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Judgment
P. Venkatarama Reddi, J.—The petitioners are all small scale industrialists who have set up Cotton Seed Oil Industries with or without refineries in Adilabad district. They took steps to get their industries registered during and after 1990 and went into commercial production before 31-3-1995. They question the withdrawal or non-sanction of incentives declared by the State Government including the Sales Tax holiday and the provisions ofA.P. Act 18 of 1996 in so far as they interfere with their right to claim incentives.
Facts and History:
The State Government issued G.O. 498, (Industries and Commerce) dated 16-10-1989 announcing a package of incentives for new industries depending on the nature, description and location of the industry. In the case of small scale industries, the G.O. conferred the benefit of sales tax holiday subject to a ceiling of Rs.35 lakhs to be availed during a period of 5 years from the date of commencement of production. This was in addition to investment subsidy to the extent of 20% of the capital cost upto a maximum of Rs.20 lakhs in regard to the industries located in three backward districts including Adilabad district. Committees were constituted at district and State level to scrutinise the applications for incentives and sanctioning them. Paragraph 10 of the G.O. made it clear that only new industrial units which hold valid registrations/letters of intent and have taken steps for the first time on or after 3-10-1989 for project implementation such as applying for project finance, placing orders for the machinery, commencement of construction etc., would be eligible for the concessions provided they go into commercial production before 31-3-1995. In paragraph 11, it was declared that "these orders shall be in force till 2-10-1992". A list of industries which are not eligible for grant of incentives were specified in the Annexure. The first item which is relevant for our purpose is "Oil Mills/Crushing Edible Oil Seeds" (the oblique mark(/) is redundant here).
Between the years 1990 and 1992 Eligibility Certificates were granted to most of the petitioners by the Industries Department in terms of the said G.O., with a condition that the industries have to take steps to commence the production by 31-3-1995. Petitioners in WP No.22114 of 1996, 35822 of 1997, 12026 and 12030 of 1998 have got such certificates in July, 1990. No such certificates were ever granted to petitioners in WP Nos. 15097 and 15098 of 1999. The Eligibility Certificates granted to other petitioners were later on cancelled either because no active steps for implementation were taken before 25-4-1991 as per the guidelines or for the reason that it is an ineligible industry. Such orders were stayed by this Court in the writ petitions filed by many the petitioners on earlier occasion. It ought to be noted that in seven out of 17 writ petitions, the temporary eligibility certificates for claiming Sales Tax Holiday to the extent of 20% of investment were granted.
Issues raised in these writ petitions take us to the Survey of subsequent measures -- executive or legislative, taken by the Government, mostly to curtail the benefits announced under G.O.498. G.O.146, Industries and Commerce (IFR) Department, dated 25-4-1991, was issued expanding and revising the list of ineligible industries "in partial modification of the orders" issued in G.O.498. Item No.1 of Annexure to G.O.146 is as follows:
"Decorticating, Expelling, Crushing, Roasting, Parching, Frying of Edible Oil Seeds of (1) Ground nut, (2) Sesamum, (3) Safflower, (4) Rape Seed/mustard (5) Coconut, (6) Sun flower, (7) Niger including Solvent Extraction process thereof and further process of Refining, Hydrogination, Vanaspathi and manufacture of Margarine and fatty acids from these oils, packing of these oils. Also all the processes of all other Edible Oil Seeds like Cotton Seed, Soyaben, Sal, Palm etc., and Rice Bran except solvent extraction plants with or without refinery."
Another development that has taken place before the issuance of G.O.146 is the ''Manual of Guidelines'' for implementation of new package of incentives, framed by the Department of Industries and Commerce of the Government by means of Memorandum N0.2125/1A/89-1, dated 15-9-1990, 11 months after the G.O.498 was promulgated. The Manual of guidelines envisage four steps for extending the incentives: (1) Registration as SSI Unit; (2) Issuance of Eligibility Certificate for availing the incentives; (3) Temporary Sales Tax Eligibility Certificate and (4) Fiscal Eligibility Certificate after production starts. The said Government Memo also laid down in para 6 B(ii) that "small scale industries are exempted from the payment of sales tax for a period of 5 years from the date of commercial production limited to 100% fixed capital investment or Rs.35 lakhs whichever is less. Questioning this restriction as reflected in the underlined words, series of writ petitions were filed in this Court. A Division Bench of this Court held in P.P.Industries v. Commissioner of Industries, WP Nos.16570 of 1991 and Batch 92 STC 419, that the condition laid down in the Government Memo dated 15-9-1990 which restricted the scope of incentives sanctioned in G.O.498, was invalid and cannot be enforced. The learned Judges held "such an alteration not having been effected by a notified order issued under Article 166(2) of the Constitution, the respondents are not entitled to rely upon the alteration or reduction in the eligibility of the petitioners for exemption to any amount lesser than that what was promised in clause (3) of G.O.498 dated 16-10-1989". Consequentially, it was declared that the petitioners therein were entitled to sales tax holiday for a period of 5 years subject to a ceiling of Rs.35 lakhs even if the total capital investment was less than that amount. The Division Bench, on application of the principle of promissory estoppel held that those who took steps to set up industries after G.O.498 was issued, were entitled to sales tax holiday in terms of that G.O. It may be clarified at this juncture that none of the petitioners herein were parties to the said Batch of writ petitions. To get over this judgment and to give a statutory basis to Para 6-B(ii) of the Government Memorandum dated 15-9-1990, the State Legislature passed A.P. Small Scale Industries (Restriction of Sales Tax Holiday) Act, (Act 14 of 1995). It was recited in the preamble to the Act that the implementation of the High Court''s judgment would run against the policy of the Government and facilitates small scale units with less investments and high turnovers taking undue advantage of the policy of the Government. Section 2 of the said Act runs as follows:
"2. Restriction on Sales Tax Holiday :--Notwithstanding anything contained in G.O. Ms No.498, Industries and Commerce (IA) Department, dated the 16th October, 1989 or, in any judgment, decree or order of any Court, Tribunal or other authority or any order to the contrary, the Government may declare a Sales Tax Holiday limited to 100% of the fixed capital investment or rupees thirty five lakhs, whichever is less, for a period of five years in respect of the small scale Industries including the Oil Mills Crushing Non-edible Oil Seeds, set up on or after 31st October, 1989 and go into commercial production before 31st March, 1995 in the State of A. P. except the Industries indicated in the Annexure to the said Government Order and the Industries indicated in the Annexure to the said Government Order and the Industries located in the Municipal Corporation limits of Hyderabad, Visakhapatnam and Vijayawada".
Retrospective effect was given to the Act to be effective from 16-10-1989. As a result of the Act, the Legislature restricted the Sales tax holiday to 100% of the fixed capital investment or Rs.3 5,00,000/-whichever is less. Going by the plain language of Section 2, the benefit was extended to Oil Mills Crushing non-edible Oil Seeds also, Cotton Seed being one such, but it goes contrary to G.O.146 by which the annexure to G.O.498 was amended. The validity of the Act was upheld by a Division Bench of this Court in Kamala Ginning Oil Mills v. State of A.P., 26 APSTJ 159. We are told that appeals against this judgment are pending in the Supreme Court.
It may be recalled that before the Act came into force, cotton seed oil Industries were not eligible for sales tax holiday in view of G.O.146. Hence, in some of the cases, applications for grant of incentives were rejected and in some cases, the Certificates already granted were cancelled. WP Nos.2031 of 1994 etc., were filed questioning the cancellation/rejection orders. By the time the writ petitions came up for disposal, Act 14 of 1995 was enacted. The Division Bench in its judgment dated 5-4-1995 after adverting the Section 2 of Act 14 of 1995, observed that cotton seed Oil Industries were also entitled for the benefits granted under G.O.498. The learned Judges further held "once this Act came into force, all the earlier G.Os., an deemed to be superseded. The question whether the parties are entitled to the benefit granted under the provisions of this Act, has to be considered by the authorities and therefore, instead of going into the merits of the matter, we feel it just and proper to set aside the impugned G.O. and direct the concerned authorities to pass appropriate orders and decide cases in the light Of the above provisions of the Act".
With great respect, the learned Judges may not be right in laying down a broad proposition that all the earlier G.Os. On the subject (which may include G.O.498 must be deemed to have been superseded). In fact, the Act itself refers to and reiterates G.O.498 subject to cutting down the amplitude of sales tax exemption. The learned Judges may not also be right in setting aside G.O.146 in toto even on the basis of the conclusion they reached. What the learned Judges evidently intended was to quash that G.O. in so far as it denied the incentives to cotton seed Oil Industries. But it is not necessary for us to dilate on this aspect further because the Legislature stepped in again to reiterate the provisions in G.O.498 substantially and the quantitative restriction contained in the Government Memorandum dated 15-9-1990.
We shall now refer to Act 18 of 1996. Section 2 of Act 14 of 1995 was substituted with the following Section with retrospective effect from 3-10-1989:
"2. Restriction on Sales Tax Holiday :--Notwithstanding the restrictions specified under Para 3-B of the G.O. Ms No.498, Industries and Commerce (IA) Department, dated the 16th October, 1989, or anything contained in any judgment, decree or order of any Court, Tribunal or other authority of any order to the contrary, the small Scale Industries which complied with the conditions stipulated in G.O. Ms No.498, Industries and Commerce (IA) Department, dated the 16th October, 1989 and Government Memo No.2125/IA/89-I, dated 15th September, 1990 shall be entitled for Sales Tax Holiday limited to 100% of the fixed capital investment of Rs.35 lakhs (Rs.Thirty five lakhs only) whichever is less, for a period of five years in respect of the Small Scale Industries set up on or after 3rd October, 1989 and go into commercial production before the 31st March, 1995 in the State of Andhra Pradesh except the Industries specified in the Annexure to the G.O. Ms No.498, Industries and Commerce Department, dated the 16th October, 1989 and the Industries located in the Municipal Corporation limits of Hyderabad, Visakhapatnam and Vijayawada".
The objective of this amending Act is spelt out by the preamble. The preamble makes it clear that it was meant to get over the judgment of this Court in WP No.2031 of 1994. In the light of this amended Act, orders were passed by the Industries Department rejecting the claims of the petitioners for the grant of sales tax holiday as per G.O. Ms No.498. In other words, the final eligibility certificates were refused. As noted above, Eligibility Certificates already granted were cancelled even earlier to this. While so, in some of the cases, the Sales Tax department started demanding the sales tax for the relevant years. This development led to the filing of the present Batch of writ petitions in which not only the provisions of Act 18 of 1996 but also rejection orders passed after the advent of Act 18 of 1996 have been challenged.
Crucial Controversy and contentions:
Before proceeding further, we would like to take note of the fact that the petitioners are only claiming the restricted relief in terms of Section 2 of Act 14 of 1995 read with the Government Memo dated 15-9-1990 to which the Legislative approval was accorded. Though Act 14 of 1995 insofar as it restricted the sales tax holiday to 100% capital investment (if it is less than Rs.35 lakhs) has been challenged in some cases, the learned senior Counsel appearing for the petitioners as well as the other Counsel made it clear that they are only claiming limited relief in terms of Section 2. In fact Act 14 of 1995 has been upheld by the Division Bench in Kamala Ginning Mills case (supra). In other words, there is no dispute as regards the quantum of relief allowable and the petitioners are prepared to avail of the sales tax holiday only to the extent of 100% capital cost even if it is less than Rs.35 lakhs. The dispute is only on the question whether the manufacturers of Cotton Seed Oil either raw or refined are eligible to claim the incentive of sales tax holiday in the light of amended Section 2 and on the application of the principle of promissory estoppel.
One of the prayers of the petitioners is to declare Act 18 of 1996 as beyond the Legislative competence and violative of Articles 14, 19(1)(g) and 300-A of the Constitution. The only argument advanced in the context of Act 18 of 1996 is that it cannot override the judgment of this Court by a mere declaration to that effect and therefore, it goes beyond the legislative competence. It is contended that the finality and binding effect of judgment in WP No.2031 of 1994 cannot be taken away by the retrospective amendment introduced by Act 18 of 1996. The learned Counsel also contended that even if Act 18 of 1996 is a valid piece of Legislation, it does not take away the benefit conferred by G.O.498 and the industries manufacturing Cotton seed oil are not disentitled from availing the benefit of sales tax holiday in terms of Section 2. It is this argument that mainly falls for consideration. The principle of promissory estoppel is also invoked to sustain their argument in this behalf.
A conspectus of the events that have taken place since the date of announcement of liberalised incentives scheme by G.O.498, dated 16-10-1989 tells us a story of wavering industrial policy of the Government, deficient G.O.s, contradictory orders and abortive attempts to overcome loopholes by Legislative measures. A decade following the announcement of incentives package has seen several rounds of litigation between industrial entrepreneurs and the Government, thanks to inartistically drafted G.O.s and the legal provisions. The eligibility certificates issued to ineligible industries have also compounded to the problem. The result is that uncertainty is looming large over the subject. We are not sure whether the judgment in the present writ petitions will close the lid on the controversy.
Features and objectives of Legislation:
Act 14 of 1995 and Act 18 of 1996
A careful scanning of the provisions of Act 18 of 1996 reveals the following features:
(1) To remedy the situation arising out of the broad observations made by this Court in WP Nos.2031 of 1994 etc., that the G.Os. issued prior to commencement of the Act 14 of 1995 (including G.O.498) must be deemed to have been superseded and to make it clear that the Government will abide by the orders issued in G.O.498 read with Government Memo No.2125/ IA/89-1, dated 15-9-1990.
(2) The other objective is to remove the words "including the Oil Mills Crushing Non-edible Oil Seeds" so as to give full effect to G.O.146 dated 25-4-1991 which revised the annexure to G.6.498.
(3) A categorical declaration (not merely conferring enabling power as in the old section) that small scale industries complying with the conditions stipulated in G.O.498 read with Government Memo dated 15-9-1990 will be entitled to sales tax holiday limited to 100% of capital investment or Rs.35 lakhs whichever is less.
Thus, while the main purpose of enacting Act 14 of 1995 (principal Act) was to restrict the quantum of relief on sales tax exemption, the avowed object of Act 18 of 1996 is twin fold: (1) to exclude certain categories of industries not eligible for relief, notwithstanding the judgment in WP No.2031 of 1994 and (2) to re-affirm the package of incentives offered to the small scale industries by G.O.498 subject to the restricted quantum of relief laid down in Section 2 of Act 14 of 1995. The amendment could not succeed in achieving its objective beyond the pale of controversy. While it deleted the words "including the Oil Mills Crushing Non-edible Oil Seeds" in tune with its intention, it has not properly accomplished the job which it set forth to perform, though, we cannot say that it was a futile exercise. Appropriate words were not incorporated in the body of the enacting section so as to put into effect what the Act contemplated to do in the preamble. If the words "as modified by G.O.146" were introduced after the words "annexure to G.O. Ms.No.498 dated 16-10-1989", much of the debate could have been avoided. Even then, we are of the view that the list of ineligible industries specified in G.O.146 is to be read into Section 2 of the Act 18 of 1996. The reason for such interpretation is to be found from the language of G.O.146 and the Preamble to Act 18 of 1996.
Interpretation of the word ''Annexure'' to G.O.498:
The crucial words found in Section 2 are..... "except the industries specified in the Annexure to G.O. Ms No.498". What is the annexure to G.O.498 is the question? Does it mean the annexure appended to G.O.498 in its original form when the G.O. was promulgated or does it mean the annexure as amended and modified by G.O.146? The obvious answer is that it only means the annexure as amended and modified by G.O.146. G.O.146 issued about 11 months subsequent to the G.O.498 reflects a slight shift in the policy of the Government as regards the classification of new industries eligible for incentives. The list of industries contained in the annexure to G.O.146 in effect replaces the original annexure to G.O.498. After the advent of G.O.146, the annexure to G.O.146 gets transplanted into G.O.498. On the issuance of G.O.146, the list of ineligible industries contemplated by and specified in G.O.498 is nothing but the list contained in G.O.146. It is to be noted that the G.O.146 is not independent of G.O.498. The very language of G.O.146 makes it crystal clear that the Government undertook the exercise of revising the list of ineligible industries mentioned in G.O.498 and to supplant the original list by a new list. The words occurring in G.O.146 are a clear indicia that G.O.146 was issued with the sole purpose of substituting a new list of ineligible industries in the place of old list
It is clearly stated in G.O.146 that the G.O.146 was "in partial modification" of G.O.498. The words "order for revision of ineligible list as per annexure" again go to show that the original list appended to G.O.498 has undergone a thorough revision. Most of the industries which are already there, are retained in the new annexure, some are deleted and some are modified. The list as contained in G.O.146 thus becomes an integral part of G.O.498. The annexure to G.O.498 in its original form gets superseded giving way to the new list brought about by G.O.146 dated 25-4-1991. The original list of industries contained in the annexure can no longer be regarded as part of G.O.498. It became obsolete for all practical purposes. The word ''annexure'' occurring in Section 2 of the Act 18 of 1996 should therefore be construed in this setting and perspective. We need not go to the extent of adding any words to the enacting provision in tune with the preamble. It would be enough if the phrase "annexure to G.O.Ms No.498" is given its due meaning having regard to the crucial event of the modification of annexure by G.O.146. The mere fact that the word ''annexure'' is not qualified by the words "as amended by G.O.146" does not make material difference, though if such words were there, there could have been no scope for argument.
Such interpretation and understanding of the expression "Annexure to G.O.498" is in tune with the Legislative intention which is clearly reflected in the preamble itself. The preamble makes no secret of the legislative intention to deny benefit to the list of ineligible industries updated by G.O.146. Whether the word ''annexure'' means earlier annexure or later one, is made clear by the Preamble.
Reliance on Preamble to understand the expression in amended Section 2:
It is trite to say that the preamble furnishes a key to the understanding of the Act. It unfolds the legislative intention and serves as a guide for the correct interpretation of the enacting provisions of a Statute. In consonance with the principle that the provisions of the Act must be read as a whole, the operative provisions of the Act can be read and interpreted in harmony with the preamble. Of course, if the operative or enacting provision of the Statute runs in a different direction from that of the preamble or it is utterly inadequate to bring into effect what is spelt out in the preamble, the Court cannot but disregard the preamble and give primacy to the actual words employed in the enacting part. The principle in this regard has been succinctly stated by Viscount Simonds in A.G. v. HRH Prince Ernest Augustus, 1957 (1) All ER (HL) 49:
"I conceive it to be my right and duty to examine every word of a statute in its context, and I use context in its widest sense as including not only other enacting provisions of the same statute, but its preamble, the existing state of the law, other statutes in pari materia, and the mischief which I can, by those and other legitimate means, discern that the statute was intended to remedy."
Lord Somervell in the same case spoke about the weight to be given to the preamble thus:
"If, in an Act, the Preamble is a general or brief statement of the main purpose, it may well be of little, if any value. The Act may, as has been said, go on beyond, or, in some respects fall short of, the purpose so briefly stated. Most Acts contain exceptions to their main purpose, on the meaning of which such a preamble would presumably, throw no light. On the other hand, some general and most local Acts have their limits set out in some detail. I will not hazard an example but there may well be cases in which a section, read with the preamble, may have a meaning different from that which it would have if there were no preamble. Court will, of course, bear in mind that a preamble is not an enacting provision, but I think it must have such weight as it can support in all contests as to construction."
The learned Law Lord again said "if, however, having read the Act as a whole, including the preamble, the enacting words clearly negative the construction which it is sought to support by the preamble, that is an end of it".
In the same decision, the following observations of Sir John Nicholl MR. were quoted with approval:
"The key to the opening of every law is the reason and the spirit of the law --it is the animus imponentis, the intention of the law maker, expressed in the law itself, taken as a whole. Hence to arrive at the true meaning of any particular phrase in a statute, that particular phrase is not to be viewed detached from the context meaning by this as well the title and the preamble as the purview or enacting part of the Statute".
The above passage was reiterated in almost the same words by the Supreme Court in Commissioner of Expenditure Tax, Gujarat, Ahmedabad Vs. Darshan Surendra Parekh, . This principle of interpretation which was so succinctly laid down by Sir John Nicholl MR found the approval of Supreme Court in K. Balakrishna Rao and Others Vs. Haji Abdulla Sait and Others, .
Mukherjee. J. expressed in Darshan Singh and Others Vs. State of Punjab, : "the words and phrases occurring in a Statute are to be taken not in an isolated or detached manner disassociated from the context, but are to be read together and construed in the light of the purpose and object of the Act itself.
Chief Justice Dyer said as long back as in 16th Century that the preamble is "a key to open the minds of the makers of the Act and the mischiefs which they intended to redress". "However, the preamble itself is not an enacting provision and the utility of preamble disminishes on a conclusion as to clarity of enacting provisions."
As observed in Maharao Sahib Shri Bhim Singhji Ors. Vs. Union of India (UOI) and Others, , the preamble to the Act ought to resolve interpretational doubts arising out of the defective drafting of section. (In that case, Section 23 of Urban Land Ceiling and Regulation Act fell for consideration).
The manner in which the preamble could be resorted to was approached from a slightly different angle by Mudholkar, J., Speaking for the Supreme Court in Burakar Coal Co. Ltd v. Union of India, AIR 1964 SC 954. His Lordship observed:
"We cannot, therefore, start with the preamble for construing the provisions of an Act, though we could be justified in resorting to it, nay, we will be required to do so, if we find that the language used by Parliament is ambiguous or is too general though in point of fact Parliament intended that it should have a limited application".
Here, we have no difficulty in reading the only enacting provision in Act 18 of 1996 (i.e., Section 2 in harmony with) the preamble. The preamble furnishes added justification to interpret the words "annexure to G.O.498" in the manner in which we have interpreted. Such interpretation incidentally carries out the Legislative purpose and objective. The Legislative purpose is apparent from the deletion of the words "including the Oil Mills Crushing Non-edible Oil Seeds" which were incorporated rather unwittingly in Act 14 of 1995 coupled with the amendment of the preamble portion of Act 14 of 1995 by referring to G.O.146.
We have thus come to the conclusion that if the industry falls within the list appended to G.O.146 dated 25-4-1991, it is disentitled to claim the Sales Tax Holiday as per Section 2 of Act 14 of 1995 as amended by Act 18 of 1996 because the annexure to G.O.146 supplants the annexure to G.O.498 and the new annexure to G.O.146 becomes part and parcel of G.O.498.
Whether petitioner''s industries fall under ineligible list:
The next question is whether the industry engaged in the manufacture of Cotton Seed Oil by crushing cotton seed with the aid of machinery is one of the ineligible industries under G.O.146 read with G.O.498. In the original annexure to G.O.498, the "Oil Mills/Crushing Edible Oil Seeds" were not eligible for grant of incentives. The learned Government Pleader for industries as well as the Government Pleader for Taxes initially raised a contention that all Oil Mills are ineligible for incentives under G.O.498. This argument is sought to be founded on the fact that there is an oblique mark (/) between the words "Oil Mills" and "Crushing Edible Oil Seeds". But such mark is really superfluous and meaningless. The latter words following the "Oil Mills" cannot have separate existence. The irresistible inference therefore is that only such of those Oil Mills Crushing Edible Oil Seeds will be ineligible for the grant of incentives, as per the G.O.498 in its original form. We may incidentally mention that it was never the contention of the State at any stage of this long drawn litigation that all Oil Mills irrespective of whether they manufacture oil out of the edible or non-edible oil seeds, are disentitled for incentives. It is too late in the day to raise any such contention.
When we come to G.O.146, item (1) was expanded covering various operations and processes relating to serveral Oil Seeds and the extraction of oil therefrom. It is faintly contended by the learned Counsel for the petitioners that firstly cotton seed being non-edible oil seed, cotton seed industry is not within the ambit of the exclusionary item and secondly, there was no processing of cotton seed. This argument does not deserve serious consideration and in fact, the learned senior Counsel appearing for some of the petitioners did not pursue this argument after a certain stage. However, the inaccuracy of the wording is again brought to the fore on a perusal of the language used in this item (1). The author of the G.O. assumed that cotton seed and other oil seeds specified therein are edible oil seeds whereas they are non-edible. If any authority is needed for this conclusion, we may refer to the judgments of the Supreme Court in Firm Girdhar Mal Kapur Chand Vs. Firm Dev Raj Madan Gopal, , and in Real Value Appliances Ltd. Vs. Canara Bank and Others, . Thus, there is inherent contradiction in referring to edible oil seeds and enumerating them by specifically mentioning certain non-edible oil seeds, for e.g., Cotton Seed. But, notwithstanding the defective description, the specification of cotton seed immediately following the words "all other edible oil seeds" leave no room for doubt that certain non-edible oil seeds specifically named therein were included in the ineligible list. Notwithstanding the apparent contradiction, we have to give proper meaning and effect to the last clause of item (1) of G.O.146 viewed in that light, we have no doubt that an industry engaged in the processing of cotton seed by extracting oil therefrom is clearly within the embargo of G.O.146 read with G.O.498. Extracting cotton seed oil from cotton seed can also be treated as one of the processes. The manufacturing is not an antithesis to processing. The other argument therefore does not call for a serious scrutiny. The ''processes'' mentioned therein will include undoubtedly the process of extraction of Oil from out of the cotton seed and any other anterior or subsequent operations.
We have therefore, no doubt in reaching the conclusion that an industry engaged in the extraction or production of cotton seed oil with or without refinery, comes under the list of ineligible industries as per the annexure to G.O.498 as amended by G.O.146.
Promissory Estoppel/legitimate expectation:
The next question is whether the petitioners can invoke the principle of promissory estoppel or the doctrine of legitimate expectation to sustain their claim for incentives even though cotton seed oil industries are otherwise ineligible to avail of the sales tax holiday. We do not think that any of these principles would come to the aid of the petitioners. Some of the essential common features of both these doctrines are: 1) unequivocal representation by a person or authority legally authorised to make such representation; 2) acting on such representation; 3) resultant detriment. It is well settled that any representation or promise made contrary to law can not be enforced by the Court. It is equally well settled that if considerations of public interest demands, the State can withdraw the promise or representation.
There is however controversy on the question whether the third requirement i.e., detriment should also be satisfied in giving effect to the doctrine of legitimate expectation in its substantive sense which according to the Supreme Court has been accepted as "part of our law" vide Punjab Communications Ltd, v. Union of India 1999 (4) SCC 729. On this aspect, the Supreme Court in the said case observed: ''The judgment in Raghunathan''s case requires that reliance must have been placed on the said representation and the representee must have thereby suffered detriment". This observation was made by Jagannadha Rao, J., after referring to various viewpoints.
In Union of India and others Vs. Hindustan Development Corpn. and others, , it was observed that legitimate expectation was not the same thing as anticipation. It is different from a mere wish or desire or hope. It is not a claim based on a right. A mere disappointment would not give rise to legal consequences. We may add that the same observations will hold good in the course of promissory estoppel also.
In the context of application of principle of promissory estoppel or legitimate expectation, the cases on hand fall in two categories: i) those who took active steps by incurring considerable expenditure before 25-4-1991 in order to establish the industry; ii) those who took such steps only after the date 25-4-1991, on which date the G.O.146 was issued modifying the list of ineligible industries contained in the annexure to G.O.498. Both these categories amongst the petitioners have of course gone into commercial production before the cut-off date prescribed under G.O.498 i.e., 31-3-1995. Whether or not the first category exists at all, is a matter of controversy. Assuming they do, there is scope for applying the principle of promissory estoppel/legitimate expectation in relation to such petitioners. However, we need not delve into this aspect further as the learned Government Pleaders have categorically stated that in view of the decision taken by the State level Committee set up under G.O.498, the benefit of incentives can be and are being extended to such cases irrespective of the fact whether they fall within the list of ineligible industries or not. The decision of the State Level Committee dated 23-8-1993 is as follows:
"The Committee decided that Oil Mills and other industries brought under ineligible list with effect from 25-4-1991 would be eligible for incentives, provided:
a) an Application for registration (EC) under the ISIS, 89 was filed with the DIG concerned before 25-4-1991;
And b) One or more of the implementation steps for project implementation namely applying for project finance (expenditure of 25% of the fixed capital cost for self financed units) placing orders for any part of the machinery, commencement of construction was taken before 25-4-1991".
It may be recalled that the date 25-4-1991 is the date on which G.O.146 came into force resulting in revision of ineligible list of industries. The above decision taken by the State Level Committee is fair and reasonable and it was obviously taken for the reason that to deny the benefit wholesale would be a negation of the principle of promissory estoppel and it may give rise to legal complications.
Neither the principle of promissory estoppel nor the legitimate expectation could however, be pressed into service in the second category of cases. With the revision of list of ineligible industries by means of G.O.146, the Government withdrew the concession earlier extended to the industries producing cotton seed oil. It may be a case of withdrawing an unintended benefit or a case of variation in policy. Whatever it be, the incentives in favour of cotton seed oil industry and the like stood withdrawn with effect from 25-4-1991. Thus, after 25-4-1991, any of the petitioners acting pursuant to representation does not arise. Such declaration or representation which was made in October, 1989 came to an end in April, 1991 as far as cotton seed oil industry is concerned. Thereafter, any steps taken by the petitioners to establish cotton seed oil manufacturing industry cannot be traced to any promise or representation which is enforceable at law. The petitioners must be presumed to be aware of G.O.146. In fact, it is not the case of any of the petitioners that they were not aware of revision of list of ineligible industries brought about by G.O.146. They could not have thereafter entertained or nurtured a legitimate expectation that they would still get incentives as per the original announcement made by the Government in October, 1989. There is no question of the petitioners belonging to second category placing reliance on the representation which was retracted and consequentially altering their position to their detriment. Subsequent steps taken by them to establish the industry cannot be attributable to any promise or representation. Despite the cotton seed oil industry being included in the ineligible list, if they still entertained any hope that Sales Tax Holiday and other incentives will be extended to them, they were only making a gamble or seeking a wind-fall. The expectation cannot be regarded as ''legitimate''.
The edifice of the petitioners'' argument is built upon the foundation that even after 25-4-1991, the eligibility certificates were granted and in few cases, temporary ST eligibility certificates were also granted after the commencement of production. It is therefore, contended that the concerned authorities of the Industries Department were themselves not sure of the withdrawal of incentives to cotton seed oil industry. The petitioner acted on a bona fide impression that the incentives package applied to their industry as well and they proceeded to act on that basis. It is contended that they not only set up the industrial units in the hope of getting concession, but also refrained from collecting sales tax. First of all, a pleading of this nature is not found in any of the writ petitions. The facts essential to make out a case for equatable relief based on promise or legitimate expectation have not been brought out succinctly. That apart, it is not open to the petitioners to rely on a certificate issued by an Officer of the Government out-stepping the limits of his authority and flagrantly violating the relevant orders within the framework of which the eligibility for incentives had to be determined. The petitioners cannot take shelter under an unauthorised act. It passes beyond our comprehension as to how such Certificates could be issued after 25-4-1991 even in the wake of G.O.146 and revising and modifying the list of ineligible industries. No rights flow from such erroneous certificates issued by the industries Department either in law or in equity. In fact, the ECs were cancelled in most of the cases soon after the mistake was realised.
As regards the argument that they did not pass on the sales tax to the buyers under the impression that it would be unlawful to do so when they were getting sales tax holiday, it is an argument which is to be taken with a pinch of salt. There is no apparent reason why the petitioners desisted from collecting the sales tax despite the fact that the authorities concerned have not issued the sales tax eligibility certificates ..... temporary or final. The cases where temporary ST eligibility certificates were granted however stand on a different footing and we shall deal with them a tittle later. But in the absence of even temporary ST eligibility certificates, no reasonable business man would have omitted to collect the sales tax, more so when their applications were kept pending.
Relief to be extended in the light of the State Level Committee''s decision:
Having regard to the view we have taken, if we consider the individual cases, we hold that in the following writ petitions, the respondents concerned should reconsider the petitioners'' claims on the basis of the criterion whether they have taken active steps prior to 25-4-1991. This direction is being given irrespective of the question of applicability of promissory estoppel inasmuch as the State Level Committee had taken a decision on 23-8-1993 to extend the incentives even to the industries originally notified under G.O.498 and were not initially ineligible for availing the incentives.
WP No. EC obtained on Commericial production started on
35822/97 25-6-1990 18-2-1993
22114/96 19-7-1990 13-12-1992
12030/96 17-5-1990 19-3-1990
12026/99 19-7-1990 18-1-1993
In all these cases, the Certificate mentions that 25% of the fixed capital cost was spent. This is in accordance with Para 9.2 of the Manual of Guidelines issued in Government Memo dated 15-9-1990. The value of the land, building and machinery is noted in each of the ECs. In the Writ Petition Nos.22114 of 1996, 12030 of 1999 and 35822 of 1997, proceedings were issued cancelling the ECs. The question whether active steps were taken before 25-4-1991 in terms of the decision taken by the State Level Committee dated 23-8-1993 was not adverted to even in the cancellation proceedings. Moreover, having regard to the date of registration and the date of issuance of eligibility certificate coupled with the date of commencement of production, the petitioners in these cases have made out prima facie cases for reconsideration in this behalf. It is not the case of the Government that after the Act came into force, no such consideration in terms of the State Level Committee''s decision should be made. In fact, we are informed that such benefit was extended to many industries which fell within the parameters of the decision taken by the State Level Committee. The petitioners in the above four cases who have made out a prima facie case should not be treated on a different footing based on a subsequent enactment.
In WP No.11152 of 1999, the petitioner was granted provisional registration on 29-3-1990. The B.C. was issued on 7-7-1992. The industry went into commercial production on 12-11-1993. Going by these dates, we would not have directed reconsideration on the same lines as in the above four writ petitions, but for the fact that in the E.G. it is mentioned that by 31-3-1990, the petitioners spent 25% of the estimated capital cost. We therefore direct reconsideration in this case too.
Judgment in WP Nos.2031 of 1994 and Batch - its real effect and how it is effected by Act 18 of 1996:
Now we pass on to the next contention advanced on behalf of the petitioners. This contention is based on the judgment of this Court in WP No.2031 of 1994. Most of the petitioners, though not all, were either parties to the said decision rendered on 5-4-1995 or they obtained similar orders following the said judgment. As already noticed, the main attack in that judgment was against G.O.146 dated 25-4-1991. By the time the writ petitions came up for hearing, Act 14 of 1995 was enacted. The Division Bench referred to Section 2 of the said Act and observed that Cotton Seed Oil Industries were also entitled for the benefits extended by G.O.498. It was then observed:
"Once this Act came into force, all the earlier G.Os. are deemed to be superseded."
So holding, the learned Judges of the Division Bench set aside the ''impugned G.O. (meaning thereby G.O.146) and directed the concerned authorities to dispose of the petitioner''s applications and to pass appropriate orders in the light of the provisions of the Act. The stay granted by this Court was directed to be continued till the disposal of the petitions.
The contention of the learned Counsel is that the categorical declaration in the judgment that Cotton Seed Oil Industries are eligible to get the benefits under G.O.498 is binding on the State and it is unaffected by the subsequent amendment of the Act. The concerned authorities should therefore proceed on the basis that G.O.146 had no effect and the petitioners are eligible to get Sales Tax Holiday in terms of G.O.498 read with Act 14 of 1995. The only enquiry they had to make was whether the conditions stipulated in G.O.498 and the criteria prescribed in Section 2 are satisfied or not. It is pointed out that the respondents fell into serious error in rejecting the applications in the light of the later Act i.e., Act 18 of 1996. It is further pointed that even the later Act does not have the effect of nullifying the judgment in WP No.2031 of 1994 and Batch which has attained finality, more so when there is no specific validating provision.
The argument over looks the real purport and effect of the judgment of this Court. The Court merely clarified the legal position obtaining u/s 2 of Act 14 of 1995 (as it then stood) that cotton seed oil industry was also eligible to get the incentives declared under G.O.498, notwithstanding G.O.146. The said conclusion was based wholly and solely on the then existing provision contained in Section 2. The ultimate direction issued was to consider the petitioners'' applications in the light of Act 14 of 1995. By the time the applications were taken up for consideration, Section 2 of Act 14 of 1995 underwent a change. We have already held that the effect of the Amendment was to deny the benefit to ineligible industries specified in G.O.146. In the face of this amendment which was brought into force with retrospective effect by Act 18 of 1996, the respondents cannot dispose of the applications, otherwise than in accordance with the amended Section 2. The judgment of this Court does not mean and imply that the applications shall be disposed of in the light of the pre-amended provision only. When the direction of this Court only obligates the respondents to consider the applications for incentives in the light of Act 14 of 1995, it does not mean that the amendment made to the Act should be eschewed from consideration. The only operative provision of Act 14 of 1995 that remains is the one that was subjected to amendment by Act 18 of 1996 and the concerned authorities were not precluded from giving effect to that amended provision. We are therefore of the view that the consideration and disposal of the petitioners'' applications for incentives in the light of Section 2 of Act 14 of 1995 as amended by Act 18 of 1996 does not go contrary to the mandamus issued by this Court in WP No.2031 of 1994 and Batch.
We are also of the view that even if the declaration of law by this Court that G.O.146 is rendered ineffective by Act 14 of 1995 and therefore, cotton seed oil industries can avail of the incentives under G.O.498 stands, Act 18 of 1996 strikes at the root of the judgment. The declaration of the legal position in the light of the pre-amended Section 2 is made ineffective by the amendments brought about by Act 18 of 1996. In this context, it is submitted by the learned Counsel that the Legislature has no power to overrule and neutralise the effect of a judgment of Court of law which has merely interpreted the existing provisions and to take away the benefits accruing therefrom. If Act 18 of 1996 is construed to have such effect, it would amount to interference with judicial functions and such a Legislation would be beyond the competence of the State Legislature.
In support of the above contention, reliance is placed on the decision of the Supreme Court in S.R. Bhagwat and others, Vs. State of Mysore, . That was a case in which the State Legislature without changing the substantive provisions of law which formed the basis for granting the relief of promotion and consequential financial benefits, passed a law only to deprive the promotees of the financial benefits. Such Legislation was held to be an encroachment on the judicial power of the High Court and therefore incompetent. The ratio of that decision is not attracted to the facts of the present case.
In that case, Majmudar, J., speaking for the Supreme Court reiterated the well-settled proposition in the following words:
"It is now well settled by a catena of decisions of this Court that a binding judicial pronouncement between the parties cannot be made ineffective with the aid of any Legislative power by enacting a provision which is substance overrules such judgment and is not in the realm of a Legislative enactment which displaces the basis or foundation of the judgment and uniformly applies to a class of persons concerned with the entire-subject sought to be covered by such an enactment having retrospective effect. We may only refer to two of these judgments".
Reliance is however placed by the petitioners'' Counsel on the observations at para 15 which are as follows:
"We may note at the very outset that in the present case the High Court had not struck down any Legislation which was sought to be re-enacted after removing any defect retrospectively by the impugned provisions. This is a case where on interpretation of existing law, the High Court had given certain benefits to the petitioners. That order of mandamus was sought to be nullified by the enactment of the impugned provisions in a new statute. This in our view would be clearly impermissible legislative exercise".
These observations have to be confined to the issue which their Lordships were dealing with. We do not understand this judgment as laying down the principle that the Legislature can remove the defect in a Statute only in a case where the provision has been struck down. Without dilating further on the true implications of these observations, it would be sufficient to refer to the dicta laid down by the Supreme Court in a recent Constitutional Bench decision in State of Tamil Nadu Vs. M/s. Arooran Sugars Ltd., . Before the Supreme Court, more or less a similar contention was raised which was not accepted. The correct legal position as regards the power to Legislature to make retrospective Legislation to remedy the situation arising out a Court''s judgment was stated in the following terms:
"It is open to the Legislature to remove the defect pointed out by the Court or to amend the definition or any other provision of the Act in question retrospectively. In this process it cannot be said that there has been an encroachment by the Legislature over the power of the judiciary. A Court''s directive must always bind unless the conditions on which it is based are so fundamentally altered that under altered circumstances such decisions could not have been given. This will include removal of the defect in a statute pointed out in the judgment in question, as well as alteration or substitution of provisions of the enactment on which such judgment is based, with retrospective effect, This is what has happened in the present case.
The judgment of the High Court in Writ Petition No. 1464 of 1974, dated 8-10-1976 was solely based on the amendments which had been introduced by Act 7 of 1974, If those amendments so introduced have been effaced by Act 25 of 1978 with retrospective effect saying that it shall be deemed that no such amendments had ever been introduced in the Principal Act, then full effect has to be given to the provisions of the later Act unless they are held to be ultra vires or unconstitutional".
The Supreme Court after approving the observations of Chandrachud. J., in The Government of Andhra Pradesh and Another Vs. Hindustan Machine Tools Ltd., observed:
"The State Legislature, it is significant, has not overruled or set aside the judgment of the High Court. It has amended the definition of ''house'' by the substitution of a new Section 2(15) for the old section and it has provided that the new definition shall have retrospective effect, notwithstanding anything contained in any judgment, decree or order of any Court or other authority. In other words, it has removed the basis of the decision rendered by the High Court so that the decision could not have been given in the altered circumstances. If the old Section 2(15) were to define ''house'' in the manner that the amended Section 2(15) does, there is no doubt that the decision of the High Court would have been otherwise. In fact, it was not disputed before us that the buildings constructed by the respondent meet fully the requirements of Section 2(15) as amended by the Act of 1974".
Another passage extracted below, in Hindustan Machine Tools Ltd. (supra) was quoted by the Constitution Bench:
"In the instant case, the Amending Act of 1974 cures the old definition contained in Section 2(15) of the vice from which it suffered. The amendment has been given retrospective effect and as stated earlier the Legislature has the power to make the laws passed by it retroactive. As the Amending Act does not ask the instrumentalities of the State to disobey or disregard the decision given by the High Court but removes the basis of its decision, the challenge made by the respondent to the Amending Act must fail. The levy of the house tax must therefore be upheld".
The enunciation of law as above applies with equal if not greater force to the case on hand. The amended section opens with a non-obstante clause "notwithstanding anything contained in the judgment, decree or order of any Court". We have already noticed the objectives of the Amendment. The underlying basis of the judgment in holding that Cotton Seed Oil Industry was eligible to get the benefit of incentives, was removed. G.O.146 excluding the benefit to the Industries producing Cotton Seed Oil and other ineligible Industries specified therein, was resuscitated. It cannot be doubted that this Court would not have observed that Cotton Seed Oil Industry was also entitled to the benefits conferred by G.O.498 but for the wording of the then existing Section 2. With the amendment of Section 2 with retrospective effect, the legal position has been so fundamentally altered that the decision could not have been given in the altered circumstances. The mere fact that the amending Act does not contain the usual provision for validating the acts done or orders passed, is immaterial. In fact, such a provision is perhaps superfluous. Between the enactment of Act 14 of 1995 (in the light of which directions were issued in WP No.2031 of 1994) and the introduction of Act 18 of 1996, practically, there was status quo and therefore the Legislature would have felt no need to insert a validating provision. It is only after Act 18 of 1996 came into force, the Commissioner of Industries started passing orders rejecting the applications in the light of Act 18 of 1996. In the interregnum, there were no orders which were contrary to later Act and which needed validation. We therefore see no force in the contention of the learned Counsel for the petitioners.
Temporary S.T. Eligibility Certificates -Relief based thereon:
The last aspect which we have to deal with pertains to cases in which temporary S.T. Eligibility Certificate was granted. That happened in seven cases, viz., WP Nos.22114 of 1996, 22115 of 1996, 22116 of 1996, 35822 of 1997, 11157 of 1999, 12026 of 1999 and 12030 of 1999. These certificates were granted in terms of Para 12.1 of the Manual of Guidelines referred to supra. According to that provision, the Certificate confers tentative eligibility for availing Sales Tax exemption upto the value of 20% of fixed capital investment and it will be operative from the first month of commencement of production and the period of eligibility was for a period of five years from that date. Based on the Certificate, the concerned Commercial Tax Officer will have to allow tax exemption upto the limit mentioned in the Certificate, and the same will be adjusted in the final eligibility Certificate to be issued later on. These certificates were issued after or just before the dates of commencement of production. Except in the case of the petitioner in WP No. 12030 of 1999, it does not appear that any other case, such Certificates were cancelled. Even in WP No.12030 of 1999, no show cause notice was given before cancelling the Certificate and the action was therefore null and void. It is the case of the petitioner that based on the tentative S.T. eligibility certificate, they did not pass on the sales tax to the buyers because it was held by this Court in the year 1994 that those who availed of S.T. exemption under the incentive scheme, are not entitled to pass on the tax. This averment has not been denied in the counter affidavits. The duration of the currency of the temporary S.T. eligibility Certificate issued to the above petitioners almost ran out by the time Act 18 of 1996 was passed. In some cases, the petitioners would have already availed of exemption upto the ceiling limit of 20% of the capital investment. No specific provision has been made in the Act for recovery of Sales Tax not paid by the petitioners based on the said Certificate. Under these circumstances, it would be unjust and unreasonable to demand Sales Tax which was otherwise due for the period prior to commencement of Act 18 of 1996. We therefore consider it just and proper to grant relief to the petitioners in the above seven writ petitions to this limited extent. However, if the petitioners in WP Nos.22114 of 1996, 35822 of 1997, 12026 of 1999 and 12030 of 1999 are found eligible to get the final eligibility certificate as per the directions given in the earlier part of this judgment, they will be entitled to full exemption from sales tax. Accordingly, it is clarified. In the result, the writ petition Nos.22114 of 1996, 22115 of 1996, 22116 of 1996, 35822 of 1997, 11157 of 1999, 12026 of 1999 and 12030 of 1999 are disposed of with the above directions. The rest of the writ petitions WP Nos.35024 of 1997, 22112 of 1996, 22113 of 1996, 25028 of 1996, 25030 of 1996, 12098 of 1999, 11152 of 1999, 15097 of 1999, 15098 of 1999 and 15114 of 1999 are dismissed. No costs.