1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1977    OF 2011 [Arising out of SLP (C) No. 16227 of 2009]

lState  of  Haryana  &  Others  ….  

Appellants

Versus

M/s. Mahabir Vegetable Oils Pvt. Ltd.     … Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

2

1. Leave granted.

2. The  issue  that  falls  for  our  consideration  in  this  appeal  is  

whether  the  Respondent  is  entitled  to  the  benefit  of  Sales  Tax  

exemption on the entire investment made by them in setting up the  

industrial  unit  i.e.  Solvent  Extraction Plant,  or  on the investments  

made  up  

till  

16.12.1996, the date on which the exemption granted under Rule 28A  

of the Haryana Sales Tax Rules (“HSTR” for short) was withdrawn by  

the State by putting the Solvent extraction plant in the negative list.  

3. The basic facts which are not in dispute, are as follows:-

The State enacted the Haryana General Sales Tax Act, 1973 (for short  

“the Act”). Section 64 of the Act provides for rule-making power. The

3 said  provision  was  amended by  inserting  sub-section  (2-A)  therein  

which reads as under:

“64. (2-A) The power to make rules under sub-sections (1)   and (2) with respect to clauses (ff)  and (oo) of sub-section   (2)  shall include the power to give retrospective effect to  such rules i.e. from the date on which policy for incentives  to industry is announced by the State and for this purpose   Rules 28-A, 28-B and 28-C of the Haryana General Sales  Tax Rules, 1975, shall have retrospective effect i.e. with  effect from 1st April,  1988,  1st August, 1997 and 15th  

November,  1999  respectively,  but  such  retrospective  operation shall not prejudicially affect the interest of any  person to whom such rules may be applicable.”

4. Clause (ff) of sub-section (2) of Section 64 of the Act provides for  

the class of industries,  period of exemption and conditions of such  

exemption, under Section 13-B; whereas clause (oo) thereof provides  

for class of industries, period of deferment and the conditions to be

4 imposed for such deferment under Section 25-A.  

5. Pursuant to or in furtherance of the said rule-making power, the  

State  made  rules  known as the Haryana General  Sales  Tax Rules,  

1975 (for short “the Rules”). Rule 28-A occurring in Chapter IV-A of  

the  Rules  provide  for  the  class  of  industries,  period  and  other  

conditions for exemption/deferment from payment of tax as envisaged  

both  

under  

Sections  

13-B  and  

25-A  of  

the  Act.  

“Operative period” has been defined in sub-rule (2)(a) of Rule 28-A of  

the Rules to mean “the period starting from the 1st day of April, 1988  

and ending on the 31st day of March, 1997”. Sub-rule (2)(c) thereof  

defines “New industrial unit” to mean:

“a  unit  which  is  or  has  been  set  up  in  the  State of   Haryana  and  comes  or  has  come  into  commercial  production for  the first time during the operative period  and has not been or is not formed as a result of purchase

5 or transfer of  old machinery except when purchased in  the course of  import into the territory of  India, or when  the cost of  old machinery does not exceed 25% of  the   total cost of  machinery re-establishment, amalgamation,  change  of  lease,  change  of  ownership,  change  in  constitution,  transfer  of  business,  reconstruction  or   revival of the existing unit”.  

6. “Negative list” has been defined in sub-rule (2)(o) to mean  

“a  list  of  class  of  industries  as  specified  in  Schedule  III  

appended  

to  these  

Rules”.

7. The  

State  of  

Haryana  

announced an industrial policy for the period 1-4-1988 to 31-3-1997  

wherein  inter alia incentive by way of sales tax exemption was to be  

given  for  the  industries  set  up  in  backward  areas  in  the  State.  

Schedule III appended to the Rules provides for a negative list of the  

industries and/or class of industries which were not to be included  

therein.  At  the  initial  stage  the  Solvent  extraction  plant  was

6 admittedly not included in the negative list.

8. On or about 3-1-1996, notice was given as regards the intention  

of  the  State  to  amend  the  Rules  in  respect  whereof  a  draft  was  

circulated for information of persons likely to be affected thereby so as  

to  enable  them  to  file  objections  and  suggestions  thereto.  

Amendments in the terms of the said draft rules were notified on 16-

12-1996  

substituting  Schedule  III  appended  to  the  Rules  whereby  and  

whereunder the solvent extraction plant was included therein. Note 2  

appended thereto reads as under:

“The  industrial  units  in  which  investment  has  been  made up to 25% of  the anticipated cost of  the project  and which have been included in the above list for the   first  time  shall  be  entitled  to  the  sales  tax  benefits  related to the extent of investment made up to 3-1-1996.  Only those assets will be included in the fixed capital

7 investment which have been installed or erected at site   and have  been  paid for.  The  anticipated cost  of  the  project  will  be  taken  on  the  basis  of  documents  furnished to a financial institution or banks for drawing   a loan and which have been accepted by the financial  institution or bank concerned for sanction of loan.”

9. On  or  about  28-5-1997  the  said  Rules  were  

amended inter alia by omitting Note 2 deeming to have  

always been omitted.

10. Yet  

again  on  

3-6-1997  

in  clause  

(a) of sub-

rule (2) of  

Rule 28-A  

of  the  

Rules instead and in place of “31-3-1997” the words “date on which  

new policy for incentive to industry is announced by the Government  

of Haryana in Industries Department” was substituted.

11. On 26-6-2001 in Section 13-B after the words “for such period”,  

the words “either prospectively or retrospectively” were inserted.

8 12. It  is  only after  the notice  dated 3.1.1996 that the respondent  

Mahabir  Vegetable  Oils  (P)  Limited  purchased  land  measuring  30  

kanals 17 marlas in the month of August 1996 to set up a solvent  

extraction plant. It also obtained registration under the provisions of  

the Act and the Central Sales Tax Act, 1956 on 6-9-1996. On 13-8-

1996 it applied for a no-objection certificate from the Haryana State  

Pollution  

Control  

Board  

which is a  

condition  

precedent  

for setting  

up  a  

solvent  

extraction  plant.  On  15-8-1996,  the  appellant  entered  into  an  

agreement with M/s Saratech Consultants and Engineers, Karnal for  

supply and erection of the plant for a sum of Rs. 55,55,000.00 and  

Rs 22,75,000 respectively and advances were paid on different dates.  

Furthermore,  on  6-9-1996,  civil  construction  work  started  at  site.

9 Plans submitted by the appellant for getting permission for storage of  

hexane were sanctioned by the Explosives Department on 19-9-1996  

and licence was finally given on 11-3-1997. On 26-9-1996, process of  

installation of the plant started at the site. On or about 18-11-1996, a  

250 kVA power-generating set costing Rs 9,91,000 was installed, no-

objection  certificate  wherefor  was  granted  on  22-11-1996.  The  

appellant  

applied to  

the  

Haryana  

State  

Electricity  

Board  for  

release  of  

the  power  

connection vide application dated 12-12-1996 and also deposited the  

security  of  Rs.  68,700 for  the  same.  On 26-3-1997,  the  appellant  

started the trial production and commercial production commenced  

on 29-3-1997.

13. The  respondent  had  applied  for  grant  of  exemption  from

10 payment  of  sales  tax  as  on  16-12-1996  which  was  rejected  the  

following terms: -

“…  The  solvent  extraction plants  were  included  in  the  negative list with effect from 16-12-1996.  The  industrial  unit has made 45% of total investment. In the notification it  was stipulated that the industrial unit in which investment  has been made up to 25% of  the anticipated cost of  the  project which has been included in the negative list for the  first time shall be entitled to sales tax benefit, however, this  condition has been  deleted vide notification dated 28-5-

1997. The Committee was of  the view that this condition   has  already  been  deleted  and  certain  parties  have  challenged it in the Punjab and Haryana High Court. The   Director  of  Industries  was of  the  view that in  case  a  particular industry is  put in the  negative list,  benefit  on  account of investment made before the date of putting the  unit in the negative list should be available to the unit for   sales tax exemption/deferment. Though the Higher Level   Screening Committee broadly agreed with this view, yet in  view of  the fact that such cases were not covered in the  existing  notification  of  the  Commercial  Taxation  Department, it was decided to reject the claim of the party.”

11 And the writ petition filed by the Respondent before the  

High Court was dismissed holding: -

“(i)  The  power to  grant exemption from  the payment of   sales tax is an exercise of  the powers conferred by the   statute on the State Government and is, thus, a delegated  legislative  function.  The  delegated  legislation  can  be  struck  down if  it  is  established  that there  is  manifest  arbitrariness. It must be shown that it was not reasonable  or manifestly arbitrary.

(ii)  As  per  the  records  made  available,  a  Standing   Committee was constituted by the State of  Haryana for   revising the negative list periodically keeping in view the  industrial scheme  of  the  State  and  its  neighbourhood.   Such  Standing  Committee  considered  the  revision  of   negative list in its meeting held on 15-9-1995 wherein it   was decided to include highly polluting industries, power- intensive industries, conventional type of industries where  sufficient capacity has already come up and any further   increase in the  capacity would jeopardise the health of   existing industry in the negative list. There is no challenge  to the decision or proceedings of such Committee on any

12 ground  indicating  arbitrariness,  bias, mala fide  or  any  such like reason.

(iii) In view of certain decisions of this Court, the benefit of   exemption can be withdrawn in public interest. (iv)  There  is  no  allegation of  exercise of  such power to   include solvent extraction plant which is actuated by any  mala fides, fraud or lack of  bona fides. It is a matter of   fiscal  policy  of  the  State  Government  as  to  which  industries should be granted exemption. (v)  Mahabir  Vegetable  Oils  (P)  Ltd.  only  invested  

Rs. 4,44,000 in the land and purchased machinery worth  Rs.16,90,000 on 14-12-1996. (vi) Thus, we hold that there is no representation on behalf   of  the  State  Government  that  the  scheme  of  granting   incentives by way of  exemption or deferment will not be  modified, amended or varied during the operative period.  There cannot be any restraint on the State Government to   exercise  the  delegated  legislative  functions  within  the  parameters laid down by the statute.”

14. Against the said dismissal the Respondent approached this

13 Court by filing Special  Leave Petition which was converted into  

Civil Appeal 1635 of 2006. The said Appeal of the respondent was  

allowed by this Court vide its judgment dated 10-3-2006 which  

was reported at  (2006) 3 SCC 620.  This Court by applying the  

Doctrine  of  Promissory  Estoppel  held  that  the  

promises/representations made by way of a statute, continued to  

operate  

in  the  

field. This  

Court  

noted  

that  it  

may  be  

true  that  

the  

Respondent altered their position only from August 1996 but it  

has neither  been  denied nor disputed that during the relevant  

period, namely, August 1996 to 16-12-1996 not only have they  

invested  huge  amounts  but  also  the  authorities  of  the  State  

sanctioned  benefits,  granted  permissions.  The  Respondent  had

14 also taken other steps which could be taken only for the purpose  

of setting up of a new industrial unit. This Court further noted  

that an entrepreneur who sets up an industry in a backward area  

unless  otherwise  prohibited,  is  entitled  to  alter  his  position  

pursuant to or in furtherance of the promises or representations  

made by the State.  

15.

However  

this  

Court,  at  

that  

stage,  did  

not  

interfere  

with the issue of the quantum of exemption which can be granted to  

the Respondent and the said issue was kept open and the matter was  

remanded to the Director Industries for fresh adjudication. The Writ  

Petition filed by the Respondent under Article 32 was also disposed  

off. The relevant portion of the said judgment is as follows:-  

“38. The promises/representations made by way of a

15 statute, therefore,  continued to operate in the field. It  may be true that the appellants altered their position  only from August 1996 but it has neither been denied  nor disputed that during the relevant period, namely,  August  1996  to  16-12-1996  not  only  have  they  invested huge amounts but also the authorities of the  State sanctioned benefits, granted permissions. Parties  had also taken other steps which could be taken only  for the purpose of setting up of a new industrial unit.  An  entrepreneur  who  sets  up  an  industry  in  a  backward area unless otherwise prohibited, is entitled  to alter his position pursuant to or in furtherance of the   

promises or  representations made by the State. The  State  accepted that equity operated in favour  of  the  entrepreneurs  by  issuing  Note  2  to  the  notification  dated 16-12-1996 whereby and whereunder solvent  extraction  plant  was  for  the  first  time  inserted  in  Schedule III i.e. in the negative list. 39. Both the provisions contained in Schedule III and  Note  2  formed  part  of  subordinate  legislation.  By  reason of the said note, the State did not deviate from  its  professed  object.  It  was in  conformity  with the  purport for which original Rule 28-A was enacted.

16 40.  We,  in  this  case,  are  not  concerned  with  the  quantum of exemption to which the appellants may be  entitled  to,  but  only  with  the  interpretation  of  the  relevant  provisions  which  arise  for  consideration  before us. 41.  We  may  at  this  stage  consider  the  effect  of   omission of the said note. It is beyond any cavil that a  subordinate legislation can  be  given  a  retrospective  effect and retroactive operation, if  any power in this  behalf  is contained in the main Act. The rule-making  power is a species of delegated legislation. A delegatee  therefore can make rules only within the four corners  

thereof. 42. 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. (See West v. Gwynne14.) 43. A retrospective effect to an amendment by way of   a delegated legislation could be given, thus, only after  coming into force of sub-section (2-A) of Section 64 of   the Act and not prior thereto. 44. By reason of Note 2, certain rights were conferred.  

17 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. 45.  For  the  reasons  aforementioned,  the  impugned  judgment  cannot  be  sustained  which  is  set  aside  accordingly. The appeals are allowed and the matter is  remitted to the Director of  Industries to consider the  matter afresh.

46. In view of our findings aforementioned no direction  is required to be issued in the writ petition filed by the  appellants.  The  writ  petition  is  disposed  of   accordingly.”

16. The  Lower  Level  Screening  Committee  (“LLSC” for  short)  After  

considering the matter in the light of the abovementioned judgment  

passed by this Court made a recommendation for grant of eligibility

18 certificate to the extent of Rs.94,48,911/- for a period of nine years  

i.e. from 29.03.1997 to 28.03.2006. The said amount was calculated  

with  reference  to  the  investment  made  by  the  petitioner  up  to  

16.12.1996 i.e. date of amendment, putting the unit in the negative  

list. On appeal, the Appellate Authority affirmed the said view with  

the following observations :-

“.....The  Committee  examined  the  judgment  relied  upon and observed that the Hon'ble Supreme Court  has  not  found  fault  with  the  amendment  dated  16.12.1996 whereby the solvent extraction plant have  been put into negative list (schedule III). The effect of   enlargement of  the negative list is that the unit has  ceased  to  be  eligible  for  exemption/deferment  with  effect from 16.12.1996. Besides, it is further observed  that  tax  concessions,  as  repeatedly  held  by  the  Hon'ble  Supreme  Court,  are  a  defeasible,  not  an  indefeasible,  right  but  the  withdrawal  is  always  prospective.”

19

17. The respondent challenged the said order & judgment before the  

High Court of Punjab & Haryana by filling a writ petition. The High  

Court by the impugned judgment allowed the writ and held once the  

Respondent has been treated to be eligible for exemption, there was  

no valid reason to further classify the benefit of investment up to the  

date  of  

amendment, putting the unit in the negative list. The relevant paras  

of the impugned judgment are follows:-  

“13. Admittedly, on the date of  commercial production  and also on the date of issue of entitlement/exemption  certificate, the petitioner was in negative list and could  not be considered to be eligible unless applicability of   notification  dated  16.12.1996  was confined  to  units  which started investment before the said date. 14.  The  respondents  themselves  have  extended  the

20 benefit by not treating the notification dated 16.12.1996  to be applicable to the petitioner. Once the petitioner has  been treated to be eligible, there was no valid reason to  further classify the benefit of investment up to the date  of amendment, putting the unit in the negative list. 14. In view of above, we allow this petition and quash  the  impugned  orders  to  the  extent  of  restricting the  benefit to the date of notification i.e. 16.12.1996. 15. The Appellate Authority may now pass a fresh order   in  accordance  with law, within four  months from the  date of certified copy of this order.”

18. It  is  against  the  said  judgment  that  the  appellants  have  

approached this Court. We heard the learned Senior Counsel for the  

parties.  However, before  we deal with the respective  submission we  

may specify that this Court in the year 2006 has already held that the  

Respondent is entitled  to the exemption, and the only issue which

21 remains  to  be  decide  is  whether  the  exemption has  to  be  granted  

upon the entire investment or the investment made up till 16.12.1996  

i.e. date of amendment, putting the unit in the negative list.

19. The learned Senior Counsel appearing for the State vehemently  

argued  that the  exemption granted  to solvent extraction plant was  

legally  withdrawn  by  the  State  Government  on  16.12.1996  as  the  

same  was  

deemed  

necessary  

in  the  

public  

interest  It  

was  

further  

submitted that it is within the prerogative of the State to withdraw an  

exemption if the same is deemed necessary in the public interest. It  

was also submitted that the Respondent does not have a vested right  

in their favour and the exemption granted cannot go beyond the date  

of  withdrawal  by the State.  It  was also  contented that as now the  

benefit of exemption has been granted on the investment made up till

22 16.12.1996 the question of retrospective effect also does not arise.  

20. On  the  other  hand,  it  was  submitted  by  the  Learned  Senior  

Counsel appearing for the Respondent that the respondent has taken  

a decision to establish its industrial unit in the said area of the State  

of Haryana, only on the basis and footing that the respondent would  

be entitled to the benefit of sales tax exemption @ 150% on the total  

capital  

investment made in that industrial unit. In order to supplement the  

said submission, the learned Senior Counsel placed strong reliance  

on the doctrine of  promissory estoppel  and submitted that once the  

Respondent, based on the representation of the State has initiated the  

steps to establish the unit and has made substantial investment in  

that regard,  the  State  now cannot  turn around and deny  the said

23 benefit of exemption.

21. We have considered the submission made by the learned senior  

counsel for the parties and have also perused the relevant provision,  

as amended from time to time and the documents placed on record.  

22. The  judgment  of  this  Court  dated  10-3-2006  in  Civil  Appeal  

1635  of  2006  reported  at  (2006)  3  SCC 620 only  considered  the  

retrospective operation of the amendments made on 16.12.1996 and  

subsequent amendments which sought to take away certain rights of  

the Respondents. This Court in the said judgment had only held that  

the amendment to Rule 28A could not have any retrospective effect,  

in the sense that it could not affect an assessee’s pre-existing rights.  

It  is also important to note that the said judgment clearly clarified

24 that the question of quantum of exemption to which the appellants  

may be entitled to was not considered. It may also be pointed out that  

this Court did not go into the challenge made to the validity of the  

Amendments made which was challenged by the Respondent by way  

of  a  Writ  Petition.  The  reliance  placed  on  the  said  Judgment  is  

therefore misplaced. The issue that falls for our consideration in this  

appeal  is  

on  the  

quantum  

of  

exemption to which the Respondent is entitled and that too for the  

period subsequent to the date of the amendment. In other words, the  

question before us pertains to whether the Respondent is entitled to  

the benefit of Sales Tax exemption on the entire investment made by  

them in setting up the industrial unit i.e.  Solvent Extraction Plant,  

made prospectively after 16.12.1996.

25 23. It has been urged on behalf of the Respondents that benefit of  

the exemption is required to be advanced to them on the principle of  

the Doctrine of Promissory Estoppel.  We are not in agreement  with  

the said argument. This Court in M/s. Motilal Padampat Sugar Mills  

Co. (P) Ltd. vs. State of Uttar Pradesh and Ors. Reported in (1979)  

2 SCC 409 held as under:  

“24. This Court finally, after referring to the decision in the  Ganges  Manufacturing  Co.  v.  Sourujmull,  Municipal  Corporation of the City of Bombay v. Secretary of State for   India and Collector of Bombay v. Municipal Corporation of   the City of Bombay summed up the position as follows:

“Under  our  jurisprudence  the  Government  is  not  exempt from liability to carry out the representation  made by it as to its future conduct and it cannot on   some  undefined  and  undisclosed  ground  of   necessity or expediency fail to carry out the promise   solemnly made by it, nor claim to be the Judge of its   own  obligation  to  the  citizen  on  an  ex  parte  appraisement  of  the  circumstances  in  which  the  obligation has arisen.”

26 The law may, therefore,  now be taken to be settled as a  result of this decision, that where the Government makes a  promise knowing or intending that it would be acted on by  the promisee and, in fact, the promisee, acting in reliance on  it, alters his position, the Government would be held bound  by  the  promise  and  the  promise  would  be  enforceable  against the Government  at the  instance of  the  promisee,   notwithstanding  that  there  is  no  consideration  for  the  promise and the promise is not recorded in the form of  a  formal  contract  as  required  by  Article  299  of  the  Constitution. It is elementary that in a republic governed by  the rule of law, no one, howsoever high or low, is above the  law. Everyone is subject to the law as fully and completely  as any other and the Government is no exception.    It is  

indeed the pride of constitutional democracy and rule of law  that the Government stands on the same footing as a private  individual so far as the obligation of the law is concerned:   the  former  is  equally  bound  as  the  latter.  It  is  indeed  difficult  to  see  on  what  principle  can  a  Government,  committed  to  the  rule  of  law,  claim  immunity  from  the   doctrine of  promissory estoppel.  Can the Government say  that it is under no obligation to act in a manner that is fair  and  just  or  that  it  is  not  bound  by  considerations  of   “honesty and good faith”? Why should the Government not  be held to a high “standard of  rectangular rectitude while  dealing  with its citizens”?    There  was a time  when the  doctrine of  executive necessity was regarded as sufficient   justification  for  the  Government  to  repudiate  even  its

27 contractual obligations; but, let it be said to the eternal glory   of  this Court, this doctrine was emphatically negatived in  the Indo-Afghan Agencies case and the supremacy of  the  rule of law was established. It was laid down by this Court   that the Government cannot claim to be immune from the  applicability  of  the  rule  of  promissory  estoppel  and  repudiate a promise made by it on the ground that such   promise  may  fetter  its  future  executive  action.   If  the  Government does not want its freedom of executive action to  be hampered or restricted, the Government need not make a  promise knowing or intending that it would be acted on by  the  promisee  and  the  promisee  would  alter  his  position  relying  upon  it.  But  if  the  Government  makes  such  a  promise and the promisee acts in reliance upon it and alters   

his position, there is no reason why the Government should  not be compelled to make good such promise like any other  private individual.   The law cannot acquire legitimacy and  gain  social  acceptance  unless  it  accords  with the  moral  values  of  the  society  and  the  constant endeavour  of  the  Courts and the legislature, must, therefore, be to close the  gap between law and morality and bring about as near an   approximation between the two as possible.   The doctrine  of  promissory estoppel is a significant judicial contribution  in that direction.   But it is necessary to point  out  that since  the   doctrine  of   promissory  estoppel  is   an   equitable  doctrine,   it   must         yield when the equity so requires. If   it can be shown by the Government that having regard to  the facts as they have transpired, it would be inequitable to

28 hold the Government to the promise made by it, the Court  would not raise an equity in favour  of  the promisee and  enforce the promise against the Government. The doctrine of   promissory  estoppel  would  be  displaced  in  such  a  case  because,  on  the  facts,  equity would  not  require  that the  Government should be held bound by the promise made by  it. When the Government is able to show that in view of the   facts as have transpired since the making of  the promise,   public interest would be prejudiced if the Government were  required to carry out the promise, the Court would have to  balance the public interest in the Government carrying out a  promise made to a citizen which has induced the citizen to  act upon  it and alter his position  and the  public  interest  likely to suffer if the promise were required to be carried out  

by the  Government and determine which way the equity  lies. It would not be enough for the Government just to say  that public interest requires that the Government should not  be  compelled  to  carry  out the promise  or  that the public  interest would suffer  if  the  Government were required  to  honour it. The Government cannot, as Shah, J., pointed out  in the Indo-Afghan Agencies case, claim to be exempt from  the liability to carry out the promise “on some indefinite and  undisclosed ground of necessity or expediency”, nor can the  Government claim to be the sole Judge of  its liability and  repudiate  it  “on  an  ex  parte  appraisement  of  the   circumstances”.  If  the  Government  wants  to  resist  the  liability, it will have to disclose to the Court what are the  facts  and  circumstances  on  account  of  which  the

29 Government claims to  be  exempt from  the liability  and it  would be for  the Court to decide whether those facts and  circumstances are such as to render it inequitable to enforce   the liability against the Government. Mere claim of change  of  policy  would  not  be  sufficient  to  exonerate  the  Government from the liability: the Government would have  to show what precisely is the changed policy and also its  reason and justification so that the Court can judge for itself   which way the public interest lies and what the equity of the  case demands. It is only if the Court is satisfied, on proper  and  adequate  material  placed  by  the  Government,  that  overriding  public  interest  requires  that  the  Government  should not be held bound by the promise but should be free   to act unfettered by it, that the Court would refuse to enforce   

the promise against the Government.  The Court would not  act on the mere ipse dixit of  the Government, for it is the  Court which has to decide and not the Government whether  the Government should be held exempt from liability. This is  the essence of the rule of law. The burden would be upon   the  Government  to  show  that the  public  interest  in  the  Government acting otherwise than in accordance with the  promise is so overwhelming that it would be inequitable to  hold the Government bound by the promise and the Court  would insist on a highly rigorous standard of  proof  in the   discharge of this burden. But even where there is no such  overriding  public interest, it may still  be competent to the  Government to resile from the promise “on giving reasonable   notice,  which  need  not  be  a  formal  notice,  giving  the

30 promisee a reasonable opportunity of resuming his position”  provided of course it is possible for the promisee to restore  status quo ante. If,  however, the promisee cannot resume  his  position,  the  promise  would  become  final  and  irrevocable. Vide Emmanuel Avodeji Ajaye v. Briscoe”.

24. The doctrine of Promissory Estoppel is an equitable remedy and  

has  to  be  moulded  depending  on  the  facts  of  each  case  and  not  

straight jacketed into pigeon holes. In other words, there cannot be  

any  hard  

and  fast  

rule  for  

applying  

the  

doctrine  

of  

Promissory Estoppel but the doctrine has to evolve and expand itself  

so as to do justice between the parties and ensure equity between the  

parties i.e. both the promissor and the promisee.  

25. The  principles  of  promissory  estoppel  is  not  applicable  in the  

instant case as the decision to put the Solvent Extraction Plant in the  

negative list was taken in public interest since the industry is in the

31 category  of  polluting  industry.  It  has  never  been  the  case  of  the  

Respondent  that  the  Solvent  Extraction  Plant  is  a  non  polluting  

industry.  There  is  also  no  allegation  that  the  decision  to  put  the  

Solvent Extraction Plant in the negative list was actuated by fraud or  

that  the  said  decision  was  not  bona  fide.  In  cases  where  the  

Government on the basis of material available before it, bona fide, is  

satisfied  

that  

public  

interest  

would  be  

served  by  

granting,  

withdrawing, modifying or rescinding an exemption already granted, it  

should be allowed a free hand to do so. The withdrawal of exemption  

“in public interest”  is a matter of policy and the Courts should not  

bind the government in its  policy  decision.  The  Courts  should  not  

normally interfere with fiscal policy of the government more so when  

such decisions are taken in public interest and where no fraud nor

32 lack of bona fide is alleged much less established.

26. An exemption is nothing but a freedom from an obligation which  

an assessee  is otherwise  liable to discharge.  In a fiscal  statute,  an  

exemption has been held to be a concession granted by the state so  

that the beneficiaries of such concession are not required to pay the  

tax or the duty they are otherwise liable to pay under such statute.  

The  

beneficiary of a concession has no legally enforceable right against the  

government to grant a concession except to enjoy the benefits of the  

concession during the period of its grant. The right to exemption or  

concession is a right that can be taken away under the very power in  

exercise of which the exemption was granted.  

27. Furthermore,  in the fact of the instant case, it cannot be said

33 that the Respondent had altered its position relying on the promise in  

as much as even before steps were taken by the Respondent for laying  

the  Solvent Extraction Plant,  the Petitioner  had made its  intention  

clear through its notice dated 3.1.1996 that it was likely to amend the  

law/rules in respect whereof a draft was circulated for information of  

persons  likely  to  be  affected  thereby  so  as  to  enable  them to  file  

objections  

and  

suggestions thereto. Amendments in the terms of the said draft rules  

were  notified  on 16-12-1996 substituting Schedule  III  appended to  

the Rules whereby and where under the solvent extraction plant was  

included therein.

28. It  cannot  be  denied  that  an  investment  was  made  by  the  

Respondent in the said area of the State of Haryana, probably on the

34 belief  that it would be entitled to the exemption. However, the said  

factor alone, in the absence of any specific confirmation cannot stop  

the State to amend the policy and withdraw the exemption if the same  

is deemed necessary and expedient in the Public Interest. Moreover,  

the said policy which was for the period of 1-4-1988 to 31-3-1997 was  

nearing its end.  

29. The  

Note  2,  

appended  

to  the  

amendment  made  to  Schedule  III  (extracted  hereinabove),  

categorically state that the industrial units in which investment has  

been made up to 25% of the anticipated cost of the project and which  

have been included in the above list for the first time shall be entitled  

to the sales tax benefits related to the extent of investment made up  

to 3-1-1996. On or about 28-5-1997 the said Rules were amended

35 inter alia by omitting Note 2 deeming to have always been omitted.

30. The  LLSC,  while  arriving  at  the  quantum  of  exemption  

considered the conditions enumerated in the Note 2 and keeping in  

view  the  observation  made  by  this  Court  in  the  abovementioned  

judgment,  granted  the  exemption  till  16.12.1996  i.e.  date  of  the  

amendment instead of 3-1-1996 as mentioned in the said Note. The  

said  

finding  

was  

upheld by  

the  

Appellate  

Authority  

which  

found  that  the  quantification  was  in  accord  with  abovementioned  

judgment passed by this Court and other principles of law.   

31. If one goes by the wording of Note 2, it appears that in order to  

balance  the  equities  and  protect  the  interest  of  the  investor  the  

benefit of the exemption was granted for the investments made up till  

16-12-1996. Moreover, as the benefit has already been granted till 16-

36 12-1996 in terms of the ratio of the judgment passed by this Court, in  

the Mahabir Vegetable case (supra) reported at (2006) 3 SCC 620 it  

cannot  be  said  that  even  now an  attempt  has  been  made  to  give  

retrospective effect to the said amendment.  

32. The High Court has gone on the premise that once the Appellant  

have themselves extended the benefit to the Respondent they cannot  

further  

classify  

the  

benefit  of  

investment  up  to  the  date  of  amendment,  putting  the  unit  in  the  

negative list. It appears that the High Court while arriving at the said  

finding  has  failed  to  appreciate  the  fact  that  the  case  of  the  

Respondent was considered for exemption in the light of the judgment  

passed by this Court in the Mahabir Vegetable case (supra) reported  

at  (2006) 3 SCC 620  wherein it was held that the Respondent is

37 entitled to exemption.  However, the issue of quantum was kept open.  

The  High Court  while  giving the said finding has altogether  closed  

itself in considering the said issue and on the contrary has held that  

only  because  the  Respondent  has  been  considered  for  grant  of  

exemption,  there  is  no  issue  of  quantum  and  the  Respondent  is  

entitled to entire exemption. In our opinion the said finding is not in  

line  with  

the  

observations  made  by  this  Court  in  the  Mahabir  Vegetable   case  

(supra) reported at (2006) 3 SCC 620. The quantification made by the  

LLSC is in accord with the ratio laid by this Court.  

38

33.

Accordingly,  we  allow  the  appeal  and  set  aside  the  impugned  

judgment passed by the High Court leaving the parties to bear their own  

costs.

............................................J          [Dr. Mukundakam Sharma ]

39

    .......................................J       [ Anil R. Dave ]

New Delhi, February 21, 2011.