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Doson Chemicals Pvt.Ltd. v. State Of Assam And Ors.
Structured Summary of the Opinion — H. K. Sema, C. J. (Acting)
Factual and Procedural Background
The appeal challenges the judgment and order of the Single Judge dated 25.08.1998 in Civil Rule No. 3748 of 1991, which dismissed the petition. The appeal was heard on 21.04.2001 and the order was reserved to allow parties to furnish citations and documents.
The appellant is a private limited company established around 1961 as a small-scale industry and registered with Respondent No. 5. At the relevant time it employed about 58 persons (in addition to shareholders and directors). The Government of Assam issued an Industrial Policy in 1982 which was reviewed in 1986. The 1986 policy provided that existing units undertaking expansion, modernization and diversification were entitled to incentives, including sales tax exemption/reduction for a period of five years.
Pursuant to the policy incentives, the appellant undertook expansion/modernisation/diversification and spent more than Rs. 8 lakhs. The appellant obtained an Eligibility Certificate from the Udyog Sahayak dated 29.05.1989 certifying entitlement to sales tax exemption from 01.04.1988 to 31.03.1993.
The Government had enacted the Assam Industries (Sales Tax Concession) Act, 1986 to regulate incentives under the 1982 policy. That 1986 Act was repealed and substituted by the Assam Industries (Sales Tax Concession) Act, 1987, with effect from 05.01.1987. The taxation authority declined the appellant's claim for sales tax exemption (letters dated 12.04.1990 and 28.05.1990 are referenced; an impugned order dated 12.04.1993 is also referenced in the opinion) on the ground that only "new industrial units" are eligible under the 1987 Act and the appellant was not a new unit.
The appellant challenged the refusal by way of the civil rule, seeking, among other reliefs, a writ of mandamus or direction compelling the Government to carry out the promised concession based on the doctrine of promissory estoppel. The Single Judge dismissed that civil rule; this appeal followed.
Legal Issues Presented
- Whether the doctrine of promissory estoppel can be invoked to compel the Government to give sales tax exemption promised under the 1982/1986 policy/Act when the statutory provision relied upon (the 1986 Act) was repealed and replaced by the 1987 Act.
- Whether the appellant qualifies as a "new industrial unit" for the purpose of sales tax concession under the Assam Industries (Sales Tax Concession) Act, 1987 (specifically the definition in Section 2(2) of that Act), given that the appellant's industry was operative since 01.10.1962.
Arguments of the Parties
Appellant's Arguments
- The Government made a promise (through the 1982 policy and under the 1986 statute/policy regime) that industrial units established under the policy, including existing units undertaking expansion/modernisation/diversification, would receive sales tax concessions; the appellant relied on that promise by incurring expenditure and obtaining an eligibility certificate.
- The appellant's counsel (Mr. G.N. Sahewalla) argued that the Government is estopped from resiling from that promise; promissory estoppel should therefore entitle the appellant to the sales tax concession despite subsequent statutory change.
- The appellant relied upon a decision of the Supreme Court in State of Bihar v. Suprabhat Steel Limited ((1999) 1 SCC 31) to support the contention that a notification or executive act cannot deny a benefit available under an incentive policy.
Respondent / Government's Arguments
- The 1986 statutory scheme on which the appellant relies was repealed and substituted by the Assam Industries (Sales Tax Concession) Act, 1987, which was in force with effect from 05.01.1987 when the appellant's claim period (01.04.1988 to 31.03.1993) arises.
- The 1987 Act defines "new industrial unit" (Section 2(2)) to mean units whose effective steps were completed on or after 15.10.1982 but before 31.03.1990; the appellant's industry has been operative since 01.10.1962 and thus does not fall within that definition.
- Promissory estoppel cannot be invoked to bind the Government or to override or compel the exercise of statutory powers or to validate action that is ultra vires. The respondents relied on the Supreme Court's decision in Home Secretary, UT of Chandigarh v. Darshijlt Singh Grewal & others ((1993) 4 SCC 25) to show the rule that estoppel is not available against ultra vires or statutory acts.
- The appellant has not challenged the vires/validity of the 1987 Act; in those circumstances, estoppel cannot be used to circumvent the statutory scheme embodied in the 1987 Act.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Home Secretary, UT of Chandigarh & another vs. Darshijlt Singh Grewal & others ((1993) 4 SCC 25) | Promissory estoppel is not available against acts that are ultra vires statutory authorities; it cannot be invoked to compel a public authority or Government to carry out a promise contrary to law. | The court relied on the principle stated in this decision to hold that promissory estoppel cannot be used to bind the Government or to validate or compel action contrary to the statutory scheme (i.e., estoppel cannot override legitimate exercise of statutory powers). |
| State of Bihar vs. Suprabhat Steel Limited ((1999) 1 SCC 31) | The Supreme Court in that case held (in the context of a notification under section 7 of the Bihar Finance Act) that a notification would not entitle the State Government to deny any benefit otherwise available to an industrial unit under the incentive policy itself. | The court considered the decision but found the facts distinguishable and not analogous; the bench concluded that the Suprabhat Steel decision did not assist the appellant because, unlike that case, here the 1986 Act had been repealed and replaced by the 1987 Act which the appellant did not challenge. |
| Order/Judgment by Hon'ble Chief Justice N.C. Jain in Writ Appeal No. 139 of 1999 (2001 (2) GLJ 141) | This judgment/order related to the 1991 Policy (as noted in the opinion). | The court noted that this decision concerned the 1991 policy and had no bearing on the factual and legal issues in the present case. |
Court's Reasoning and Analysis
The Court agreed with the Single Judge's conclusion and proceeded by applying well-established principles governing promissory estoppel when invoked against public authorities and statutory schemes. The analysis proceeded in these principal steps:
- Legislative change and timing: The Court observed that the Assam Industries (Sales Tax Concession) Act, 1986 was repealed and substituted by the Assam Industries (Sales Tax Concession) Act, 1987 with effect from 05.01.1987. The appellant applied for exemption for the period 01.04.1988 to 31.03.1993, a period when the 1987 Act was in force.
- Absence of challenge to the new statute: The appellant did not challenge the vires (validity) of the 1987 Act. Because the 1986 Act had been substituted by the 1987 Act, reliance on the earlier statutory regime could not prevail in the face of the later statutory framework unless the validity of the replacement statute were successfully challenged.
- Legal principle on promissory estoppel: The Court reiterated the principle (citing the Supreme Court) that promissory estoppel is grounded in fairness and equity but cannot be invoked to bind the Government or a statutory authority so as to prevent the legitimate exercise of statutory powers, nor can it be used to validate or enforce promises contrary to law or which are ultra vires statutory powers.
- Application to facts: Given that the 1987 Act defined "new industrial unit" as one whose effective steps were completed on or after 15.10.1982 but before 31.03.1990, and that the appellant's industry was operative since 01.10.1962, the appellant plainly did not meet the statutory definition in the 1987 Act. Thus, under the statute in force for the period claimed, the appellant was ineligible.
- Distinguishing appellant's authorities: The Court considered the appellant's reliance on Suprabhat Steel (1999) but found the facts distinguishable because that decision dealt with a different statutory/notification context; here the 1986 Act had been repealed and substituted, and the appellant had not attacked the substitution.
- Conclusion from the above: Since the appellant sought to invoke promissory estoppel to secure benefits contrary to the statutory scheme in force (and without challenging that statute), the doctrine could not be allowed to be operative in the appellant's favour.
Holding and Implications
Holding: The Court dismissed the writ appeal and agreed with the Single Judge's order. The opinion concludes:
DISMISSED. The writ appeal is dismissed as meritless.
Direct implications for the parties:
- The appellant is not entitled to the claimed sales tax exemption for the period 01.04.1988 to 31.03.1993 under the 1987 statutory scheme because it does not fall within the statutory definition of a "new industrial unit".
- The doctrine of promissory estoppel was held inapplicable to compel the Government to honour the earlier promise to the appellant where that promise is contrary to, or displaced by, the later statute (which was not itself challenged by the appellant).
- Parties were directed to bear their own costs.
Broader implications: The Court did not purport to lay down any new legal precedent; it applied established principles that promissory estoppel cannot be invoked to override or validate action that is contrary to statute or to bind public authorities in the exercise of legitimate statutory powers.
H. K. Sema, C. J. (Acting)
This appeal is directed against the judgment and order of the learned Single Judge dated 25.08.98 passed in civil rule no.3748 of 1991 dismissing the petition. This appeal was conclusively heard on 21.4.2001. As the parties would like to furnish citations and some relevant documents to support their contentions, the order was reserved.
2. Facts leading to filing the present writ appeal may, briefly be recited. The appellant is a private limited company. The appellant industry was established some time in the year 1961 as small scale sector and it was registered with the respondent No.5. It is stated that there were about 58 employees in the industry besides share holders and Directors. In order to boost industrial development the Govt of Assam issued the Industrial Policy of 1982 and thereafter it was reviewed in 1986. It is stated that in the aforesaid policy of 1986 an existing unit which undertakes expansion, modernization and diversification are also entitled to get incentives. Such units were also held to be eligible units under the policy and also entitled to get sales tax exemption and reduction of Assam Finance (Sales Tax) for a period of 5 years.
3. It is stated that pursuant to the incentive offered by the policy to small scale industries, the appellant company also undertook expansion, modernisation and diversification of industry in term of the policy and thereafter applied for issuance of eligibility certificate to the Udyog Sahayak. It is stated that for expansion, modernisation and diversification work the appellant has spent more than rupees eight lakhs. The Udyog Sahayak after making proper enquiry and after due conside ration also issued Eligibility Certificate to the appellant on 29.5.89 certifying that the appellant is entitled to exemption of sales tax with effect from 1.4.88 to 31.3.93.
4. The Govt of Assam for the purpose of regulating the incentive granted under the 1982 Policy passed an Act namely, the Assam Industries (Sales Tax Concession) Act, 1986 and under the said Act a provision has been made for exemption of sales tax in respect of new industries as per the 1982 Policy and Rules are also framed thereunder. Thereafter, the 1982 Industrial Policy has been reviewed by the 1986 Industrial Policy. However, under the 1986 Industrial Policy the Govt of Assam did not make any statutory provision for granting exemption of the existing industries by an enactment. The appellant, however, applied for granting of sales tax exemption to the taxation authority. However, the same was refused by the taxation authority by its letter dated 12.4.90 and 28.5.90 on the ground that the appellant industry is not a new industry and the provision of the Assam Industries (Sales Tax Concession) Act, 1986 does not apply to it. Being aggrieved by the impugned letters dated 12.4.90 and 28.4.90 the appellant preferred a writ further was dismissed by the learned Single Judge. Hence, the present appeal.
5. Before we advert further for other points in the facts and circumstances as alluded above, it is clear that the Govt of Assam passed an Act called Assam. Industries (Sales Tax Concession) Act, 1986 (in short the Act), for regulating incentive of the industries granted under the 1982 Industrial Policy. However, after the 1982 Policy has been reviewed by another Policy of 1986, no such statutory provision for exemption under the 1986 Act has been provided. The civil rule was filed, inter alia, praying to issue a writ of Mandamus or direction to the Govt of Assam to carry out the promise based on the doctrine of promissory estoppel. We shall deal with this point at appropriate time a little later.
6. In the instant case the admitted fact is that the Assam Industries (Sales Tax Concession) Act, 1986 has been repealed by the Assam Industries (Sales Tax Concession) Act, 1987 with effect from 5,1.1987. It is the case of one statute substituted by another statute. The appellant company applied for sales tax exemption for the assessment year 1.4.88 to 31.3.93 while the Assam Industries (Sales Tax Concession) Act, 1987 was holding the field. The claim of the appellants for exemption of sales tax with effect from 1.4.88 to 31.3.93 was rejected by the impugned order dated 12.4.93 (Annexure 3). It reads -
"With reference to the subject mentioned above, 1 would like to inform you that only new industrial unit will get the benefit of sales tax concession.
The new industrial unit defined under section 2 (2) of the Assam Industries (Sales Tax Concession) Act, 1987 as follows:
'New Industrial Units' means an industrial unit for the setting up of which all the effective steps have been completed on or after 15th October, 1982, but before 3lst March, l990.
Since, your industries inoperative wef l.10.62, 1 do not see any legal provision as pet Assam Industries (Sales Tax Concession) Act, 1987 to accept your claim to exempt you from paying sales tax.
So, you ate liable to pay sates tax on your sales of own manufactured medicines."
7. It is vehemently contended by Mr. GN Sahewalla, learned counsel for the appellant that the Govt made a promise that industrial units established under the 1982 policy would be entitled to sales tax concession and under Assam Industries (Sales Tax Concession) Act 1986 and therefore the Govt is estopped from resiling the same promise by application of the doctrine of promissory estoppel. This contention has been rejected by the learned Single Judge in para 6 of the impugned judgment. It reads-
6. It was never in dispute that the Assam Industries (Sales Tax Concession) Act, 1986 provides sales tax concession. The validity of the Act was not in question. At any rate, the act of the respondents cannot be faulted on the face of the statutory provisions. The principle of requisite estoppel is a principle based on fairness and equity. The application of promissory estoppel will depend on the facts and circumstances of the case. There cannot be any estoppel against legitimate exercise of statutory powers. Similarly, estoppel cannot bind any promise or undertaking which is contrary to the statute. Estoppel cannot stand in the way of the Govt in formulating policy and the Legislature from making any statutory provisions. Principle of promissory estoppel cannot stop public authorities from discharging its statutory duties and the doctrine cannot hinder operation of law."
8. We are entirely in agreement with the finding of the learned Single Judge.
9. We have already held that the statute of 1986 has been repealed by another statute of 1987 with effect from 5.1.87. The appellant applied for exemption of sales tax from 1.4.88 to 31.3.93 after the 1987 Act came into being. The appellant has not assailed the vires of Assam Industries (Sales Tax Concession) Act, 1987. In such a situation there cannot be any estoppel against the legitimate exercise of statutory powers. Mr. C. Choudhury, learned Senior Govt Advocate, Assam has rightly brought to our notice the decision of the Apex Court in Home Secretary, UT of Chandigarh & another vs. Darshijlt Singh Grewal & others reported in (1993) 4 SCC 25. In mat case the Supreme Court white dealing with the rule of promissory estoppel in paragraph 23 of its judgment after referring to various decision of the Supreme Court observed as follows:
"Indeed, it is reiterated in these cases that the said rule is not available in respect of the ultra-vires acts of a statutory body/authority nor can it be invoked to compel the Govt - a public authority to carry out a promise which is contrary to law or ultra vires its powers."
10. The doctrine of estoppel cannot be invoked to confer upon public authority powers which it does not in law process. Nor can it be invoked to legitimate action which is ultra vires the statutes.
11. In the instant case, admittedly the 1986 Sales Tax Concession Act has been substituted by another Act of 1987 with effect from 5.1.87. The appellant has not challenged the vires of the 1987 Act Since the 1986 Act has been substituted a by another Act in 1987, the doctrine of promissory estoppel cannot be invoked to compel the Govt to carry out the promise which is contrary to the statute.
12. Admittedly the 1987 Act which came into being with effect from 5.1.87 defined the new industrial units thus, 'New Industrial Unit' means an industrial unit for the setting up of which all the effective steps have been completed on or after the 15th October, 1982 but before 31st March, 1990. The appellant industry has been in operative since 1.10.62 as admitted by the appellant themselves. Therefore, in our view, the appellant industry does not come within the definition of the new Industrial Unit under sub-section (2) of section 2 of the Assam Industries (Sales Tax Concession) Act, 1987.
13. Mr. GN Sahewalla, learned counsel for the appellant has strenuously contends that despite 1987 Act, the appellant company is entitled to sales tax exemption under the incentive Policy of 1986 Act. In this connection he has referred a decision of the Supreme Court rendered in State of Bihar vs. Suprabhat Steel Limited reported in (1999) 1 SCC 31. In para 7 of its judgment the Supreme Court while considering the notification issued by the Govt in exercise of power under section 7 of the Bihar Finance Act had held that such notification would not entitle the State Govt to deny any benefit which is otherwise available to an industrial unit under the incentive policy itself. In that case the notification was issued in exercise of power under section 7 of the Act denying the benefit to industrial units which granted incentive under the policy itself. Facts of this case is not analogous with the present facts of the case at hand. As pointed out above, the 1986 Act has been substituted by another Act of 1987. The Assam Industries (Sales Tax Concession) Act, 1986 on the basis of which the appellant industry claim exemption was repealed by another Act of 1987. Therefore, this decision is of no help to the appellant.
14. Mr. Sahewalla has also brought to out notice the judgment and order dated 27.3.2001 passed by Hon'ble Chief Justice Mr. NC Jain (as his Lordship then was) in batches of writ appeal viz Writ Appeal No. 139 of 1999 (2001 (2) GLJ 141) and others as third judge. A bare perusal of the order it is noticed the judgment relates to 1991 Policy and has no bearing in the facts of the case at hand.
15. In the result, there is no infirmity in the order passed by the learned Single Judge which warrants our interference. This writ appeal is accordingly dismissed as meritless. Parties are to bear their own costs.
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