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PETITIONER: AMRIT BANASPATI CO.LTD.AND ANR.

       Vs.

RESPONDENT: STATE OF PUNJAB AND ANR.

DATE OF JUDGMENT05/03/1992

BENCH: SAHAI, R.M. (J) BENCH: SAHAI, R.M. (J) MOHAN, S. (J)

CITATION:  1992 AIR 1075            1992 SCR  (2)  13  1992 SCC  (2) 411        JT 1992 (2)   217  1992 SCALE  (1)540

ACT:      Promissory  Estoppel- Nature extent  and  applicability of-Promissory estoppel cannot be enforced against Statute or public policy.      State-Announcement   of   policy  of   incentives   and concession   including  refund  of  sales  tax  to   persons establishing   large  scale  industries  in   focal   point- Establishment   of   Vanaspati   Unit-Authorities   assuring concession  and  incentive-Claim for refund  of  sales  tax- Action  of authorities held not unauthorised nor beyond  the scope of their authority-Held there was estoppel against the Government-But  scheme of refund of sales tax held  contrary to  public policy and void under section 23 of the  Contract Act and not enforceable in law.           Constitution of India, 1950 : Article 265.           Taxation-Nature      of     power-Taxation      is sovereign power.           Taxation-Refund of tax-Permissibility and legality of-No law can be made to refund the tax except when the levy is contrary to law-A promise or agreement to refund tax is a fraud on Constitution-Exemption from tax and refund of tax - Distinction  between  -  Exemption is  neither  illegal  nor against public policy-Refund of tax, unless levied  contrary to law, would be invalid and ultra vires.

HEADNOTE:      The Government of Punjab issued a brochure in December, 1966  announcing its ‘New Policy’ declaring that  incentives and  concession, one of the them being refund  of  sales-tax would be available to those persons  who were willing to set up  selective  large scale industries in  the  focal  point. Attracted by the concessions and incentives the  appellant’s Manager  wrote a letter in June, 1968 to the Chief  Minister of  Punjab expressing his willingness to set up a  vanaspati unit  provided the concession was made available to  it.  By its  letter dated 2nd July, 1968 the Director of  Industries replied the appellant assuring that the concession would  be granted to it.                                                       14 Thereafter  there  had been exchange of  correspondence  and various meetings between the appellant’s representative  and

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officials  of  the  Government. By  its  letter  dated  25th October,  1968 the appellant requested for  confirmation  of the  concession.  By a letter dated 16th June, 1969  it  was confirmed  that the State Government had agreed to give  the concession  and  incentives.  Acting on  the  assurance  the appellant purchased the land, which by a notification issued by the Government was included in the focal point, and  also invested substantial amount in setting up the unit.      Subsequently, the appellant claimed refund of sales tax paid by it to the State Government on sale made by it of its finished  products.  On respondents failure  to  refund  the amount,  the  appellant filed a writ petition  in  the  High Court  of Punjab and Haryana for a direction to refund   the sales tax to the appellant.      A  single judge of the High Court allowed the  petition and  directed  the Government to honour  its  commitment  of refunding  sales  tax  to  the  appellant  on  principle  of promissory estoppel.      On appeal the order of Single Judge was set aside by the Division  Bench  holding  that  (i)  the  decision  of   the Government to grant concession came in June,1969 but  before that  i.e. in May, 1969 the policy had undergone  a  change; (ii) in view of the decision of the Cabinet Sub-Committee in 1966 not to give any refund of sales tax the brochure itself was  unauthorised  and   consequently  the  actions  of  the Government officials could not create any right in favour of the appellant; and (iii) the refund of amount paid as  sales tax  by the appellant would be contrary to Articles 265  and 266 of the Constitution of India.      In  appeal to this Court it was contended on behalf  on the  State  that (i) in the absence of any  assurance  by  a competent  authority on behalf of  the State the promise  if any  was  incapable of giving rise to any equity;  and  (ii) that the policy of the Government announced in the  brochure was  only an offer and letter of the appellant sent on  25th October,   1968  was  a  counter  offer  which   was   under consideration of Government which made another counter offer on  16th  June  Which was accepted  by  the  appellant   who thereafter  applied  for  registration  and  the  Government issued  a  notification declaring the factory in  the  focal point.      Dismissing the appeal this Court,                                                          15      HELD  :  1.  The finding of  the  Division  Bench,  was factually  and  legally incorrect. It was not  justified  in holding that the Government officials had extended  promise, unauthorisedly and beyond scope of their authority. [26-F]      Vasant  Kumar Radhakisan Vora v. Board of  Trustees  of the  Port  of  Bombay  &  Anr.,  [1991]  1  SCC  761,   held inapplicable. 2.   The Government functions through its officials  and  so long  they are acting bona fide in pursuance  of  Government policy the Government cannot be permitted to disown it as  a citizen can have no means to know if what was being done was with tacit approval of the Government. The Government cannot be  permitted  to go back on its promise by  producing  some documents  lying  in its file which was neither  known,  nor announced, nor acted upon as it would be unjust and  unfair, therefore,  illegal. If it is found that the  representation made by the official concerned  was such that any reasonable person  would believe it to have been made on behalf of  the Government then unless such representation is established to be  beyond scope of authority it should be held  binding  on the  Government.  It is another matter that even  if  it  is binding   it   may  be  contrary  to   law   and   therefore

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unenforceable. [21F-G, 25-H, 26-A]      Motilal Padampat Sugar Mills v. State of U.P., [1979] 2 S.C.R. 641, referred to. 2.1  In the instant case the record unmistakenly demonstrate that  the authorities were not only assuring  the  appellant but were making every effort that the unit be established in consonance with the policy of Government as it would  result in  industrialization  and development of  the  State.  Such painstaking   effort of responsible and senior  officers  of the State was neither unauthorised nor beyond scope of their authority. [23b-C]   3.  There is no merit in the finding that by the time  the Government  agreed,  in  writing, to  grant  concession  the policy  had  undergone  a  change.  Estoppel  arose  against Government  not by the letter dated 16th June, 1969  but  by the  promise made by it in December, 1968, assurance by  its officials  both  in writing and oral  leading  appellant  to believe  that  it was intended to create an  agreement  that sales tax paid shall be refunded as a result of which it not only  purchased land, machinery and other parts much  before the  policy went into any change but the  Government  issued notification as                                                     16  well  declaring the area where the factory was  established to  be  in  focal point. Rights of  parties  were  therefore governed by the old and not new policy. [26H, 27A-C]      Purnami  Oil MIlls etc. v. State of Kerala,  [1987]  1 S.C.R.  654. and Assistant Commissioner of Commercial  Taxes v. Dharnendra Trading Co., [1988] 3 S.C.R. 946, referred to.      4.  The  entire argument founded on offer  and  counter offer  is misconceived. There is no merit in the  submission that after considering proposal of appellant the  Government gave  a  counter offer on 16th June, 1969. It would  be  too much  to read to letter dated 25th October, 1968 as  counter offer.  It was only intimation by the appellant that it  had decided  to set up the unit as it has been assured that  the concessions  as announced would be available to it.  [25A-C, 24-E]      5.  Promissory Estoppel being extension of principle of equity,  the  basic purpose of which is to  promote  justice founded on fairness and relieve a promises of any  injustice perpetrated due to promisor’s going back on its promise,  is incapable of being enforced in a court of law if the promise which  furnishes  the  cause of  action  or  the  agreement, express  of  implied  giving rise  to  binding  contract  is statutorily prohibited or is against public policy. [27E-F]         Union  of  India v. Indo Afghan Agencies,  [1968]  2 S.C.R.  366; Union of India V. Godfrey Philips  India  Ltd., [1985]  4 SCC 370 and Delhi Cloth and General Mills Ltd.  v. Union of India , [1988] 1. S.C.R.383, referred to.      6.  Taxation is sovereign power exercised by the  State to   realise   revenue  to  enable  it  to   discharge   its obligations.  Even  a legislature, much less  a  government, cannot enact a law or issue an order or agree to refund  the tax realised by it from people in exercise of its  sovereign powers, except when the levy or realisation is contrary to a law  validly enacted. A promise or agreement to  refund  tax which  is due under the Act and realised in accordance  with law  would be fraud on the Constitution and breach of  faith of the people. [27-G, 28A-B]      Halsbury’s  Laws  of  England, Vol.,  52;  para  20.04, referred to.      7.  Exemption from tax to encourage  industrialisation should  not  be confused with refund of tax.  They  are  two different  legal and distinct

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                                                       17 concepts. An exemption is a concession allowed to a class or individual  from  general burden for valid  and  justifiable reason.  Such provision in an Act or Notification  or  order issued by Government are neither illegal nor against  public policy. [28D-F]      7.1  But refund of tax is made in consequence of excess payment  of it or its realisation illegally or  contrary  to the  provisions of law. A provision or agreement  to  refund tax  due  or  realised  in accordance  with  law  cannot  be comprehended.  No  law  can  be  made  to  refund  tax  to a manufacturer  realised under a statute. It would be  invalid and  ultra  vires. An agreement or even  a  notification  or order permitting refund of sales tax which was due shall  be contrary to the Statute. [28G, 29A]      7.2   Neither section 12 nor section 30 of  the  Punjab Sales  Tax Act empowers the Government to refund  sales  tax realised by a manufacturer on sales of its finished product. Refund could be allowed if tax paid was in excess of  amount due. Any agreement for such refund being contrary to  public policy  was void under Section 23 of the Contract  Act.  The constitutional  requirements  of levy of tax being  for  the welfare of the society and not for a specific individual the agreement   or  promise  made  by  the  government  was   in contravention  of  public purpose thus violative  of  public policy. No legal relationship could have arisen by operation of  promissory  estoppel  as it was  contrary  both  to  the Constitution  and the law. Realisation of tax through  State mechanism  for sake of paying it to private person  directly or indirectly is impermissible under constitutional  scheme. The  law does not permit it nor equity can  countenance  it. The  scheme  of refund of sales tax was  thus  incapable  of being enforced in a court of law. [28H, 29A-D]

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.  2832- 2833 of 1979.      From  the  Judgment and Order dated  25.1.1977  of  the Punjab and Haryana High Court in Civil Writ No. 5653 of 1975 and Letters Patent Appeal No. 368 of 1975.      Kapil  Sibal,  U.K. Khaitan, Praveen  Kumar  and  Vivek Sibal for the Appellants.      D.S.  Mehra,  Mrs Jayshree Anand,  Arun  Mehra,  Sanjay Bansal and G.K. Bansal, for the Respondents.                                                         18      The Judgment of the Court was delivered by      R.M.  SAHAI,  J. Promissory estoppel,  its  extent  and applicability,  apart,  one  of the  important  issue,  that arises  for consideration in this appeal,  directed  against the judgment and order of a Division Bench of the Punjab and Haryana  High  Court exercising jurisdiction  under  Letters Patent  and setting aside order of the learned single  judge directing refund of sales tax and inter-State sales tax,  is if  the  Government  of a State  could  agree  expressly  or impliedly to refund sales tax realised by a manufacturer.      Facts,  found by the learned single Judge,  which  were sufficient    to  direct  the  government   to  honour   its commitments  of  refunding  sales tax to  the  appellant  on principle of promissory estoppel were announcement of policy by  the Government to refund sales tax, as an  incentive  to those  who  were  willing to set up  large  scale  selective industries  in  the focal points, letter  of  the  appellant seeking  details  of policy as he was willing to  set  up  a

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Vanaspati  manufacturing unit, favourable response from  the Director of  Industries followed by exchange of letters  and meetings  between appellant’s representatives and  Secretary of Industries extending assurance that the incentives  shall be available to; the appellant acting on which it  purchased land,  machinery  etc., laying of foundation  stone  by  the Governor and issuance of notification declaring the land, on which  unit was established, in focal point. The  order  was set aside in appeal and it was held that even though rule of equitable estoppel should be observed by all government  and public authorities but its scope was restricted and it could not be extended, too widely so as to bind a government  even where its officials in excess of their authority or  against the  interest  of the government extended the  promise.  The Bench drew inference against the appellant from its  letters seeking  written  assurance  that the  concession  would  be extended to it which came, as well, in June,1969 but  before that the policy had, already, undergone change in May, 1969. The Bench further felt mystified that even though there  was a decision of Cabinet Sub-Committee as far back as 1966  not to give any refund of sales tax yet the Government officials acting  contrary to it issued the brochure and  corresponded with the appellant in, wholly unauthorised manner  therefore their  action  could not create any right in favour  of  the appellant.  It  also negatived the claim  of  appellant,  as refund  of  an amount paid as sales tax  by  the  appellant, would be raising revenue by the Government not for itself or for public but for a private person which would be  contrary to Articles 265 and 266 of                                                        19 the Constitution of India.      Law  of  Promissory  Estoppel which   Found  its  ‘most eloquent  exposition’  in  Union of  India  v.  Indo  Afghan Agencies, [1968] 2 SCR 366, crystallised in Motilal Padampat Sugar Mills v. State of U.P., [1972] 2 SCR 641 as furnishing cause of action to a citizen, enforceable in a court of law, against government if it or its officials in course of their authority extended any promise which created or was  capable or  creating legal relationship, and it was acted  upon,  by the promise irrespective of any prejudice. It was reiterated in  Union of India v. Godfrey Philips India Ltd.,  [1985]  4 SCC 370 and was taken further when it was held that no  duty of  excise  was  assessable on  cigarettes  manufactured  by assessee   by  including,  cost  of  corrugated   fibreboard containers,  when it was clearly represented by the  Central Board  of Excise and Customs in response to  the  submission made  by  the Cigarette Manufacturer’s’ Association-and  this representation  was  approved and accepted  by  the  Central Government   -  that  the  cost  of  corrugated   fibreboard containers  would  not be includible in the  value  of   the cigarettes for the purpose of assessment of excise duty.  In Delhi  Cloth  and  General Mills Ltd . v.  Union  of  India, [1988] 1 SCR 383 it was held.          "All  that  is  now  required  is  that  the  party          asserting   the  estoppel  must  have   acted   the          assurance given to him. Must have relied  upon  the          representation made to him. It means, the party has          changed  or altered the position by relying on  the          assurance or the representation. The alteration  of          position  by  the party is the  only  indispensable          requirement of the doctrine. It is not necessary to          prove  further any damages, detriment or  prejudice          to the party asserting the estoppel."      What,  therefore , requires to be examined, is  if  any     promise  was made by the Government or its officials  to

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   the appellant that sales tax shall be refunded to it and     if the appellant acting on it altered its position.  For     this  it is necessary to narrate few facts  even  though     both  the learned Single Judge and Division  Beach  have     dealt  with it elaborately. Admittedly. a  brochure  was     issued  in  December 1966 by the Government   of  Punjab     announcing its ‘New Policy’ declaring that incentive and     concession, one of them being refund of sales tax, would     be available to those persons who set up selective large     scale  industries  in  the  focal  point.  Whether  this     brochure  was authorised or not and its legal effect  on     rights of parties shall                                                      20     be  adverted to later. But it is undisputed that  acting     on  it  the appellant’s representative   met  the  Chief     Minister  of the State personally and found that he  was     interested  in encouraging Vanaspati Manufacturing  unit     in  the  State,therefore, its Manager wrote a letter  in     June, 1968 to the Chief Minister expressing  willingness     to  set up the unit provided the concessions  were  made     available  to  it which was replied by the  Director  of     Industries on 2nd July, 1968 assuring the appellant that     the  concession  as  announced shall  be  available  and     further  informed the appellant that the Government  was     willing to consider such additional concession which the     appellant may require for implementation of the  scheme.     It  was  followed  by  exchange  of  correspondence  and     various meetings between appellant’s representative  and     officials  of the Government. Outcome of it is  recorded     in the note submitted by the Secretary of Industries  on     1.4.1969 to Finance department, on certain queries  made     by it, relevant portion of which reads,          "As Government investment had take place in Rajpura          the   Sub-Committee  appointed  for  allotment   of          industrial  plots was very much concerned to  allot          the same but it was finding  difficulty in  getting          suitable parties.  In October, 1968 Shri Khaitan of          Amrit Banaspati Factory of Ghaziabad approached  me          and the D.I. for location of their vanaspati  plant          of  100  tonnes capacity per day in  Punjab.  These          people  since  they were already very much  in  the          business and since their vegetable ghee was meeting          20  to  25% of Punjab’s needs of vanaspati  it  was          felt  that if we encourage these people to come  to          Punjab  it  will  give great  boost  to  industrial          growth.   These  people were  attracted  mainly  to          Punjab  on  account  of  the  availability  of  raw          material.  i.e.,  groundnut  which  are  in  plenty          around  about.  They consequently asked for a  plot          in  Dhandari  Kalan.  At  that  stage  we  had  2-3          application  for setting up of vanaspati plants  at          Ludhiana and since our Rajpura Estate was very much          neglected  it  was decided that  we  persuade  this          party to locate its factory at Rajpura as by  their          coming  there, it was felt that several  small  and          ancillary  units  would also get  located  and  our          plots would be sold.  In fact Shri Khaitan,  during          the  course  of his discussions with  me  mentioned          that  his  project which would  be  costing  nearly          Rs.1.5  crores  would necessitate  setting  up  the          other smaller units-tin makers-who would come  over          from  U.P.  and settle up at Rajpura .  Taking  all          these                                                          21          factors into consideration I mentioned this  matter

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        to  Mr.---- and also informally to FS also at  that          stage  and  it was decided that we get  this  party          located  at Rajpura. Unfortunately, the  demand  of          land by this party was in one place to the tune  of          15 to 20 acres and since our plots were only of  1-          1.5 acres of  size it was decided that they may  be          allowed  to  locate their plot nearabout our  Focal          Point so that it could be integrated finally in our          future  expansion  of  the  Industrial  Estate   at          Rajpura  which  yet  shows  no  sign  of  life  and          consequently it was felt that by bringing this part          more  industries of allies nature would come  here.          In plan for 1969-70 the F.D. are aware that we have          very little money set aside for further acquisition          of land.  Realising this, we, therefore,  suggested          to  this  party  to go in   for  purchase  of  land          themselves as we were not sure whether we would  be          able  to have enough funds to acquire more land  at          Rajpura particularly when our earlier plots had not          been  sold out.  This party was keen to come in  as          it  wanted  to do  into production  from  November,          1969.  The party has purchased that piece  of  land          which has approval of the Town and Country Planning          department,  it  has also submitted  its  plan  for          construction of buildings etc."         It  is, thus, obvious that there was  representation     to the appellant that it would be entitled to concession     and incentives announced by the Government if it set  up     its   unit   in   the   focal   point.    Whether   such     representation   resulted   in  binding   agreement   is     different  issue  but  the  representation  coming  from     Industries  Secretary  and  Director  of  Industries  in     pursuance  of  Government policy cannot be  held  to  be     unauthorised  or  beyond the  scope of  authority.   The     Government  functions through its officials and so  long     they  are  acting bona fide in pursuance  of  Government     policy  the Government cannot be permitted to disown  it     as a citizen can have no means to know if what was being     done was with tacit approval of the Government.  And  if     it is found that the representation made by the official     concerned  was  such that any  reasonable  person  would     believe it to have been made on behalf of the Government     then  unless  such representation is established  to  be     beyond  scope of authority it should be held binding  on     the government.  It is another matter that even if it is     binding  it  may  be  contrary  to  law  and   therefore     unenforceable.  In Motilal Padampat Sugar Mills  (supra)     the Government was held bound to grant exemption from                                                        22     sales tax to the sugar mill even though the manufacturer     had  written letter to the Director of Industries  on  a     news  item published for grant of exemption  from  sales     tax,  based  on a statement issued by the  Secretary  of     Industries  which  was favourably replied first  by  the     Director  of  Industries  endorsed later  by  the  Chief     Secretary informing the manufacturer that government was     willing to consider the request and necessary from  etc.     may be obtained from Secretary Industries.  As is  clear     from the noting of the Secretary the appellant purchased     the land, privately, on assurance of the Secretary which     by  a notification issued by Government was included  in     focal  point.  It was not denied that by  January,  1969     the appellant had purchased  the land and various  other     materials at a cost of 15 lakhs and had placed an  order     for  purchase of plant and machinery of value  of  Rs.35

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   lakhs  which  was intimated by a telegram sent  on  11th     January, 1969. Even rules were framed in February,  1969     by sanction of the President of India which provided for     refund  of sales and purchase tax to new  and  expanding     industries  .  All this indicates that  the promise  was     made  on  behalf of the Government by its  officials  in     pursuance of and in line with the declaration of  policy     by  the Government that a new unit shall be entitled  to     concession.   Acting on the assurance, both express  and     implied,  the appellant invested substantial  amount  in     setting  up the unit requesting, in the  meanwhile,  for     grant  of  written sanction from the  Government  which,     too,  came.  But even if it would not have it would  not     have made any difference in law as the  equity arose  in     favour  of appellant not by the letter dated 16th  June,     1969 but by altering its position on assurance given  by     authorities. In Godfrey Philips (supra) it was observed,          "Now  the doctrine of promissory estoppel is  well-          established in the administrative law of India,  It          represents  a principle evolved by equity to  avoid          injustice  and,  though commonly  named  promissory          estoppel,it is neither in the realm of contract nor          in  the  realm  of estoppel.   The  basis  of  this          doctrine  is the interposition of equity which  has          always, true to its form, stepped into mitigate the          rigour of strict law."      Basic ingredients  of promise by the Government, belief of  the appellant that it was true and if acted upon  shall, entitle it to refund of sales tax, and finally altering  its position   by   investing  substantial  amount   were   thus established   to   invoke   promissory   estoppel    against government.                                                       23 Vehement  argument of the learned counsel, for the State  of Punjab,  that  in absence of any assurance  by  a  competent authority  on  behalf of the State the promise  if  any  was incapable  of giving rise to any equity, cannot be  accepted in  absence  of  any  positive material  to  show  that  the Government either disassociated itself from the letter  sent by the Secretary or Director of Industries or acted contrary to  what was alleged to have been represented or assured  by them.  On  the  other hand the  notings  of  the  Secretary, extracted   earlier,  demonstrate  unmistakenly   that   the authorities  were not only assuring the appellant  but  were making  every  effort  that  the   unit  be  established  in consonance with the policy of Government as it would  result in  industrialisation  and development of  the  State.  Such painstaking effort of responsible and senior officers of the State  was  neither unauthorised nor beyond scope  of  their authority.  In fact the letter dated 16th January, 1969  and the  notification  declaring  the land  where  the  unit  of appellant was established to be in focal point to enable  it it avail of the  concession were only follow up action which demolish any such conclusion as was canvassed by the learned counsel.      Effort  was,  also,  made  to  advanced  an  innovative submission of offer, counter offer and recounter offer.   It was submitted that policy of the Government announced in the brochure  was  only an offer.  And letter of  the  appellant sent  on  25th October, 1968 was counter  offer  which   was under consideration of Government which made another counter offer  on 16th June which was accepted by the appellant  who thereafter  applied  for  registration  and  the  Government issued  a  notification declaring the factory in  the  focal point.  All  that can be said is that  the  submission   was

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advanced  without any foundation, in complete is  regard  of facts and misapprehension about the law of offer and counter offer.  Letter dated 25th October, 1968 was written, to  the Secretary  of  Industries  Pursuant  to  letter  dated   2nd July,1968  and with reference to the interview held  between appellant’s representative  and the Secretary of  Industries at Chandigarh on 16th October,1 1968 undertaking to set up a factory  at  Rajpura,  a site  approved  by  the  department within area covered by the layout plan of industrial  estate with  assurance  that the plot shall be in focal   point  at Rajpura and if necessary steps shall be taken to include  it in focal point.  The letter mentioned that according to  the policy  the concession available to the appellant  would  be refund of purchase and sales tax including inter-state sales tax  for  a  period of five years.  In paragraph  6  of  the letter  the appellant  wanted clarification that the  period of five years shall be counted from the date of production.                                                            24 Paragraph 7 of the letter read,          "7.   We  would very much like to  spend  money  on          further  industrial development, staff  and  labour          welfare  activities, housing for staff and  labour,          research  and development of agricultural  products          for  use  in industry in the State  of  Punjab.  In          order  to enable us to do so, it is requested  that          instead of refunding the amount of the purchase and          sales  tax including inter-state sales tax as  such          an amount equivalent to the amount of purchase  and          sales  tax including inter-state tax to be paid  by          us  every  quarter is paid to us as  Capital  grant          quarterly  for  a period of five  years  commencing          from  the  date of production.  If our  request  is          accepted,  we on our part undertake to utilise  the          same for all or any of the said purposes as we feel          proper in the State of Punjab. You will  appreciate          that  after  all  the State  will  benefit  if  the          concession are utilised for advancement of industry          and research and staff and welfare in the State and          this will be possible if our request is  considered          favourably."      Request for confirmation of the concession mentioned in the  letter  dated 25th October, 1968 were reiterated  in  a telegram  sent on 11th January and letters dated  3rd,  13th and  23rd January, 1969.  It would be too much to  read  the letter  dated 25 th October, 1968, as counter offer, It  was intimation  by the appellant that it had decided to  set  up the  unit  as it  has been assured that the  concessions  as announced  would  be available to it. The request  that  the period  of five years for refund should be  calculated  from the date of production, and capital grant may be made  every quarterly  equivalent  to  the  amount  of  sales  tax   are impossible  to  be read as declining of availing  the  offer made  by  the Government.   What was requested was  that  if instead  of  refunding of the sales tax or purchase  tax  an amount  equivalent to it was paid to them every quarter  for a  period of five years it would enable them to utilise  the same  for  the benefit of the State itself.    It  was  this request  which was reiterated in the telegrams  and  letters but at no point of time the appellant made any request  that if  capital  grant was not paid it shall not  avail  of  the concession  in  respect  of sales tax.  The request  was  to change  the nature of payment and not the refund.  It  could no  be termed as counter offer, also because  the  appellant not only undertook to establish the unit but as agreed  went on to purchase land and

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                                                      25 machinery etc. Nor is there any merit in the submission that after considering proposal of appellant the Government  gave a counter offer on 16th June, 1969 forgetting that  issuance of  letter was not an isolated action of the Government  but it  was  preceded,  apart,  from  earlier  notings  of   the Secretary  extracted earlier, by a meeting which took  place on  2nd May between various officials in which the  decision was taken. ‘that the concession and incentives applicable to focal  point will be given to M/S Amrit Banaspati  Co.  Ltd. only  in respect of 12 acres of land to be utilised by  them for setting up the ghee industry’.  Letter dated 16th  June, 1969 was faithful reproduction of the decision taken on  2nd May,   1979  informing  the  appellant  that,   ‘the   State Government   have  agreed  to  give  the   concessions   and incentives  admissible  to  a unit in  the  focal  point  of industrial  growth to the unit proposed to be set up by  you for the manufacture of Vanaspati Ghee.’  The entire argument founded an offer and counter offer, thus, was misconceived.      Two  reasons were given, by Division Bench of the  High Court, to permit the Government to escape from rigour of the principle  of  promissory  estoppel one  that  the  brochure itself was unauthorised and other that  when the decision of the Government came the policy had already undergone change. Neither appear to be well founded.  Cabinet  Sub-Committee’s decision  of 15th December, 1968 which formed the basis  for the finding that the brochure was unauthorised, are  minutes of  a decision of a Committee comprising of  the  Industries Minister and Secretary Industries which did not see light of the day till it was filed by way o;f supplementary affidavit before  the  Division  Bench.   As  against  it,  the  Chief Minister  and Industries Minister in an inaugural speech  of Conference  Of Industries at Chandigarh after five  days  of its,  that  is,  on  20th  December,  1968,  announced  that concession  and incentive shall be offered to new units  set up  in  focal points details of which were  mention  in  the booklet  issued  by the Government in December, 1966,  which provided of refund of sales tax as claimed by the appellant.      A  citizen  of a State can have no means  to  ascertain that  announcement by the Chief Minister and the  Industries Minister of State that concession made in the booklet  would be  available  was not the government policy as the  Cabinet Sub-Committee  earlier had taken some other  decision.   The Government cannot be permitted to go back on its promise  by producing some documents lying in its file which was neither known,                                                        26 nor  announced,  nor acted upon as it would  be  unjust  and unfair,  therefore,  illegal. Factually the  Division  Bench read  too much in the minutes of 15th December, 1968 but  it is not necessary to deal with it. Suffice it to say how  the Government  understood and wanted others to  understand  its policy was mentioned in the brochure. Even the Secretary who was a member of the Sub-Committee understood it in the manner in  which  it  was  printed in  the  booklet.  In  the  note submitted to the Finance Department it was stated,          "...The  Entire  Matter of giving  concessions  was          discussed  at  the  Cabinet  level  and  all  these          factors  (namely  exemption from sales  tax)*  were          taken into consideration when the Government took a          decision to give such attractive concessions to the          industry.   I  would like this case to be  seen  by          D.M.  also as he had enquired about this case  from          me.   The Amrit Banaspati people as I.N. and  F.S.R          are  aware, have already gone for  construction  of

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        their  building  and according to their  plan  they          propose  to go into product in November 1969.  They          are  anxious  that the Government  takes  an  early          decision granting concession to their unit  also.As          it  is a big industry we should take  an  immediate          decision as by so doing the possibility of bringing          in ancillary can be explored thereby ensuring  that          our  industrial estate gets fully developed at  the          earliest..."                                        *[bracket supplied]      As stated earlier the letter dated 16th June, 1969  was founded  on  notings of 27th May, 1969 which  was  based  on decision  arrived  on 22nd May, 1969.  The  finding  of  the Division  Bench, was thus, factually and legally  incorrect. It  was  not  justified  in  holding  that  the   Government officials  had extended promise, unauthorisedly  and  beyond scope of their authority. Reliance on Vasantkumar Radhakisan Vora  v. Board of Trustees of the Port of Bombay &  another, [1991]  1 SCC 761 was not apposite as the Estate Manager  at whose instance the lessee had deposited the amount for grant of  tenancy after reconstruction was authorised  to  collect rent  only. Further the letter indicated that if the  lessee complied with conditions he would recommend to the Board for grant  of  lease.   And recommendation was  made.   But  not accepted.      Nor there is any merit in the finding that by the  time the Government                                                        27 agreed,  in  writing,  to grant concession  the  policy  had undergone  change, therefore, the appellant was entitled  to the  concession  under the new policy only,  Estoppel  arose against  Government not by the letter dated 16th June,  1969 but by the promise made by it in December, 1968 to those who were willing to set up new unit, assurance by its  officials both in writing and oral leading appellant to belief that it was  intended  to create an agreement that  sales  tax  paid shall be refunded as a result of which it not only purchased land, machinery and other parts much before the policy  went into  any change but the Government issued  notification  as well declaring the area where the factory was established to be in focal point. Rights of parties were therefore governed by  the  old  and not new policy. The  appellant  was  never intimated  that  the Government had changed  its  policy  in respect of refund of sales tax at any point prior to  filing of  the counter affidavit in th High Court. Even the  letter dated  16th June, 1969, did not mention that the  concession would  be  available  as provided in  the  new  policy.   In Purnami Oil Mills, etc. V. State of Kerala, [1987] 1 SCR 654 the  Government was not permitted to go back on its  earlier promise  of wider exemption from sales tax in  pursuance  of which  the  industries  had  been set  up  on  principle  of promissory  estoppel and the Notification issued  after  one year  curtailing exemption was held to apply  to  industries set  up  thereafter.   To same effect  is  the  decision  in Assistant  Commissioner  of Commercial Taxes  v.  Dharnendra Trading Company [1988] 3 SCR 946.      But Promissory Estoppel being on extension of principle of equity, the basic purpose of which is to promote  justice founded on fairness and relieve a promisee of any  injustice perpetrated due to promisor’s going back on its promise,  is incapable of being enforced in a court of law if the promise which  furnishes  the  cause of  action  or  the  agreement, express  of  implied,  giving rise to  binding  contract  is statutorily  prohibited  or is against public  policy.  What then  was  the nature of refund which was  promised  by  the

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govt.?  Was such promise contrary to law and against  public policy? Could it be enforced in a court of law? Taxation  is a sovereign power exercised by the State to realise  revenue to enable it to discharge its obligations. Power to do so is derived  from entries in Lists I, II and III of the  Seventh Schedule  of the Constitution. Sales tax or purchase tax  is levied in exercise of power derived from an Act passed by  a State under Entry 54 of List II of VIIth Schedule. It is  an indirect tax as even though it is collected by a dealer  the normally permits it to be passed on and the ultimate  burden is borne by the consumer. But ’the fact that the burden of                                                        28 a  tax may have been passed on the consumer does  not  alter the  legal nature of the tax’ (Halsbury’s Laws  of  England, Vol.  52,  paragraph 20.04). Therefore even  a  legislature, much  less government, cannot enact a law or issue an  order or  agree  to refund the tax realised by it from  people  in exercise  of its sovereign powers, except when the  levy  or realisation is contrary to a law validly enacted. A  promise or  agreement to refund tax which is due under the  Act  and realised  in  accordance with law would be a  fraud  on  the Constitution and branch of faith of the people.  Taxes  like sales  tax are paid even by a poor man irrespective  of  his savings with a sense of participation in growth of  national economy and development of the State. Its utilization by way of  refund  not  to the payer but to  a  private  person,  a manufacturer,  as  an inducement to set up its unit  in  the State  would be breach of trust of the people  amounting  to deception under law.      Exemption  from  tax  to  encourage   industrialisation should  not  be confused with refund of tax.  They  are  two different  legal  and distinct concepts. An exemption  is  a concession  allowed  to a class or individual  from  general burden  for valid and justifiable reason.  For instance  tax holiday or concession to new or expanding industries is well known  to  be  one  of the methods  to  grant  incentive  to encourage  industrialisation. Avowed objective is to  enable the  industry to stand up and compete in the  market.  Sales tax is an indirect tax which is ultimately passed on to  the consumer.  If  an industry is exempt from tax  the  ultimate beneficiary  is  the consumer.  The industry is  allowed  to overcome  its  teething period by selling  its  products  at comparatively   cheaper   rate  as   compared   to   others. Therefore,  both the manufacture, and consumer gain, one  by concession  of  non-levy  and other  by  non-payment.   Such provisions  in  an Act or Notification or orders  issued  by Government are neither illegal not against public policy.      But  refund  of tax is made in  consequence  of  excess payment  of it or its realisation illegally or  contrary  to the  provisions of law. A provision or agreement  to  refund tax  due  or  realised  in accordance  with  law  cannot  be comprehended.  No  law  can  be made  to  refund  tax  to  a manufacturer realised under a statute.  It would be  invalid and  ultra  vires.  The Punjab Sales Tax  Act  provided  for refund of sales tax and grant of exemption in  circumstances specified  in  Sections  12  and  30  respectively.  Neither empowered  the Government to refund sales tax realised by  a manufacturer on sales of its finished product. Refund  could be allowed if tax paid was                                                        29 in excess of amount due. An agreement or even a notification or order permitting refund of sales tax which was due  shall be contrary to the statute.  To illustrate it the  appellant claimed  refund  of  sales  tax paid  by  it  to  the  State Government of sale made by it of its finished products.  But

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the  tax  paid is not an amount spent by the  appellant  but realised on sale by it. What is deposited under this head is tax  which  is otherwise due under provisions  of  the  Act. Return  of refund of its or its equivalent, irrespective  of from  is  repayment or refund of sales tax.  This  would  be contrary  to  Constitution. Any agreement  for  such  refund being contrary to public policy was void under Section 23 of Contract  Act.  The constitutional requirements of  levy  of tax  being  for  the welfare of the society and  not  for  a specific  individual  the agreement or promise made  by  the government  was  in  contravention of  public  purpose  thus violative of public policy. No legal relationship could have arisen  by  operation  of  promissory  estoppel  as  it  was contrary both to the Constitution and the law.   Realisation of  tax  through State mechanism for sake of  paying  it  to private person directly or indirectly is impermissible under Constitutional  scheme.   The  law does not  permit  it  nor equity  can countenance it.  The scheme of refund  of  sales tax was thus incapable of being enforced in a court of law.      Fallacy  of  such  constitutionally  inhibited  policy, sacrificing  public  interest resulting in  illegal  private enrichment  is exposed by claim of refund for nearly  Rs.  2 crores,  for  a  period of three  years,  only,  when  total investment in establishing the unit was Rs. 1.5 crores, Levy of tax to raise revenue for promoting economic growth of the State  reduced itself in enhancing the profit margin of  the manufacturer  and the sales tax stood converted into  income of  the appellant. Such contrivance of law even though  bona fide is legally unenforceable.      In  the result this appeal fails and is dismissed  with cost.   T.N.A.                                 Appeal dismissed.                                                      30