the
parties i.e. both the promissor and the promise.
E
Interpretation of Statutes - Fiscal statute - Exemption -
Nature of - Held: It is a concession granted by the State so
that the beneficiaries of such concession are not required to
pay the tax or the duty they are otherwise liable to pay under
such statute - The beneficiary of a concession has no legally F
enforceable right against the government to grant a
concession except to enjoy the benefits of the concession
during the period of its grant.
Dispute arose as to whether the Respondent was G
entitled to the benefit of Sales Jax exemption on the entire
investment made by them in setting up the industrial unit
i.e. Solvent Extraction Plant, or on the investments made
up till 16.12.1996, i.e. date of amendment or in other
H
946 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A words the date on which the exemption granted under
Rule 28A of the Haryana Sales Tax Rules ("HSTR") was
withdrawn by the State by putting the Solvent extraction
plant in the negative list. The High Court, by the
impugned judgment, held that once the Respondent was
B treated to be eligible for exemption, there was no valid
reason to further classify the benefit of investment up to
the date of amendment, putting the unit in the negative
list.
In appeal before this Court, the State vehemently
C contended that the exemption granted to solvent
extraction plant was legally withdrawn by the State
Government on 16.12.1996 as the same was deemed
necessary in the public interest. The Respondent, on the
other hand, submitted that it had taken a decision to
D establish its industrial unit in the said area of the State
of Haryana, only on the basis and footing that the
respondent would be entitled to the benefit of sales tax
exemption@ 150% on the total capital investment made
in that industrial unit and that in view of the doctrine of
E promissory estoppel, once the Respondent, based on the
representation of the State, had initiated the steps to
establish the unit and had made substantial investment
in that regard, the State now cannot turn around and
F deny the said benefit of exemption.
Allowing the appeal, the Court
HELD:1. The doctrine of Promissory Estoppel is an
equitable remedy and has to be moulded depending on
G the facts of each case and not straight jacketed into
pigeon holes. In other words, there cannot be any hard
and fast rule for applying the doctrine of Promissory
Estoppel but the doctrine has to evolve and expand itself
so as to do justice between the parties and ensure equity
H
• STATE OF HARYANA v. MAHABIR VEGETABLE OILS 947
PVT. LTD.
between the parties i.e. both the promissor and the A
promisee. [Para 24] [965·8-C]
Mis. Motilal Padampat Sugar Mills Co. (P) Ltd. vs. State
of Uttar Pradesh and Ors., (1979) 2 SCC 409 - referred to.
2. The principles of promissory estoppel is not B
applicable in the instant case as the decision to put the
Solvent Extraction Plant in the negative list was taken in
public interest since the industry is in the category of
polluting industry. It was never the case of the
Respondent that the Solvent Extraction Plant was a non C
polluting industry. There is also no allegation that the
decision to put the Solvent Extraction Plant in the
negative list was actuated by fraud or that the said
decision was not bona fide. In cases where the
Government on the basis of material available before it, D
bona fide, is satisfied that public interest would be served
by granting, withdrawing, modifying or rescinding an
exemption already granted, it should be allowed a free
hand to do so. The withdrawal of exemption "in public E
interest" is a matter of policy and the Courts should not
bind the government in its policy decision. The Courts
should not normally interfere with fiscal policy of the
government more so when such decisions are taken in
public interest and where no fraud nor lack of bona fide
is alleged much less established. [Para 25) [965-C-F] F
3. An exemption is nothing but a freedom from an
obligation which an assessee is otherwise liable to
discharge. In a fiscal statute, an exemption has been held
to be a concession granted by the state so that the G
beneficiaries of such concession·are not required to pay
the tax or the duty they are otherwise liable to pay under
such statute. The beneficiary of a concession has no
legally enforceable right against the government to grant
H
948 SUPREME COURT REPORTS [2011) 4 S.C.R.
•
A a concession except to enjoy the benefits of the
concession during the period of its grant. The right to
exemption or concession is a right that can be taken
away under the very power in exercise of which, the
exemption was granted. [Para 26] [965-G-H; 966-A-B]
B
4. Furthermore, in the fact of the instant case, it
cannot be said that the Respondent had altered its
position relying on the promise in as much as even
before steps were taken by the Respondent for laying the
C Solvent Extraction Plant, the Appellant had made its
intention clear through its notice dated 3.1.1996 that it
was likely to amend the law/rules in respect whereof a
draft was circulated for information of persons likely to
be affected thereby so as to enable them to file objections
0 and suggestions thereto. Amendments in the terms of the
said draft rules were notified on 16-12-1996 substituting
Schedule Ill appended to the Rules whereby and where
under the solvent extraction plant was included therein.
[Para 27] [966-C-D]
E 5. Though it cannot be denied that an investment
was made by the Respondent in the said area of the State
of Haryana, probably on the belief that it would be entitled
to the exemption. However, the said factor alone, in the
absence of any specific confirmation cannot stop the
F State to amend the policy and withdraw the exemption if
the same is deemed necessary and expedient in the
Public Interest. Moreover, the said policy which was for
the period of 1-4-1988 to 31-3-1997 was nearing its end.
[Para 28) [966-E-F]
G
6. The High Court went on the premise that once the
Appellant have themselves extended the benefit to the
Respondent they cannot further classify the benefit of
investment up to the date of amendment, putting the unit
H
• STATE OF HARYANA v. MAHABIR VEGETABLE OILS 949
PVT. LTD.
in the negative list. It appears that the High Court while A
arriving at the said finding failed to appreciate the fact that
the case of the Respondent was considered for
exemption in the light of the judgment passed by this
Court in the Mahabir Vegetable case, (2006) 3 SCC 620
wherein it was held that the Respondent is entitled to B
exemption. However, the issue of quantum was kept
open. The High Court while giving the said finding
altogether closed itself in considering the said issue and
on the contrary held that only because the Respondent
was considered for grant of exemption, there was no c
issue of quantum and the Respondent was entitled to
entire exemption. The said finding is not in line with the
observations made by this Court in the Mahabir
Vegetable case, (2006) 3 SCC 620. [Para 32] [967-E-H;
008~ D
Case Law Reference:
(1979) 2 sec 409 .referred to Para 23
(2006) 3 sec 620 referred to Para 32
E
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
1977 of 2011.
From the Judgment & Order dated 09.12.2008 of the High
Court of Punjab and Haryana at Chandigarh in Civil Writ F
Petition No. 14236 of 2008.
Rajiv Dutta, Alok Sangwan, Devashish Bharuka for the
Appellants.
S. Ganesh, Mahabir Singh, S.P.S. Chauhan, Nikhil Jain for G
the Respondent.
The Judgment of the Court was delivered
DR. MUKUNDAKAM SHARMA, J. 1. Leave granted.
H
950 SUPREME COURT REPORTS [2011) 4 S.C.R.
A 2. The issue that falls for our consideration in this appeal
is whether the Respondent is entitled to the benefit of Sales
Tax exemption on the entire investment made by them in setting
up the industrial unit i.e. Solvent Extraction Plant, or on the
investments made up till 16.12.1996, the date on which the
8 exemption granted under Rule 28A of the Haryana Sales Tax
Rules ("HSTR" for short) was withdrawn by the State by putting
the Solvent extraction plant in the negative list.
3. The basic facts which are not in dispute, are as follows:-
c The State enacted the Haryana General Sales Tax Act,
1973 (for short "the Act"). Section 64 of the Act provides for
rule-making power. The said provision was amended by
inserting sub-section (2-A) therein which reads as under:
"64. (2-A) The power to make rules under sub-sections (1)
D
and (2) with respect to clauses (ff) and (oo) of sub-section
(2) shall include the power to give retrospective effect to
such rules i.e. from the date on which policy for incentives
to industry is announced by the State and for this purpose
Rules 28-A, 28-B and 28-C of the Haryana General Sales
E Tax Rules, 1975, shall have retrospective effect i.e. with
effect from 1st April, 1988, 1st August, 1997 and 15th
November, 1999 respectively, but such retrospective
operation shall not prejudicially affect the interest of any
person to whom such rules may be applicable."
F
4. Clause (ff) of sub-section (2) of Section 64 of the Act
provides for the class of industries, period of exemption and
conditions of such exemption, under Section 13-B; whereas
clause (oo) thereof provides for class of industries, period of
G deferment and the conditions to be imposed for such deferment
under Section 25-A.
5. Pursuant to or in furtherance of the said rule-making
power, the State made rules known as the Haryana General
H
• STATE OF HARYANA v. MAHABIR VEGETABLE OILS 951
PVT. LTD. [DR. MUKUNDAKAM SHARMA, J.]
Sales Tax Rules, 1975 (for short "the Rules"). Rule 28-A A
occurring in Chapter IV-A of the Rules provide for the class of
industries, period and other conditions for exemption/deferment
from payment of tax as envisaged both under Sections 13-B
and 25-A of the Act. "Operative period" has been defined in
sub-rule (2)(a) of Rule 28-A of the Rules to mean "the period B
starting from the 1st day of April, 1988 and ending on the 31st
day of March, 1997". Sub-rule (2)(c) thereof defines "New
industrial unit" to mean:
"a unit which is or has been set up in the State of Haryana C
and comes or has come into commercial production for
the first time during the operative period and has not been
or is not formed as a result of purchase or transfer of old
machinery except when purchased in the course of import
into the territory of India, or when the cost of old machinery D
does not exceed 25% of the total cost of machinery re-
establishment, amalgamation, change of lease, change of
ownership, change in constitution, transfer of business,
reconstruction or revival of the existing unit".
6. "Negative list" has been defined in sub-rule (2)(o) to E
mean "a list of class of industries as specified in Schedule Ill
appended to these Rules".
7. The State of Haryana announced an industrial policy for
the period 1-4-1988 to 31-3-1997 wherein inter alia incentive F
by way of sales tax exemption was to be given for the industries
set up in backward areas in the State. Schedule Ill appended
to the Rules provides for a negative list of the industries and/or
class of industries which were not to be included therein. At the
initial stage the Solvent extraction plant was admittedly not G
included in the negative list.
8. On or about 3-1-1996, notice was giv~n· as regards the
intention of the State to a"'mend the Rules in respect whereof a
draft was circulated for information of persons likely to be
affected thereby so as to enable them to file objections and H
952 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A suggestions thereto. Amendments in the terms of the said draft
rules were notified on 16-12-1996 substituting Schedule Ill
appended to the Rules whereby and whereunder the solvent
extraction plant was included therein. Note 2 appended thereto
reads as under:
B
"The industrial units in which investment has been made
up to 25% of the anticipated cost of the project and which
have been included in the above list for the first time shall
be entitled to the sales tax benefits related to the extent of
investment made up to 3-1-1996. Only those assets will
c be included in the fixed capital investment which have been
installed or erected at site and have been paid for. The
anticipated cost of the project will be taken on the basis
of documents furnished to a financial institution or banks
for drawing a loan and which have been accepted by the
D financial institution or bank concerned for sanction of loan."
9. On or about 28-5-1997 the said Rules were amended
inter alia by omitting Note 2 deeming to have always been
omitted.
E
10. Yet again on 3-6-1997 in clause (a) of sub-rule (2) of
Rule 28-A of the Rules instead and in place of "31-3-1997" the
words "date on which new policy for incentive to industry is
announced by the Government of Haryana in Industries
F Department" was substituted.
11. On 26-6-2001 in Section 13-B after the words "for such
period", the words "either prospectively or retrospectively" were
inserted.
G 12. It is only after the notice dated 3.1.1996 that the
respondent Mahabir Vegetable Oils (P) Limited purchased land
measuring 30 kanals 17 marlas in the month of August 1996
to set up a solvent extraction plant. It also obtained registration
under the provisions of the Act and the Central Sales Tax Act,
H 1956 on 6-9-1996. On 13-8-1996 it applied for a no-objection
•STATE OF HARYANA v. MAHABIR VEGETABLE OILS 953
PVT. LTD. [DR. MUKUNDAKAM SHARMA, J.]
certificate from the Haryana State Pollution Control Board which A
is a condition precedent for setting up a solvent extraction plant.
On 15-8-1996, the appellant entered into an agreement with M/
s Saratech Consultants and Engineers, Kamal for supply and
erection of the plant for a sum of Rs. 55,55,000.00 and
.Rs 22, 75,000 respectively and advances were paid on different B
dates. Furthermore, on 6-9-1996, civil construction work started
at site. Plans submitted by the appellant for getting permission
for storage of hexane were sanctioned by the Explosives
Department on 19-9-1996 and licence was finally given on 11-
3-1997. On 26-9-1996, process of installation of the plant c
started at the site. On or about 18-11-1996, a 250 kVA power-
generating set costing Rs 9,91,000 was installed, no-objection
certificate wherefor was granted on 22-11-1996. The appellant
applied to the Haryana State Electricity Board for release of
the power connection vide application dated 12-12-1996 and D
also deposited the security of Rs. 68, 700 for the same. On 26-
' 3-1997, the appellant started the trial production and
commercial production commenced on 29-3-1997.
13. The respondent had applied for grant of exemption
from payment of sales tax as on 16-12-1996 which was E
rejected the following terms: -
"... The solvent extraction plants were included in the
negative list with effect from 16-12-1996. The industrial unit
has made 45% of total investment. In the notification it was F
stipulated that the industrial unit in which investment has
been made up to 25% of the anticipated cost of the project
which has been included in the negative list for the first time
shall be entitled to sales tax benefit, however, this condition
has been deleted vide notification dated 28-5-1997. The G
Committee was of the view that this condition has already
been deleted and certain parties have challenged it in the
Punjab and Haryana High Court. The Director of Industries
was of the view that in case a particular industry is put in
the negative list, benefit on account of investment made H
954 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A before the date of putting the unit in the negative list should
be available to the unit for sales tax exemption/deferment.
Thougii the Higher Level Screening Committee broadly
agreed with this view, yet in view of the fact that such
cases were not coveri-,.d in the existing notification of the
B Commercial Taxation Department, it was decided to reject
the claim of the party."
And the writ petition filed by the Respondent before the High
Court was dismissed holding: -
c "(i) The power to grant exemption from the payment of sales
tax is an exercise of the powers conferred by the statute
on the State Government and is, thus, a delegated
legislative function. The delegated legislation can be struck
down if it is established that there is manifest arbitrariness.
D It must be shown that it was not reasonable or manifestly
arbitrary.
(ii) As per the records made available, a Standing
Committee was constituted by the State of Haryana for
revising the negative list periodically keeping in view the
E
industrial scheme of the State and its neighbourhood. Such
Standing Committee considered the revision of negative
list in its meeting held on 15-9-1995 wherein it was
decided to include highly polluting industries, power-
intensive industries, conventional type of industries where
F sufficient capacity has already come up and any further
increase in the capacity would jeopardise the health of
existing industry in the negative list. There is no challenge
to the decision or proceedings of such Committee on any
ground indicating arbitrariness, bias, mala fide or any such
G like reason.
(iii) In view of certain decisions of this Court, the benefit
of exemption can be withdrawn in public interest.
(iv) There is no allegation of exercise of such power to
H
STATE OF HARYANA v. MAHABIR VEGETABLE OILS 955
PVT. LTD. [DR. MUKUNDAKAM SHARMA, J.]
include solvent extractpn plant which is actuated by any A
mala tides, fraud or lack of bona tides. It is a matter of fiscal
policy of the State Government as to which industries
should be granted exemption.
(v) Mahabir Vegetable Oils (P) ltd. only invested B
Rs. 4,44,000 in the land and purchased machinery worth
Rs.16,90,000 on 14-12-1996.
(vi) Thus, we hold that there is no representation on behalf
of the State Government that the scheme of granting
incentives by way of exemption or deferment will not be C
modified, amended or varied during the operative period.
There cannot be any restraint on the State Government to
exercise the delega'ted ·legislative functions within the
parameters laid down by the statute."
D
14. Against the said dismissal the Respondent
approached this Court by filing Special Leave Petition which
· was converted into Civil Appeal 1635 of 2006. The said Appeal
of the respondent was allowed by this Court vide its judgment
dated 10-3-2006 which was reported at (2006) 3 SCC 620. E
This Court by applying the Doctrine of Promissory Estoppel held
that the promises/representations made by way of a statute,
continued to operate in the field. This Court noted that it may
be true that the Respondent altered their position only from
August 1996 but it has neither been denied nor disputed that F
during the relevant period, namely, August 1996 to 16-12-1996
not only have they invested huge amounts but also the
authorities of the State sanctioned benefits, granted
permissions. The Respondent had also taken other steps which
could be taken' only for the purpose of setting up of a new
industrial unit. This Court further noted that an entrepreneur who G
sets up an industry in a backward area unless otherwise
prohibited, is entitled to alter his position pursuant to or in
furtherance of the promises or representations made by the
State.
H
956 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A 15. However this Court, at that stage, did not interfere with
the issue of the quantum of exemption which can be granted
to the Respondent and the said issue was kept open and the
matter was remanded to the Director Industries for fresh
adjudication. The Writ Petition filed by the Respondent under
B Article 32 was also disposed off. The relevant portion of the
said judgment is as follows:-
"38. The promises/representations made by way of a
statute, therefore, continued to operate in the field. It may
be true that the appellants altered their position only from
c August 1996 but it has neither been denied nor disputed
that during the relevant period, namely, August 1996 to 16-
12-1996 not only have they invested huge amounts but
also the authorities of the State sanctioned benefits,
granted permissions. Parties had also taken other steps
D which could be taken only for the purpose of setting up of
a new industrial unit. An entrepreneur who sets up an
industry in a backward area unless otherwise prohibited,
is entitled to alter his position pursuant to or in furtherance
of the promises or representations made by the State. The
E State accepted that equity operated in favour of the
entrepreneurs by issuing Note 2 to the notification dated
16-12-1996 whereby and whereunder solvent extraction
plant was for the first time inserted in Schedule Ill i.e. in
the negative list.
F
39. Both the provisions contained in Schedule Ill and Note
2 formed part of subordinate legislation. By reason of the
said note, the State did not deviate from its professed
object. It was in conformity with the purport for which
original Rule 28-A was enacted.
G
40. We, in this case, are not concerned with the quantum
of exemption to which the appellants may be entitled to,
but only with the interpretation of the relevant provisions
which arise for consideration before us.
H
• STATE OF HARYANA v. MAHABIR VEGETABLE OILS 957
PVT. LTD. [DR. MUKUNDAKAM SHARMA, J.]
41. We may at this stage consider the effect of omission A
of the said note. It is beyond any cavil that a subordinate
legislation can be given a retrospective effect and
retroactive operation, if any power in this behalf is
contained in the main Act. The rule-making power is a
species of delegated legislation. A delegatee therefore B
can make rules only within the four corners thereof.
42. It is a fundamental rule of law that no statute shall be
construed to have a retrospective operation unless such
a construction appears very clearly in the terms of the Act, C
or arises by necessary and distinct implication. (See West
v. Gwynne14.)
43. A retrospective effect to an amendment by way of a
delegated legislation could be given, thus, only after
coming into force of sub-section (2-A) of Section 64 of the D
Act and not prior thereto.
44. By reason of Note 2, certain rights were conferred.
Although there lies a distinction between vested rights and
accrued rights as by reason of a delegated legislation, a E
right cannot be taken away. The amendments carried out
in 1996 as also the subsequent amendments made prior
to 2001, could not, thus, have taken away the rights of the
appellant with retrospective effect.
45. For the reasons aforementioned, the impugned F
judgment cannot be sustained which is set aside
accordingly. The appeals are allowed and the matter is
remitted to the Director of Industries to consider the matter
afresh.
G
46. In view of our findings aforementioned no direction is
required to be issued in the writ petition filed by the
appellants. The writ petition is disposed of accordingly."
16. The Lower Level Screening Committee ("LLSC" for
short) After considering the matter in the light ofthe H
958 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A abovementioned judgment passed by this Court made a
recommendation for grant of eligibility certificate to the extent
of Rs.94,48,911/- for a period of nine years i.e. from 29.03.1997
to 28.03.2006. The said amount was calculated with reference
to the in~estment made by the petitioner up to 16.12.1996 i.e.
B date of amendment, putting the unit in the negative list. On
appeal, the Appellate Authority affirmed the said view with the
following observations :-
"..... The Committee examined the judgment relied upon and
c observed that the Hon'ble Supreme Court has not found
fault with the amendment dated 16.12.1996 whereby the
solvent extraction plant have been put into negative list
(schedule Ill). The effect of enlargement of the negative list
is that the unit has ceased.Jo be eligible for exemption/
deferment with effect from 16.12.1996. Besides, it is further
0
observed that tax concessions, as repeatedly held by the
Hon'ble Supreme Court, are a defeasible, not an
indefeasible, right but the withdrawal is always
prospective."
E 17. The respondent challenged the said order & judgment
before the High Court of Punjab & Haryana by filling a writ
petition. The High Court by the impugned judgment allowed the
writ and held once the Respondent has been treated to be
eligible for exemption, there was no valid reason to further
F classify the benefit of investment up to the date of amendment,
putting the unit in the negative list. The relevant paras of the
impugned judgment are follows:-
"13. Admittedly, on the date of commercial production and
also on the date of issue of entitlement/exemption
G certificate, the petitioner was in negative list and could not
be considered to be eligible unless applicability of
notification dated 16.12.1996 was confined to units which
started investment before the said date.
H 14. The respondents themselves have extended the benefit
• STATE OF HARYANA v. MAHABIR VEGETABLE OILS 959 ·
PVT. LTD. [DR. MUKUNDAKAM SHARMA, J.]
by not treating the notification dated 16.12.1996 to be A
applicable to the petitioner. Once the petitioner has been
treated to be eligible, there was no valid reason to further
classify the benefit of investment up to the date of
amendment, putting the unit in the negative list.
B
14. In view of above, we allow this petition and quash the
impugned orders to the extent of restricting the benefit to
the date of notification i.e. 16.12.1996.
15. The Appellate Authority may now pass a fresh order
in accordance with law, within four months from the date C
of certified copy of this order."
18. It is .against the said judgment that the appellants have
approached this Court. We heard the learned Senior Counsel
~for the parties. However, before we deal with the respective D
submission we may specify that this Court in the year 2006 has
already held that the Respondent is entiUed to the exemption,
and the only issue which remains to be decide is whether the
exemption has to be granted upon the entire investment or the
investment made up till 16.12.1996 i.e. date of amendment, E
putting the unit in the negative list.
19. The learned Senior Counsel appearing for the State
vehemently argued that the exemption granted to solvent
extraction plant was legally withdrawn by the State Government
on 16.12.1996 as the same was deemed necessary in the F
public interest It was further submitted that it is within the ·
prerogative of the State to withdraw an exemption if the same
is deemed necessary in the public interest. It was. also
submitted that the Respondent does not have a vested right in
their favour and the exemption grarited cannot go beyond the G
date of withdrawal by the State. It was also contented that as
now the benefit of exemption has been granted on the
· investment made up till 16.12.1996 the question of retrospective
effect also does not arise.
H
960 SUPREME COURT REPORTS (2011] 4 S.C.R.
•
A 20. On the other hand, it was submitted by the Learned
Senior Counsel appearing for the Respondent that the
respondent has taken a decision to establish its industrial unit
in the said area of the State of Haryana, only on the basis and
footing that the respondent would be entitled to the benefit of
B sales tax exemption @ 150% on the total capital investment
made in that industrial unit. In order to supplement the said
submission, the learned Senior Counsel placed strong reliance
on the doctrine of promissory estoppel and submitted that once
the Respondent, based on the representation of the State has
c initiated the steps to establish the unit and has made
substantial investment in that regard, the State now cannot turn
around and deny the said benefit of exemption.
21. We have considered the submission made by the
learned senior counsel for the parties and have also perused
D the relevant provision, as amended from time to time and the
documents placed on record.
22. The judgment of this Court dated 10-3-2006 in Civil
Appeal 1635 of 2006 reported at (2006) 3 sec 620 only
E considered the retrospective operation of the amendments
made on 16.12.1996 and subsequent amendments which
sought to take away certain rights of the Respondents. This
Court in the said judgment had only held that the amendment
to Rule 28A could not have any retrospective effect, in the
F sense that it could not affect an assessee's pre-existing rights.
It is also important to note that the said judgment clearly clarified
that the question of quantum of exemption to which the
appellants may be entitled to was not considered. It may also
be pointed out that this Court did not go into the challenge made
G to the validity of the Amendments made which was challenged
by the Respondent by way of a Writ Petition. The reliance
placed on the said Judgment is therefore misplaced. The issue
that falls for our consideration in this appeal is on the quantum
of exemption to which the Respondent is entitled and that too
for the period subsequent to the date of the amendment. In other
H
• STATE OF HARYANA v. MAHABIR VEGETABLE OILS 961
PVT. LTD. [DR. MUKUNDAKAM SHARMA, J.]
words, the question before us pertains to whether the A
Respondent is entitled to the benefit of Sales Tax exemptiqn
on the entire investment made by them in setting up the
industrial unit i.e. Solvent Extraction Plant, made prospectively
after 16.12.1996.
B
23. It has been urged on behalf of the Respondents that
benefit of the exemption is required to be advanced to them
on the principle of the Doctrine of Promissory Estoppel. We are
not in agreement with the said argument. This Court in Mis.
Motilal Padampat Sugar Mills Co. (P) Ltd. vs. State of Uttar C
Pradesh and Ors. Reported in (1979) 2 SCC 409 held as
under:
"24. This Court finally, after referring to the decision in the
Ganges Manufacturing Co. v. Sourujmull, Municipal
Corporation of the City of Bombay v. Secretary of State D
for India and Collector of Bombay v. Municipal Corporation
of the City of Bombay summed up the position as follows:
"Under our jurisprudence the Government is not
exempt from liability to carry out the representation E
made by it as to its future conduct and it cannot on
some undefined and undisclosed ground of
necessity or expediency fail to carry out the promise
solemnly made by it, nor claim to be the Judge of
its own obligation to the citizen on an ex parte
appraisement of the circumstances in which the F
obligation has arisen."
The law may, therefore, now be taken to be settled as a
result of this decision, that where the Government makes
a promise knowing or intending that it would be acted on G
by the promisee and, in fact, the promisee, acting in
reliance on it, alters his position, the Government would be
held bound by the promise and the promise would be
enforceable against the Government at the instance of the
promisee, notwithstanding that there is no consideration H
962 SUPREME COURT REPORTS [2011) 4 S.C.R.
A for the promise and the promise is not recorded in the form
of a formal contract as required by Article 299 of the
Constitution. It is elementary that in a republic governed
by the rule of law, no one, howsoever high or low, is above
the law. Everyone is subject to the law as fully and
8 completely as any other and the Government is no
exception. It is indeed the pride of constitutional democracy
and rule of law that the Government stands on the same
footing as a private individual so far as the obligation of
the law is concerned: the former is equally bound as the
c latter. It is indeed difficult to see on what principle can a
Government, committed to the rule of law, claim immunity
from the doctrine of promissory estoppel. Can the
Government say that it is under no obligation tc act in a
manner that is fair and just or that it is not bound by
considerations of "honesty and good faith"? Why should
D
the Government not be held to a high "standard of
rectangular rectitude while dealing with its citizens"? There
was a time when the doctrine of executive necessity was
regarded as sufficient justification for the Government to
repudiate even its contractual obligations; but, let it be said
E to the eternal glory of this Court, this doctrine was
emphatically negatived in the lndo-Afghan Agencies case
and the supremacy of the rule of law was established. It
was laid down by this Court that the Government cannot
claim to be immune from the applicability of the rule of·
F promissory estoppel and repudiate a promise made by it
on the ground that such promise may fetter its future
executive action. If the Government does not want its
freedom of executive action to be hampered or restricted,
the Government need not make a promise knowing or
G intending that it would be acted on by the promisee and
the promisee would alter his position relying upon it. But if
the Government makes such a promise and the promisee
acts in reliance upon it and alters his position, there is no
reason why the Government should not be compelled to
H make good such promise like any other private individual. .
•
STATE OF HARYANA v. MAHABIR VEGETABLE OILS 963
PVT. LTD. [DR. MUKUNDAKAM SHARMA, J.l
The law cannot acquire legitimacy and gain social A
acceptance{ unless it accords with the moral values of the
society and the constant endeavour of the Courts and the
legislature, must, therefore, be to close the gap between
law and morality and bring about as near an approximation
between the two as possible. The doctrine of promissory B
estoppel is a significant judicial contribution in that
direction. But it is necessary to point out that since the
doctrine of promissory estoppel is an equitable doctrine,
it must yield when the equity so requires. If it can be shown
by the Government that having regard to the facts as they c
have transpired, it would be inequitable to hold the
Government to the promise made by it, the Court would
not raise an equity in favour of the promisee and enforce
the promise against the Government. The doctrine of
promissory estoppel would be displaced in such a case D
because, on the facts, equity would not require that the
Government should be held bound by the promise made
by it. When the Government is able to show that in view of
the facts as have transpired since the making of the
promise, public interest would be prejudiced iJ the E
Government were required to carry out the promise, the
Court would have to balance the public interest in the
Government carrying out a promise made to a citizen which
has induced the citizen to act upon it and alter his position
and the public interest likely to suffer if the promise were
required to be carried out by the Government and F
determine which way the equity lies. It would not be enough
for the Government just to say that public interest requires
that the Government should not be compelled to carry out
the. promise or that the public interest would suffer if the
Government were required to honour it. The Government G
·cannot, as Shah, J., pointed out in the lndo-Afghan
Agencies case, claim to be exempt from the liability to
carry out the promise "on some indefinite and undisclosed
ground of necessity or expediency", nor can the
Government claim to be the sole Judge of its liability and H
964 SUPREME COURT REPORTS [2011] 4 S.C.R.
A repudiate it "on an ex parte appraisement of the
circumstances". If the Government wants to resist the
liability, it will have to disclose to the Court what are the
facts and circumstances on account of which the
Government claims to be exempt from the liability and it
B would be for the Court to decide whether those facts and
circumstances are such as to render it inequitable to
enforce the liability against the Government. Mere claim
of change of policy would not be sufficient to exonerate the
Government from the liability: the Government would have
c to show what precisely is the changed policy and also its
reason and justification so that the Court can judge for
itself which way the public interest lies and what the equity
of the case demands. It is only if the Court is satisfied, on
proper and adequate material placed by the Government,
that overriding public interest requires that the Government
D
should not be held bound by the promise but should be free
to act unfettered by it, that the Court would refuse to
enforce the promise against the Government. The Court
would not act on the mere ipse dixit of the Government,
for it is the Court which has to decide and not the
E Government whether the Government should be held
exempt from liability. This is the essence of the rule of law.
The burden would be upon the Government to show that
the public interest in the Government acting otheiwise than
in accordance with the promise is so oveiwhelming that it
F would be inequitable to hold the Government bound by the
promise and the Court would insist on a highly rigorous
standard of proof in the discharge of this burden. But even
where there is no such overriding public interest, it may still
be competent to the Government to resile from the
G promise "on giving reasonable notice, which need not be
a formal notice, giving the promisee a reasonable
opportunity of resuming his position" provided of course it
is possible for the promisee to restore status quo ante. If,
however, the promisee cannot resume his position, the
H
STATE OF HARYANA v. MAHABIR VEGETABLE OILS 965
PVT. LTD. [DR. MUKUNDAKAM SHARMA, J.]
promise would become final and irrevocable. Vide A
Emmanuel Avodeji Ajaye v. Briscoe".
24. The doctrine of Promissory Estoppal is an equitable
remedy and has to be moulded depending on the facts of each
case and not straight jacketed into pigeon holes. In other words, B
there cannot be any hard and fast rule for applying the doctrine
of Promissory Estoppel but the doctrine has to evolve and
expand itself so as to do justice between the parties and ensure
equity between the parties i.e. both the promissor and the
promisee.
c
25. The principles of promissory estoppel is not applicable
in the instant case as the decision to put the Solvent Extraction
Plant in the negative list was taken in public interest since the
industry is in the category of polluting industry. It has never been
the case of the Respondent that the Solvent Extraction Plant D
is a non polluting industry. There is also no allegation that the
decision to put the Solvent Extraction Plant in the negative list
was actuated by fraud or that the said decision was not bona
fide. In cases where the Government on the basis of material
available before it, bona fide, is satisfied that public interest E
would be served by granting, withdrawing, modifying or
rescinding an exemption already granted, it should be allowed
a free hand to do so. The withdrawal of exemption "in public
interest" is a matter of policy and the Courts should not bind
the government in its policy decision. The Courts should not F
normally interfere with fiscal policy of the government more so
when such decisions are taken in public interest and where no
fraud nor lack of bona fide is alleged much less established.
--26. An exemption is nothing but a freedom from an
obligation which an assessee is otherwise liable to discharge. G
In a fiscal statute, an exemption has been held to be a
concession granted by the state so that the beneficiaries of
such concession are not required to pay the tax or the duty they
are otherwise liable to pay under such statute. The beneficiary
of a concession has no legally enforceable right against the H
966 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A government to grant a concession except to enjoy the benefits
of the concession during the period of its grant. The right to
exemption or concession is a right that can be taken away
under the very power in exercise of which the exemption was
granted.
B
27. Furthermore, fn the fact of the instant case, it cannot
be said that the Respondent had altered its position relying on
the promise in as much as even before steps were taken by
the Respondent for laying the Solvent Extraction Plant, the
Petitioner had made its intention clear through its notice dated
C 3.1.1996 that it was likely to amend the law/rules in respect
whereof a draft was circulated for information of persons likely
to be affected thereby so as to enable them to file objections
and suggestions thereto. Amendments in the terms of the said
draft rules were notified on 16-12-1996 substituting Schedule
D Ill appended to the Rules whereby and where under the solvent
extraction plant was included therei~.
28. It cannot be denied that an investment was made by
the Respondent in the said area of the State of Haryana,
E probably on the belief that it would be entitled to the exemption.
However, the said factor alone, in the absence of any specific
confirmation cannot stop the State to amend the policy and
withdraw the exemption if the same is deerr.<=!d necessary and
expedient in the Public Interest. Moreover, i:1e said policy which
' F was for the period of 1-4-1988 to 31-3-1997 was nearing its
end.
29. The Note 2, appended to the amendment made to
Schedule Ill (extracted hereinabove), categorically state that the
industrial units in which investment has been made up to 25%
G of the anticipated cost of the project and which have been
included in the above list for the first time shall be entitled to
the sales tax benefits related to the extent of investment made
up to 3-1-1996. On or about 28-5-1997 the said Rules were
amended inter alia by omitting Note 2 deeming to have always
H been omitted.
•
•
STATE OF HARYANA v. MAHABIR VEGETABLE OILS 967
PVT. LTD. [DR. MUKUNDAKAM SHARMA, J.]
30. The LLSC, while arriving at the quantum of exemption A
considered the conditions enumerated in the Note 2 and
keeping in view the observation made by this Court in the
abovementioned judgment, granted the exernption till
16.12.1996 i.e. date of the amendm'ent instead of3-1-1996 as
mentioned in the said Note. The said finding was upheld by the B
Appellate Authority which found that the quantification wasin
accord with abovementioned judgment passed by this Court
and other principles of law.
31. If one goes by the wording of Note 2, it appears that
in order to balance the equities and protect the interest of the C
investor the benefit of the exemption was granted for the
investments made up till 16-12-1996. Moreover, as the benefit
has already been granted till 16-.12-1996 in terms of the ratio
of the judgment passed by this Court, in the Mahabir
Vegetable case (supra) reported at (2006) 3 SCC 620 it D
cannot be said that even now an attempt has been made to
give retrospective effect to the said amendment.
32. The High Court has gone on the premise that once the
Appellant have themselves extended the benefit to the E
Respondent they cannot further classify the benefit of investment
up to the date of amendment, putting th~ unit in the negative
list. It appears that the High Court while ·arriving at the said
finding has failed to appreciate the fact that the case of the
Respondent was considered for exemption in the light of the F
judgment passed by this Court in the Mahabir Vegetable case
(supra) reported at (2006) 3 sec 620 wherein it was held that
the Respondent is entitled to exemption. However, the issue
of quantum was kept open. The High Court while giving the said
finding has altogether closed itself in considering the said issue G
-and on the contrary has held that only because the Respondent
hai> been considered for grant of exemption, there is no issue
of quantum and the Respondent is entitled to entire exemption.
In our°' opinion the said finding is not in line with the observations
made by this Court in the Mahabir Vegetable case (supra) H
968 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A reported at (2006) 3 SCC 620. The quantification made by the
LLSC is in accord with the ratio laid by this Court.
33. Accordingly, we allow the appeal and set aside the
impugned judgment passed by the High Court leaving the
B parties to bear their own costs.
B.B.B. Appeal allowed.
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