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SCA/6896/1993 51/ 53 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 6896 of 1993
With
SPECIAL
CIVIL APPLICATION No. 13969 of 1993
For
Approval and Signature:
HONOURABLE
MR.JUSTICE K.A.PUJ
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
GUJARAT
HOTELS LIMITED & 3 – Petitioner(s)
Versus
STATE
OF GUJARAT & 5 – Respondent(s)
=========================================================
Appearance
:
MR
SN SHELAT, LD SR. ADVOCATE with MR AS ASTHAVADI
for
Petitioner(s) : 1 – 4.
MR PK JANI, GOVERNMENT PLEADER for
Respondent(s) : 1 – 3,5 – 6.
RULE SERVED for Respondent(s) :
4,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
Date
: 14/06/2010
CAV JUDGMENT
Since common issue is
involved in both these petitions and since they are heard together,
the same are being disposed of by this common judgment and order.
Special Civil Application
No.6896 of 1993 is filed by the petitioners praying for striking out
and quashing the impugned Resolution dated 8.6.1993 (Annexure-E) and
impugned letters of demand dated 23.6.1993, 24.6.1993 and 8.7.1994
(Annexure-G) collectively. The petitioners have also prayed for the
direction to the respondents to grant to the petitioner Nos.1 and 3
Companies the benefits and concessions contained and set out in the
minutes of the meeting dated 4.10.1990 and the Resolution dated
22.3.1991 and 10.9.1992 (Annexure A, B and C respectively). The
petitioners have alternatively prayed for the directions to the
State Government to honour commitment and promise as made vide its
Resolution dated 22.3.1991 and 10.9.1992 to grant concession of
Rs.278 lacs by way of differed payment of luxury-tax, purchase tax,
sales-tax and electricity duty for four years from 1991-92 to
1994-95 without interest.
Special Civil Application
No.6896 of 1993 was admitted and rule was issued by this Court on
5.8.1993. This Court has passed a detailed order while refusing to
grant interim relief. The Court in concluding paragraph has observed
that the petitioner Company has received the amount of tax from its
customer for and on behalf of the State Government and seeks to
prevent the government from releasing the said amount which is even
otherwise payable to the State Government under the Act. The Court,
therefore, took the view that this is not a fit case in which
interim relief should be granted in favour of the petitioners. There
would not be miscarriage of justice if interim relief was refused.
On the contrary, granting of interim relief would amount to abuse of
process of Court and hence interim relief was refused. This order
was challenged by the petitioners before the Division Bench of this
Court in Letters Patent Appeal No.30 of 1994. The Appeal was
disposed of by the Court on 2.2.1994. While disposing of the said
Appeal the Court observed that it is not disputed that a Resolution
was passed by the Government by way of a package deal, whereby
payment of luxury tax by the appellants, to the respondents was
deferred by four years. This meant that the appellants could collect
tax from the customers, but would not be obliged to pay to the
Government for a period of four years. This concession was given in
order to rehabilitate the sick unit and because of this, one of the
major shareholders of the Company invested, approximately
Rs.1,24,00,000/-. The Court further observed that under the Gujarat
Tax on Luxury (Hotels and Lodging Houses) Act, 1977 such deferment
could not have been granted and, therefore, principles of promissory
estoppel are not applicable. Without expressing any final opinion,
prima facie, it appears to the Court that under proviso to Section-8
time for payment of tax already realised could be extended.
Therefore, the action of the State Government in deferring payment
would not be contrary to law. In this view of the matter, the Court
stayed the realisation of the demand by the respondents. The Court,
however, made it clear that the appellants shall be bound by the
terms of the Government Resolution, whereby the payment was deferred
by only four years. The Court, therefore, continued interim relief
till disposal of the Special Civil Application and liberty was
granted to the parties to approach the Single Judge for expeditious
hearing. The Court further made it clear that the question regarding
payment of interest, if any, would arise on the disposal of the
Special Civil Application.
The petition is now to be
taken up for hearing in light of the above observations of the
Division Bench.
Special Civil Application
No.13969 of 1993 was admitted and Rule was issued on 5.8.1994.
Interim relief granted earlier was ordered to be continued till
further order.
Brief facts giving rise
to the present petition are that Gujarat Industrial Investment
Corporation formed a Company on 7.8.1982, namely, Gujarat Hotels
Ltd., to promote tourism. It started searching for a promoter.
Initially it was a wholly own subsidiary of Gujarat Industrial
Investment Corporation. The Gujarat Industrial Investment
Corporation thereafter signed shareholders agreement on 18.1.1984
with ITC and agreed to pay 26% equity in the Company. The ITC agreed
to take 25% and the remaining 49% was to be offered to public. The
duration of agreement was 15 years. The Gujarat Industrial
Investment Corporation wanted to promote tourism in the State and to
build up hotels at various places. The ITC had expertise for
running, constructing and managing hotels of first quality through
out India. A supplementary shareholders agreement was executed on
1.8.1985. The share holding patern was changed and ITC held 24.9%
shares whereas GIIC held 26.1% shares.
The petitioner Company,
namely, Gujarat Hotels Ltd., thereafter took land on sub-lease and
started up a hotel at Vadodara. It raised term loan of Rs.303 lacs
from Financial Institutions like IFCI and SBI. ITC had brought in
Rs.78 lacs by way of unsecured loans. The hotel was commissioned
during the year 1986-87. The Gujarat Hotels Ltd., however started
incurring losses due to high rate of luxury tax and high electricity
tariff in the State and low occupancy. GHL’s accumulated losses was
of Rs.304 lacs against the equity capital of Rs.378 lacs. The joint
meeting was convened on 4.10.1990 by Chief Secretary, Gujarat
Government to plan rehabilitation of GHL whereat GIIC, Government of
Gujarat, ITC and Financial Institutions took participation. Sick
Industrial Companies (Special Provisions) Act, 1985 was in force but
it did not apply to GHL. The parties agreed to make following
sacrifices in Net Present Value terms.
(1)
Financial Institutions = 83 lacs (they agreed to give one time
settlement after reducing the rate of interest and forgoing the
penal interest and liquidated damages).
(2)
ITC = 126 lacs.
(3)
Government/GIIC = 110 lacs.
All
parties agreed that GHL must be revived without any further delay
and that all parties must contribute equitably for such a revival.
It was also agreed that the above sacrifices will be brought about
through the concessions from each party. There may be changes in the
exact nature of these concessions but the net present value of
sacrifices as indicated above will be protected. The State
Government thereafter passed a Resolution on 22.3.1991 agreeing the
deferment (not exemption) of luxury tax, sales tax, electricity duty
and purchase tax without interest. The Government made sacrifices
only in terms of interest.
The Government passed
another Resolution on 10.9.1992 permitting ITC to run hotel and
availed the same concession/relief. This was required because ITC
was running the hotel as a licensee and, therefore, could not have
availed of the benefits. On 30.3.1993 a newspaper item appeared
reporting that Government was considering to withdraw the
concessions. GHL therefore made a representation on 2.4.1993 to the
Chief Minister of the State requesting him not to withdraw the
concession. No reply was received to this representation nor any
hearing or opportunity to show cause was given against the
withdrawal of the concession. The Government thereafter raised
demand for repayment of the luxury tax and threatened that it would
be recovered as arrear of land revenue vide notices dated 23.6.1993,
24.6.1993 and 8.7.1993. All these resolutions and notices were
challenged in Special Civil Application No.6896 of 1993.
The Government thereafter
passed another Resolution on 11.11.1993 withdrawing the remaining
concession, namely, sales tax, purchase tax and electricity duty.
This Resolution was challenged in Special Civil Application No.13696
of 1993. As stated above, the Division Bench granted stay order in
LPA No.30 of 1993 on the ground that though there is no estoppel
against the statute time for payment of tax already realised could
have been granted under proviso to Section-8 of the Gujarat Luxury
(Hotels and Lodging Houses) Act, 1977. The learned Single Judge
granted stay on 5.8.1994 in Special Civil Application No.13969 of
1993 on the ground that no reply to the petition has been filed
inspite of more than a dozen adjournments.
The only question which
is now to be decided in both these petitions is in respect of
interest on deferred payment of luxury tax, sales tax, purchase tax
and electricity duty as by now all these amounts of tax have been
paid by the petitioner.
Mr. S.N.Shelat, learned
Senior Counsel appearing with Mr. A.S. Asthavadi, learned advocate
for the petitioners submitted that the Resolution dated 8.6.1993 and
11.11.1993 are required to be quashed and set aside and this Court
may issue a writ of mandamus or any other direction directing the
respondents to comply with the Resolution dated 22.3.1991
incorporating the agreement between the parties arrived at the
meeting held on 4.10.1990 presided over by the Chief Secretary,
Government of Gujarat. He has further submitted that the
respondents are bound to abide by the promise, assurances and agreed
terms at the meeting held on 4.10.1990 ITC and financial
institutions have made their sacrifices agreed to at the meeting to
the extent of (1) purchasing shares of the GIIC at Rs.12.50 (2)
agreed to pay its dues of Rs.78 lacs from GHL. ITC paid Rs.240 lacs
to GHL to repay the outstanding loans of financial institutions. ITC
paid Rs.120 lacs rental for two years in advance in view of the
operating license agreement. He has further submitted that the
shareholders’ agreement between the parties reflects that the State
Government
(i)
wanted to promote industries and tourism in the State of Gujarat by
providing infrastructural facilities to the hotel at Vadodara.
(ii)
the control over the appointment of the Chairman and Board of
Directors and nomination of Directors on the Board.
(iii)
the affidavit filed by the State Government in Special Civil
Application No.6869 dated 26.8.1996 expressly states that the
Government has accorded consent to GIIC on 21.9.1983 for promoting
Gujarat Hotel Project at Vadodara (Gujarat Hotels Ltd.,) in joint
sector with ITC Group. The Government, therefore, made effort to
rehabilitate the hotel when it had become sick. He has further
submitted that the State Government is estopped from resiling on its
promise by passing a Resolution dated 8.6.1993 and 11.11.1993 in
view of the fact that the impugned Resolutions are invalid in law as
no reasons are disclosed. The respondents cannot supplement the
reasons in the affidavit in reply. The petitioners have altered
their position by making sacrifices and granting financial benefit
to the hotel as per the agreement arrived at between the parties.
The agreement has created legal relationship between the parties. In
the affidavit-in-reply dated 6.2.1996, 28.11.2006 and 20.12.2006 it
is contended on behalf of the respondents that statutory provisions
do not permit grant of such benefit. However, this contention is
wholly unjustified as provisions of Luxury Tax enable the State
Government to grant benefit if it is so inclined under Section-8A of
the Act. The Collector is competent to record in writing and extend
the date of payment. The Collector as an agent of the State
Government could have extended the date of payment of the Luxury Tax
and granted benefit of deferment of Luxury Tax as agreed to between
the parties. Section-49 of the Sales Tax Act provides for grant of
exemption. Section 3(2AAA)(a) provides exemption under the
provisions of Electricity Duty Act, 1958. The second contention
raised is that there is a discriminatory treatment in favour of the
petitioner. This ground is also not valid as there is no
discriminatory treatment. The State Government was inclined to
promote hotel at Vadodara through the instrumentality of GIIC,
petitioner and ITC. Promotion of hotel tourism is in the public
interest. Subsequently the State Government by Resolution dated
20.12.1995 has granted incentives and benefits to promote hotel
industries. The State Government has subsequently enacted Act 2 of
1997 retrospectively to grant benefit of Luxury Tax pursuant to its
1995 Policy. The State Government has entered into legal
relationship between the parties and is bound to abide by the terms
of Agreement.
The reasoning that the
contract is not executed is wholly unjustified in view of the
decision of the Apex Court. In the case of GSFC Vs. Lotus
Hotel Ltd., AIR 1983 (SC) 848,
the Apex Court approved the decision of the High Court. In this
case, the GSFC entered into agreement in performance of its
statutory duty to advance loan to a Company. Acting on such
undertaking the Company proceeded to undertake and execute project
of setting up a four star hotel. The Company incurred huge expenses
and suffered liabilities to set up hotel. The Court held that the
principle of promissory estoppal would certainly estop the
Corporation from backing out of its obligation arising from a solemn
promise made by it to the respondent Company. In the case of State
of Punjab Vs. Nestle India, 2004 Judgment Today (Supple.) Vol.2 SC
283,
the Government was held to be equally susceptible to the operation
of the doctrine in whatever area or field the promise is made,
contractual, administrative or statutory. The Court further held
that, “the doctrine of promissory estoppel would undoubtedly
be applicable where an entrepreneur alters his position pursuant to
or in furtherance of the promise made by a State to grant inter alia
exemption from payment of taxes or charges on the basis of the
current tariff. Such a policy decision on the part of the State
shall not only be expressed by reason of notifications issued under
the statutory provisions but also under the executive instructions .
In the case of Mahabir Vegetables Oil Vs. State
of Haryana, 2006 Vol.3 Judgment Today 544,
it is held that it is a fundamental rule of law that no statute
shall be construed to have a retrospective operation unless such a
construction appears very clearly in the terms of the act or arises
by necessary and distinct implication. A retrospective effect to an
amendment by way of a delegated legislation could be given, thus,
only after coming into force of sub-section (2A) of Section 64 of
the Act and not prior thereto. Although there lies a distinction
between vested rights and accrued rights as by reason of a delegated
legislation, a right cannot be taken away. The amendments carried
out in 1996 as also the subsequent amendments made prior to 2001,
could not, thus, have taken away the rights of the appellant with
retrospective effect. Reliance is also placed on the decision of the
Apex Court in the case of U.P.Power Corporation
Vs. Sant Steel & Alloys (P) Ltd., & Ors, AIR 2008 SC 693.
In the case of State of Bihar Vs. Kalyanpur
Cements Ltd., Judgment Today 2010 (1) SC 225
the Apex Court after having considered all the decision has
reiterated that the State is bound by the promise.
In
Kishorkumar Prabhudas Tanna & Anr. Vs. State
of Gujarat through Secretary & Ors., reported in 2009 (1) GLR
683,
the Division Bench of this Court has held that there is no quarrel
with the submission that if the statute empowers the Government to
exercise discretion for grant of the benefit of exemption, the same
powers can be resorted to for withdrawal of those exemptions also.
However, once such a benefit has been extended in exercise of
statutory power like Sec.49(2) of the Sales Tax Act, granting the
benefit of exemption for the period from 1.12.2005 to 30.11.2008,
there has to be justification for rescinding or withdrawing such
benefit of exemption. There is no justification or public interest
explained. The Court further held that when there is no explanation
or justification for rescinding the benefit of exemption granted
earlier for a period from 1.12.2005 to 30.11.2008 before the expiry
is coming forth, then, it would certainly attract the doctrine of
promissory estoppel irrespective of the fact that it has been
rescinded in exercise of the same statutory power under the Sales
Tax Act. The Court further held that even if the Sales Tax Act has
been repealed, the benefit granted under the erstwhile Sales Tax Act
for the exemption by notification which was to remain valid from
1.12.2005 to 30.11.2008 could have continued or remained and it is
only for taking care of such eventualities Section-100 of the V.A.T.
Act providing for repeal and saving clause has been made which takes
care of such situation.
In
Express Newspapers Pvt. Ltd. and others vs.
Union of India and others, (1986) 1 SCC 133
the Apex Court held that it would appear that Denning, J. evoked
two doctrines : (1) that assurances intended to be acted upon and in
fact acted upon were binding; and (2) that where a Government
department wrongfully assumes authority to perform some legal act,
the citizen is entitled to assume that it has that authority, and he
dismissed the contention that estoppels do not bind the Crown by
saying that ‘that doctrine has long been exploded’ and that the
Crown cannot fetter its future executive action. Professor Wade
points out that the proposition about wrongful assumption of
authority evoked by Denning, J. was immediately repudiated by the
House of Lords in a later case in which Denning, LJ. had again put
it forward in Howell v. Falmouth Boat Construction Company Ltd.,
L.R. [1951] AC 837, it is beyond the scope of this judgment to enter
into a discussion as to how far Denning, J.’s dictum can still be
regarded as part of the common law in England. But there appears to
be a school of thought in India laying down that the doctrine of
promissory estoppel applies to the Government except under certain
circumstances.
Mr.Shelat alternatively
submitted that the petitioners are entitled to the benefit of the
Resolution dated 22.3.1991 till the communication dated 8.6.1993
(Luxury Tax) and dated 11.11.1993 (Sales Tax, Purchase Tax,
Electricity Duty). He has further submitted that the petitioners
have as per the agreement between the parties complied with the
payment of deferred taxes and paid –
(i)
deferred Sales Tax during 29.5.1995 to 2.9.1998.
(ii)
deferred Electricity Duty from 10.5.1995 to 8.10.1998.
(iii)
deferred Luxury Tax from 4.5.1995 to 3.10.1998.
In
view of the above averments Mr.Shelat submitted that the petitions
are required to be allowed and rule be made absolute accordingly.
Mr. P. K. Jani, learned
Government Pleader appearing on behalf of the respondents has
submitted that the petitioners are not entitled to the reliefs
prayed for in any of these two petitions inasmuchas the decision of
the Government in the matter regarding withdrawal of concession of
deferment of Luxury Tax has been taken by the Government after due
deliberation and proper application of mind and the said policy
decision is in confirmity with the requirement of the Gujarat Tax on
Luxuries (Hotels and Lodging Houses) Act, 1977. He has further
submitted that by the Government Resolution dated 8.6.1993 the State
Government has corrected its mistake which it had committed while
granting a package of concessions to the petitioner No.1. He has
further submitted that only deferment of luxury tax which was
granted vide Government Resolution dated 22.3.1991 has been
withdrawn out of the package of concessions granted to the
petitioner No.1 and subsequently extended to the petitioner No.3.
The Government realised that the Government resolution dated
22.3.1991 which granted deferment of luxury tax to the petitioners
is prohibited by statute, that is, the Act herein and the same is
against a public policy, inasmuch as the State Government could not
have granted such deferment to the petitioners in view of the
provisions of the Act. He has further submitted that Section-3 of
the Act deals with the levy and collection of the luxury tax. In
view of Section-3 the Government is empowered to recover luxury tax,
for the luxury provided in a hotel and the said luxury tax which is
collected by the proprietor of the hotel has to be paid into the
Government Treasury within the time and in the manner provided in
the Act. The petitioner No.1 has collected luxury tax from its
clients but has not paid the same into the Government Treasury. In
view of the provisions of the Act, it is incumbent on the Government
to recover the said amount of luxury tax from the petitioners, which
the petitioners have already recovered from their customers/clients.
Since the promise/agreement which was made in Government Resolution
dated 22.3.1991 is prohibited by the Statute and is consequently
against public policy, the same cannot be enforced in Court of law.
The tax which is validly levied under the Act and which is collected
by the petitioners has to be paid into the Government Treasury as
required under the Act. Since the Government realised its mistake,
it has by Government Resolution dated 8.3.1993 withdrawn concession
with regard to the deferment of Luxury tax.
Mr.Jani further submitted
that the petitioners are required to pay after Government Resolution
dated 22.3.1991. that is, for the period of April, 1991 to June,
1993 an amount of Rs.67.35 lacs approximately by way of luxury tax
into the Government Treasury. He has further submitted that mere
fact of grant of initial exemption and subsequent revocation thereof
is not sufficient to attract the doctrine of promissory estoppel as
well as the doctrine of legitimate expectation inasmuch as no
promise or agreement which is prohibited by statute can be enforced
in a Court of law. He has further submitted that the doctrine of
promissory estoppel is not attracted in the sphere of statutory
power. In the present case the Act requires collection of luxury tax
to be paid into the Government Treasury and if the same is not done
as required under the Act the same would be contrary to the
provisions of the Act and consequently illegal. He has submitted
that very foundation of deferment of luxury tax is contrary to the
provisions of the Act and is consequently contrary to the Act and,
therefore, doctrine of promissory estoppel cannot be attracted in
this case.
Mr.Jani further submitted
that there is no question of the petitioner altering his position
inasmuch as the petitioner No.1 existed prior to the concession of
deferment of luxury tax.
Mr.Jani further submitted
that pursuant to the order passed by this Court on 18.1.2007
Additional Affidavit was filed by Shri Pankaj Kumar, Information &
Broadcasting Department, Government of Gujarat wherein it is clearly
stated that 1995 Scheme had nothing to do with individual benefits
extended to the petitioners in the year 1991. It was benefit of
deferment from various taxes which was extended to the petitioners
in contradiction with the benefit relating to exemption from taxes
which was available under 1995 Scheme called New Package Scheme
of Incentives for Tourism Projects, 1995-2000 declared in the
year 1995 and made effective from 1.8.1995 vide Government
Resolution dated 20.12.1995. He has further submitted that when the
policy underlying the 1995 Scheme being in contemplation necessary
steps were taken on 13.2.1995 by way of pre-budget discussion with
the Finance Department to give effect to the benefit of exemption
from luxury tax under the applicable legislation. In furtherance
thereof, process of preparing draft ordinance for amending the
provisions of the Gujarat Tax on Luxuries (Hotels and Lodging
Houses) Act, 1977 was commenced, so as to bring the same in
consonance with the spirit of the Tourism Scheme of 1995 after
following due procedure which included consultation with the
concerned departments like Finance Department and Legislative and
Parliamentary Affairs Department. The ordinance was promulgated with
the sanction of the Governor on 18.6.1996. Thereafter, the proposed
amendment in the provisions of the Gujarat Tax on Luxuries (Hotels
and Lodging Houses) Act, 1977 came to be effected by inserting
Section-20B which received the assent of the Governor on 26.2.1997
and the same was given retrospective effect from 18.6.1996.
Mr.Jani further submitted
that while declaring the assurances pursuant to the 1995 Scheme with
reference to the benefit of exemption from luxury tax, consequential
corresponding amendments in the provisions of the above referred Act
were very much under process. It is under these circumstances, that
the erstwhile Information, Broadcasting and Tourism Department
issued a Notification dated 14.2.1997 providing inter alia that the
effective date of exemption from the payment of luxury tax under the
1995 Scheme would be the date mentioned in the eligibility
certificate issued by the appropriate authority under the 1995
Scheme.
Mr.Jani further submitted
that affidavit-in-reply was filed on behalf of the respondent No.3
on 10.2.2006 wherein it is inter alia stated that Gujarat Industrial
Investment Corporation Ltd., had disinvested its total shareholding
in the year 1988-89 in favour of its Joint Sector partner ITC Ltd.,
and since then the respondent No.3 has no interest of whatsoever
nature in the petitioner No.1 Company. For remaining averments
reliance was placed on the affidavit-in-reply filed on behalf of the
respondent No.5.
Mr.Jani further submitted
that Additional Affidavit was filed on behalf of the respondent No.2
on 28.11.2006 wherein entire circumstances granting of deferment of
payment of taxes as well as subsequent withdrawal were explained. It
is stated therein that since the benefits granted to the petitioner
were not supported by the provisions of law and also same being
discriminatory against other similarly situated hotels, the decision
was taken to withdraw concession. It is further stated that the
petitioner was supposed to pay respective tax as per the assessment
and within the period prescribed. Since the petitioner has not paid
the tax, the State Government is entitled to claim interest on such
amount as the petitioner when charged their customers with all these
taxes at the relevant point of time recovered the said amount, has
utilized for its own purposes and, therefore, the petitioner is
liable to pay interest on the said amount. It is further stated that
the action of the State Government is neither discriminatory nor
does it cause any undue hardship to the petitioner as the petitioner
from its customers has charged various taxes for which deferment was
granted and, therefore, amount thus collected was with the
petitioner Company. It is further stated that the petitioner Company
went into operation much before 1995-2000 Policy Tourism and hence
the petitioner Company is not eligible for any benefit of that
Scheme.
In support of his
submission Mr.Jani relied on the decision of Kasinka Trading
and Anr. Vs. Union of India and Anr, reported in AIR 1995 SC 874,
the Apex Court has held that; Where with a view to equalising sale
prices of the indigenous and the imported material and to make the
commodity available to the consumer at a uniform price, keeping in
view the trends in the supply of the material, the exemption
Notification No. 66 of 1979 was issued under Section 25(1) of the
Act, however subsequently, when it was found and realised that the
international prices of the product were falling and consequently
the import prices had become lower than the exfactory prices of the
indigenous material, the matter was examined by the Government of
India and it was decided in “public interest” to withdraw
the exemption Notification, the action of Govt. in withdrawing the
earlier exemption notification cannot be challenged on ground of
promissory estoppel. The exemption Notification issued under Section
25(1) of the Act, in “public interest”, was designed to
offset the excess price which the local entrepreneurs were required
to pay for importing PVC resin at a time when the difference between
the indigenous product and the imported product was substantial. No
importer could be expected to import PVC resins after paying duty
and incur losses. The exemption Notification, was therefore, issued
with a view to offset those losses to the extent possible. The
exemption Notification was not issued as a potential source of extra
profit for the importer. Again at the time when the Notification was
withdrawn by the Government there was no scope for any loss to be
suffered by the importers. The exemption Notification did not hold
out to the appellants any enforceable promise. Moreover, the
Notification cannot be said to have extended any “representation”
much less a “promise” to a party getting the benefit of
it to enable, to invoke the doctrine of promissory estoppel against
the State. A Notification issued under Section 25 of the Act cannot
be said to be holding out of any such unequivocal promise by the
Government which was intended to create any legal relationship
between the Government and the party drawing benefit flowing from
the said Notification. It cannot, therefore be said that even if the
public interest so demanded and the Central Government was satisfied
any further, it could still not withdraw the exemption. In such a
case, merely by mentioning the date as 31st March, 1981, as the date
up to which the exemption Notification was to be operative, no
unequivocal representation could be said to have been made that it
could not be rescinded or modified before that date even if the
Government was satisfied that it was necessary in the public
interest to rescind it. Since, the Notification had been issued
under Section 25(1) of the Act, the very same power was available to
the authority for rescinding or modifying that Notification and the
dealer ought to have known that the said Notification was capable of
or liable to be revoked, modified or rescinded at any time even
before the expiry of 31st March if the `public interest’ so
demanded. Moreover, it was not permissible to postpone the
compulsions of “public interest” till after 31st March,
1981 if the Government is satisfied as to the change in the
circumstances before that date.
In
Sales Tax Officer and Anr. Vs. Shree Durga Oil
Mills And Anr., reported in (1998) 1 SCC 572,
the Apex Court held that Industrial Policy Resolution (IPR) can be
changed if there is an overriding public interest involved. In the
instant case, it has been stated on behalf of the State that various
notifications granting sales tax exemptions to the dealers resulted
in severe resource crunch. On reconsideration of the financial
position, it was decided to limit the scope of the earlier exemption
notifications issued under Section-6 of the Orissa Sales Tax Act.
Because of this new perception of the economic scenarios of the
State, the scope of the earlier notifications had to be restricted.
Withdrawal of notification was done in public interest. Public
interest must override any consideration of private loss or gain.
Thus the plea of change of policy of trade on the basis of resource
crunch should have been sufficient for dismissing the respondent’s
case based on the doctrine of promissory estoppel.
In
M.P.Mathur & Ors. Vs. D.T.C. & Ors.,
reported in AIR 2007 SC 414,
the Apex Court held that The promissory estoppel is based on equity
or obligations. It is not based on vested right. In equity the Court
has to strike a balance between individual rights on one hand and
the larger public interest on the other hand. Freedom to contract is
a common law civil liberty enjoyed by all persons. But when the
government is contracting with private parties this common law
freedom is circumscribed by the principles of administrative law
which requires larger public interest to be taken into account. Even
applying the principles enshrined in Article 39 (b) and (c) of the
Constitution, egalitarian quality requires the Government to strike
a balance between competing claims. Even in the realm of social
justice, on which the Constitution is founded, the administration
has to strike a balance between the competing claims.
Having
heard the learned Senior Counsel Mr. S.N.Shelat for the petitioners
and Mr.P.K. Jani, the learned Government Pleader for the respondents
and having considered their rival submissions in light of the
Government Resolutions dated 22.3.1991 and 10.9.1992 granting
benefit of deferred payment of Luxury Tax, electricity duty,
Sales-tax and purchase-tax for the period of four years from 1991 to
1994 and withdrawal thereof by subsequent Government Resolutions
dated 8.6.1993 and 11.11.1993 and having further considered the
validity of the State Government’s action of withdrawal of benefit
of deferred payment of taxes in light of the principle of estoppal
as propounded by the Courts and the relevant statutory provisions
contained in the Gujarat Tax on Luxuries (Hotels & Lodging
Houses) Act, 1977, Bombay Electricity Duty Act, 1958 and the Gujarat
Sales Tax Act, 1969, the Court is of the view that so far as the tax
benefit of deferred payment of luxury tax is concerned, the Division
Bench of this Court, while disposing off the Letters Patent Appeal
No.30 of 1994 on 2.2.1994, had already expressed prima facie opinion
that under proviso to Section-8 of the Act, time for payment of tax
already realised could be extended. Therefore, the action of the
State Government in deferring payment would not be contrary to law.
Thus prim facie opinion will have to be taken into consideration
while disposing off these petitions finally. The question of payment
of interest, if any, also assumes significance.
So
far as Special Civil Application No.13969
of 1993 is concerned, this Court has admitted
the petition and continued the interim relief till further order
only because despite more than a dozen adjournments and despite very
huge amount was involved, the State
Government had not made its stand clear nor filed any affidavit. The
Court, therefore, observed in its order dated 5.8.1994 that the stay
of recovery of a huge amount approximately Rs.300 lakhs has
continued because of the passive attitude of the Government. This
passive attitude on the part of the Government has to be broken and
the Government must come out from the slumber to take appropriate
action/decision at appropriate time.
Be
that as it may, since the deferred payment of luxury tax,
electricity duty and sales-tax has been made by the petitioners as
per the terms of the resolutions granting such benefit, the question
of further payment survives
qua the interest only.
The starting point of
the entire controversy is the meeting held on 4.10.1990 and the
minutes drawn thereat. The financial institutions, Government of
Gujarat, GIIC and ITC decided to revive Gujarat Hotels Ltd., and to
make their respective sacrifices for such revival. The State
Government undertook to sacrifice by offering concessions of (a)
deferment of Luxury tax for four years (b) deferment of Sales-tax
for four years (c) deferment of Purchase-tax (State Sales Tax on
input purchases for four years and (d) deferment of electricity duty
for four years. The total quantum of these deferred taxes were to be
repaid in four annual installments beginning from 1995-96.
Pursuant to the minutes
of the meeting, a Government Resolution was passed on 22.3.1991.
This Resolution states as under:-
After
careful consideration, Government is pleased to
extend the following concessions as a part of the rehabilitation
plan to the Gujarat Hotels Ltd., for a period of four years from
1991-92 (i.e. from 1991-92 to 1994-95).
(1) Deferment of
purchase-tax by way of interest free loan through GIIC for an
equivalent amount of sales-tax paid by the company for purchase of
raw materials etc. This loan will be disbursed by the GIIC and GIIC
is authorized to make such disbursement on behalf of State
Government.
(2) Deferment of
Electricity Duty.
(3) Deferment of
sales-tax.
(4) Deferment of luxury
tax.
The Government of
Gujarat, thereafter passed another Resolution on 10.9.1992
clarifying that as a part of the rehabilitation plan, it had granted
its consent to the proposal of GIIC Ltd., to permit ITC Ltd., to run
the Gujarat Hotel Ltd., on a license basis. Accordingly, ITC was to
take GHL on an operating license/lease initially for a period of 30
years and to pay a minimum lease rental of Rs.60 lakhs. It was
further clarified that both ITC Ltd., GHL was jointly and severally
liable for the repayment of taxes to the Government after the period
of deferment as specified in the Government Resolution of 22.3.1991
was over.
Before the period of
four years for deferred payment of Luxury taxes expired the State
Government passed a Resolution dated 8.6.1993 withdrawing concession
of deferred payment of Luxury tax granted to GHL and extended to
ITC. Similar Resolution was passed on 11.11.1993 withdrawing
concession of deferred payment of Sales-tax, purchase tax and
electricity duty. The petitioner Nos.1 and 3 i.e. GHL and ITC Ltd.,
were directed to pay the amount of taxes in question within 30 days
of the issue of the respective Government Resolution. Though no
reasons are given for withdrawal of such concessions, in the
affidavit in reply, it is conveyed that grant of concessions was
merely a mistake. The State Government has no power to grant such
concessions and it would amount to show some favour to the
petitioners.
To consider this
reasoning, it is necessary to have a close look at the statutory
provisions. The Gujarat Tax on Luxuries (Hotels and Lodging Houses)
Act, 1977 is enacted to provide for the levy and collection of a tax
on luxuries provided in hotels and lodging houses and for matters
connected, therewith. Section 2(b) defines ‘Collector’ who includes
any officer appointed by the State Government to exercise the powers
and perform the functions of the Collector under this Act. Section-3
deals with levy and collection of luxury tax. Sub-section 3 of
Section-3 states that the tax payable under this Section shall be
collected by the proprietor and be paid a Government treasury within
the time and in the manner provided in the Act. Section-6 deals with
assessment and collection of tax and Section-7 discusses about the
imposition of penalty in certain cases. Section-7A talks of
liability of proprietor to pay interest. Section-8(1) says that the
amount of tax, penalty and interest, if any, shall be paid by the
proprietor liable therefore into a Government treasury by such date
as may be specified in the notice issued by the Collector for this
purpose, being a date not earlier than thirty days from the date of
service of notice. However. The proviso to Section-8(1) is very
important. It says that the Collector or the appellate authority in
an Appeal under Section-9 may, in respect of any particular
proprietor and for reasons to be recorded in writing, extend the
date of payment, or allow him to pay the tax, penalty or interest,
if any, by installments. Thus, by virtue of this proviso, powers
are conferred on the Collector as well as appellate authority to
grant an extension of time in making payment of tax, penalty or
interest, if any. The deferment of payment in nothing but an
extension of time in making payment. When officers appointed by the
State Government are having powers under the Act to grant extension
of time in making payment of taxes, the State Government can
certainly have such powers and such powers can be exercised by the
State Government even prior to the machinaries or procedure
prescribed in the Act are put into motion.
Similarly, Section-47
of Gujarat Sales Tax Act, 1969 deals with payment of tax and
deferred payment of tax etc. Sub Section-4 of Section-47 says that
the amount of tax, penalty or interest, if any shall be paid by the
dealer or the person liable therefore into a Government treasury by
such date as may be specified in a notice issued by the Commissioner
for this purpose, being a date not earlier than ten days from the
date of service of the notice. Here also, two proviso are very
important. The first proviso states that the Commissioner or an
appellate authority in an Appeal under Section-65 may, in respect of
any particular dealer or person, and for reasons to be recorded in
writing, extend the date of payment, or allow him to pay the tax or
penalty (if any) by installments. The second proviso starts with
non-obstantie clause. It states that notwithstanding anything
contained in this Act or in the rules made thereunder but subject to
such conditions as the State Government or the Commissioner may by
general or special order specify, where a dealer to whom incentives
by way of deferment of sales tax or purchase tax or both have been
granted by virtue of an eligibility certificate granted by the
Commissioner of industries, Gujarat State or any Officer authorized
by him in this behalf and where a loan liability equal to the amount
of any such tax payable by such dealer has been raised by the
Gujarat Industrial Investment Corporation Ltd., or Gujarat State
Financial Corporation Ltd., then such tax shall be deemed, in the
public interest, to have been paid. Thus, the State Government is
well within its competence to grant deferment of Sales-tax and
Purchase-tax.
The case of deferment of
electricity is however, somewhat different. Section-4 of the Bombay
Electricity Duty Act, 1958 deals with payment of electricity duty.
Sub Section-1 of Section-4 states that every licensee shall collect
and pay to the State Government at the time and in the manner
prescribed, the proper electricity duty payable under this Act, in
respect of energy supplied by him to consumers. The duty so payable
shall be a first charge on the amount recoverable by the licensee
for the energy supplied by him and shall be a debt due by him to the
State Government. It is true that Sub Section-3A of Section-4
empowers the State Government or an officer authorized by the State
Government in this behalf, in respect of any consumer to extend the
date of payment or allow him to pay electricity duty by installments
in such manner and on such conditions as may be prescribed and allow
deferment of payment of electricity duty under such circumstances,
on such conditions and for such period not exceeding five years in
aggregate, if deferment is allowed for hundred per cent of the
payment liability of electricity duty and not exceeding seven years
in aggregate, if deferment is allowed for fifty per cent of the
payment liability of electricity duty, as may be prescribed.
However, Sub Section-3A is brought on the Statute book with effect
from 1.4.1999. Hence on the date when such concession was granted
the power of deferment of electricity duty was not vested in the
State Government. Even the provisions of Section-3(2AAA) of the Act
would not make any difference as by virtue of this sub-section, only
those powers are saved which are already in existence.
In view of the above
discussion, the whole question of deferment of payment of taxes is
to be addressed from two different view points (1) if the powers are
there and initially deferment is granted for four years and before
the expiry of this period, deferment is withdrawn, and (2) if the
powers are not there and yet deferment is granted for four years and
before expiry of this period, deferment is withdrawn. The deferment
of luxury tax and sales-tax falls in the first category, whereas
deferment of electricity duty falls in the second category.
In view of the settled
legal position, the principle of estoppal can certainly be invoked
by the petitioners so far as withdrawal of concessions of deferment
of sales-tax, purchase tax and luxury tax is concerned. Under the
respective statute, the State Government is vested with such powers
and by exercising such powers, concession of deferment of payment
for four years was granted. Such concession was in the nature of
sacrifice undertaken and assured by the State Government. The
Financial Institutions and ITC have also made their sacrifices. It
is, therefore, not open for the State Government to withdraw such
concession before the expiry of four years. The Government
Resolution dated 8.6.1993 withdrawing the concession of deferment of
luxury tax is therefore quashed and set aside. Since the entire
amount of luxury tax has been paid by the petitioners within time,
there is no question of charging any interest. Similarly on the same
parity of reasoning, the Government Resolution dated 11.11.1993 in
so far as it relates to sales-tax and purchase-tax, is hereby
quashed and set aside. Since the entire amount of deferred sales-tax
has been paid within time, there is no question of charging any
interest.
So far as deferred
payment of electricity duty is concerned, despite there being no
power, such deferment is granted. However, the petitioners cannot be
saddled with any liability till the date of withdrawal of such
deferment. Thus, the petitioners are not liable to pay any interest
on the outstanding payment of electricity duty till 11.11.1993. The
petitioners Nos.1 and 3 are, therefore, held to be liable to pay
interest at the applicable rate on the outstanding amount of
electricity duty, commencing from 11.11.1993 till the date of actual
payment.
The above view taken by
this Court in respect of electricity duty is duly supported by the
decision of the Apex Court in U.P. Power
Corporation Ltd., & Anr., Vs. Sant Steels & Alloys (P) Ltd.,
(Supra), wherein, in somewhat similar circumstances,
the Court held that since such benefits have not been recognized by
the Act of 1999, upto the date of coming into force of the Act of
1999, all the benefits which were being given to the respondent
entrepreneurs shall be protected by invoking the principle of
promissory estoppal, but after coming into force of the Act of 1999
which is a primary legislation enacted by the State legislature the
benefits from the date of the Act has come into force, cannot be
made available to the respondents.
In the result, Special
Civil Application No.6896 of 1993 is allowed and rule made absolute,
whereas Special Civil Application No.13969 of 1993 is partly allowed
and rule made absolute to the above extent. There shall be no order
as to costs.
(K. A. PUJ,
J.)
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