State of Uttar Pradesh & Anr. vs M/s. Birla Corporation Limited

1.2. On a bare reading of section 5 of the Uttar Pradesh Trade Tax Act, 1948, it is evident that there is no express authority given to the Executive to issue notification for “withdrawing or rescinding the rebate facility” from a date prior to the date of notification. Section 5(2) merely constrict that power only for “allowing” rebate with effect from a date prior to the date of notification. That does not include, by necessary implication or otherwise, power to “withdraw” or “rescind” the rebate from a date prior to the date of the notification [Para 25] [151-C-D]

1.3. Section 21 of the 1897 Act also will be of no avail. Section 21 of the 1904 Act, is pari materia to the above provision and will be of no avail for withdrawing the rebate from a date prior to the date of the notification. The plain language of the notification dated 14th October, 2004, itself expressly rescinds notification dated 27th February, 1998 with effect from 14th October, 2004. There is no express or tacit intent manifested from this notification, so as to construe it as bestowing power to withdraw the rebate facility with effect from a date prior to the date of notification as such. On this finding, nothing more is required to be said as the concomitant of this finding would necessarily be that all the industrial units set up after 27th February, 1998 and before 14th October, 2004 which had commenced commercial production, must continue to qualify for rebate for specified term mentioned in notification dated 27th February, 1998, subject to fulfilling all other conditions specified therein. [Para 26, 27] [151-E, G-H; 152-A]

1.4 In the case of BCL, the rebate ought to continue up to 13th December, 2008 and in the case of JPAL, up to 17th September, 2014. Any other interpretation of the impugned notification dated 14th October, 2004, would entail in giving retrospective or retroactive effect thereto. That is not predicated by Section 5 of the 1948 Act or the impugned notification itself. Having said this, it would necessarily follow that the challenge to the notification on the ground of being hit by doctrine of promissory estoppel need not detain this Court any further. Similarly, the argument regarding the circumstances in which the Government could stave off from the dispensation under notification dated 27th February, 1998 has become irrelevant. [Para 28] [152-B-C]

1.5 The dominant intent behind notification dated 27th February, 1998 was to invite the investors to set up industrial unit in the designated areas within the State of Uttar Pradesh which were known to be underdeveloped or backward areas and more importantly to address the environmental issue because of the fly ash generated by the thermal power stations situated in Uttar Pradesh and incidentally to generate job opportunities and employment to the locals. It is one thing to argue that because of the interpretation given to the notification dated 27th February, 1998 by the High Court and affirmed by this Court, the industrial units situated in the neighbouring States may not be able to fulfill the underlying intent behind the notification dated 27th February, 1998 in its letter and spirit. That is not the plea of the State. Furthermore, it is undeniable that the thermal power stations in the State of Uttar Pradesh are still operational and are generating fly ash in the same manner and quantity as was happening in February, 1998, if not more. It is also indisputable that the industrial units set up in furtherance of the promise or representation made in the notification dated 27th February, 1998 which had commenced commercial production in respect of specified goods before 14th October, 2004, would continue to achieve the same objective as is specified in the notification dated 27th February, 1998. In that, the concerned manufacturing units continue to manufacture specified goods by using fly ash purchased or produced from the thermal power stations situated within the State. As long as that activity is continued until the term specified under the notification dated 27th February, 1998, namely ten years from the date of commencement of commercial production, there is no tangible reason nor it is open to contend that the dominant purpose underlying notification dated 27th February, 1998 had ceased to exist or had become irrelevant in any manner, much less there are supervening circumstances qua such units which are so overwhelming that it would be inequitable for the State Government to be bound by the promise given in notification dated 27th February, 1998. [Para 29] [152-F-H; 153-A-D]

1.6 The judgment rendered by the High Court and affirmed by this Court in interpreting the notification dated 27th February, 1998, at best, may have given rise to some logistical issues for the State including financial implications regarding future revenue loss. That ground cannot be invoked as supervening public interest in reference to the activities of the industrial units who qualify the conditions specified in notification dated 27th February, 1998 in all other respects and had commenced commercial production of the specified product before 14th October, 2004. Indubitably, an enforceable right had accrued to and crystalised in favour of such industrial units which could not be truncated or snapped unless the dominant purpose for which the notification dated 27th February, 1998 came to be issued had ceased to exist, namely generation of fly ash by the thermal power stations situated within the State and consumption of that fly ash by the industrial units established within the designated areas of the State as per the specified quantity to become entitled for rebate for the duration mentioned therein. The question of future revenue loss would not arise as the industrial units established in the neighbouring States would not be eligible to avail of the rebate because of rescinding the earlier notification. Suffice it to observe that the argument about future revenue loss cannot be invoked against the industrial units who had already established and commenced production after 27th February, 1998 and before 14th October, 2004. For, it can be safely presumed that the policy makers were fully conscious about the so–called loss of future revenue due to rebate to those units when they had issued notification dated 27th February, 1998. That ground cannot be set up against the industrial units who qualify in all other respect under the notification dated 27th February, 1998 and have made substantial investment running into crores much less as being supervening public interest, as is being placated by the State in these proceedings. This is clearly an afterthought plea, which by no standards can stand the test of judicial scrutiny. It is well established that the Court is obliged to insist for a highly rigorous standard of proof in the discharge of the burden and onus upon the State to justify its action as supervening public interest. [Para 30] [153-E-H; 154-A-C]

1.7 The impugned notification dated 14th October, 2004 can have no application to the settled enforceable right accrued to industrial units who fulfill all other conditions specified in the notification dated 27th February, 1998, having commenced commercial production of the specified goods before 14th October, 2004. The stand of the State Government about the supervening public interest qua the respondents and similarly placed persons is rejected. The notification dated 14th October, 2004 cannot be construed as having retrospective or retroactive effect to whittle down the accrued rights in favour of such industrial units. [Para 31] [154-D-E]

1.8 The grievance of the appellant that the High Court has not elaborately dealt with the argument of supervening public interest justifying the issuance of notification dated 14th October, 2004 is disposed of because, the argument of the respondents are convincing that no material fact has been pleaded in the response filed before the High Court or in the present proceedings by the State Government in that regard. [Para 32] [154-G]

1.9 The State Government was permitted to articulate the reasons which it did in the written submissions. The said reasons are analysed and are of the considered opinion that the same singularly or taken together would be of no avail to the State Government, to justify the application of the impugned notification dated 14th October, 2004, to industrial units already set up which had commenced commercial production of the specified goods in the designated areas before 14th October, 2004. [Para 33] [154-H; 155-A-B]

1.10. A priori, the respondents and similarly placed persons would be entitled to rebate for the relevant period prescribed in the notification dated 27th February, 1998 which would continue to remain in vogue until the expiry of the specified period, namely, ten years. In the case of BCL up to 13th December, 2008 and in the case of JPAL up to 17th September, 2014 respectively. The amount of rebate, however, would depend on the verification of their refund claim pending before the concerned authorities and would be subject to just exceptions including the principle of unjust enrichment. The respondents should be able to substantiate that the amount claimed by them has not been passed on to their consumers. Only then, they would be entitled for refund. The competent authority may verify the claim for refund of each of the respondent(s) in accordance with law and pass appropriate orders, including about the interest for the relevant period. [Para 34] [155-B-D]

State of Jammu & Kashmir v. Trikuta Roller Flour Mills Pvt. Ltd. & Anr. (2018) 11 SCC 260 ; Sales Tax Officer & Anr. v. Shree Durga Oil Mills & Anr. (1998) 1 SCC

572 – distinguished.

State of Uttar Pradesh & Ors. v. Jaiprakash Associates Limited (2014) 4 SCC 720 ; Shree Digvijay Cement Co. Ltd. & Anr. v. Union of India & Anr. (2003) 2 SCC

614 ; Kazi Lhendup Dorji v. Central Bureau of Investigation & Ors. (1994) Suppl. 2 SCC 116 ; Industrial Infrastructure Development Corporation (Gwalior) Madhya Pradesh Limited v. Commissioner of Income Tax, Gwalior, Madhya Pradesh (2018) 4 SCC

494 ; MRF Limited, Kottayam v. Assistant Commissioner (Assessment) Sales Tax & Others (2006) 8 SCC 702 ; Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector & ETIO & Others (2007) 5 SCC 447 ;

Pournami Oil Mills & Ors. v. State of Kerala & Anr. (1986) Suppl. SCC 728 ; Director General of Foreign Trade & Anr. v. Kanak Exports & Anr. (2016) 2 SCC

226 ; M/s. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh & Others (1979) 2 SCC 409 ; Manuelsons Hotels Pvt. Ltd. v. State of Kerala & Others (2016) 6 SCC 766 ; State of Bihar & Others v. Kalyanpur Cement Limited (2010) 3 SCC 274 ; Lok Prahari Through Its General Secretary v. State of Uttar Pradesh & Others (2018) 6 SCC 1 – referred to.