Augustan Textile Colours Limited v. Director of Industries, Government of Kerala & State of Kerala

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE K.SURENDRA MOHAN & THE HONOURABLE MRS. JUSTICE MARY JOSEPH** **THURSDAY, THE 28TH DAY OF SEPTEMBER 2017 / 6TH ASWINA, 1939** **WA.No. 2021 of 2012 IN WPC. 5677/2007** **AGAINST THE JUDGMENT IN WP(C) NO.5677/2007 of HIGH COURT OF KERALA DATED 13-03-2012** ## **APPELLANT(S):** **AUGUSTAN TEXTILE COLOURS LIMITED (NOW AUGUSTAN TEXTILE COLOURS PRIVATE LIMITED), C1-110(1-7), MALAMPUZHA ROAD, CHADAYANKALAI, KANJIKODE WEST P.O., PALAKKAD, KERALA-678623, REPRESENTED BY ITS MANAGER(P & A),MR.JEEJO.** **BY ADVS.SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH SRI.P.BENNY THOMAS SRI.KURYAN THOMAS** ## **RESPONDENT(S):** **1. DIRECTOR OF INDUSTRIES GOVERNMENT OF KERALA, SECRETARIAT, THIRUVANANTHAPURAM-695001.** **2. STATE OF KERALA REPRESENTED BY ITS SECRETARY (TAXATION), SECRETARIAT, THIRUVANANTHAPURAM-695001.** **BY SMT.THUSHARA JAMES, GOVERNMENT PLEADER** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 28-09-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **SKK/200418** ## K. Surendra Mohan & Mary Joseph, JJ. ========================= W.A. No.2021 of 2012 ========================= Dated this the 28[th] day of September, 2017 ## J U D G M E N T ## K. Surendra Mohan, J. The appellant had filed WP(C) No.5677/2007 challenging Ext.P3 Government Order. By Ext.P3, an exemption from payment of tax granted to the appellant as per Ext.P2 has been withdrawn. The appellant is before us aggrieved by the judgment of the learned Single Judge dated 13.03.2012 dismissing the writ petition. 2. According to the appellant, they had taken over a sick industrial unit by name M/s. Teak Tex Processing Complex Ltd. The unit was engaged in dyeing of clothes. The unit had been remaining closed for a long time. Proceedings were initiated for revival of the company under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as 'the Act' for short). In proceedings that were pending before the Board for Industrial Finance and Reconstruction (hereinafter referred to as 'BIFR' for short), the prospect of reviving the company was under W.A. No.2021 of 2012 2 consideration. The appellant came forward to revive the company by investing money. Accordingly, discussions were held with the State Government also which constituted an Empowered Committee for that purpose. Various concessions were offered to the appellant. Finally, Ext.P2 order dated 20.03.2004 was issued granting a number of exemptions. On the basis of Ext.P2, Ext.P1 scheme for revival of the company was finalised by the BIFR. Accordingly, the unit was taken over by the appellant and was being revived. In the above circumstances, as per Ext.P3 order dated 21.11.2006, the exemption granted to them from Works Contract Tax on processing of fabrics like bleaching and dyeing etc. was withdrawn. It was aggrieved by Ext.P3 that the writ petition was filed by the appellant. 3. The writ petition was contested by the respondents, though no formal counter affidavit was filed. The learned Single Judge considered the respective contentions and found that the exemption that was granted by Ext.P2 was traceable to the power under Section 10(1) of the Kerala General Sales Tax Act, 1963 (hereinafter referred to as the 'KGST Act' for short). Holding that, W.A. No.2021 of 2012 3 exemption in exercise of the power under the said provision could be granted only to specified goods or class of goods or to a specified class of persons, revocation thereof by Ext.P3 was sustained. Accordingly, the writ petition was dismissed. This appeal is against the said judgment. 4. According to Adv.Kurian Thomas, who appears for the appellant, this is a case where a sick industrial unit was sought to be revived and nursed back to health by the BIFR. It was with the said objective that Ext.P1 scheme was formulated. The State Government was also a participant to the said efforts. After deliberations with the Empowered Committee, the details of the concessions were worked out. It was on the said basis that Ext.P2 Government Order was issued. Both the appellant as well as the BIFR had proceeded in the matter, placing reliance on the said Government Order. Accordingly, Ext.P1 scheme was finalised on the basis of Ext.P2. The appellant has been in the process of reviving the company thereafter. 5. In view of the above, according to the learned counsel, the exemption granted as per Ext.P2 formed part of Ext.P1 W.A. No.2021 of 2012 4 scheme, that was formulated by the BIFR. Since the company was being revived on the basis of the said scheme, it was not open to the State of Kerala to resile from the said promise. It is further pointed out that the scheme had been formulated under Section 19 of the Act and was binding on the State Government in view of the provisions thereof. Since no appeal was filed challenging the same, under Section 25 of the Act, the said proceedings had become final and cannot therefore be retracted from. Ext.P3 is attacked pointing out that no public interest of extraordinary nature has been shown to exist, for the issue of Ext.P3. Though the reason stated for the issue of Ext.P3 is that the power to exempt under Section 10(1) of the KGST Act was available only in respect of a class of persons, in the present case the appellant, an industry that was being revived under the provisions of the Act constitutes a separate class, to which such exemption could be granted. Apart from the above, according to the learned counsel, the appellant had relied on the promise held out in Ext.P2, had invested money into the company that was sick and has altered its position to its disadvantage. Therefore, it shall not be open to W.A. No.2021 of 2012 5 the State Government to go back on its promise. It is contended that the doctrine of promissory estoppel squarely applies to the present case. The counsel places reliance on an unreported decision of a Division Bench of this Court dated 17.01.2013 in W.A No.1290/2012 as well as the decision in Pournami Oil Mills v. State of Kerala and Anr. [AIR (1987) SC 590= 1987 SC 1794] in support of his contentions. 6. Per contra, Smt. Thushara James, Senior Government Pleader contends that though the industrial unit was being revived under the Act by the BIFR the appellant does not have a right to insist that the concessions granted should continue indefinitely. The learned Government Pleader points out that the concession in Ext.P2 was granted on 20.03.2004 whereas Ext.P3 is dated 21.11.2006. They had been enjoying the benefits of Ext.P2 for more than two years. The power to grant exemption from Sales Tax is traceable to Section 10(1) of the KGST Act. The power is confined to the grant of exemption to a class of persons only and not to an individual unit like the appellant. The error was noticed only subsequently. It was immediately brought to W.A. No.2021 of 2012 6 the notice of the Government. There were other industrial units engaged in the same business that were not granted a similar exemption. It was in view of the above circumstances that Ext.P3 Government Order was issued withdrawing the exemption granted by Ext.P2. Reliance is placed on Section 10(3) of the KGST Act to point out that the Government was armed with sufficient powers to withdraw the exemption, at any time. Since the Government was vested with sufficient powers to withdraw the exemption, it is contended that the principle of promissory estoppel would not be available to the appellant, especially in view of the fact that he was claiming the same against a statutory provision. It is contended that the principle cannot be used to restrict the power conferred on the Government by the statute. It is therefore, contended that the learned Single Judge has rightly dismissed the writ petition. 7. Heard. It is no doubt, true that the appellant has taken over a sick industrial unit that was remaining closed for a number of years. The appellant had responded to a notification inviting offers to revive the company issued by the ICICI Bank. As per W.A. No.2021 of 2012 7 Ext.P2, a number of concessions were offered to the appellant. A perusal of Ext.P2 shows that, a number of payments were set apart for being satisfied by the appellant also. The dispute in this case is only with respect to the exemption granted with respect to the Sales Tax/ Works Contract Tax. The relevant portion of Ext.P2 is extracted hereunder for the sake of clarity - “ (1) Sales Tax/Works Contract Tax: - (a) The past arrears of Sales Tax/Works contract tax will be completely waived/ - (b) Works contract Tax on processing of Fabrics like bleaching and dying etc. will be exempted in the State.” It is not in dispute that the past arrears of Sales Tax/Works Contract Tax payable by the sick industrial unit were completely waived. The Sub clause (b) provides an exemption from Works Contracts Tax on processing of fabrics like bleaching, dyeing, etc. What is stated is that Works Contract Tax would be exempted in the State. As rightly noticed by the learned Single Judge, we are also of the view that the said clause is vague. The clause does not specify any period for the exemption that was granted. There cannot be any dispute that, such an exemption cannot be allowed to continue indefinitely. Considering the objective of granting W.A. No.2021 of 2012 8 the exemption, it can be safely concluded that, such exemption cannot extend beyond the point at which the industrial unit is revived fully. In this case, we do not have any data or material to show whether the unit has been revived or nursed back to health. Therefore, we do not propose to dwell much on the said aspect. 8. It is clear on an examination of Section 10 of the KGST Act, that the power to grant exemption from Sales Tax is available to the State only with respect to “any specified class or persons in regard to the whole or any part of their turnover” Ext.P2 was issued in respect of the appellant, a single industrial unit. The contention of the counsel for the appellant is that, being a sick industrial unit that was being revived by the BIFR, the appellant would form a class by itself. We are not prepared to accept the said contention. The contention would have had some force, had the exemption in Ext.P2 been made applicable to all sick industrial units engaged in the activities of bleaching, dyeing, etc. The learned counsel has also placed reliance on a Government Order dated 25.11.1994 to contend that there is an W.A. No.2021 of 2012 9 assurance therein by the State to consider each sick industrial unit on a case to case basis. The said Government Order cannot help the appellant for the reason that the Government has only promised to consider each sick industrial unit on a case to case basis. The State has the power under Section 10(3) of the KGST Act, to withdraw Ext.P3 and it is in exercise of the said power that Ext.P3 has been issued. 9. It is true that, Ext.P1 scheme has been finalised under Section 19 of the Act and that there has been no appeal against the said proceedings, at the instance of the State. However, the fact remains that Ext.P2 Government Order was issued on a mistaken understanding that such power was available to the State under Section 10 (1) of the KGST Act. The impugned order Ext.P3 having been issued for the purpose of correcting the said mistake, cannot be found fault with for the reason that no appeal was filed against the proceedings finalising Ext.P1 scheme. The State was only correcting a wrong exercise of power, which constituted only one of the assurances given to the appellant for facilitating the revival of the company. As we have already W.A. No.2021 of 2012 10 noticed above, the appellant has taken the benefit of all the other concessions contained in Ext.P2 except the continuing exemption, referred to above. Since the said exemption could not have been granted as per law, Ext.P3 cannot be found fault with. 10. The other submission put forward by the learned counsel for the appellant is on the basis of the principle of promissory estoppel. We have perused the judgment of this Court in W.A. No.1290/2012. That was a case in which a draft rehabilitation scheme was under consideration of the BIFR. Revenue Recovery proceedings were initiated by the State for recovery of the arrears of tax due at a time, when the draft scheme was pending consideration of the BIFR. Though the unit therein had approached the State Government, no relief was granted. This Court in the said circumstances held that the State Government had participated in the proceedings, and since they expressed their reluctance to extend relief to the industrial unit, the BIFR had issued revised directions in the said regard and that the State Government had not challenged the said order in appeal W.A. No.2021 of 2012 11 under Section 25 of the Act. It was also found that in the absence of co-operation from State Government revival of the industry would not become a reality. 11. The State was therefore, directed to reconsider the matter and pass fresh orders. No such situation exists in the present case. The other decision relied upon is the one in Pournami Oil Mills (supra). In the said case, the exemption ordered was to the effect that new industrial units under small scale industries set up after 01.04.1979 should be exempted from payment of Sales Tax for a period of five years from the date of commencement of production. It is clear from the above that, the exemption extended to all new industrial units. Further, the exemption was for a specific period of five years. It was in view of the above that, the Apex Court invoked the principle of promissory estoppel. There was no violation of the statutory provision, the exemption having been granted in respect of a class of persons. The same was also to be in force only for a particular period of time. 12. In the present case, as we have already noticed above, W.A. No.2021 of 2012 12 the appellant has taken advantage of the benefits that were granted. It is only with respect to one benefit regarding the exemption from Tax on Works Contract that Ext.P3 has been issued. Absolutely no material or evidence has been placed before us warranting a conclusion that any prejudice has been caused to the appellant by the issue of Ext.P2. We notice that the learned Single Judge has considered the issues in the proper perspective. We find no infirmity in the judgment warranting an interference therewith. For the foregoing reasons the writ appeal fails and is accordingly dismissed. Sd/K. SURENDRA MOHAN, JUDGE ## Sd/MARY JOSEPH, JUDGE //TRUE COPY// P.A. TO JUDGE Skk/101017