JUDGMENT
Satyeshwar Roy, J.
1. Petitioner No. 1, the company, set up an industrial unit at Adityapur for the manufacture of steel wire ropes in coils. The unit went into production on 21st March, 1979. The petitioners, petitioner No. 2 is a share holder of petitioner No. 1, have prayed for appropriate writ for commanding the respondents to grant exemption to petitioner No. 1 from sales tax in respect of purchase of raw materials made by it for its Adityapur industrial unit for a period of ten years from 21st March, 1979. Prayer has also been made for quashing annexure 11 order dated 24th November, 1979, passed by respondent No. 1 by which the petitioner was granted exemption from the levy of general sales tax, special sales tax or purchase tax up to the period of 31st March, 1979.
2. The petitioner’s case is that on 29th September, 1973, the Government of Bihar in the Department of Industry and Technical Education adopted a resolution, which was duly published in the Bihar Gazette, to grant various incentives for establishment of new large and medium industry in the State- of Bihar in private sector. It was, inter alia, resolved in that resolution that during the initial period of production the Government would grant exemption from sales tax on all purchase of raw materials needed in the process of manufacture for a period of ten years from the date the unit went into production and exemption from multi-point sales tax at the first stage of sales from the manufacturer for a period of ten years from the date the unit went into production. Relying upon this resolution as contained in annexure 1 petitioner No. 1 took steps for setting up an industrial unit at Adityapur. It applied to the Government of India for an industrial licence for the manufacture of steel wire ropes in coils in that Unit. The Government of India granted letter of intent dated 26th July, 1976, to petitioner No. 1. It obtained loans both in Indian currency and foreign exchange from different financial institutions including banks. The Adityapur Industrial Area Development Authority (A.I.A.D.A.) allotted land to petitioner No. 1. It thereafter established and set up the industry in 1977-78. Petitioner No. 1 wrote the Industrial Development Commissioner, Bihar, after furnishing him various details and informations in respect of the unit, to confirm that the industrial unit would get the necessary exemptions from sales tax besides other incentives. These letters are annexures 5, 5/A and 5/B. By annexure 6 the Industry Department, Bihar, informed petitioner No. 1 that it would get various incentives announced from time to time and required it to make application in the prescribed form for sales tax incentives. By annexure 7, letter dated 21st February, 1979, petitioner No. 1 made the required application.
The Government of Bihar issued a notification on 18th March, 1977, under the Bihar Sales Tax Ordinance exempting the owners of new medium and large industries from the levy of the general sales tax and special sales tax or purchase tax on raw materials for a period of five years from the date the industry started its production as contained in annexure 8. The unit was also registered under the Bihar Sales Tax Act. It was accepted as a large industry. The unit went into production on 21st March, 1979. By annexure 11, respondent No. 1 being satisfied that petitioner No. 1 was entitled to exemption as notified by annexure 8 held that in terms of annexure 8 it was entitled to exemption from the sales tax up to 31st March, 1979. It accordingly ordered that exemption certificate would remain operative up to 31st March, 1979. By annexure 12 dated 30th January, 1980, petitioner No. 1 wrote to the Industry Department to issue necessary instructions to the concerned department for issuing an exemption certificate under the Sales Tax Act for a period of ten years as per annexure 1. The respondents, however, declined to allow the benefit and insisted that tax must be paid on all raw materials purchased after 31st March, 1979. In the writ petition, the supplementary affidavit and the rejoinder .to the counter-affidavits, the petitioners stated that petitioner No. 1 was entitled to the exemption for a period of ten years from the date it went into production in terms of various resolutions and statement of the Finance Minister, Bihar, as contained in annexures 1,1/S, A, 1/C, 6, 7, I/I, 1/J, 1/H, 1/G and 2/S.
3. Two counter-affidavits were filed on behalf of the respondents. According to the counter-affidavits petitioner No. 1 was entitled to incentives under the Sales Tax Act in terms of the statutory notifications issued under that Act. Petitioner No. 1 was not entitled to any benefit under any of the resolutions of the State Government. Statutory notifications under the Sales Tax Act or Ordinance of Bihar Finance Act were issued from time to time in public interest and in terms of such notifications the petitioner was allowed incentives for the period up to 31st March, 1979. It was not entitled to any exemption for ten years from the date it went into production as claimed by it.
4. Before proceeding further to decide the issues involved, it is necessary to note that at the outset of the hearing of this case with regard to the validity of the order as contained-in annexure 11 the learned Advocate-General conceded that in view of Kailash Roller Flour Mills v. Assistant Commissioner of Commercial Taxes 1980 BLJR 432 the order in annexure 11 that petitioner No. 1 would get exemption from the sales tax up to 31st March, 1979, cannot be sustained. The learned Advocate-General, submitted that as petitioner No. 1 went into production at its Adityapur unit on 21st March, 1979, it was entitled to the exemption for five years from that date under the statutory notifications issued under the Sales Tax Act /Ordinance/ Finance Act. In view of Kailash Mills’ case 1980 BLJR 432 and in view of the submissions made by the learned Advocate-General, the order as contained in annexure 11 shall have to be quashed.
5. Dr. Pal, the learned counsel for the petitioners, submitted that petitioner No. 1 was entitled to incentives for ten years, and therefore, in this application it should be decided whether petitioner No. 1 was so entitled.
6. There is no dispute that petitioner No. 1 fulfilled all the requirements as laid down in the different resolutions of the State Government for getting sales tax exemption for ten years from the date it went into production. The question that falls for consideration in this case is whether petitioner No. 1 was entitled to sales tax exemption in terms of the resolutions of the State Government or in terms of the notifications under the sales tax legislation. According to the petitioners, it was so entitled under the resolutions and according to the respondents it was entitled under the notifications.
7. In support of the case of the petitioners, Dr. Pal submitted that since petitioner No. 1 set up the industrial unit at Adityapur basing on the terms held out by the State Government in its different resolutions and acted to its detriment by taking huge loans from the public institutions, the respondents are estopped from denying petitioner No. 1 the incentives under the sales tax legislation, for ten years, from 21st March, 1979. The learned Advocate-General submitted that petitioner No. 1 never acted on the basis of the resolutions of the State Government. Even if it acted, the notifications under the sales tax legislations will prevail over the resolutions of the State Government and therefore petitioner No. 1 was entitled to incentives for five years only from 21st March, 1979.
8. In order to appreciate the respective contentions, it is necessary to look into the resolutions and the notifications. By annexure 1 the Government of Bihar in the Industry Department, adopted a resolution which was duly published in the Bihar Gazette. By annexure 1 it was resolved that to achieve a faster rate of industrial growth and equitable disposal, to build up and strengthen entrepreneurial activity within the State to the extent possible and to draw potential investors from outside, as well as to ensure that industrial units spread out to new areas and existing imbalance in the levels of development in different regions of the State were gradually overcome, the State Government decided to grant various incentives to large and medium industrial enterprises. Some of the incentives were that the Government would support the application for industrial licence to the concerned authorities under the Government of India, would give all reasonable assistance to the party concerned in securing the licence as well as the foreign exchange required for setting up the unit, would allot land in different industrial areas including Adityapur, would provide revolving fund for building materials, would give preference, for the purchase of stores, to the products of all large and medium industries located in Bihar, would give financial assistance and in order to help all new industries to compete with an established industry during the initial period of its production, would grant exemption from sales tax on all purchase of raw materials needed in the process of manufacture for a period of 10 years, from the date the unit went into production and exemption from multi-point sales tax at the first stage of sale from the manufacturer of the finished product for a period of 10 years from the date the unit went into production. By annexure A dated 29th June, 1976, the State Government, after noticing that large and medium industrial units were given some reliefs under the sales tax legislation for a period of 10 years, resolved to amend annexure 1. Accordingly it decided that large and medium industries which went into production before 1st July, 1976, or later would be entitled to get interest free and unsecured loans of the amount paid as sales tax for a period of 10 years, from the date of production. Large and medium industrial units which went into production before 1st July, 1976, and which had not completed ten years would be entitled to interest-free loans in lieu of sales tax paid by them for the remaining period commencing from 1st July, 1976. Large and medium industrial units set up before 1st July, 1976, and which had completed ten years from the date of start of production would also be eligible for the respective incentives provided they took up an expansion and diversification programme and make additional investments.
Annexure A was amended by annexure 1/C dated 28th November, 1976, and it was resolved that the sales tax exemption would be for ten years from the date of production in terms of annexure 1, and units which went into production after 1st July, 1976, or would go into production in future would not only get exemption from sales tax on purchase of raw materials, but also be entitled to a loan equal to the amount of sales “tax on finished goods in terms of annexure A. By annexure 1/E dated 8th February, 1977, respondent No. 2 informed all the subordinate offices that annexure A was modified and directed to implement annexure 1/C. During the subsistence of this resolution, the Government of Bihar in terms of the provisions of the Sales Tax Act /Ordinance/ Bihar Finance Act issued from time to time notifications exempting industrial units from the operation of the Act for a period of five years from the date the industrial units went into production. These notifications during the relevant period are dated 14th May, 1974, 30th June, 1976, 18th January, 1977, 18th March, 1977, and 10th October, 1981. So far the notification dated 10th October, 1981, as contained in annexure 2/S, is concerned that has no application to the present case, because it was meant for industrial units which went into production between 1st October, 1979, to 31st March, 1984.
It will thus appear that whereas in the resolutions the State Government resolved to give incentives from the sales tax to large industrial units for ten years from the date of production, under the notifications such exemption was provided for five years only. In paragraph 5 of the writ petition it has been stated that petitioner No. 1 relying on annexure 1 took steps for setting up an industrial unit at Adityapur and accordingly applied for an industrial licence to the Government of India. These facts have not been controverted in the counter-affidavit. The learned Advocate-General, however, submitted that before petitioner No. 1 applied for land to the A.I.A.D.A. and for the industrial licence, notification under the Sales Tax Act was issued on 14th March, 1974, by which under that Act exemption was given to large and medium scale industries for a period of five years from the date the industries started its production. He contended that the petitioners cannot contend that they took steps on the basis of annexure 1. In other words, his submission was that before petitioner No. 1 took effective steps to set up the industrial unit at Adityapur, exemption for five years was issued on 14th March, 1974, and the petitioners, therefore, cannot claim any exemption under annexure 1 or any subsequent resolutions. Dr. Pal submitted that by notification dated 14th March, 1974, annexure 1 was not revoked and on the contrary during the subsistence of that notification annexure A was issued. Annexures A, 1/C and 1/E dated 29th June, 1976, 28th November, 1976 and 8th February, 1977, respectively, were issued from time to time which contained in the resolution of the State Government and during the subsistence of those resolutions, notifications under the sales tax legislation were also issued. Petitioner No. 1 obtained loans from the financial institutions to the tune of Rs. 3.14 crores and entered into a lease with the A.I.A.D.A. On 18th January, 1977, a notification under Section 4(3)(6) of the Bihar Sales Tax Act, 1959 (annexure 1/D) was issued exempting from sales tax, special sales tax and purchase tax to new large and medium industries on purchase of raw materials required by it in use of manufacture of goods for sale within the State of Bihar for a period of five years from the date the unit went into production. This came into force with retrospective effect from 1st July, 1976.
9. It is interesting to note that in annexure 1/E the attention of different offices of the Commercial Tax Department was drawn to annexure 1/C and it was stated that annexure 1/D was issued in fulfilment of resolution of the State Government in the Department of Industry. It will thus appear that before issuance of notification under the sales tax legislation the State Government was conscious about this resolution. By annexure 5 dated 5th August, 1977, annexure 5/A dated 27th September, 1971, and annexure 5/B dated 4th July, 1978, petitioner No. 1 wrote the Industrial Development Commissioner to confirm that its new unit would be exempted from payment of sales tax on its purchase of raw materials and also entitled to exemption of the sales tax payable on its finished products. In annexure 5 reference was made to annexures A and 1/E and in annexure 5/A reference was made to annexure A. By annexure 6 the Director of Industry wrote to petitioner No. 1 that it would get the incentives decided from time to time by the State Government and required it to return the required pro forma which was enclosed with annexure 6 after properly filling up for getting the approval of the State-level committee.
10. Respondent No. 3, the Managing Director, A.I.A.D.A., with reference to annexure 6 sent the application duly filled up by petitioner No. 1 to the Secretary, Department of Industry, for exemption in terms of annexure 1. From the perusal of this annexure it appears that the pro forma in which the applications were required to be filed for exemption was prepared in pursuance of annexure 1. By annexure I/I dated 19th October, 1979, again a resolution of the State Government in the name of the Governor of Bihar was published in which reference was made to different resolutions of the State Government including annexures 1, A and 1/C and it was stated that the said resolution would remain in force up to 30th September, 1979. Yet another resolution was published under the order of the Governor of Bihar on 8th March, 1980, as contained in annexure 1/J, by which again the exemptions from sales tax legislation were provided for ten years for large industry. Annexure 1/H dated 20th January, 1981, was also on the same terms.
11. On the basis of the above facts relying on Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. AIR 1979 SC 621, Dr. Pal contended that the respondents were bound to give necessary exemption under the sales tax legislation to petitioner No. 1. In Motilal’s case AIR 1979 SC 621 the Supreme Court observed as follows:
The true principle of promissory estoppel, therefore, seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre-existing relationship between the parties or not.
12. The learned Advocate-General submitted that Motilal’s case AIR 1979 SC 621 has no application to the present case inasmuch as petitioner No. 1 before embarking on the project never got it confirmed from the State Government as to whether it would get exemption from the sales tax legislation under the different resolutions of the State Government as was done in Motilal’s case AIR 1979 SC 621. He further contended that in Jit Ram Shiv Kumar v. State of Haryana AIR 1980 SC 1285, the Supreme Court differed from Motilal’s case AIR 1979 SC 621. With regard to the first part of the submissions of the learned Advocate-General as already noticed, as far back as on 5th of August, 1977, by annexure 5 petitioner No. 1 wrote to the Industrial Development Commissioner to confirm whether they were entitled to the incentives in terms of annexures A and 1/E. This was followed by annexure 5/1 dated 27th September, 1977, in which reference was made to annexure A. On 26th December, 1978, by annexure 6 the Director of Industries assured petitioner No. 1 that it would get the incentives and from annexure 7 it appears that the incentives referred to in annexure 6 were the incentives as stated in annexure 1. All the resolutions of the State Government were published in the Bihar Gazette. Some were issued in the name of the Governor of Bihar. That being the position, I am of the opinion that Motilal’s case AIR 1979 SC 621 cannot be distinguished on facts, rather the petitioners are on a better footing in this case. With regard to the second part of the contention of the learned Advocate-General it is true that in Jit Ram’s case AIR 1980 SC 1285 the Supreme Court differed with the proposition stated in Motilal’s case AIR 1979 SC 621. Both, Motilal’s case AIR 1979 SC 62 and Jit Ram’s case AIR 1980 SC 1285 were noticed in Gujarat State Financial Corporation v. Lotus Hotels Pvt. Ltd. AIR 1983 SC 848 and with reference to Jit Ram’s case AIR 1980 SC 1285 the Supreme Court observed as follows:
Jit Ram Shiv Kumar v. State of Haryana [1980] 3 SCR 689 which slightly differs from the view taken by this court in the aforementioned decision at any rate would not help the appellant because it only lays down that the principle of promissory estoppel cannot be invoked for preventing the Government from discharging its functions under the law. Even then, it was held that when the officer authorised under a scheme enters into an agreement and makes a representation and a person acting on that representation puts himself in a disadvantageous position, the court is entitled to regulate the officer to act according to the scheme and the agreement or . the representation. The officer cannot arbitrarily on his mere whim ignore his promise on some undefined and undisclosed grounds of necessity or changed the conditions to the prejudice of a person which had acted upon such representation and put himself in an disadvantageous position. On this point, both the decisions concur and the ratio would govern the decision in this appeal. The respondent acting upon the solemn promise made by the appellant incurred huge expenditure and if the appellant is not held to its promise, the respondent would be put in a very disadvantageous position and therefore also the principle of promissory estoppel can be invoked in this case.
In Lotus Hotels’ case AIR 1983 SC 848, the Supreme Court, therefore, have laid down the impact of Jit Ram’s case AIR 1980 SC 1285 on the decision in Motilal’s case AIR 1979 SC 621.
13. It is true that in Motilal’s case AIR 1979 SC 621 the Supreme Court also observed as under :
If it can be shown by the Government that, having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promisee and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of facts which have transpired since the making of the promise, public interest would be prejudiced if the Government were required to carry out the promise, the court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies.
14. Relying on this the learned Advocate-General drew our attention to paragraph 3 of the counter-affidavit filed on 22nd December, 1983. Paragraph 3 of the counter-affidavit reads as follows :
That the statutory notification under the Bihar Sales Tax Act giving exemption of tax for 5 years and not for 10 years were issued in public interest.
Due to increasing over draft and deficit budget of the state and due to shortage of resources for progressing development and welfare scheme, it was not possible to give exemption for 10 years.
The public interest shown in this paragraphs was, therefore, increasing over draft and deficit budget of the State Government and due to shortage of resources for progressing development and welfare scheme. As already noticed, the State Government repeatedly adopted resolutions for giving incentives to large industrial units by way of exemption from sales tax for ten years and/or loan or exemption from purchase tax and loan equivalent to the amount paid as sales tax on the finished goods. In this case the period which have been brought to our notice within which the resolutions were repeately adopted was between September, 1973, to October, 1981. It is common knowledge that the State was always overburdened with overdraft and deficit budget. Relying on the observations made in Motilal’s case AIR 1979 SC 621 at 644 it must be held that the public interest shown in the counter-affidavit is not such for which the State Government should be relieved from carrying out the promise.
15. Besides all the facts noticed above, there is yet another document for which also the contention of the learned Advocate-General cannot be sustained. Annexure 1/G is the letter dated 17th March, 1981, from the Director, Industries-cum-Special Secretary, Bihar, to petitioner No. 1. By this annexure petitioner No. 1 was informed that it was entitled to the incentives in terms of annexure 1, annexure A and annexure 1/H. This was issued during the pendency of this writ petition. No counter-affidavit was filed by the respondents controverting the grounds of annexure 1/G and nothing was stated as to why the petitioner should not be granted relief on the basis of annexure 1/G. It was not contended that annexure 1/G was ultra vires the power of the Director of industries-cum-Special Secretary. Equity in this case must be held to be in favour of the petitioner.
16. In the result, this application is allowed and annexure 11 is quashed. It is held that petitioner No. 1 shall be entitled to the incentives under the sales tax legislation in terms of annexure 1/G dated 17th March, 1981. No order as to costs.
Abhiram Singh, J.
17. I agree.