- (1.) Promissory estoppel, its extent and applicability apart, one of the important issue, that arises for consideration in this appeal, directed against the judgment and order of a Division Bench of the Punjab and Haryana High Court exercising jurisdiction under Letters Patent and setting aside order of the learned single Judge directing refund of sales tax and inter-State sales tax, is if the Government of a State could agree expressly or impliedly to refund sales tax realised by a manufacturer.
(2.) Facts, found by the learned single Judge, which were sufficient to direct the Government to honour its commitments of refunding sales tax to the appellant on principle of promissory estoppel were announcement of policy by the Government to refund sales tax, as an incentive to those who were willing to set up large scale selective industries in the focal points, letter of the appellant seeking details of policy as he was willing to set up a Vanaspati manufacturing unit, favourable response from the Director of Industries followed by exchange of letters and meetings between appellant's representatives and Secretary of Industries extending assurance that the incentives shall be available to the appellant acting on which it purchased land, machinery etc., laying of foundation stone by the Governor and issuance of notification declaring the land, on which unit was established, in focal point. The order was set aside in appeal and it was held that even though rule of equitable estoppel should be observed by all Government and public authorities but its scope was restricted and it could not be extended too widely so as to bind a Government even where its officials in excess of their authority or against the interest of the Government extended the promise. The Bench drew inference against the appellant from its letters seeking written assurance that the concession would be extended to it which came, as well, in June 1969 but before that the policy had already undergone change in May, 1969. The Bench further felt mystified that even though there was a decision of Cabinet Sub-Committee as far back as 1966 not to give any refund of sales tax yet the Government officials acting contrary to it issued the brochure and corresponded with the appellant in, wholly, unauthorised manner therefore their action could not create any right in favour of the appellant. It also negatived the claim of appellant, as refund of an amount paid as sales tax by the appellant would be raising revenue by the Government not for itself or for public but for a private person which would be contrary to Arts. 265 and 266 of the Constitution of India.
(3.) Law of Promissory Estoppel which found its 'most eloquent exposition' in Union of India v. Indo Afghan Agencies (1968) 2 SCR 366: (AIR 1968 SC 718), crystallised in Motilal Padampat Sugar Mills v. State Of U.P. (1979) 2 SCR 641: (AIR 1979 SC 621) as furnishing cause of action to a citizen, enforceable in a Court of law, against Government if it or its officials in course of their authority extended any promise which created or was capable of creating legal relationship, and it was acted upon, by the promisee irrespective of any prejudice. It was reiterated in Union of India v. Godfrey Philips India Ltd. (1985) 4 SCC 369 (370): (AIR 1986 SC 806) and was taken further when it was held that no duty of excise was assessable on cigarettes manufactured by assessee by including cost of corrugated fibreboard containers, when it was clearly represented by the Central Board of Excise and Customs in response to the submission made by the Cigarette Manufacturers' Association and this representation was approved and accepted by the Central Government that the cost of corrugated fibreboard containers would not be includible in the value of the cigarettes for the purpose of assessment of excise duty. In Delhi Cloth and General Mills Ltd. v. Union of India (1988) 1 SCR 383 : (AIR 1987 SC 2414 at p. 2419) it was held: "All that is now required is that the party asserting the estoppel must have acted upon the assurance given to him. Must have relied upon the representation made to him. It means, the party has changed or altered the position by relying on the assurance or the representation. The alteration of position by the party is the only indispensable requirement of the doctrine. It is not necessary to prove further any damages, detriment or prejudice to the party asserting the estoppel." What, therefore, requires to be examined is if any promise was made by the Government or its officials to the appellant that sales tax shall be refunded to it and if the appellant acting on it altered its position. For this it is necessary to narrate few facts even though both the learned single Judge and Division Bench have dealt with it elaborately. Admittedly, a brochure was issued in December, 1966 by the Government of Punjab announcing its 'New Policy' declaring that incentive and concession, one of them being refund erf sales tax would be available to those persons who set up selective large scale industries in the focal point. Whether this brochure was authorised or not and its legal effect on rights of parties shall be adverted to later. But it is undisputed that acting on it the appellant's representative met the Chief Minister of the State personally and found that he was interested in encouraging Vanaspati Manufacturing unit in the State, therefore, its Manager wrote a letter in June, 1968 to the Chief Minister expressing willingness to set up the unit provided the concessions were made available to it which was replied by the Director of Industries on 2nd July, 1968 assuring the appellant that the concession as announced shall be available and further informed the appellant that the Government was willing to consider such additional concession which the appellant may require for implementation of the scheme. It was followed by exchange of correspondence and various meetings between appellant's representative and officials of the Government. Outcome of it is recorded in the note submitted by the Secretary of Industries on 1-4-1969 to Finance Department, on certain queries made by it, relevant portion of which reads: "As Government investment had taken plate in Rajpura the Sub-Committee a-ppointed for allotment of industrial plots was very much concerned to allot the same but it was finding difficulty in getting suitable parties. In October, 1968 Shri Khaitan of Amrit Banaspati Factory of Ghaziabad approached me and the D.I. for location of their vanaspati plant of 100 tonnes capacity per day in Punjab. These people since they were already very much in the business and since their vegetable ghee was meeting 20 to 25% of Punjab's needs of vanaspati it was felt that if we encourage these people to come to Punjab it will give great boost to industrial growth. These people were attracted mainly to Punjab on account of the availability of raw material, i.e., groundnut which are in plenty round about. They consequently asked for a plot in Dhandari Kalan. At that stage we had 2-3 applications for setting up of vanaspati plants at Ludhiana and since our Rajpura Estate was very much neglected it was decided that we persuade this party to locate its factory at Rajpura as by their coming there, it was felt that several -small and ancillary units would also get locatedand our plots would be sold. In fact Shri Khaitan, during the course of his discussions with me mentioned that his project which would be costing nearly Rs. 1.5 crores would necessitate setting up of the other smaller units of tin makers who would come over from U. P. and settle up at Rajpura. Taking all these factors into consideration I mentioned this matter to Mr........... and also informally to FS also at that stage and it was decided that we get this party located at Rajpura. Unfortunately, the demand of land by this party was in one place to the tune of 15 to 20 acres and since our plots were only of 1-1.5 acres of size it was decided that they may be allowed to locate their plot nearabout our Focal'Point so that it could be integrated finally in our future expansion of the Industrial Estate at Rajpura which yet shows no sign of life and consequently it was felt that by bringing this party more industries of allied nature would come here. In plan for 1969-70 the F.D. are aware that we have very little money set aside for further acquisition of land. Realising this we, therefore, suggested to this party to go in for purchase of land themselves as we were not sure whether we would be able to have enough funds to acquire more land at Rajpura particularly when our earlier plots had not been sold out. This party was keen to come in as it wanted to go into production from November, 1969. The party has purchased that piece of land which has approval of the Town and Country Planning Department, it has also submitted its plan for construction of buildings etc." It is thus obvious that there was representation to the appellant that it would be entitled to concession and incentives announced by the Government if it set up its unit in the focal point. Whether such representation resulted in binding agreement is different issue but the representation coming from Industries Secretary and Director of Industries in pursuance of Government policy cannot be held to be unauthorised or beyond the scope of authority. The Government functions through its officials and so long they are acting bona. fide in pursuance of Government policy the Government cannot be permitted to disown it as a citizen can have no means to know if what was being done was with tacit approval of the Government. And if it is found that the representation made by the official concerned was such thal. any reasonable person would believe it to have been made on behalf of the Government then unless such representation is established to be beyond scope of authority it should be held binding on the Government. It is another matter that even if it isbinding it may be contrary to law and therefore unenforceable. In Motilal Padampat Sugar Mills (AIR 1979 SC 621) (supra) the Government was held bound to grant exemption from sales tax to the sugar mill even though the manufacturer had written letter to the Director of Industries on a news item published for grant of exemption from sales tax, based on a statement issued by the Secretary of Industries which was favourably replied first by the Director of Industries endorsed later by the Chief Secretary informing the manufacturer that Government was willing to consider the request and necessary form etc. may be obtained from Secretary Industries. As is clear from the noting of the Secretary the appellant purchased the land, privately, on assurance of the Secretary which by a notification issued by Government was included in focal point. It was not denied that by January, 1969 the appellant had purchased the land and various other material at a cost of 15 lakhs and had placed an order for purchase of plant and machinery of value of Rs.35 lakhs which was intimated by a telegram sent on 11 th January, 1969. Even rules were framed in February, 1969 by sanction of the President of India which provided for refund of sales and purchase tax to new and expanding industries. All this indicates that tile promise was made on behalf of the Government by its officials in pursuance of and in line with the declaration of policy by the Government that a new unit shall be entitled to concession. Acting on the assurance, both express and implied, the appellant invested substantial amount in setting up the unit requesting, in the meanwhile, for grant of written sanction from the Government which, too, came. But even if it would not have (come ) it would not have made any difference in law as the equity arose in favour of appellant not by the letter dated 16th June, 1969 but by altering its position on assurance given by authorities. In Godfrey Philips (AIR 1986 SC 806) (supra) it was observed, "Now the doctrine of promissory estoppel is well established in the administrative law of India. It represents a principle evolved by equity to avoid injustice and, though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. The basis of this doctrine is the interposition of equity which has always, true to its form, stepped in to mitigate the rigour of strict law." Basic ingredients of promise by the Government, belief of the appellant that it was true and if acted upon shall entitle it to refund of sales tax, and finally altering its position by investing substantial amount were thus established to invoke promissory estoppel against Government.;