(2023) taxcode.in 201 HC
IN THE HIGH COURT OF JHARKHAND
Atibir Industries Company Ltd.
v.
The State of Jharkhand and Ors.
W.P. (T) No. 3357 of 2023
Decided on 12-Sep-23
Mr. Justice Rongon Mukhopadhay and Mr. Justice Deepak Roshan
Add. Info:
For Appellant(s): Mr. Kartik Kurmy, Advocate, Mr. Sumeet Gadodia, Advocate, Mrs. Shilpi Sandil Gadodia, Advocate, Mr. Ritesh Kumar Gupta, Advocate
For Respondent(s): Mr. Sachin Kumar, AAG-II,
Judgment/Order:
J U D G M E N T
Per Deepak Roshan, J: Heard learned counsel for the parties.
2. Petitioner has filed the instant writ application primarily praying therein for the following reliefs:-:-
(i) For issuance of an appropriate writ/order/direction, including Writ of Declaration, declaring that amendment carried out vide Notification dated 7th March, 2019 (Annexure-4) by the Department of Industries, Government of Jharkhand to Clause 7.5 of The Jharkhand Industrial Investment and Promotion Policy, 2016 (for short ‘Policy of 2016’), wherein an ‘Explanation’ has been inserted to define the term ‘State GST paid on Intrastate sale subject to tax realization in the State Government Treasury’ in alleged exercise of power under Clause 10.7 of the Policy of 2016, has an effect of imposing additional restriction and/or condition nullifying the effect of the Policy of 2016 and is, thus, wholly without jurisdiction and beyond the power of the Department of Industries which is only entitled under Clause 10.7 to lay down guidelines and/or issue statutory Notification for giving effect to the provisions of the Policy.
(ii) In alternative to prayer (i) above, Petitioner prays for issuance of an appropriate writ/order/direction including Writ of Declaration declaring that purported amendment carried out under Clause 7.5 (aa)(v) of The Jharkhand Industrial Investment and Promotion Policy, 2016 vide Notification 7th March, 2019 (Annexure-4) wherein an ‘Explanation’ has been inserted to define the term ‘State GST paid on Intrastate sale subject to tax realization in the State Government Treasury’ to the extent in the inserted Explanation it has been provided that if any Input Tax Credit is claimed on the goods supplied by the Unit by any subsequent taxable person, then SGST paid on such goods shall not be eligible for reimbursement, is wholly arbitrary, illegal and contrary to the principles of Legitimate Expectations and Promissory Estoppel, as by insertion of the aforesaid Explanation, the entire benefit of subsidy/incentive on GST provided under the Industrial Policy of 2016 has been rendered nugatory and not applicable to the Petitioner’s Industry.
(iii) For issuance of further appropriate writ/order/direction for quashing/setting aside the decision contained in Memo No 393 dated 17.02.2023 (Annexure-15) of the High Power Committee headed by the Chief Secretary of Jharkhand, wherein it has been decided that Petitioner-Unit is not eligible for grant of SGST subsidy as per existing Standard Operating Procedure (for short ‘SOP’) issued by Commercial Taxes Department, Jharkhand and, accordingly, decision was taken to keep the decision of the High Powered Committee dated 6th January, 2022 in abeyance by which subsidy of Rs. 53,17,97,670/-, as SGST subsidy was sanctioned in favour of the Petitioner.
(iv) For issuance of further appropriate writ/order/direction for quashing/setting aside Letter dated 13.12.2022 (Annexure-16) issued by Additional Commissioner, Commercial Taxes Department (Respondent No.8) to the extent it relates to the Petitioner-Unit, wherein it has been communicated to Director of Industries (Respondent No.3) that Petitioner is not entitled for the benefit of SGST subsidy under the Policy of 2016.
(v) For issuance of further appropriate writ/order/ direction, including Writ of Mandamus, directing the Respondents to immediately and forthwith release the amount of GST subsidy under the Policy of 2016 to the Petitioner-Unit for the period 2017-18 to 2022-23 amounting to Rs.117,13,33,199/- along with interest @ 18% per annum from the due date of payment of said subsidy amount till the date of actual payment, especially in view of the fact that Petitioner is entitled for grant of said subsidy, as it is fulfilling all eligibility criteria under the Policy of 2016.
3. Facts of the case in short, as evident from the instant writ application, are that the State of Jharkhand, through Department of Industries, Mines and Geology promulgated Jharkhand Industrial Investment and Promotion Policy, 2016 (for short ‘I.P. 2016’), which was notified vide Notification dated 16th February, 2016. The policy was aimed at creating industry-friendly environment for maximizing investment especially in mineral and natural resources-based industries, MSMEs, infrastructure development and rehabilitation of viable sick units. The objective under the I.P. 2016 was to maximize the value addition to States natural resources by setting-up industries across the State, generating revenue and creating employment. The policy proposed to provide attractive package to industry and investment opportunities, which lead to growth in industrialization and investment having multiplies effect on economy, like employment generation, increase income level, higher tax multiplies effect on economy, like employment generation, increase of income level, higher tax revenue etc.
4. I.P. 2016, vide clause 7.5 prescribes provisions for subsidy/incentive on Value Added Tax (in short, VAT) and Clause 7.5 (a)(2) provides, inter alia, that New large projects will be given reimbursement of 75% of NET VAT per annum for seven years from the date of production with a ceiling of maximum 100% of total fixed capital investment made.
5. Clause 7.5 (b) extended the benefit provided to new large projects even to units undertaking expansion/modernization/diversification by providing inter alia that said units would be treated to be new units and would be entitled to get similar benefits in respect of VAT.
6. In view of representations made in I.P. 2016, petitioner-industry engaged in the manufacture of iron and steel, expanded its unit for production of Sinter and Pig Iron with investment of Rs. 158.88 crores. The date of commercial production of the unit was determined as 20.02.2017, which was during subsistence of the policy, which was effective from 01.04.2016 for five years.
7. The policy itself contemplated that GST regime is likely to be implemented shortly and, accordingly, a ‘Note’ was provided under clause 7.5 of the policy enabling the State Government to make appropriate amendment, deletion or substitution of any incentives granted in the policy after implementation of the Goods and Service Tax System into the State.
8. The State of Jharkhand, after implementation of GST regime, amended Clause 7.5 of the Policy vide Notification contained in Memo No. 1335 dated 16.05.2018 and inserted Clause 7.5 (aa) providing, inter alia, that new large units including the units having undertaken expansion/ modernization/diversification, would be given incentive of 75% reimbursement of ‘State GST paid on Intrastate Sale subject to actual realization in the State Government Treasury’ for seven years with a ceiling of 100% of total fixed capital investment made.
Thus, State Government, after implementation of the GST regime, in consonance with the spirit of the Industrial Policy, extended the benefit of reimbursement of State GST paid on ‘Intrastate sale’ instead of the earlier benefit stipulated of reimbursement of net VAT paid in the State. Since the State Government already amended the policy to make it in consonance with GST regime, power conferred upon State Government by virtue of the ‘Note’ attached to Clause 7.5 was also deleted.
Petitioner-Unit, since commenced commercial production on 20.02.1017, accordingly, it applied for grant of reimbursement of State GST subsidy by filing applications for the period 2017-18 (July, 2017 to March, 2018) to the period 2022-23 and claimed total incentive for an amount of Rs. 117,13,33,199/-, which is enumerated herein in a tabulated chart:-
| Period | Date of filing of application | Amount claimed |
| 2017-18 | 20.09.2018 | 7,66,58,223/- |
| 2018-19 | 28.09.2019 | 30,24,75,473/ |
| 2019-20 | 25.09.2020 | 33,93,76,443/- |
| 2020-21 | 18.06.2021 | 19,31,21,714/- |
| 2021-22 | 23.07.2022 | 12,52,16,514/- |
| 2022-23 | 24.06.2023 | 13,44,84,833/- |
| Total | 117,13,33,199/- |
9. The claim of the petitioner for SGST subsidy for the periods 2017-18 to 2020-21 under I.P.2016 was considered by High Powered Committee constituted under the policy and in the meeting held on 6th January, 2022, as against the claim of subsidy of the petitioner for the period 2017-18 to 2020-21 amounting to Rs. 91,16,31,853/-, an amount of Rs. 53,17,97,670/- was approved by the High Powered Committee and direction was given to the Petitioner to obtain No Dues Certificate from Commercial Taxes Department for payment of Incentive amount to the Petitioner-Unit.
10. It is the case of the Petitioner that though it produced “No Dues Certificate” issued by Commercial Taxes Department, but the amount sanctioned towards subsidy/incentive for the period 2017-18 to2020-21 of Rs. 53,17,97,670/- was not being disbursed to it, which compelled the petitioner to approach this Court by filing writ petition being W.P.(C) No. 6476 of 2022 primarily praying therein for issuance of Mandamus upon the authorities of the State of Jharkhand to disburse the amount of incentive in favour of the petitioner along with interest @ 18%.
11. During pendency of the aforesaid writ application, counter affidavit was filed on behalf of the State of Jharkhand and, for the first time, a subsequent decision of the High Powered Committee contained in Memo No. 393 dated 17.02.2023 was annexed along with said counter affidavit, wherein the High Powered Committee decided to keep in abeyance the earlier decision of grant of SGST subsidy to the petitioner by relying upon the purported amendment carried out in the Industrial Policy vide Notification dated 7th March, 2019, wherein an Explanation was inserted to Clause 7.5(aa). Reliance was also placed upon the Standard Operating Procedure (for short ‘SOP’) issued by Commercial Taxes Department for denying the benefit of reimbursement of State GST to the Petitioner.
12. By virtue of Notification dated 7th March, 2019, an Explanation was inserted to Clause 7.5(aa) of the I.P.2016, wherein the term ‘SGST paid on intrastate sale subject to tax realization in the State Government Treasury, as contained under Clause 7.5(aa) was expanded and it was provided, inter alia, that if a subsequent taxable person to whom supply of goods has been made, claims Input Tax Credit (for short ‘ITC’) on the goods supplied, benefit of SGST subsidy would not be available to the Industry. In the garb of the said Explanation inserted to Clause 7.5(aa), Commercial Taxes Department, vide its letter dated 13.12.2022 held that petitioner is not entitled for any subsidy as the goods which have been sold by the petitioner, although being intrastate sale, the recipient of the said goods has availed ITC and, thus, petitioner is not entitled for the benefit of reimbursement. It is in the aforesaid background; petitioner has filed the instant writ application for the reliefs stated hereinabove.
13. Mr. Kartik Kurmy, learned counsel for the petitioner along with Mr. Sumeet Gadodia, learned counsel assailed the impugned action of the State of Jharkhand in denying the benefit of incentive under I.P. 2016 by primarily contending, inter alia, that Notification dated 7th March, 2019 issued by Department of Industries, Government of Jharkhand, wherein an Explanation has been inserted to define the term ‘State GST paid on intrastate sale subject to tax realization in the State Government Treasury’ in alleged exercise of power under Clause 10.7 of the I.P. 2016 has an effect of imposing additional conditions and restrictions nullifying the effect of I.P. 2016 and is, thus, wholly without jurisdiction and beyond the power of the Department of Industries, which is only entitled under Clause 10.7 to lay down guidelines and to issue statutory notification for giving effect to the policy. Learned Counsels for the Petitioner have invited our attention to Clause 7.5 of the Industrial Policy, which is quoted herein under for the sake of ready reference:-
“7.5 Subsidy/Incentive on VAT
This facility will be available to all industries including MSME, Handloom, Sericulture, Handicraft, Khadi and village industries products, as given below:
(a) Incentive on VAT:
1) New MSME units will be given incentive of 80% NET VAT payable p.a. for five years from the date of Production with a ceiling of maximum 100% of total fixed capital investment made.
2) New large projects will be given incentive of 75% of NET VAT p.a. for seven years from the date of Production with a ceiling of maximum 100% of total fixed capital investment made.
3) New mega projects will be given incentive of 75% of NET VAT p.a. for nine years from the date of Production with a ceiling of maximum 100% of total fixed capital investment made.
4) New ultra-mega projects will be given incentive of 75% of NET VAT p.a. for twelve years from the date of Production with a ceiling of maximum 100% of total fixed capital investment made.
(b) Industrial units which have qualified to be new unit by expansion/modernization/diversification will be entitled to get similar benefits in respect of VAT. However, they have to maintain separate record of production, investment details and VAT paid/payable after such expansion/ diversification / modernization. In case, maintaining a separate record is not possible by such units the benefit to such eligible units shall be available in the ratio of installed capacity.
(c) Any unit claiming these benefits will have to get registered with Commercial Taxes Department, Government of Jharkhand and shall have to file all their statutory returns.
(d) Department of Commercial Taxes shall give top priority to such units in matters of final assessment of annual tax return in a specific time frame.
(e) Commercial Taxes Department shall also notify the responsibility of assessing officers along with time frame to be maintained in assessment of tax.
(f) VAT incentive will be made on annual basis and claim for such incentives shall be made in the next financial year after the financial year in which DoP was given.
(g) The unit for which return assessment has not been duly completed by Commercial Taxes Department will not be eligible for incentive of the VAT claimed for the next year.
(h) Net VAT incentive claim for the final year i.e. the last year of eligibility period can only be entertained after the complete assessment of all the previous years.
(i) After availing VAT incentive facility for eligibility period, industrial units are to maintain tax compliance at similar level in future for the same number of years they have claimed VAT e.g. a unit which has claimed VAT incentive for five years for location, will have to do the tax compliance for another five years after the expiry of incentive.
Note: Notwithstanding anything contained in this Industrial and Investment Promotion Policy, the State reserves its right, to take appropriate direction including amendment, deletion or substitution of any incentives as granted in this Policy after the implementation of the Goods and Services Tax System into the State.”
14. By referring to Clause 7.5 of the Industrial Policy, it has been contended that the policy, which was effective from 01.01.2016, promised incentive of 75% of net VAT per annum for seven years to new large projects (like, Petitioner-Unit) subject to a ceiling of maximum 100% of total fixed capital investment made. By specifically referring to the ‘Note’ appended to Clause 7.5, it was argued that State of Jharkhand was aware that GST regime is likely to be implemented shortly in the country including the State of Jharkhand and, thus, in order to give confidence to the proposed investors, the ‘Note’ was specifically incorporated under the Policy enabling the State Government to amend the policy and to substitute the VAT incentive granted under the Policy with GST incentive after implementation of GST regime.
15. By referring to Notification dated 16th May, 2018, it has been contended that by virtue of the said Notification, State of Jharkhand has exercised its power appended to the ‘Note’ to Clause 7.5 after implementation of the GST regime and instead of ‘Net VAT’ incentive, incentive towards ‘State GST paid on intrastate sale’ was notified by the aforesaid Notification. For the sake of ready reference, Clause 7.5(aa) of I.P. 2016 is quoted herein-under:-
“(aa) Incentive on GST
(i) New MSME unit will be given incentive of 80% reimbursement of State GST paid on intra state sale subject to the tax actual realization in the state government treasury for five year from the Date of production with a ceiling of 100% of total fixed capital investment made.
(ii) New Large unit will be given incentive of 75% reimbursement of state GST paid on intra state sale subject to the tax actual realization in the state government treasury for seven year from the Date of production with a ceiling of 100% of total fixed capital investment made.
(iii) New Mega unit will be given incentive of 75% reimbursement of state GST paid on intra state sale subject to the tax actual realization in the state government treasury for nine year from the Date of production with a ceiling of 100% of total fixed capital investment made.
(iv) New ultra Mega unit will be given incentive of 75% reimbursement of state GST paid on intra state sale subject to the tax actual realization in the state government treasury for twelve year from the Date of production with a ceiling of 100% of total fixed capital investment made.”
16. By referring to the amended Notification dated 16th May, 2018, it was contended that said Notification clearly records, inter alia, that said amendment is being made pursuant to decision of the Council of Ministers dated 18.04.2018, wherein decision has been taken to amend the Industrial Policy to make it in consonance with the GST regime. It has been specifically contended that since aforesaid Notification dated 16th May, 2018 was issued making the Industrial Policy, 2016 in consonance with the GST regime, the power given to the State Government to amend the benefit of incentive as provided under Clause 7.5 by virtue of the ‘Note’ was intentionally deleted vide Clause 4(vi) of the said Notification, which reads as under:-
17. It has been submitted that under the amended Notification dated 16th May, 2018, an Industry was entitled for incentive of 75% reimbursement of State GST paid on intrastate sale subject to actual realization in the State Government Treasury for seven years. It has been contended that the term ‘tax actual realization in the State Government Treasury’ meant Net GST payable by an Industry i.e. GST (-) ITC = Net GST.
18. It has been contended that after aforesaid amendment carried out by the State of Jharkhand and deletion of the enabling provision of amendment of the incentive under Clause 7.5 of the policy, the Department of Industries, Government of Jharkhand, in order to give effect to the Industrial Policy, in exercise of the power under Clause 10.7 of I.P. 2016, issued Notification dated 7th March, 2019. Clause 10.7 of I.P. 2016 is quoted herein-under:-
“10.7 Procedure for operationalization of the provision of the policy.
Implementation of various provisions covering the incentives, concessions etc. will be subject to the issue of detailed guidelines/statutory notifications, wherever necessary in respect of each item by the concerned Administrative Department.”
19. It has been submitted that from bare perusal of the Notification dated 7th March, 2019, it would be evident that said Notification was issued for laying down procedures/guidelines only for ‘implementation’/ कार्यान्वयन of the Policy and not to amend the Policy in any manner, but, in the garb of issuance of follow-up Notification, new conditions and/or restrictions were imposed in Explanation inserted to Clause 7.5 (aa), which reads as under :-
“(aa)(v) Explanation:- Actual realization in the state treasury means the goods supplied by the industrial unit and finally consumed within the state and SGST paid thereof realized in the state treasury. If any ITC is claimed on the goods supplied by the unit or by any subsequent taxable person in any manner whatsoever e.g. ITC on inter-State supply, then SGST paid on such goods shall not be eligible for reimbursement.”
20. It has been contended that the Department of Industries, while issuing follow up Notification, has, in effect, introduced an ‘End User Condition Within the State” which amounts to imposing additional condition and/or restriction in availing the benefit under the policy, which is not permissible in the eye of law. Reference in this regard has been placed by the counsels for the Petitioner on the decisions rendered by Hon’ble Apex Court in the cases of :-
(i) State of Bihar Vs. Suprabhat Steel Ltd., reported in (1999) 1 SCC 31 (relevant Para-7).
(ii) State of Orissa and Orts. Vs. Tata Sponge Iron Ltd., reported in (2007) 8 SCC 189.
(iii) ‘Manuelsons Hotels Private Ltd. Vs. State of Kerala and Ors., reported in (2016) 6 SCC 766.
21. It has been fervently submitted that the petitioner in the writ application specifically pleaded that amendment vide Notification dated 7th March, 2019 has been carried out by the Department of Industries, Government of Jharkhand and not by the State of Jharkhand in exercise of power under Clause 10.7 of the I.P. 2016 and said Notification is bad in law. It has been submitted that the averment made in the writ application that aforesaid Notification dated 7th March, 2019 has been issued in exercise of the power under Clause 10.7 of the I.P. 2016 has not been denied by Respondents in their Counter Affidavit and, thus, the said fact stands undisputed and admitted.
22. Further, in alternative, it has been argued that an exemption notification for promotion of industries is to be construed liberally keeping in mind the aims and objectives and the purposes sought to be achieved. Reliance in this regard has been made to the decisions of the Hon’ble Apex Court in the case of ‘Amara Raja Batteries Ltd,’ reported in (2009) 24 VST 536 (S.C.) (Paras 24,30,31), ‘Belapur Sugar & Allied Industries Ltd.’, reported in (1999) 108 E.L.T. 9 (S.C.) (Para-9), ‘Tata Cummins Ltd.’, reported in (2006) 4 SCC 57 (Para-16) and ‘M. Ambalal and Company’, reported in (2011) 2 SCC 74 (Para 16).
23. Reliance has also been placed to recent decision of Hon’ble Supreme Court in the case of Government of Kerala and Anr. Vs. Mother Superior Adoration Convent, reported in (2021) 5 SCC 602, to contend, inter alia, that a beneficial exemption notification is to be interpreted keeping the object for which the said notification has been issued.
24. It has been submitted that even if, for the sake of argument, it is presumed that amendment carried out vide Notification dated 7th March, 2019 has been carried out by Respondent-State of Jharkhand for amending the Industrial Policy, said amendment seeks to curtail and to take away and/or nullify and/or make illusionary the SGST incentive promised under Clause 7.5(aa) of I.P. 2016 and leads to absurdity and anomaly. It has been contended that ‘subsidy/incentive on VAT/GST’ under Clause 7.5 of the Policy was extended to the industries in public interest and accrued/acquired and/or vested right cannot be taken away, curtailed or additional conditions be added as neither in the Notification dated 07.03.2019 nor in the Counter Affidavit filed by Respondents, it has been pleaded that supervening public interest requires curtailment of the benefits under the Policy. It has been vehemently argued that Respondents are bound by promissory estoppel and legitimate expectations which are facets of Article 14 of the Constitution of India and, in absence of any supervening public interest’ being pleaded and/or established by Respondent-State of Jharkhand, the policy cannot be amended to the detriment of the Petitioner, as the Petitioner has made substantial investment and has altered its position. Reliance in this regard has been placed to the decisions in the cases of Birla Corporation Ltd., MRF Ltd. and Pondicherry State Cooperative Consumer Federation Ltd., and it has been contended that Hon’ble Apex Court in the aforesaid Judgments has held that rigorous burden of proof lies on State to show the supervening public interest and mere loss of future revenue cannot be a ground to invoke benefit promised under the policy, on the strength of which, Industrial Unit has already established and commenced production.
Following rulings have been cited in support of aforesaid contentions.
(i) State of U.P. Vs. Birla Corporation Ltd. reported in (2020) 72 GSTR 1 (SC);
(ii) MRF Ltd. Vs. ACST, reported in (2006) 8 SCC 702; and
(iii) Pondicherry State Cooperative Consumer Federation Ltd. vs. Union Territory of Pondicherry, reported in (2007) 10 VST 630 (SC).
25. Petitioner has further placed reliance upon the decision of Hon’ble Apex Court in the case of Brahamputra Metallics Ltd., reported in 2020 SCC Online SC 968, and has contended that State Government, after having promised to grant industrial subsidy/incentive to Industrial Units being established in the State of Jharkhand during the period 01.04.2016 to 31.03.2021, cannot deny the said incentive by amending the policy by giving it retrospective effect. In this regard it has been submitted that even otherwise, the Notification dated 07.03.2019 cannot be given retrospective effect and, if at all, it is presumed, for the sake of arguments, that State of Jharkhand was entitled under law to curtail the benefits as promised under the Industrial Policy, said curtailment would apply only prospectively and since Petitioner-Unit has already commenced its commercial production on 20th February, 2017, its accrued and acquired right under the Policy cannot be taken away. To buttress the aforesaid contention, petitioner relied upon the decision of the High-Powered Committee dated 6th January, 2022 wherein despite issuance of Notification dated 7th March, 2019, the High-Powered Committee took decision to sanction subsidy in favour of the petitioner for the period 2017-18 to 2020-21. It was submitted that High Powered Committee was aware that subsequent Notification dated 7th March, 2019 cannot apply retrospectively and, hence, benefit under I.P.-2016 which has already been accrued to the Petitioner on its coming into commercial production with effect from 20.02.2017, cannot be denied and it is in the said background that benefit of subsidy was sanctioned.
26. However, it was submitted that, subsequently, High Powered Committee, merely on the strength of the letter dated 13.12.2022 issued by Additional Commissioner, Commercial Taxes Department, denied the benefit of incentive to the petitioner vide decision contained in Memo No. 793 dated 07.02.2023, wherein earlier decision of High-Powered Committee dated 6th January, 2022 was kept in abeyance.
27. Lastly, it was argued by the counsels of the petitioner that petitioner, in terms of Clause 7.5(b) of I.P. 2016, has maintained separate record of production, investment, details of SGST paid/payable, after expansion of its Unit, but despite the same, while computing eligibility of the petitioner toward incentive, the NET SGST paid by the petitioner of its expanded unit has not been taken into consideration and, arbitrarily, the amount of incentive payable to the petitioner has been reduced even in the original High Powered Committee’s decision dated 6th January, 2022. It has been contended by the petitioner that petitioner, for the period 2017-18 up to 2022-23, is entitled for subsidy being 75% reimbursement of NET SGST paid of Rs. 117,13,33,199/- and appropriate direction in the nature of Mandamus be issued upon Respondents to sanction the said amount and, consequently pay incentive to the petitioner within the stipulated time. Petitioner also, during the course of arguments, emphasized that due to latches being committed on behalf of the State Government, petitioner has been denied its valid claim of incentive and, thus, it is liable to be compensated on account of withholding of the amount towards reimbursement of SGST incentive by issuance of appropriate direction upon the State Government to pay interest on the incentive amount to the Petitioner.
28. Per contra, Mr. Sachin Kumar, learned AAG-II has defended the decision of the High Powered Committee dated 17.03.2023 by placing reliance upon Counter Affidavit filed by the State of Jharkhand, more particularly, Paragraphs 10 and 11 thereof, which reads as under:-
“10. That it is stated and submitted that in the year 2017 after coming of GST and after implementation of GST, State of Jharkhand amended Clause 7.5 of Jharkhand Industrial Investment and Promotion Policy, 2016 through Notification vide Memo No. 1335 dated 16.05.2018.”
“11. That it is stated and submitted that on 07.03.2019 vide Memo No. 512, a notification was issued in which clause 7.5 of Jharkhand Industrial Investment and Promotion Policy, 2016 includes by amendment sub-clause (aa)(v) which is read as follows:-
“Actual realization in the state treasury means the goods supplied by the industrial unit and finally consumed within the State and SGST paid thereof realized in the state treasury. If any ITC is claimed on the goods supplied by the unit or by any subsequent taxable person in any manner whatsoever e.g. ITC on inter-state supply, then SGST paid on such goods shall not be eligible for reimbursement.”
29. During the course of arguments, we specifically asked the Respondent-State of Jharkhand to clarify as to whether impugned Notification dated 07.03.2019, which has been issued for implementation of the policy, has been issued under Clause 10.7 of I.P.2016 or has been issued under any other provision. Counsel for the Respondent, during the course of argument, relied upon Clause 10.10 of the Policy, 2016 which gives power to the State Government to amend or withdraw any of the provisions and/or scheme under the Policy, but Respondent fairly submitted that in absence of any pleadings made in the Counter Affidavit that Notification dated 7th March, 2019 has been issued in exercise of the power under Clause 10.10 of I.P. 2016, it cannot be argued that said Notification was issued in exercise of power under Clause 10.10 of the Policy. For the sake of ready reference, Clause 10.10 of I.P. 2016 is quoted herein-under:-
“10.10 Power of the State Government:-
Notwithstanding anything contained in the foregoing paragraphs of this Industrial and Investment Promotion Policy, the State Government by issuance of Notification in the official gazette may amend or withdraw any of the provisions and/or the schemes mentioned herein above.”
30. Counsel for the Respondent further relied upon provisions of Section 24 of the General Clauses Act to contend, inter alia, that power to enact includes therein the power to repeal and/or amend and submitted that the Notification dated 7th March, 2019 can be traced to the power under Section 24 of the General Clauses Act. However, there is no pleading in the Counter Affidavit of any supervening public interest for amending/withdrawing the benefits conferred under the policy and, on the contrary, the Notification dated 7th March, 2019 speaks about implementation of the Policy.
31. We have heard learned counsels for the partiers and have given our anxious consideration to the submissions made in the bar. In our opinion, following two questions arise for consideration in the instant writ petition, namely:-
(i) Whether a Notification issued under Clause 10.7 of I.P. 2016 by the Department of Industries for giving effect to the provisions of the Policy can lay down additional conditions and/or restrictions for availment of benefit of Incentive which has not been stipulated under the Policy?
(ii) Whether even if it is presumed that Notification dated 7th March, 2019 has been issued by the State of Jharkhand in exercise of power under Clause 10.10 of I.P. 2016 curtailing the benefit of Incentive of reimbursement of SGST, the same is contrary to the principles of Promissory Estoppel and whether the same can be sustained in absence of any supervening public interest being pleaded and/or established by the State of Jharkhand for curtailing the benefits as promised under I.P. 2016?
32. We have already quoted above relevant provisions of the policy including relevant Clause 7.5 and 7.5(aa) as well as Explanation inserted vide impugned Notification dated 7th March, 2019.
33. The Petitioner-unit is a manufacturer of iron and steel and expanded its unit for production of Sinter and Pig Iron with an actual investment of Rs. 158.88 crores. Admittedly, date of commercial production of the expanded unit was certified by the Department of Industries as 20.02.2017 and the Petitioner filed application for grant of SGST subsidy for the period 2017-18 to the period 2022- 23 and claimed a total Incentive for an amount of Rs. 117,13,33,199/-.
34. The policy was effective from 01.01.2016 for a period of five years and, admittedly, petitioner was falling under the ambit of the policy. The ‘Note’ appended to Clause 7.5 specifically empowers the State Government to reserve its right to take appropriate decision including amendment, deletion or substitution of any incentive after implementation of Goods & Services Tax system into the State. Admittedly, in exercise of the said power, the State of Jharkhand, through its Council of Ministers, vide decision dated 18.04.2018, decided to make the policy in consonance with the GST regime and the earlier benefit of reimbursement of ‘NET VAT’ was substituted with reimbursement of ‘State GST paid’. This decision of the Council of Ministers was notified vide Notification contained in Memo No. 1335 dated 16.05.2018 which was in consonance with the aims and objectives of I.P. 2016. It is interesting to note here that after the State of Jharkhand made suitable amendment for reimbursement of ‘State GST’ instead of reimbursement of ‘NET VAT’, as originally stipulated in I.P. 2016, in the Notification contained in Memo No. 1335 dated 16.05.2018, the State of Jharkhand expressly deleted the ‘Note’ appended to Clause 7.5 of I.P. 2016. This, in our opinion, was done by the State of Jharkhand to instill confidence amongst the investors intending to invest in the State of Jharkhand, as the State of Jharkhand, under the policy, was intending to maximize industrial growth in the State by promoting manufacturing activity. With the advent of the GST regime, the State of Jharkhand amended the Industrial Policy by providing reimbursement of SGST paid instead of reimbursement of ‘NET VAT’ and deleted the ‘Note’ appended to Clause 7.5 with a clear intention to convey a message that it has already amended the policy in terms of the GST regime and the benefit offered under the Policy would not be further amended and/or curtailed.
35. However, interestingly, the Department of Industries, Government of Jharkhand issued the impugned Notification dated 7th March, 2019, wherein although in the said Notification it was spelt out that the same is being issued for implementation of I.P. 2016, but, interestingly, an Explanation was added to Clause 7.5(aa)(v). We are again quoting the said Explanation for the sake of ready reference:-
“(aa)(v) Explanation:- Actual realization in the state treasury means the goods supplied by the industrial unit and finally consumed within the state and SGST paid thereof realized in the state treasury. If any ITC is claimed on the goods supplied by the unit or by any subsequent taxable person in any manner whatsoever e.g. ITC on inter-State supply, then SGST paid on such goods shall not be eligible for reimbursement.”
36. By virtue of the aforesaid Explanation, the term ‘actual realization in the State Treasury’ was defined to mean ‘Goods supplied by the Industrial Unit’ and finally consumed within the State and ‘SGST paid thereof realized in the State Treasury’. To this extent, there is no difficulty, as in the Notification dated 16th May, 2018, reimbursement of State GST was only to the extent of ‘intrastate sale subject to tax actual realization in the State Government’. Thus, the first part of the Explanation is in consonance with I.P. 2016 including its amendment vide Notification dated 16th May, 2018. However, the second part of the Explanation provides that if recipient of the goods or any subsequent taxable person claims ITC on the goods supplied, then, SGST paid by the eligible Unit under I.P. 2016, would not be available for reimbursement. Thus, an additional condition and/or restriction has been imposed by virtue of aforesaid Explanation, which is in the form of ‘End User Restriction’. In substance, second part of the Explanation states that if an eligible Industry sell its products on intrastate sales on which SGST is realized in Government Treasury, but, if the recipient of the goods or any other taxable person avails ITC in any manner whatsoever on the SGST paid on such goods, then, the eligible Industry would not be entitled for reimbursement of SGST paid. This additional condition or restriction which has been imposed by the Department of Industries in exercise of the power conferred under Clause 10.7 of the policy is clearly wholly without jurisdiction and beyond its powers. What has been promised by the State Government cannot be taken away by a Department of the State Government by laying down guidelines for implementation of the Policy. The issue is no longer res integra and has been settled by three decisions of the Hon’ble Apex Court in the case of Suprabhat Steel Ltd., Tata Sponge Iron Ltd. and Manuelsons Hotels Private Limited (supra).
37. In the case of Suprabhat Steel Ltd., one of the questions for consideration was whether the State Government, in issuing follow up Notification for exemption, can lay down additional conditions and/or restrictions or not? The Hon’ble Apex Court, vide Para-7 of its report, held as under:-
“7. Coming to the second question, namely, the issuance of notification by the State Government in exercise of power under Section 7 of the Bihar Finance Act, it is true that issuance of such notifications entitles the industrial units to avail of the incentives and benefits declared by the State Government in its own industrial incentive policy. But in exercise of such power, it would not be permissible for the State Government to deny any benefit which is otherwise available to an industrial unit under the incentive policy itself. The industrial incentive policy is issued by the State Government after such policy is approved by the Cabinet itself. The issuance of the notification under Section 7 of the Bihar Finance Act is by the State Government in the Finance Department which notification is issued to carry out the objectives and the policy decisions taken in the industrial policy itself, In this view of the matter, any notification issued by government order in exercise of power under Section 7 of the Bihar Finance Act, if is found to be repugnant to the industrial policy declared in a government resolution, then the said notification must be held to be bad to that extent. In the case in hand, the notification issued by the State Government on 4-4-1994 has been examined by the High Court and has been found, rightly, to be contrary to the Industrial Incentive Policy, more particularly, the policy engrafted in clause 10.4(i)(b. Consequently, the High Court was fully justified in striking down that part of the notification which is repugnant to sub-clause (b) of clause 10.4(i) and we do not find any error committed by the High Court in striking down the said notification. We are not persuaded to accept the contention of Mr. Dwivedi that it would be open for the Government to issue a notification in exercise of power under Section 7 of the Bihar Finance Act, which may override the incentive policy itself. In our considered opinion, the expression “such conditions and restrictions as it may impose” in sub-section (3) of Sectio9n 7 of the Bihar Finance Act will not authorize the State Government to negate the incentives and benefits which any industrial unit would be otherwise entitled to under the general policy resolution itself. In this view of the matter, we see no illegality with the impugned judgment of the High Court in striking down a part of the notification dated 4-4-1994.”
38. Similar issue came up for consideration before the Hon’ble Apex Court in the case of Tata Sponge Iron Ltd., wherein vide Para 7.4 and 7.5 of IPR 1992, promulgated by the State of Odisha, was under consideration. Para-7.4 of IPR 1992 provided, inter alia, for exemption of deferment of sales tax on raw materials for a period of five years subject to ceiling of 100% of fixed capital investment to new small, medium and large scale industrial units. On the contrary, Para 7.5 provided for exemption or deferment of sales tax to units undertaking expansion, modernization and diversification, wherein no restriction was imposed of availing the benefit of exemption or deferment of sales tax within five years. However, the State of Orissa, while issuing eligibility certificate to the units which undertook expansion/modernization/diversification, laid down a condition that benefit of exemption or deferment of sales tax should be availed within a period of five years/seven years. The said restriction was laid down by purported operational guidelines issued by Government of Orissa, which was challenged before the High Court of Orissa and the Hon’ble High Court of Orissa declared the said additional condition laid down in operational guidelines/instructions as being wholly without jurisdiction and without sanction of law and also ultra vires the IPR 1992.
39. The State of Odisha challenged the said decision before Hon’ble Apex Court and the Hon’ble Apex Court, in its Judgment rendered in the case of Tata Sponge Iron Pvt. Ltd. , vide Paras 13 and 20, has held as under:-
“13. The High Court passed the impugned Judgment inter alia on the premise that operational guidelines being in the nature of a subordinate sub-delegated legislation, the same was required to be in consonance with the IPR and by reason thereof no other or further condition could have been stipulated so as to prevail over the policy decision itself holding:
“….. If we accept the contention advanced by the learned counsel for the Revenue that the ‘operational guidelines’ provide a ‘limitation’ or ‘time-period’ for sales tax incentives, it would tantamount to accepting a principle that by sub-delegated legislation, a delegatee may also effectively amend or supplant legislation, which it is clearly incompetent to do. On a reading of the said ‘operational guidelines’ and the terms thereof would clearly indicate that the stipulations regarding time period find mention in Clause 5 of the ‘operational guidelines’. It would be clear that the said stipulation would relate only to those industries covered under Paras 7.3 and 7.4 of IPT, 1992 and would be limited to apply to those industries only to which ‘time periods’ have been stipulated in IPR itself and not to the industries/activities covered under Paras 7.2 and 7.5. Since the petitioner’s industry is covered in the EMD category under Para 7.5 or IPT 1992 read with Entry 44 of SRO No. 1091 of 1992, Clause 5 of the ‘operational guidelines’ cannot be said to apply to it. We are of the view that Clause 5 of the ‘operational guidelines’ and stipulation in the eligibility from (the eligibility certificate), to the extent that it provides for a period of time is not in consonance with IPT, 1992, is clearly without jurisdiction/without sanction of law and is also ultra vires IPT, 1992.
(c) The operational guidelines and/or instructions were `made for administration of incentive contained in the policy and not for the purpose of imposing any new stipulation and/or conditions alien to and/or not in consonance with the passing of the 1992 Policy. Such a stipulation cannot in law be read into and allowed to operate since it would frustrate the very objective sought to be achieved by the 1992 Policy Declaration.”
It was furthermore held:
“Drawing an analogy from the aforesaid principles of law, we are of the view that for the incentive under Para 7.5 read with Entry 44 as notified in SRO No. 1091 of 1992, exemption of tax did not provide any period of limitation. Neither IPR, 1992 nor the Finance Department notification in SRO No. 1091 of 1992 provided any stipulation as to how long the exemption from sales tax would remain in force and, therefore, the position that emerges therefrom, is that, such exemption granted under the notification was to remain operative till the industry utilizes/exhausts the incentive granted to it. The petitioner is entitled to such benefit till such time such exemption is allowed to remain in force without being withdrawn by the subsequent notification. It is important to point out here that no such notification withdrawing such exemption has been brought to our notice in course of hearing.”
“20. In view of the clear legal provision as also the aforementioned Notification dated 23-9-1992, there cannot be any doubt whatsoever that the exemption in respect of deferment of sales tax having been provided for under the Orissa Sales Tax Act as also the notification issued thereunder, the High Court, in our opinion, is correct in taking its view.”
40. The case of the Petitioner is squarely covered by the aforesaid decisions of the Hon’ble Supreme Court, as in the present case also, Department of Industries, Government of Jharkhand, in exercise of the power under Clause 10.7 of I.P. 2016, wherein power has been given for laying down operational guidelines, has imposed additional condition curtailing the benefit of reimbursement of State GST on End User restriction by providing, inter alia, that if any ITC is claimed by recipient of the goods sold by an eligible industry, the eligible industry would not be entitled for reimbursement of SGST as promised in the Industrial Policy, 2016.
41. At this stage, we would like to refer to the pleading made in the writ application, specifically paragraphs 47 and 48 thereof, wherein petitioner has specifically pleaded that its expanded unit is manufacturing Pig Iron which is not a consumable product by the people at large, or is not an End User product. It has been specifically pleaded that the expanded unit manufactures Pig Iron and Sinter, which necessarily can be used only by a Unit manufacturing Iron and Steel and the manufacturer of Iron and Steel would inevitably be entitled for ITC on the said amount and, thus, in view of the Explanation inserted vide Notification dated 7th March, 2019, benefit of reimbursement of SGST would not be available to the petitioner at any cost. Petitioner has specifically pleaded that the Explanation inserted would make the entire benefit under the policy as nugatory and/or illusionary and, in fact, the benefit stipulated in I.P. 2016 has actually been made illusionary and nugatory for the petitioner, as the High Powered Committee which earlier sanctioned incentive to the petitioner, kept in abeyance its decision vide its subsequent decision dated 06.02.2023. In view of the facts mentioned hereinabove, we answer Issue No.1 in affirmative and declare that amendment carried out vide Notification dated 7th March, 2019, wherein Explanation has been inserted to Clause 7.5(aa) of I.P. 2016, is clearly without jurisdiction, without sanction of law and is also ultra vires I.P. 2016.
Issue No. (ii)-
42. Ordinarily, after having rendered our finding on the first Issue, we would have restrained ourselves from giving any further finding on Issue No.2. However, we are persuaded by the counsels of the petitioner during the course of arguments, to even adjudicate the alternative plea raised by them on the basis of their submissions that in the State of Jharkhand, despite attractive Industrial Policy being framed by it, adequate investments are not being made by entrepreneurs due to uncertainty being prevalent among the Industrial Groups regarding actual benefit of incentive reaching to them despite promise being extended by the State of Jharkhand in its Industrial Policy. It is for the said reason, we are even persuaded to further adjudicate Issue No.2 which we have framed above.
43. A bare perusal of the Industrial Policy would reveal that broad objective of the Policy was to convert the State of Jharkhand into a favoured destination for investors and to promote sustainable Industrial Growth in the State. The Policy specifically enumerates that State of Jharkhand has accorded top priority to industrial growth as a means to mitigate poverty and unemployment. I.P. 2016 aims to establish State of the art infrastructure, promote manufacturing, enhance inclusivity poster innovation and create employment opportunities across sectors. It is with this bona fide objective I.P. 2016 has been promulgated. However, we take judicial note of the fact that despite the fact that State of Jharkhand is abundantly rich in mineral resources and also despite the fact that it is promulgating attractive Industrial Policies, still adequate industrial development has not taken place in the State of Jharkhand in a proportionate manner. This, in our opinion, is primarily due to lack of confidence among the potential investors regarding certainty of implementation of the Industrial Policy by the authorities of the State of Jharkhand. The classic example is the case of the petitioner before us. I.P. 2016, vide Clause 2.2, provided ‘Single Window Clearance Mechanism’ wherein for Ease of Doing business and for providing mandatory clearances and disbursement of fiscal incentives within the time limit, a High Powered Committee was formed under the Chairmanship of the Chief Secretary with the Principal Secretary of Department of Industries, Mines and Geology, and few other Secretaries as Members, for granting approvals of fiscal incentives for large industries. In the case of the petitioner, the High-Powered Committee, vide its decision dated 6th January, 2022, considered the claim of the Petitioner for SGST incentive for the period 2017-18 to 2020-21 under I.P. 2016 and even sanctioned an amount of Rs. 53.17 crores for being disbursed to the Petitioner subject to obtainment of “No Dues Certificate” from Commercial Taxes Department. Despite the fact that said decision was taken in January, 2022, the amount of incentive was not disbursed to the petitioner which compelled the petitioner to file a writ application before this Court being W.P.(C) No. 6476 of 2022 primarily praying therein for grant of subsidy/incentive pertaining to reimbursement of State GST. It is during pendency of the said writ application, petitioner was communicated a decision of the High-Powered Committee headed by the Chief Secretary, Jharkhand, contained in Memo No. 393 dated 17.02.2023, wherein on the opinion of Commercial Taxes Department dated 13.12.2022, the benefit granted earlier of reimbursement of SGST was denied on the ground of Explanation inserted vide impugned Notification dated 07.03.2019. Said benefit was denied on the sole ground that recipient of the goods of the petitioner had availed the benefit of ITC on such goods. It is due to the said action that Petitioner was compelled to approach this Court by filing the instant writ petition.
44. Recently, Hon’ble Apex Court, in its decision rendered in the case of Brahmaputra Metallics Ltd., dealt with Industrial Policy, 2012 notified by the State Government on 16th June, 2012. In the earlier Policy of 2012, certain benefits towards exemption from payment of 50% of Electricity Duty for a period of five years for self-consumption of captive use was stipulated vide Clause 32.10 of I.P. 2012. Despite such unambiguous promise being extended by the State of Jharkhand, in a similar fashion by issuing Operational Guidelines and/or Notification, said benefit was sought to be curtailed to eligible Industrial Units. It is in the said background that Hon’ble Supreme Court, in its aforesaid report, held as under:-
“51. Applying the abovementioned principles in the present case, we are unable to perceive any substance in the submission of the State which was urged in defense before the High Court. Not only did the State in the present case hold out a solemn representation, this representation was founded on its stated desire to encourage industrialization in the State. The policy document spelt out:
(i) The nature of the incentives;
(ii) The period during which the incentives would be n available; and
(iii) The time limit within which follow-up action would be taken by the State government through its departments for implementing the Industrial Policy 2012.
“52. The State having held out a solemn representation in the above terms, it would be manifestly unfair and arbitrary to deprive industrial units within the State of their legitimate entitlement. The State government did as a matter of fact, issue a statutory notification under Section 9 but by doing so prospectively with effect from 8 January 2015 it negated the nature of the representation which was held out in the Industrial Policy 2012. Absolutely no justification bearing on reasons of policy or public interest has been offered before the High Court or before this Court for the delay in issuing a notification. The pleadings are completely silent on the reasons for the delay on the part of the government and offer no justification for making the exemption prospective, contrary to the terms of the representation held out in the Industrial Policy, 2012. “
“53. It is one thing for the State to assert that the writ petitioner had no vested right but quite another for the State to assert that it is not duty bound to disclose its reasons for not giving effect to the exemption notification within the period that was envisaged in the Industrial Policy, 2012. Both the accountability of the State and the solemn obligation which it undertook in terms of the policy document militate against accepting such a notion of state power. The state must discard the colonial notion that it is a sovereign handing out doles at its will. Its policies give rise to legitimate expectations that the state will act according to what it puts forth in the public realm. In all its actions, the State is bound to act fairly, in a transparent manner. This is an elementary requirement of the guarantee against arbitrary state action which Article 14 of the Constitution adopts. A deprivation of the entitlement of private citizens and private business must be proportional to a requirement grounded in public interest. This conception of state power has been recognized by this Court in a consistent line of decisions. As an illustration, we would like to extract this Court’s observations in National Building Construction Corporation (supra):
“The Government and its departments, in administering the affairs of the country are expected to honour their statements of policy or intention and treat the citizens with full personal consideration without any iota of abuse of discretion. The policy statements cannot be disregarded unfairly or applied selectively. Unfairness in the form of unreasonableness is akin to violation of natural justice.”
“54. Therefore, it is clear that the State had made a representation to the respondent and similarly situated industrial units under the Industrial Policy, 2012. This representation gave rise to a legitimate expectation on their behalf, that they would be offered a 50 per cent rebate/deduction in electricity duty for the next five years. However, due to the failure to issue a notification within the stipulated time and by the grant of the exemption only prospectively, the expectation and trust in the State stood violated. Since the State has offered no justification for the delay in issuance of the notification, or provided reasons for it being in public interest, we hold that such a course of action by the State is arbitrary and is violative of Article 14.”
45. We would further like to refer another recent decision of Hon’ble Apex Court in the case of ‘Mother Superior Adoration Convent’, wherein Hon’ble Supreme Court was interpreting a beneficial Notification of Exemption and, vide Para 27 of its report has held as under :-
“27. This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that if any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Consequently, for the reasons given by us, we agree with the conclusions reached by the impugned judgments of the Division Bench and the Full Bench.”
46. Definitely, the objective of the Industrial Policy was to promote Industrial Growth and it is in that background provisions were incorporated for reimbursement of 75% of SGST. However, impugned Notification dated 7th March, 2019, in effect nullifies, annuls or makes illusionary benefit under I.P. 2016 by introducing a fresh/new ‘End User condition within the State’ having an effect of destroying the acquired and/or vested right of the Petitioner. Reliance in this regard may also be made to the decision of Hon’ble Supreme Court in the case of Madhya Pradesh & Ors. v. Orient Paper Mills Ltd., reported in (1991) SCC 176, wherein vide Para-7, Hon’ble Supreme Court has held as under:-
“7. Whether the respondent was of one mind right from the beginning to set up a power plant, with or without the assurance of the State Government dated August 1, 1961, as asserted by the State, is neither borne out nor is the view of the High Court arrived at from the record. Rather, on the contrary, the view taken is that the respondent’s indecision in that regard ended and it became decisive on the announcement of the assurance dated August 1, 1961. Such a view of the High Court was a possible view to be taken on the material placed before it and the inference drawn therefrom could be that the respondent had acted on the basis of the assurance. The effort here to redo the exercise in this regard must inevitably fail, for this Court ordinarily does not interfere with factual findings arrived at by the High Court and this case has not been shown to us to be an exception. In this situation, the view taken by the High Court was unexceptional warranting it to be left un-interfered with.”
47. Further, in the case of ‘Pepsico India Holdings Private Limited Vs. State of Kerala and ors, reported in (2009) 13 SCC 55, Hon’ble Apex Court has held at Paras 25 and 55, has held as under:-
“25. The exemption notification was issued for the purpose of achieving the economic growth in the State. The letters exchanged by and between the appellant and the authorities of the State, which we have noticed hereto before, in no uncertain terms, show that the appellant was intending to set up a plant in the State of Kerala pursuant to the provisions made by the State. It is beyond any doubt or dispute that pursuant to or in furtherance of the said assurance, the appellant altered its position. It made a huge investment. It entered into an agreement of lease with the authorities of the State for which it had expanded a sum of Rs. 2,77,64,000. The lease was for a period of 99 years with an option of renewal for another period of 99 years.”
“55. It was furthermore observed: (Sant Steels Case, SCC p. 803 para 35)—
“35. In this 21st century, when there is global economy, the question of faith is very important. The Government offers certain benefits to attract the entrepreneurs and the entrepreneurs act on those beneficial offers.
Thereafter, the Government withdraws those benefits. This will seriously affect the credibility of the Government and would show the short-sightedness of governance. Therefore, in order to keep the faith of the people, the Government or its instrumentality should abide by their commitments. In this context, the action taken by the appellant Corporation in revoking the benefits given to the entrepreneurs in the hill areas will sadly reflect their credibility and people will not take the word of the Government. That will shake the faith of the people in the governance. Therefore, in order to keep the faith and maintain good governance, it is necessary that whatever representation is made by the Government or its instrumentality which induces the other party to act, the Government should not be permitted to withdraw from that. This is a matter of faith.”
48. Recently, Hon’ble High Court of Odisha, in the case of ‘Ultratech Cement Limited and Another Vs. State of Odisha & Ors., reported in 2022 SCC OnLine Ori 13, has held as under:-
“44. It was held by the Supreme Court in the said decision as Under:-
“32. State and its instrumentalities ……. can be made subject to the equitable doctrine of promissory estoppel in cases where because of their representation the party claiming estoppel has changed its position and if such an estoppel does not fly in the face of any statutory prohibition, absence of power and authority of the promisor and is otherwise not opposed to public interest, and also when equity in favour of the promise does not outweigh equity in favour of the promisor entitling the latter to legally get out of the promise.”
“34. …. Where a right has already accrued, for instance, the right to exemption of tax for a fixed period and the conditions for that exemption have been fulfilled, then the withdrawal of the exemption during that fixed period cannot affect the already accrued right. Of course, overriding public interest would prevail over a plea based on promissory estoppel, but in the present case there is not even a whisper of any overriding public interest or equity …”
“39. …. MRF made a huge investment in the State of Kerala under a promise held to it that it would be granted exemption from payment of sales tax for a period of seven years. It was granted the eligibility certificate. The exemption order had also been passed. It is not open to or permissible for the State Government to seek to deprive MRF of the benefit of tax exemption in respect of its substantial investment in expansion in respect of compound rubber when the State Government had enjoyed the benefit from the investment made by the MRF in the form of industrial development in the State, contribution to labour and employment and also a huge benefit to the State exchequer ……. The impugned action on the part of the State Government is highly unfair, unreasonable, arbitrary and, therefore, the same is violative of Article 14 of the Constitution of India. The action of the State cannot be permitted to operate if it is arbitrary or unreasonable…. Equity that arises in favour of a party as a result of a representation made by the State is founded on the basic concept of “justice and fair play”. The attempt to take away the said benefit of exemption with effect from 15.1.1998 and thereby deprive MRF of the benefit of exemption for more than 5 years out of a total period of 7 years, in our opinion, is highly arbitrary, unjust and unreasonable and deserves to be quashed. In any event, the State Government has no power to make a retrospective amendment to SRO No. 1729/93 affecting rights already accrued to MRF thereunder.”
49. The said Judgment of Odisha High Court was challenged before Hon’ble Apex Court and S.L.P. has been dismissed.
50. There is one another aspect which we intend to highlight in our Judgment regarding retrospective application of Notification dated 07.03.2019. Admittedly, said Notification does not provide for any retrospective application and is prospective in nature. The Petitioner-unit came into commercial production on 20.02.2017 and there was no stipulation under the Industrial Policy which provided that benefit of reimbursement of NET VAT/SGST would not be paid to it if the recipient of the goods has availed ITC on such goods. In absence of the Notification dated 07.03.2019 being given retrospective effect, the accrued and acquired right of the petitioner cannot be curtailed. In view of the cumulative facts, we hereby declare that the Notification dated 7th March, 2019 having an effect of destroying the acquired and accrued and vested right of the petitioner is without any authority, irrational and unreasonable and violative of Article 14 of the Constitution of India and is unsustainable.
51. The Petitioner, during the course of argument, invited out attention to the Industrial Policy, particularly, Clause 7.5(b) which provides, inter alia, that an industrial unit which has undertaken expansion would be entitled to get similar benefit as any large Project. However, in order to get the benefit, the expanded unit is required to maintain separate records of production, investment, details of VAT/SGST paid/payable after such expansion. Petitioner, in the writ application, has annexed a Certificate issued by Commercial Taxes Department contained in Memo No. 08 dated 10.01.2022, wherein jurisdiction Assessing Authority of the petitioner has certified that the Petitioner maintains separate books of account for its expanded unit.
52. It is the case of the petitioner that although the petitioner, for expanded Unit, has maintained separate books of account, but while considering the claim of incentive of the petitioner by the High Powered Committee on 6th January, 2022, reimbursement of SGST paid was not calculated on the basis of the expanded unit, but was calculated taking into consideration the entire unit i.e., the original and expanded unit of the Petitioner, which resulted into reduction of the claim of subsidy of the petitioner. Petitioner had claimed an amount of Rs. 117,13,33,199/- for the period 2017-18 to 2022-23 being 75% of SGST paid in respect of its expanded unit, which it is entitled to receive from the Respondent-State of Jharkhand. The Respondent-State of Jharkhand is directed to calculate the incentive towards reimbursement of SGST paid to the petitioner keeping in view the expanded unit of the petitioner only, as the petitioner is maintaining separate books of account and, consequently, to sanction and disburse the amount claimed by the Petitioner.
53. In view of cumulative facts and circumstances mentioned hereinabove, we declare that the amendment carried out vide Notification dated 7th March, 2019 is not sustainable and, accordingly, we quash and set aside the decision of the High Powered Committee dated 17.02.2023 and the letter dated 30.12.2022 issued by Additional Commissioner, Commercial Taxes Department and direct the Respondents to release the amount towards reimbursement of SGST subsidy to the Petitioner under I.P. 2016 for the period 2017-18 to 2022-23 within a period of three months from the date of receipt/production of the copy of this order.
54. As a result, the instant writ application is allowed. Pending I.A. if any, also stands disposed of.
(Rongon Mukhopadhyay, J)
(Deepak Roshan, J)
Original judgment copy is available here.