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PETITIONER: BAKUL OIL INDUSTRIES & ANR.

       Vs.

RESPONDENT: STATE OF GUJARAT & ANR.

DATE OF JUDGMENT11/11/1986

BENCH: NATRAJAN, S. (J) BENCH: NATRAJAN, S. (J) THAKKAR, M.P. (J)

CITATION:  1987 AIR  142            1987 SCR  (1) 185  1987 SCC  (1)  31        JT 1986   801  1986 SCALE  (2)750  CITATOR INFO :  F          1991 SC1456  (13)

ACT:     Gujarat Sales Tax Act, 1969: ss. 15 & 49(2)--Tax  exemp- tion  for  a  period o f five years  from  commissioning  of industry--Withdrawal  Effect  and  validity  of   Government notification.     Promissory  estoppel--Doctrine  of--Grant  of  exemption from  sales  tax to new  industry--  Withdrawal  of--Whether permissible.

HEADNOTE:     By  a notification dated April 29, 1970 issued under  s. 49(2)  of the Gujarat Sales Tax Act. 1969 the State  Govern- ment exempted wholly or partly from payment of sales tax  or purchase  tax  certain specified classes of sales  and  pur- chases  described in entries 1 to 52 in the  Schedule.  This notification  was  subsequently  amended  by  another  dated November 11, 1970 by adding a new entry No. 53 in the Sched- ule  exempting a manufacturer, who established a new  indus- try,  from the whole of (a) purchase tax under s. 15 of  the Act,  (b) sales tax leviable under the Act, for a period  of five  years from the date of commissioning the industry.  By another notification issued on July 17, 1971 the  Government amended the explanation contained in the second notification thereby taking out certain industries, including oil  mills, out of the purview of the Act.     The  appellants’ oil mill set up in a  conforming  area, was  commissioned  on May 14, 1970.  Their  application  for eligibility certificate for claiming exemption from  payment of  sales  tax as per the second  notification  having  been rejected  by the Industries Commissioner, they filed a  spe- cial  civil application under Art. 226 of  the  Constitution for an order directing the Industries Commissioner to  grant them eligibility certificate. It was contended for them that the notification dated July 17, 1971 would have no effect on the  eligibility  already acquired by them in terms  of  the second notification.     The High Court took the view that the notification dated July  17,  1971 was only prospective in  operation  and  not retrospective, that it did not affect the exemption  enjoyed

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by the petitioners under the second notification in  respect of  the purchases and sales effected prior-to July 17,  1971 and  that  the  second notification  created  only  existing rights and not vested rights and such existing rights  could he taken away by  186 the  subsequent notification. It, therefore, held  that  the appellants  were entitled to exemption from payment  of  tax only  for the period anterior to July 17, 1971, and for  the period thereafter they had no rights to claim exemption.     In  this appeal by certificate under Art.  133(1)(c)  of the Constitution it was contended for the appellants that by virtue  of the first and the second notifications  they  had acquired  a  vested right to a tax holiday for a  period  of five  years  and the Government acting in  exercise  of  the delegated  powers  did not have competence  to  nullify  the exemption by giving retrospective effect to its notification dated  July I7, 1971, and that in any event they were  enti- tled  to the benefit of tax exemption for a period  of  five years  on the ground of promissory estoppel and the  Govern- ment was obligated to give tax exemption for the full period of the claim. Dismissing the appeal, the Court,     HELD:  1. The appellants are entitled to the benefit  of tax exemption. only for the limited period during which  the concession was offered by the Government. [194F]     2. Since the first notification dated April 29. 1970 did not  stipulate as to how long the exemption from  sales  tax would remain in operation the concession granted  thereunder was to have operative force only till such time that it  was allowed  to  remain in force before being withdrawn  by  the subsequent  notification.  The  second  notification   dated November  11, 1970 which set out that the exemption  granted would be operative for a period of five years from the  date of  commissioning  of the industry at any  time  during  the period from April 1, 1970 to March 31, 1975, was prospective in  operation. It would, therefore, apply only to those  new industries  which were commissioned subsequent  to  issuance thereof.  As the appellants’ unit was  commissioned  several months  before  the second notification the same  cannot  be invoked by them for claiming benefit of tax exemption for  a period of five years from the date of commissioning of their mill. [191E-192A]     3.  The State Government was under no obligation in  any manner known to law to grant exemption from sales tax.  What was granted under the first notification was only by way  of concession for encouraging entrepreneurs to start industries in  rural and undeveloped areas. Such a concession could  be withdrawn or revoked at any time and no time limit could  be insisted before doing so. The State Government was, 187 therefore,  fully within its powers to revoke the  exemption by  means of a subsequent notification. [192C,  193A,  192B, 192D]     4. 1 The Government could withdraw an exemption  granted by it earlier only if such withdrawal could be made  without offending  the rule of promissory estoppel and  without  de- priving  an  industry entitled to claim  exemption.  If  the Government grants exemption to a new industry and if on  the basis of the representation made by the Government an indus- try  is established in order to avail the benefit of  exemp- tion  then the new industry can legitimately raise a  griev- ance  that  the exemption could not be withdrawn  except  by means of legislation having regard to the fact that  promis- sory estoppel cannot be claimed against a statute. [193B-D]

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   4.2 In order to claim the benefit of promissory estoppel it was necessary to establish: (i) that a representation was made to grant the exemption for a particular period to a new industry established in view of the representation held  out by the State Government, and (ii) that the new industry  was established acting upon the representation made by the State Government.  In  the instant case, however,  the  appellants have failed to prove that but for the concession offered  in the, first notification they would not have established  the industry  in  question and that the entire venture  was  at- tributable only to the inducement offered by the Government. That  notification was made on April 29, 1970 while the  oil mill  constructed by the appellants came to be  commissioned on  May  17. 1970 itself. The issuance of  the  notification granting tax exemption only constituted a fortuitous circum- stance in appellants’ case and it could not be said that the commissioning of their industry was directly the outcome  of the   Government’s  notification  granting  tax   exemption. [193FG,H, 194AB,D]

JUDGMENT: CIVIL APPELLATE JURISIDICTION: Civil Appeal No. 2061 of 1972     From  the  Judgment and Order dated 8/9.3. 1972  of  the Gujarat High Court in Spl. Civil Appl. No. 562 of 1971.     S.T. Desai. H.S. Parihar. M.N. Tandan and Vipin  Chandra for the Appellants. G.A. Shah, Mrs. H. Wahi and M.N. Shroff for the Respondents. The Judgment of the Court was delivered by 188     NATARAJAN, J. In this appeal by certificate under  Arti- cle  133(1)(c)  of the Constitution two questions  fail  for consideration viz;                    (1) Whether the appellants had acquired a               vested  right  of exemption  from  payment  of               sales  tax  under the Gujarat Sales  Tax  Act,               1969  (for short the ’Act’) for a period of  5               years from the date of commissioning of  their               oil  mill  in respect of purchases  and  sales               relating  to the business of their  oil  mill?               and                    (2)  whether in any event the  appellants               are  entitled  to claim tax  exemption  for  a               period of 5 years under cover of the  doctrine               of Promissory Estoppel?     In  order  to achieve dispersal of industries  to  rural areas  and  to provide fillip to accelerate  development  of industries the Government of Gujarat (’Government’ in short) issued a Notification on 29.4.1970 in exercise of its pOwers under  Section 49(2) of the Act exempting wholly  or  partly from  payment of sales tax or purchase tax, as the case  may be,  certain  specified classes of sales and  purchases  de- scribed in the entries at Serial Nos. 1 to 52 in the  Sched- ule.  The  said  Notification was  subsequently  amended  by another Notification dated 11.11.1970 and a new Entry, Entry No. 53, was added in the Schedule below Entry at Serial  No. 52.  The new entry consisted of two parts, one  part  giving exemption  from purchase tax and the other, from sales  tax. The  Notification  provided that subject to  the  conditions specified  therein  a  manufacturer who  establishes  a  new industry would be given exemption of "the whole of  purchase tax under Section 15 of the Act" in respect of "purchase  of raw  materials, processing materials, machinery  or  packing

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materials from a person who is not a registered dealer".  It was  similarly provided that subject to the conditions  pre- scribed in the Notification a manufacturer who establishes a new industry would be given exemption of the whole of  sales tax  leviable  under  the Act in respect of  "sales  of  raw materials, processing materials by a registered dealer". One of  the conditions impOsed was that the new industry  should have been commissioned on or after 1.4.1970 in areas  beyond 24  kilometers  from the Municipal limits of the  cities  of Ahmedabad  and Baroda and 16 kilometers from  the  Municipal limits of Surat, Bhavnagar, Rajkot and Jamnagar and that the manufacturer  should obtain an eligibility certificate  from the  Industries Commissioner, Gujarat State  certifying  the fulfilment  of these conditions. The  Notification  provided that  a  certified manufacturer "shall be  entitled  to  the exemption  for a period of five years from the date of  com- missioning of 189 the industry as certified by the Industries Commissioner  in the  eligibility certificate". There was an  Explanation  in the Notification to define what a "new industry." means  and it was in the following terms:--               "For  the purpose of items (1) and  (2)  above               ’new industry’ means and includes an  industry               which has been commissioned at any time during               the period from 1st April, 1970 to 31st March,               1975(both  days  inclusive);  but  shall   not               include  such  industrial  undertaking  estab-               lished by transferring or shifting or  disman-               tling an existing industrial unit".     The appellants had set up a plant for decorticating  and crushing  cotton and groundnut seeds for manufacture of  oil at  a place called Kadi beyond 24 kilometers from  Ahmedabad and commissioned the plant on May 17, 1970. On the  strength of  the  location of the oil mill at a place  more  than  24 kilometers  from the Municipal limits of Ahmedabad  and  the commissioning  of the plant on May 17, 1970, the  appellants applied  to the Industries Commissioner for an  "eligibility certificate"  for claiming exemption from payment  of  sales tax  as  per the Notification dated November 11,  1970.  The Industries  Commissioner  rejected  the  application  giving certain  reasons  therefor. The appellants  thereupon  filed Special Civil Application No. 562 of 1971 under Article  226 of  the Constitution for an order directing  the  Industries Commissioner  to  grant them an eligibility  certificate  in terms of the Notification.     During  the pendency of the petition, the State  Govern- ment issued another Notification dated July 17, 1971  amend- ing  the  Explanation contained in  the  Notification  dated November  11, 1970. The amendment provided inter  alia  that "new  industry"  shall not include "any of  the  industries, whether  so  commissioned  or not, mentioned  in  the  table appended  hereto". The table set out some 14  industries  of which  the twelfth was "decorticating, expelling,  crushing, roasting,  parching, frying of oilseeds and coloring,  deco- louring  and  scenting  of oil". It would  appear  that  the effect  of the exemption was reviewed by the Government  and on  such reconsideration "the Government was satisfied  that certain industries and the oil industries in particular were sufficiently  dispersed in rural areas, in respect of  which the  existing capacity of the existing industries  was  also more than adequate" and "the Government reached the  conclu- sion  that certain industries required to be  excluded  from the purview of the Act". As the oil mill commissioned by the appellants fell within the denotified industries the  appel-

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lants  obtained  the leave of the court  and  amended  their peti- 190 tion  suitably  in order to contend  that  the  Notification dated July 17, 1971 would have no effect on the  eligibility already acquired by them to claim exemption from payment  of sales  tax in the fight of the provisions contained  in  the second Notification dated November 11, 1970.     The  appellants’  petition and a connected  matter  viz. Special Civil Application No. 1307 of 1971 filed by a  third party came to be considered together by a Division Bench  of the  Gujarat  High Court. The High Court,  by  its  judgment dated 8-9/3/72, held that the Notification dated 17.7.71 was only prospective in operation and not retrospective, that it did  not  affect the exemption enjoyed  by  the  petitioners under  the Notification dated 11.11.1970 in respect of  pur- chases  and  sales  effected prior to  17.7.1971,  that  the Notification  dated 11.11.1970 created only existing  fights and  not  vested rights and such existing  rights  could  be taken  away  by the Notification dated 17.7.1971.  The  High Court, therefore, ruled that the appellants were entitled to exemption  from payment of tax only for the period  anterior to 17.7.1971 and for the period thereafter they had no right to  claim  exemption. Being aggrieved by  the  non-grant  of relief  of tax exemption for the full period of 5 years  the appellants  have  preferred this appeal  after  obtaining  a certificate under Article 133(1)(c) of the Constitution.     Mr. Desai, learned counsel for the appellants formulated his  arguments under three heads to contend before  us  that the  High Court ought to have granted relief to  the  appel- lants  to the full extent of their claim and it  should  not have  restricted  the relief of tax exemption only  for  the period 17.5.1970 to 17.7.1971. The propositions put  forward were in the following terms:--                    1.  By virtue of the Notifications  dated               29.4.70  and 11.11.70 the appellants  had  ac-               quired  a vested right to a tax holiday for  a               period  of 5 years and the Government,  acting               in  exercise of its delegated powers  did  not               have  competence to nullify the  exemption  by               giving  retrospective effect to its  Notifica-               tion dated 17.7.71.                    2.  The High Court was not  justified  in               drawing  a  fine  distinction  between  vested               rights  and existing rights and  holding  that               the Notifications created only existing rights               and  such rights are subject to defeasance  by               means of subsequent Notifications.               3. In any event the appellants are entitled to               the benefit of               191               tax  exemption for a period of five  years  on               the  ground  of Promissory  Estoppel  and  the               Government is obligated to give tax  exemption               for the full period of claim.     Elaborating the first two ’contentions Mr. Desai  argued that  the  Government  by virtue of the  first  and  second. Notifications  had irretrievably committed itself  to  grant exemption from payment of sales tax and purchase tax to  the notified industries commissioned at any time after  1.4.1970 and  before 31.3.1975 at places beyond the  prescribed  dis- tances from the Municipal limits of the cities named in  the Notification.  Inasmuch  as the appellants  had  established their oil mill at a place more than 24 kilometers away  from the Municipal limits of Ahmedabad City and had  commissioned

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the plant on 17.5.1970 Mr. Desai argued that the  appellants had  acquired  a vested right of exemption and it  was  not, therefore,  open to the Government under law to nullify  the exemption  by  issuing the Notification dated  17.7.1971  in exercise of its delegated powers.     The merit of these contentions has to be determined with reference  to the date of commissioning of  the  appellants’ oil mill as well as the dates of the Notifications and their contents.  Admittedly, the appellants’ oil mill was  commis- sioned on 17.5. 1970 and, therefore, it follows that the oil mill was commissioned after the first Notification but  long before the second Notification. It is indisputable that  the first Notification, though it provided for exemption of  tax under  the Act, did not provide any period of exemption.  In other  words, the Notification did not stipulate as  to  how long  the exemption from sales tax’ would remain  in  opera- tion. The position emerging therefrom is that the  exemption granted  under the Notification was to have operative  force only till such time that the exemption was allowed to remain before  being  withdrawn by a subsequent  Notification.  The second  Notification  no doubt set out  that  the  exemption granted  would be for a period of 5 years from the  date  of the  commissioning  of the industry at any time  during  the period  from 1st April, 1970 to 31st March, 1975 (both  days inclusive).  But  this provision cannot be  invoked  by  the appellants  for  claiming the benefit of tax  exemption  for five  years because the second Notification was  prospective in  operation  as has been rightly pointed out by  the  High Court  in  its judgment. Since the second  Notification  was prospective  in  operation the period of 5  years  mentioned therein would apply only to those new industries which. were commissioned  subsequent to the issuance of  that  Notifica- tion.  As admittedly, the appellants’ unit was  commissioned several months before the second Notification was made,  the second Notification cannot 192 afford a basis to the appellants to raise a claim for exemp- tion  for a period of 5 years from the date of  the  commis- sioning of their plant.     Viewed from another perspective, it may be noticed  that the State Government was under no obligation to grant exemp- tion  from sales tax. The appellants could  not,  therefore, have insisted on the State Government granting exemption  to them from payment of sales tax. What consequently follows is that the exemption granted by the Government was only by way of  concession. Once this position emerges it  goes  without saying that a concession can be withdrawn at any time and no time  limit  can be insisted upon before the  concession  is withdrawn.  The  Notifications  of  the  Government  clearly manifest  that the State Government had earlier granted  the exemption  only  by way of concession  and  subsequently  by means  of the revised Notification issued on 17.7.1971,  the concession  had been withdrawn. As the State Government  was under  no obligation, in any manner known to law.  to  grant exemption  it  was  fully within its powers  to  revoke  the exemption by means of a subsequent Notification. This is  an additional factor militating against the contentions of  the appellants.     Much  of the arguments of the appellants’  counsel  pro- ceeded on the assumption that the appellants had acquired  a vested right under the Notification issued by the Government on 11.11. 1970 to claim exemption from payment of sales  tax for  a period of five years and consequently the  Government had no right to take away the appellants’ vested right.  The contentions  are untenable because of the fallacy  contained

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in  them viz. the wrong assumption that the  appellants  had acquired a vested fight. The High Court has rightly repelled the plea that the appellants had acquired a vested right and were, therefore, entitled to claim exemption from payment of tax  for a period of five years notwithstanding the  revoca- tion   of  the  exemption  under  the   Notification   dated 17.7.1971.  The High Court has further taken the  view  that the  earlier  Notifications granting exemption of  tax  only created existing rights and such existing fights can  always be withdrawn by means of a revocation Notification and  that is exactly what has happened in this case.     For  the  purposes  of this appeal we do  not  think  it necessary to go into the question whether the earlier  Noti- fication  had  created existing rights and whether  the  im- pugned  Notification had the effect of only taking away  the existing  rights.  We are taking this view because  we  have already  pointed out that the State Government was under  no obligation  to grant exemption and that the granting of  tax exemption 193 was  only  by  way of a concession. Having  regard  to  this conclusion  there  is no need for any probe to  be  made  to determine whether the Notification had created vested rights or  only existing rights. The exemption granted by the  Gov- ernment,  as already stated, was only by way  of  concession for  encouraging entrepreneurs to start industries in  rural and undeveloped areas and as such it was always open to  the State  Government to withdraw or revoke the  concession.  We must,  however,  observe  that the power  of  revocation  or withdrawal would be subject to one limitation viz. the power cannot  be exercised in violation of the rule of  Promissory Estoppel.  In  other words, the Government can  withdraw  an exemption granted by it earlier if such withdrawal could  be done  without offending the rule of Promissory Estoppel  and depriving  an  industry  entitled to  claim  exemption  from payment of tax under the said rule. If the Government grants exemption  to  a  new industry and if on the  basis  of  the representation made by the Government an industry is  estab- lished  in order to avail the benefit of exemption.  it  may then  follow that the new industry can legitimately raise  a grievance  that the exemption could not be withdrawn  except by  means  of  legislation having regard to  the  fact  that Promissory Estoppel cannot be claimed against a statute.  In the  present case the appellants had not raised the plea  of Promissory  Estoppel before the High Court. This  is  under- standable  because the principle of Promissory Estoppel  had not  found crystalised acceptance by courts of law when  the Special Civil Application came to be heard by the High Court in the year 1972. Be that as it may, we find that the appel- lants  have  not made out any case  of  Promissory  Estoppel either on the basis of the averments made in their  petition or  with reference to the facts which have emerged from  the affidavits filed in the case. In order to claim the  benefit of Promissory Estoppel the appellants must establish:--                     (i)  that a representation was  made  to               grant the exemption for a particular period to               a  new  industry established in  view  of  the               representation  held out by the State  Govern-               ment; and                     (ii) that the appellants had established               the  new industry acting upon the  representa-               tion made by the State Government. The  facts in the present case do not go to  establish  that the  appellants  had  put up the new  industry  in  question subsequent  to and in pursuance of the promise held  out  by

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Notification dated 29.4.1970 granting exemption. Putting  it differently the appellants have not 194 proved  that  but for the concession offered  in  the  first Notification,  they would not have established the  industry in  question  and that the entire venture  was  attributable only  to the inducement offered by the Government. From  the facts set out supra it may be seen that the first  Notifica- tion was made on 29.4.1970 while the oil mill constructed by the appellants came to be commissioned on 17.5. 1970 itself. It is not the appellants’ case and indeed it can never be so contended  that they launched the project and commenced  the construction of the oil mill only after the Notification  of 29.4.1970  was  made and that the  entire  construction  was completed  in  about  two weeks’ time so as  to  enable  the appellants  to commission the plant on 17.5. 1970.  What  is envisaged  under the Notification is that the  project  must have  been  undertaken and construction work  itself  should have been started in response to and acting on the Notifica- tion.  It is not sufficient to rely on the commissioning  of an industry after completion of construction work which  had been commenced long before the Notification was made by  the Government.  In respect of such an industry as .the  present one,  the issuance of a Notification granting tax  exemption would  only constitute a fortuitous circumstance and  by  no stretch of imagination can it ever be said that the  commis- sioning  of  the industry was directly the  outcome  of  the Government’s  Notification granting tax exemption. The  con- cession offered by the Government under the first  Notifica- tion  dated  29.4.70 did not prescribe any  period  or  time limit,  and hence the appellants cannot claim anything  more than  the  benefit of the Notification for such  period  the exemption  was  in force. Once the  Government  decided,  in exercise of the powers vested in it, to revoke the  original Notification,  the benefit of exemption from sales  tax  en- joyed by the appellants came to an automatic end. The period of five years mentioned in the second Notification will have no  reference to the appellants’ oil mill commissioned  much earlier  because the Notification had only  prospective  ef- fect.  We  have, therefore, to affirm the view of  the  High Court that the appellants will be entitled to the benefit of tax  exemption only for the limited period during which  the concession was offered by the Government.     We find no merit in the appeal and accordingly it stands dismissed. No order as to costs. P.S.S.                                         Appeal   dis- missed. 195