SALES TAX OFFICER AND ANR.versusM/S SHREE DURGA OIL MILLS AND ANR.

A                      SALES TAX OFFICER AND ANR.
                                          v.
                MIS SHREE DURGA OIL MILLS AND ANR. ·

                               DECEMBER 15, 1997

B            (SUHAS C. SEN AND SUJATA V. MANOHAR, JJ.)

          Administrative Law :

          Promissory estoppel-Applicability o_rWhen. not applicabl~State
C Govemment under its lndusflial Policy Resolution (IPR) granted exemption
    for five years from payment of sales tax/purchase tax ta ce1tain industries on
    vmious iteins-Mode of exemption to be issued separately by the depmtment
    concemed and not under the IPR - Sales tax exemption granted to new
    indust1ies under Section 6 of the Orissa Sales Tax Act-Exemption sub-
    sequently withdrawn by the State in public interest, by the exercise of same
D   power under Section 6 of the Act-lndusfly alleged to be set up after the
    introduction of IPR, claimed exemption from payment of sales tax on the
    doct1ine of promisso1y estoppel--No mate1ial to show that the industly was
    set up 011 the basis of IPR-Held, principles of promisso1y estoppel not
    applicabl~Withdrawal of notification under Section 6 of the Act done in
E   public interest on the basis of resources cnmch--Hence the Cowt will not
    inte1fere with any such actio11 taken by the Stat~Fwther held, the indust1y
     affected by the State action must be deemed to know that notificatio11 was
    liable to be amended or resci11ded at a11y time under Sectio11 6 of the
    Act-Sales Tax-Orissa Sales Tax Act, 1947, Section 6.

F         Public interest-May ovenide consideration of p1ivate loss or gai11.

        The industry department of the State Government issued an In-
  dustrial Policy Resolution (IPR) on 18.7.1979. Clause (8) of the IPR
  provided specific industries certified as such by the Government and small
G scale industries to be exempt from purchases/sales tax for five years on
  construction material, raw material, machinery and packaging materials.
  The IPR further provided that Government orders would be issued laying
  down the mode of administering the concessions and incentives by the
  department concerned. The IPR was effective for the period 1979- 83. Sec-
  tion 6 of the Orissa Sales 'fax Act provides that the State may, by notilica·
H tion, exempt from tax the sale or purchase of any goods or class of goods
                                         488
             SALES TAX OFFICER v. DURGA OIL MILLS                        489

and likewise withdraw any such exemption. State Governm.ent had issued          A
a notification under Section 6 of the Act on 11.11.1969, by which raw
materials which went into manufacture of the finished goods were exempt
from payment of sales/purchase tax when such goods were sold to
registered dealer who was a manufacturer inside the State and who had
started production after 1.4.1969. A similar notification dated 23.4.1976 was
issued, granting exemption to raw materials purchased by a manufacturer         B
for a further period of five years from the date on which the production had
commenced. The exemption notifications were withdrawn by a notification
dated 20.5. 1977 but were again restored by another notification dated
9.9.1977 but in that notification the exemption was limited only to the
industries which had started prnduction prior to 1.4.1977.                      c
      The respondent claimed to have set up its industry pursuant to the
IPR by obtaining huge loans from Bank, and commenced its production on
19.3.1980 and hence it was not eligible for the exemption under notification
dated 9.9.1977. The respondent was assessed to tax for the subsequent
assessment years, which was challenged by the respoudent before the _High D
Court by filing a writ peti~on invoking the doctrine of promissory estoppel,
claiming that the respondent was entitled to tax exemption on purchase of
raw materials as promised by the Government under the IPR, which was
allowed by the High Court. Hence this appeal by the Revenue.
                                                                                E
      Allowing the appeal, the Court

      HELD· : 1.1. The IPR on which reliance has been placed by the
respondent was issued on 18.7.1979. A provisional registration certificate
in respect of the respondent's industry was issued on 28.11.1979. The
respondent has not given factual details of how in the short span of about      F
four months, it set up its industry on the basis of the IPR. [495-D]

       1.2. Any IPR can be changed if there is an overriding public interest
involved. In the instant case, it has been stated on behalf of the State that
various notifications granting sales tax exemptions to the dealers resulted
in severe resource crunch. On reconsideration of the financial position, it G
was decided to limit the scope of the earlier exemption notifications issued
under Section 6 of the Orissa Sales Tax Act. Because of this new perception
of the economic scenario of the State, the scope of the earlier notifications
had to be restricted. Withdrawal of notifications was done in public inter-
est. The Court will not interfere with any action taken by the Government H
    490                   SUPREME COURT REPORTS [1997) SUPP. 6 S.C.R.

A in public interest. Public interest must override any consideration of
    private loss or gain. Thus the plea of change of policy trade on the basis of
    resource crunch should have been sufficient for dismissing the
    respondent's case based on the doctrine of promissory estoppel.
                                                     [496-H; 497-A-G; 498-E-F]
B         1.3. Moreover, the IPR itself had not granted any exemption but had
    indicated that orders will be issued by various departments for granting
    the exemptions. The exemption order under sales tax could only be issued
    under Section 6 which could be amended or withdrawn altogether. This is
    expressly provided by Section 6. If the respondent acted on the basis of a
    notification issued under Section 6 it should have known that such
C   notification was liable to be amended or rescinded at any point of time, if
    the Government felt that it was necessary to do so in public interest. This
    is exactly what has happened in this case. [498-G-H]

        Kasinka Oil Mills v. Union of India, [1995] 1 SCC 274; Sluijee Sales
D   Cmporation v. Union of India, (1997] 3 SCC 398, relied on.

          Pownami Oil Mills v. State of Kera/a, (1987] 1 SCR 654, referred to.

         Pine Chemicals Ltd. v. Assessing Auth01ity, [1992] 2 SCC 683, distin-
    guished.
E        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3784 of
    1988 Etc.

         From the Judgment and Order dated 15.9.87 of the Orissa High
    Court in O.J.C. No. 2090 of 1980.
F         R.K. Mehta for the Appellants.

          Vinoo Bhagat for the Respondents.

          The Judgment of the Court was delivered by

G         SEN, J. M/s Shree Durga 0:1 Mills, respondent herein, was assessed
    to tax by the Sales Tax Officer for the assessment years 1979-80, 1980-81
    and 1981-82 for purchase of groundnut from unregistered dealers. There
    is no dispute that groundnut was purchased from time to time by the
    respondents and utilised for manufacturing oil. The assessment orders
H   were challenged by a writ petition on the ground that in view of the
          SALES TAX OFFICER v. DURGA OIL MILLS [SEN, J.]                    491

Industrial Policy Resolution (I.P.R.) dated 18.7.1979 issued by the In-            A
dustries Department of the Government of Orissa, sales tax was not
payable by a new industry on the purchase of raw material for the period
prescribed in the 1.P .R.

       It was contended on behalf of the writ petitioner that it had applied
for a license setting up an industry at Betnoti in the district of Mayurbhanj      B
and obtained a provisional registration certificate on 28.11.1979. A per-
manent registration certificate as a small scale industrial unit was granted
by the Director of Industries, Orissa on 10.4.1980. The industrial unit also
obtained a production certificate certifying that it had started production
on 19.3.1980. The certificate of registration was renewed from time to time.       c
Clause (8) of the 1.P.R. effective for the period 1979-83 provided that
village cottage and tiny industries certified as such by the State Government
and small scale industries shall be exempt from purchase/sales tax for five
years on construction material, raw material, machinery and packaging
materials. Small scale industrial units in non-backward areas would be
entitled to this exemption only for four years. The case of the writ               D
petitioner before the High Court was that it set up its industry in the district
of Mayurbhanj pursuant to this 1.P.R. It had obtained a huge loan from the
United Bank of India. In terms of the 1.P.R., it was entitled to tax exemp-
tion on purchase of groundnut, mustard seeds etc. which were used as raw
material for production of oil.                                                    E

      The Sales Tax Officer took the stand that there was no notification
m force under Section 6 of the Orissa Sales Tax Act, 1947 granting
exemption to purchase or sale of groundnut, mustard seeds etc, during the
relevant period. In the absence of such a notification, the assessee could
not gain immunity from payment of tax on its purchases.
                                                                                   F

       Section 6 of the Orissa Sales Tax Act provides that the State may by
notification, subject to such conditions and exceptions, if any, exempt from
tax the sale or purchase of any goods or class of goods and likewise
withdraw any such exemption. A notification dated 11.11.1969 had been G
issued under Section 6 by the Stale Government by which raw materials
which ~ent into manufacture of the finished goods were exempted from
sale/purchase tax when such goods were sold to a registered dealer who
was a manufacturer inside the State and who had started production after
1.4.1969. This exemption had been given for a period of five years from the H
    492                   SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R.

A date on which such registered dealer had started production. A similar
    notification dated 23.4.1976 was issued granting exemption to raw materials
    purchased by a manufacturer for a further period of five years from the
    date on which production had commenced. Both these notifications require
    that in order to avail this exemption the manufacturer should furnish
B   declarations in Form 'D'.

          The exemptions granted by the two earlier notifications were
    abrogated by notification dated 20.5.1977. The State Government again
    restored the earlier two notifications by another notification dated 9.9.1977.
    However, in that notification dated 9.9.1977, the exemption was limited
C   only to the industries which had started production prior to 1.4.1977. Since
    the industry set up by the writ petitioner had commenced production on
    19.3.1980, it was not eligible for the exemption given by the notification
    dated 9.9.1977. The case of the respondent in the writ petition was that the
    LP .R. was effective for the period 1979-83. The petitioner had set up its
D   industry pursuant to and in terms of this Resolution. Exemption from tax
    had been granted by the two notifications issued on 11.11.1969 and
    23.4.1976. The State Government could not change these notifications to
    the detriment of the assessee after the assessee had set up its plant and
    had taken a huge loan from the bank for carrying on its business. A prayer
E   was made to declare the notification dated 9.9.1977 as ultra vires Article
    19(1)(g) of the Constitution of India.

           The High Court allowed the writ petition on the ground that in the
    LP.R., a clear and unequivocal promise had been made by which a legal
    relationship was sought to be created between the State and the persons
F   who had acted on the basis of the LP.R. M/s Shree Durga Oil Mills, the
    writ petitioner, had set up its industry on the basis of the declaration made
    in the LP .R. and the promise held not therein. There was no way the State
    Government could back out from the commitments made by it in the LP.R.
    after the petitioner had actually set up its industry pursuant to that
G   Resolution which was effective for the period 1977-83. On the strength of
    this reasoning, the Orissa High Court quashed the assessment orders
    passed by the Sales Tax Officer. The State has now come up in appeal.

          One of the points raised in this Court on behalf of the respondent is
H   that the High Court had merely followed its judgments in the case of
            SALES TAX OFFICER v. DURGAOILMILLS [SEN,J.]                      493

  Jagannath Roller Flour Mills and Ors. v. State of 01issa, (1987) 65 STC 384 A
  and also in M/s. Industrial Packaging. No appeal was preferred against
  these two judgments. Therefore, it is not open to the state now to contend
  in this case that the decision of the High Court was erroneous. Since the
  Sales Tax Department had accepted the aforesaid two decisions as final
  and binding, it could not be permitted to challenge the settled law.        B

         On behalf of the appellant, it has been pointed out that although the
  earlier two decisions were not challenged in this Court, the High Court's
  view needs reconsideration in view of the decision of this Court in the case
  of Commissioner of Sales Tax, Orissa and Anr. v. M/s. Jagannath Cotton
  Mill, 99 STC 83 where it was pointed out :                                        C

           "The High Court seems to have proceeded on the assumption that
           the I.P.R. by itself is enough to provide the exemption from the
           sales tax. But where the provisions of the Sales Tax Act are also
           amended providing for exemption, then the court has to see               D
           whether they are the same as the I.P.R. or are they different-and
           if different, what is the effect of such difference. It is, therefore,
           necessary to ascertain the relevant provisions in the Sales Tax Act,
           Rules and notifications, if any, issued thereunder before expressing
           a final opinion in the matter."
                                                                                    E
         In our view, this appeal cannot be shut out on the preliminary ground
  that no appeal was preferred against the two earlier decisions of the High
  Court which were followed in the instant case. It is for the Court to decide
  whether to entertain an appeal or not. In our view, the point of law raised
  in this case is of general public importance and this appeal cannot be            F
  dismissed in limine on the preliminary issue of maintainability. On behalf
  of the appellant, it has been pointed out that in the High Court itself, there
  has been a change in the perception of law in this regard.

        On the merit of the case, it has been contended on behalf of the
  respondent that the State cannot be allowed to first grant exemption and          G
  induce industries to be set up on the basis of the promise held out in its
- I.P.R. and thereafter back ovt from the promise after it had been acted
  upon. Reliance was placed on a decision of this Court in Pownami Oil
  Mills v. State of Kera la & Anr., [1987] 1 SCR 654 for the proposition that
  for granting exemption from sales tax an LP.R. was sufficient by itself. A        H
    494                   SUPREME COURT REPORTS [1997) SUPP. 6 S.C.R.

A statutory notification was not necessary to implement that policy. Persons
    who had acted on the basis of the l.P.R. were entitled to get benefit
    thereunder. It has been contended that this Court has emphasised this rule
    once again in the case of Pine Chemicals Ltd. v. Assessing Auth01ity, [1992)
    2 sec 683.
B       Pine Chemicals case dealt with the exemption from sales tax granted
  under the J & K General Sales Tax Act, 1962. lt was held in that case that
  if the exemption was claimed on the basis of a Minister's speech or a
  brochure published by the Government then the claim of promissory
  estoppel could not be entertained on behalf of any person who claimed
C that they had changed their position on the basis of the speech or the
  brochure. It was, however, held that if the Government in exercise of
  powers under a statute granted exemption then if appropriate conditions
  existed a case of promissory estoppel could arise. The Court in that case
  found, that the Government had not made any general dechration of its
D intention but had actually passed an order granting exemption to new
  industries from Sales Tax. The order was held to have been issued under
  Section 5 of the General Sales Tax Act. Relying on these representations
  each of the appellant had set up their industries. This Court was of the
  view that since the appellants on the representation of the State had set up
  their industries, they were entitled to the benefit of tax exemption for the
E entire period of five years as promised by the Government. Section 5 of
  the General Sales Tax Act as set out in the judgment was :

             "5. Exemption from tax - The Government may, subject to such
             restrictions and conditions as may be prescribed, including condi-
F            tions as to licence and licence fee, by order exempt in whole or in
             part from payment of tax any class of dealers or any goods in class
             or description of goods."

  It will be seen that unlike Section 6 of the Orissa Sales Tax it does not
  specifically say that any exemption from tax could be granted by the
G Government by a notification and such exemption could be withdrawn at
  any point of time by the Government. Moreover, in that case no argument
  was advanced nor was the Court called upon to consider the necessity of
  overriding public interest in situations like this. If the Government after
  granting tax exemption to various industries finds itself in a tremendous
H financial crunch and seeks to raise· finance by doing away with the exemp-
         SALES TAX OFFICER v. DURGAOIL MILLS [SEN,J.]                   495

tions, it cannot be argued that because the Government had promised to         A
give tax exemption, which was revocable under the statute, the Government
cannot resile from its stand however disastrous it may turn out to be for
the State's economy.

      The crux of the matter in this case is whether the Government had
made any promise to the respondent and if so, can it depart from the           B
promise made by it in the I.P.R. which was stated to be effective from
1977-1983.

      There are several reasons why we are unable to uphold the conten~
tion based on the principle of promissory estoppel raised by the respon- C
dents in this case. No particulars have been given by the respondents as to
when the decision was taken to set up the industry, the date whr,n the loan
was obtained from the bank, and exactly when land was purchased or the
plant and machinery were acquired for setting up of the small scale
industrial unit. The I.P.R. on which reliance has been placed by the
respondent was issued on 18.7.1979. A provisional registration certificate D
in respect of the respondent's industry was issued on 28.11.1979. The
respondent has not given factual details of how in the short span of about
four months, it set up it~ industry on the basis of the 1.P.R.

       Moreover, the Government may change its industrial policy if the
                                                                               E
situation so warrants. Merely because, the 1.P.R. was announced for the
period 1979-1983, it does not mean that the Government cannot amend or
change the policy under any circumstance. As a matter of fact, in this case
the Government had published another I.P.R. on 31.7.1980 modifying the
earlier !.P.R. The vires of the second l.P.R. has not been challenged. The
two I.P.Rs. have not been issued under any particular statute. A general       F
announcement was made by the Government that certain economic policy
would be pursued for the acceleration of the growth of the industrial sector
in the State of Orissa. For that purpose, a package of measures for
stimulating the growth of industries were announced. It was specifically
made clear in the !.P.R. dated 18.7.1979 that :
                                                                               G
        "Government orders will issue laying down the mode of administer-
        ing the concessions and incentives by concerned departments."

     In other words, the l.P.R. dated 18.7.79 by itself did not grant any
exemption to the persons who set up industries pursuant to that 1.P.R. The H
    496                   SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R.

A I.P .R. merely promised that orders will be issued laying down the mode of
    administering the concessions and incentives by concerned departments.
    Exemption of sales tax can only be granted in the manner laid down by the
    Sales Tax Act. The Government by an executive order cannot override the
    requirement of the statute. The method and manner of granting exemption
    has been laid down in Section 6 of the Orissa Sales Tax Act. This Section
B
    specifically says that exemptions have to be granted by a notification. It
    further provides that exemption granted by a notification issued under
    Section 6 can be modified or withdrawn by the State Government at any
    point of time. The State Government in the instant case, initially issued the
    exemption notifications under Section 6. The State Government sub-
c   sequently decided to withdraw the exemption notification in respect of
    some industries which had commenced production after 1.4.1977. The
    State Government was fully competent to do so under the provisions of
    Section 6 of the Act. The respondent must have been aware of this when
    its industry was set up. Everybody is presumed to know the law. Section 6
D   of the Orissa sales Tax Act which empowers the State Government to issue
    a notification granting exemption from sales tax, also empowers the State
    Government to withdraw, amend or modify any such notification <P> and
    when it thinks necessary to do so. Section 6 of the Orissa Sales Tax Act is
    as under :

E            "6 Tax-free Goods -

                The· State Government may, by notification, subject to such
             conditions and exceptions, if any, exempt from tax the sale or
             purchase of any goods, or class of goods and likewise withdraw
             any such exemption".
F
          When the respondent set up its oil mill and was granted exemption
    from sales tax, it should have known that the notification granting exemp-
    tion of tax under Section 6 could be withdrawn at any point of time.
    Therefore, the case of promissory estoppel is without any basis. There
G   cannot be any estoppel against statute.

          Moreover, it is well settled that any I.P.R. can be changed if there is
    an overriding public interest involved. It has been stated on affidavit by the
    State of Orissa that after a package of incentives was given to the industries,
    the Government was faced with severe resource crunch. On a review of its
H   financial position, it was felt that for the sake of the economy of the State,
         SALES TAX OFFICER v. DURGA OIL MILLS !SEN, J.]                  497

it was necessary to limit the scope of exemption granted to various in-         A
dustries. Accordingly, further notifications were issued under Section 6 of
the Orissa Sales Tax Act from time to time. Because of this new perception
of the economic scenario; the scope of the earlier notifications was
restricted by subsequent notifications issued under Section 6. This also led
to issuance of the second !.P.R. dated 31.7.1980.
                                                                                B
      The question of applicability of the doctrine of promissory estoppel
against the Government has been considered in a number of cases by this
Court.

      In the case of Kasinka Trading and A11other v. U11io11 of India a11d      C
Anothe1; [1995] l SCC 274, a notification was issued by the Customs
Department under Section 25( 1) of the Customs Act in public interest
exempting certain goods from basic import duty and specified the date
upto which it will remain in force. Prior to expiry of that date another
notification was issued withdrawing the exemption and imposing customs
duty on import of such goods. A challenge was made to withdrawal of the         D
notification by some importers who claimed that they had entered into
agreements on the basis of the eatlier notifications. It was held by this
Court that the Government had issued the first notification in public
interest for a certain period. But it was felt later that in public interest,
exemption should not be continued even though that period had not               E
expired. Therefore the Government withdrew it. It was held that when
exemption was granted under statutory power, it was implicit that it could
also be rescinded or modified in exercise of the same power.

      In the instant case, Section 6 of the Orissa Sales Tax Act specifically
lays down that the exemption notification issued under that Section can be      F
withdrawn at any point of time.

      Moreover withdrawal of notification was done in public interest. The
Court will not interfere with any action taken by the Government in public
interest. Public interest must override any consideration of private loss or    G
gam.

     The view taken by this Court in Kasinka's case was reiterated by a
Bench of three-Judges in the case of Sluijee Sales Corporation & Anr. v.
Union of India, [1997] 3 SCC 398. It was laid down in that case that the
determination of applicability of promissory estoppel against the Govern-       H
    498                   SUPREME COURT REPORTS [1997] SUPP. 6 S.C.R.

A ment hinges upon balance of equity or public interest. In case there is a
    supervening public equity, the Government would be allowed to change its •
    stand; it would then be able to withdraw from representation made by it
    which induced persons to take certain steps which may have gone adverse
    to the interest of such persons on account of such withdrawal. Once public
B   interest was accepted as the superior equity which can override individual
    equity, the aforesaid principle ~,hould be applicable even in cases where a
    period had been indicated for operation of the promise. In that case, a
    notification was issued exempting customs duty on PVC. By a second
    notification the exemption was withdrawn. The Court held that the facts of
    the case revealed that there was a supervening public interest and the
C   Government was competent to withdraw the first notification without giving
    any prior notice to the respondent.

           In the instant case, it has been stated on behalf of the State that
    various notifications granting sales tax exemptions to the dealers resulted
D   in severe resource crunch. On reconsideration of the financial position, it
    was decided to limit the scope of the earlier exemption notifications issued
    under Section 6 of the Orissa Sales Tax Act. Because of this new
    perception of the economic scenario of the State, the scope of the earlier
    notifications had to be restricted. They were first abrogated altogether on
    20.5.1977. Thereafter, it was decided to grant exemption at a limited scale.
E
          In our opinion, the plea of change of policy trade on the basis of
    resource crunch should have been sufficient for dismissing the respondent's
    case based on the doctrine of promissory estoppel. Public interest
    demanded modification of the earlier l.P.R.
F
          Moreover, as it has been noted earlier that the 1.P.R. itself had not
   granted any exemption but had indicated that orders will be issued by
   various department for granting the exemptions. The exemption order
 · under sales tax could only be issued under Section 6 which could be
   amended or withdrawn altogether. This is expressly provided by Section 6.
G If the respondent acted on the basis of a notification issued under section
   6 it should have known that such notification was liable to be amended or
   rescinded at any point of time, if the Government felt that it was necessary
   to do so in public interest. That is exactly what has happened in this case.

H         In view of the above, we are of the opinion that this appeal must
         SALES TAX OFFICER v. DUR GA OIL MILLS [SEN, J.]              499

succeed and is allowed. The judgment under appeal is set aside. There will   A
be no order as to costs.

CA. Nos. 3785-86 of 1988

      In view of the above decision in C.A. No. 3784/88, these appeals are
also allowed.                                                                B
R.K.S.                                                   Appeals allowed.