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IN THE HIGH COURT OF ORISSA AT CUTTACK

W.P.(C) No.36871 of 2020

CNR No. ODHC010781632020

(In the matter of an application under Articles 226 and 227 of the

Constitution of India, 1950).

M/S JSW Cement Limited, Jajpur &

Anr.

…. Petitioner (s)

-versus-

State of Odisha & Ors. …. Opposite Party (s)

Advocates appeared in the case through Hybrid Mode:

For Petitioner (s) : Mr. Surya Prasad Mishra, Senior Advocate

Along with

Ms. Pami Rath, Senior Advocate

assisted by

Ms. Chitta Ranjan Dash, Advocate

For Opposite Party (s) : Mr. Satyabrata Mohanty, AGA

Mr. Surya Kanta Padhy, Senior Advocate

for O.P. No.4

CORAM:

HON’BLE DR. JUSTICE SANJEEB K PANIGRAHI

HON’BLE MR. JUSTICE MURAHARI SRI RAMAN

DATE OF HEARING:-07.10.2026

DATE OF JUDGMENT:-16.10.2026

Dr. Sanjeeb K Panigrahi, J.

1. The present Writ Petition calls in question the validity of the

amendment introduced by the Industries Department, Government of

Odisha, by Resolution dated 18.8.2020, whereby cement manufacturing

and grinding units were excluded from the benefit of reimbursement

of net State Goods and Services Tax (SGST) under Clause 5.4.5(a) of the WP(C)/36871/2020

ODHC010781632020

2026:OHC:213-DB

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Industrial Policy Resolution, 2015 (hereinafter referred to as “IPR

2015”), with retrospective effect from 1.07.2017. The petitioners contend

that the amendment withdraws an incentive which formed part of the

policy framework under which they altered their position, undertook

substantial investment, established the industrial unit and proceeded

to commence commercial production. They also question the failure of

the authorities to recognise their provisional Priority Sector status,

despite the application having been inspected and forwarded by the

Regional Industries Centre (RIC).

I. FACTUAL MATRIX OF THE CASE :

2. The Government of Odisha introduced IPR 2015 on 24.8.2015 with the

object of promoting industrial development in the State through a

framework of incentives and facilitation for eligible industrial units.

Among the incentives contemplated under the policy was

reimbursement of tax to eligible units falling within the “Priority

Sector”, subject to the prescribed conditions and operational guidelines.

3. The petitioners state that, acting upon the policy, they proceeded with

the establishment of a cement manufacturing unit in Odisha. The

proposal of the JSW group received in-principle approval of the State

Level Single Window Clearance Authority (SLSWCA) on 2.12.2015.

Thereafter, land was allotted by the Industrial Infrastructure

Development Corporation of Odisha (IDCO) on 22.1.2016 for the

proposed industrial project.

4. The petitioners assert that substantial investment was thereafter made

towards establishment of the unit. The first fixed capital investment is

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recorded as having been made on 31.7.2017. The petitioners have

referred to a total capital investment of approximately ₹350 crore in the

new unit and fixed capital investment of ₹167.78 crore. Their case is that

the investment was undertaken in furtherance of the industrial project

and in the expectation that the incentives available under IPR 2015

would govern the project, subject to fulfilment of the conditions

prescribed by the policy.

5. The Operational Guidelines for Grant of Priority Sector Status under

IPR 2015 prescribe a procedure for recognition of an eligible industrial

unit. During implementation of the project, an eligible unit may obtain

provisional Priority Sector status. Upon commencement of commercial

production, the unit may apply for recognition as a Priority Sector

industry in accordance with the prescribed procedure. The guidelines

also prescribe timelines for scrutiny and processing of the application

by the RIC and the Director of Industries.

6. On 16.8.2017, the petitioners submitted an application before the RIC

seeking provisional Priority Sector status. The application was

acknowledged on 21.8.2017, and the unit was inspected on 22.8.2017.

Following inspection, the RIC forwarded the application to the Director

of Industries on 22.9.2017 along with its inspection report and

certificate of verification.

7. The petitioners rely upon the verification undertaken by the RIC, which

recorded the date of the first investment, examined whether the unit

fell within the Negative List and recommended grant of provisional

Priority Sector status. According to the petitioners, the application had

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thus undergone the scrutiny contemplated by the guidelines and had

been forwarded to the authority responsible for issuing the certificate.

The petitioners maintain that no order rejecting the application was

communicated within the period prescribed under the guidelines.

8. The petitioners also rely upon Section 11 of the Orissa Industries

(Facilitation) Act, 2004 (hereinafter referred to as “the Facilitation Act”),

which provides for deemed issuance of the requisite clearance where

the concerned Department or Authority fails to issue the same within

the prescribed period. Clause 4.2 of IPR 2015 is relied upon in support

of the applicability of the statutory facilitation framework to the grant

of industrial incentives. The petitioners contend that the failure to

decide their application within the prescribed time must be considered

in the light of these provisions.

9. The unit commenced commercial production on 1.5.2020. According to

the petitioners, production commenced within the period

contemplated under IPR 2015, reckoned from the date of the first fixed

capital investment.

10. In the meantime, the State Government issued the impugned

Resolution dated 18.8.2020 amending Clause 5.4.5(a) of IPR 2015. The

amendment substituted the earlier tax reimbursement framework with

reimbursement of net SGST but excluded cement manufacturing and

grinding units, blast furnace slag-based units and other specified

categories from the benefit. The amendment was made operative

retrospectively with effect from 1.7.2017.

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11. The petitioners contend that the retrospective date is material because

the first fixed capital investment had already been made and the

application for provisional Priority Sector status had been submitted

before the amendment was issued. The unit had also commenced

commercial production by that time. The petitioners further state that,

on 7.9.2020, IPICOL conveyed the in-principle approval of the SLSWCA

in relation to the additional investment for the expansion project.

12. The petitioners have also relied upon a communication issued by the

RIC on 27.5.2020. According to them, the communication recorded that

the application for provisional Priority Sector status had already been

forwarded to the Director of Industries and remained under

consideration. Certain additional documents and information,

including the date of commencement of production, were also sought.

The petitioners contend that this communication did not reject the

earlier application and cannot be treated as a decision within the period

prescribed under the guidelines.

13. The State has filed its counter affidavit opposing the writ petition. It

relies, inter alia, upon the proceedings of the High Level Committee

dated 24.1.2019, the decision of the Cabinet and the financial

implications associated with reimbursement of SGST following the

introduction of the Goods and Services Tax regime. The State maintains

that the policy could be modified in view of the financial burden upon

the exchequer and that the petitioners cannot claim the incentive

merely on the basis of an application or recommendation made by the

RIC.

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14. In their rejoinder, the petitioners dispute the State’s stand. They

maintain that the RIC inspected the unit, verified the relevant

particulars and forwarded the application with its recommendation;

that no rejection was communicated within the stipulated period and

that the subsequent request for additional documents could not cure

the earlier failure to decide the application. They also dispute the

contention that the unit falls within the Negative List and rely on the

inspection and verification undertaken by the RIC.

15. The controversy must be considered against this factual background.

The challenge to the retrospective amendment concerns the effect of a

subsequent policy decision upon an industrial project which had

already progressed under IPR 2015. The claim concerning provisional

Priority Sector status, on the other hand, turns upon the procedure

prescribed for processing the application, the failure to communicate a

decision within the stipulated period and the consequence, if any,

flowing from Section 11 of the Facilitation Act. The question of

reimbursement ultimately depends on the application of these findings

to the terms of the policy and the eligibility conditions applicable to the

unit.

II. SUBMISSIONS ON BEHALF OF THE PETITIONERS :

16. Learned Sr. Counsel for the petitioners submits that the Resolution

dated 18.8.2020 is arbitrary and unsustainable insofar as it excludes

cement manufacturing and grinding units from reimbursement of net

SGST with retrospective effect from 1.7.2017. The petitioners had

undertaken substantial investment under IPR 2015, obtained the

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requisite in-principle approvals, secured land, established the unit and

commenced commercial production. It is contended that the incentive

formed part of the policy framework under which the project was

undertaken and that its subsequent withdrawal for a period preceding

the date of the amendment defeats the legitimate expectation created

by the State’s own policy.

17. Learned Sr. Counsel distinguishes between the power of the State to

amend an industrial policy prospectively and the power to withdraw

an existing benefit retrospectively. It is submitted that the State may

alter the terms of its incentive scheme in accordance with law, but such

power cannot be exercised in a manner that arbitrarily deprives an

industrial unit of an incentive for a period during which the policy was

in force, particularly when the unit has already altered its position and

incurred substantial expenditure in reliance upon that policy.

18. Reliance is placed upon the judgment of this Court in Ultratech Cement

Limited and Another v. State of Odisha and Others

1

. It is submitted

that the said judgment considered the Resolution dated 18.8.2020

insofar as it amended IPR 2007 and retrospectively excluded cement

units from the relevant tax reimbursement benefit. This Court rejected

the justification advanced for giving the amendment retrospective

effect and held that it could only operate prospectively. The petitioners

further point out that the judgment was affirmed by the Hon’ble

1

2022 SCC OnLine Ori 13

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Supreme Court vide order dated 14.10.2022

2

and thus Ultratech Cement

(supra) has attained finality.

19. According to the petitioners, the principle laid down in Ultratech

Cement applies with equal force to the impugned amendment of IPR

2015. Although the two cases concern different industrial policies, the

amendment challenged in both matters is the exactly the same

Resolution dated 18.8.2020, which seeks to exclude cement units from

a tax reimbursement incentive with retrospective effect. The petitioners

also rely upon M/s Maa Bhairabi Industries LLP v. State of Odisha

3

,

in support of their objection to the retrospective withdrawal of an

industrial incentive.

20. Learned counsel submits that the financial considerations relied upon

by the State may explain the decision to review the incentive scheme,

but do not, by themselves, justify applying the exclusion

retrospectively. The State was aware of the terms of IPR 2015 when the

project was approved and investment was undertaken. If a change in

fiscal circumstances warranted modification of the policy, the State

could amend it for the future. It could not, according to the petitioners,

use a subsequent amendment to defeat the very incentive for a period

during which the petitioners claim to have fulfilled the applicable

requirements.

21. On the question of provisional Priority Sector status, learned counsel

submits that the application dated 16.8.2017 was made in accordance

2

Order dated 14.10.2022 in SLP(C) Nos. 13756-13757 of 2022

3

W.P.(C) No. 5449 of 2018, decided on 13.07.2021

Page 9

with the Operational Guidelines. The RIC acknowledged the

application, inspected the unit and forwarded it to the Director of

Industries on 22.9.2017 with its inspection report and certificate of

verification. The petitioners rely upon the recommendation made by

the RIC and submit that the verification did not record any

disqualification under the Negative List.

22. It is contended that Clauses 6.1, 6.2, 7.1 and 8.1 of the Operational

Guidelines prescribe a time-bound procedure for processing

applications for Priority Sector status. The RIC is required to examine

and forward the application within the prescribed period, while the

Director of Industries is required to issue the certificate within the

stipulated time after receipt. The guidelines also contemplate

communication of rejection within the prescribed period. In the present

case, no rejection was communicated within that period, although the

application had already been forwarded by the RIC.

23. Learned counsel relies upon Section 11 of the Facilitation Act, read with

Clause 4.2 of IPR 2015, to submit that failure by the competent authority

to issue the requisite clearance within the prescribed period attracts the

statutory consequence of deemed issuance. It is argued that the

requirement of a subsequent written communication by the Nodal

Agency cannot be interpreted to mean that the statutory consequence

arises only if the defaulting authorities choose to acknowledge it. Such

an interpretation, according to the petitioners, would permit the

authorities to defeat the object of the legislation by their own inaction.

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24. The case is, therefore, not one where the entrepreneur failed to submit

an application or bypassed the prescribed procedure. The petitioners

participated in the inspection and awaited a decision from the

competent authority. They contend that the absence of a formal

certificate cannot be relied upon to defeat their claim when the

application remained undecided beyond the time stipulated under the

applicable framework.

25. The communication dated 27.5.2020 is also relied upon by the

petitioners. It is submitted that the communication acknowledged that

the application had been forwarded to the Director of Industries and

remained under consideration. The request for additional documents

and information did not amount to a rejection of the application. Nor,

according to the petitioners, could it revive a period which had already

expired or nullify the consequence claimed to have arisen from the

earlier failure to decide the application.

26. The petitioners also dispute the State’s reliance upon the Negative List.

They submit that the relevant entry, properly construed, does not

exclude their unit in the manner suggested by the State. According to

them, the entry concerning certain grinding or size-reducing units is

subject to the terms and qualifications contained therein, including the

investment threshold and the distinction relating to cement

manufacturing with clinker. The nature of the unit and the investment

involved, it is argued, take the petitioners outside the exclusion relied

upon by the State. Particular reliance is placed upon the RIC’s

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inspection and verification, which recorded that the unit did not fall

within the Negative List.

27. The petitioners invoke Articles 14, 19(1)(g) and 300A of the Constitution

of India. It is contended that retrospective withdrawal of the incentive,

in the circumstances of the present case, is arbitrary and adversely

affects the petitioners’ ability to carry on their industrial activity on the

terms under which the project was undertaken. Reliance is also placed

upon the principles of promissory estoppel and legitimate expectation,

with reference to the decision of the Hon’ble Supreme Court in MRF

Ltd. v. Assistant Commissioner (Assessment), Sales Tax

4

.

28. On the aforesaid grounds, the petitioner seeks quashing of the

impugned amendment insofar as it operates retrospectively against

their unit, a declaration that their application for provisional Priority

Sector status is to be treated in accordance with Section 11 of the

Facilitation Act and the applicable guidelines, and consequential relief

in respect of reimbursement of net SGST under IPR 2015.

III. SUBMISSIONS ON BEHALF OF THE OPPOSITE PARTIES:

29. Learned counsel appearing for the State opposes the writ petition and

submits that the impugned amendment is a policy decision taken by

the State Government in the exercise of its authority to determine the

nature and extent of fiscal incentives to be extended to industrial units.

It is contended that the State is not bound to continue a particular

incentive indefinitely and may modify its industrial policy in response

4

(2006) 8 SCC 702

Page 12

to changing economic circumstances and the financial implications of

the scheme.

30. It is submitted that the transition to the GST regime materially altered

the fiscal context in which the incentive was originally framed. The

Government was, therefore, entitled to review the policy and exclude

categories of units for which continuation of the reimbursement scheme

was considered financially unsustainable.

31. The State further relies upon paragraph 14(f) of IPR 2015 to contend

that the policy is capable of being reviewed or modified by the

Government. According to the State, an industrial policy is not an

immutable promise, and an entrepreneur cannot claim an indefeasible

right to the continuation of a fiscal incentive merely because the project

was undertaken while the policy was in force.

32. Learned counsel submits that the petitioners’ reliance upon Ultratech

Cement (supra) is misplaced. It is pointed out that the said case

concerned IPR 2007 and the circumstances of the industrial units

involved therein. In the present case, the petitioners did not possess a

final certificate recognising the unit as a Priority Sector industry when

the amendment dated 18.8.2020 was issued. The State accordingly

contends that the petitioners cannot equate their position with that of

an industrial unit whose entitlement had already been formally

recognised by the authorities.

33. The State disputes the contention that the petitioners had acquired an

enforceable right to reimbursement of SGST. It is argued that the

incentive was subject to the conditions contained in IPR 2015 and the

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applicable Operational Guidelines. Until the competent authority

granted the requisite Priority Sector status and the other conditions of

eligibility were verified, the petitioners could not claim reimbursement

as a matter of right.

34. On the question of deemed approval, the State submits that the RIC’s

forwarding of the application to the Director of Industries was only an

intermediate step in the administrative process and did not amount to

a final decision granting Priority Sector status. The recommendation of

the RIC, according to the State, could not substitute the certificate

required to be issued by the competent authority. The application

remained subject to further consideration and verification, and no final

order granting the benefit had been issued.

35. The State also relies upon the communication dated 27.5.2020, under

which certain additional documents and information were sought from

the petitioners, including the date of commencement of commercial

production. According to the State, the requirement to furnish further

documents demonstrates that eligibility had not been finally

determined and that the authorities were entitled to seek information

before deciding the application.

36. The State disputes the petitioners’ interpretation of the Negative List

and maintains that the unit falls within the category of industrial units

excluded from the relevant incentive. It is submitted that the nature of

the industrial activity and the applicable policy provisions must be

examined before the benefit can be granted. The petitioners cannot,

according to the State, rely solely upon the RIC’s recommendation to

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avoid such scrutiny or claim a benefit contrary to the terms of the

policy.

37. The State, accordingly, submits that neither the retrospective

amendment nor the absence of a final Priority Sector certificate

warrants interference by this Court. It is submitted that the petitioners

have failed to establish an unconditional entitlement to reimbursement

and that the writ petition ought to be dismissed.

IV. REASONING AND JUDGMENT ANALYSIS OF THIS COURT :

38. Having considered the pleadings, the materials placed on record and

the submissions advanced on behalf of the parties, the following issues

arise for consideration:

A. Whether the amendment introduced by Resolution dated

18.8.2020, insofar as it retrospectively excludes cement

manufacturing and grinding units from the benefit of net SGST

reimbursement under IPR 2015 with effect from 1.7.2017, can

be sustained in the facts and circumstances of the present case.

B. Whether, having regard to Section 11 of the Facilitation Act,

Clause 4.2 of IPR 2015 and the Operational Guidelines for

Grant of Priority Sector Status, the petitioners’ application

dated 16.8.2017 attracts the consequence of deemed approval in

view of the failure of the authorities to decide it within the

prescribed period.

C. Whether the petitioners’ unit is liable to be treated as falling

within the Negative List and, consequently, whether the

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petitioners are entitled to consequential consideration and

grant of reimbursement of net SGST under IPR 2015.

A. Retrospective withdrawal of the incentive/ Doctrine of Promissory

Estoppel and Legitimate Expectation:

39. The first issue concerns the retrospective operation of the Resolution

dated 18.8.2020. The State’s competence to frame an industrial policy

and to modify the incentives offered under it is not in dispute. Nor can

it be disputed that the Government may, in an appropriate case,

reconsider the financial terms of an incentive scheme in public interest.

The question is whether the decision to exclude a category of industrial

units could be made operative from a date preceding the amendment,

thereby affecting an industrial project which had already proceeded

under the existing policy.

40. The chronology assumes importance in this regard. IPR 2015 was

issued on 24.8.2015. The petitioners’ project received in-principle

approval on 2.12.2015, land was allotted on 22.1.2016, and the first fixed

capital investment is recorded as having been made on 31.7.2017. The

application for provisional Priority Sector status followed on 16.8.2017.

The unit thereafter proceeded towards establishment and commenced

commercial production on 1.5.2020. These events preceded the

Resolution dated 18.8.2020. The petitioners’ case is, therefore, founded

upon steps actually taken towards implementation of the industrial

project and not merely upon an intention to invest at some future point.

41. The State relies upon paragraph 14(f) of IPR 2015, which permits review

or modification of the policy. Such a provision recognises the

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Government’s authority to reconsider its industrial policy; it does not,

by itself, answer whether every amendment may be given retrospective

effect. The power to alter the policy framework and the power to

withdraw a benefit for a period preceding the amendment are distinct

questions. The latter must be examined with reference to the language

of the amendment, the nature of the incentive, the terms of the original

policy and the circumstances in which the industrial project was

undertaken.

42. The Resolution dated 18.8.2020 did not merely prescribe different

conditions for reimbursement in the future. It excluded the specified

categories of units with effect from 1.7.2017. The effect was to extend

the exclusion to a period commencing more than three years before the

Resolution was issued. An industrial unit which had acted upon IPR

2015 and incurred expenditure before the amendment could

consequently be deprived of the benefit for a period during which the

earlier policy governed the project. It is this retrospective consequence,

rather than the mere decision to alter the incentive, which requires

examination.

43. The State seeks to justify the amendment by reference to the financial

implications of reimbursement following the introduction of GST and

the decision taken by the Government after consideration at the

appropriate levels. These considerations may explain why the

Government decided to review the scheme. They do not, without

further justification, explain why the exclusion had to be imposed

retrospectively upon units which had already acted under the existing

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policy. The financial consequences of continuing an incentive and the

legality of withdrawing it for a past period are separate matters. The

former may support a policy change; it does not, by itself, resolve the

latter.

44. In examining the retrospective operation of the amendment, this Court

must also consider the nature of the representation made through the

industrial policy and the extent to which the petitioners acted upon it.

45. The principal authority relied upon by the petitioners is the judgment

of this Court in Ultratech (supra). In that case, this Court examined the

Resolution dated 18.8.2020 insofar as it amended IPR 2007 by

retrospectively excluding cement units from the relevant tax

reimbursement benefit. The Court considered the justification

advanced by the State and rejected the retrospective operation of the

exclusion, holding that the amendment could operate prospectively

and could not be used to withdraw the benefit for the preceding period

in the manner sought by the State. The judgment was subsequently

affirmed by the Hon’ble Supreme Court.

46. The State is correct in pointing out that Ultratech Cement (supra)

concerned IPR 2007, whereas the present petition concerns IPR 2015.

The petitioners’ entitlement must, therefore, be determined under the

latter policy and the applicable guidelines. However, the distinction

between the two policies does not render the reasoning in Ultratech

Cement (supra) irrelevant. In both cases, the challenge concerns the

retrospective exclusion of cement units from a tax reimbursement

incentive through the self-same Resolution dated 18.8.2020. The

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principle emerging from that decision is directly relevant to the

question whether the State may apply the exclusion retrospectively to

a period during which an industrial unit had acted under the existing

policy.

47. The absence of a final Priority Sector certificate on the date of the

amendment is a circumstance which must be considered, but it cannot

by itself determine the validity of the retrospective exclusion. The

petitioners’ case is that they applied for provisional status in August

2017, that the RIC inspected and verified the unit and forwarded the

application in September 2017 and that the competent authority did not

reject it within the prescribed period. Whether the petitioners can rely

upon deemed approval is a separate question to be considered under

Section 11 of the Facilitation Act. The State cannot dispose of the

challenge to retrospective operation merely by pointing to the absence

of a certificate without addressing the circumstances in which the

application remained pending.

48. Further, this is a fit case for governing the principle of promissory

estoppel. The principles governing promissory estoppel and legitimate

expectation, as explained by the Hon’ble Supreme Court in MRF Ltd.

v. Assistant Commissioner (Assessment), Sales Tax (supra), State of

Uttar Pradesh v. Birla Corporation Limited

5

, Manuelsons Hotels Pvt.

Ltd. v. State of Kerela

6

, State of Punjab v. Nestle India Ltd.

7

, Motilal

5

(2019) SCC OnLine SC 1569

6

(2016) 6 SCC 766

7

(2004) 6 SCC 465

Page 19

Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh

8

, are also

relevant. The doctrine does not prevent the Government from changing

its policy in the public interest or from exercising a lawful power to

modify an incentive scheme. At the same time, the Government cannot

disregard the consequences of a representation upon which a party has

acted merely by asserting that the representation formed part of a

policy capable of amendment. The nature of the representation, the

conduct of the party claiming its benefit and the justification for the

change must be considered together.

49. In the present case, the petitioners rely upon the approvals obtained for

the project, the allotment of land, the investment made, the application

for provisional Priority Sector status and the subsequent

commencement of commercial production. The State, on the other

hand, relies upon the financial consequences of the incentive scheme

and its power to review the policy. The financial considerations explain

the decision to modify the scheme, but the material placed before this

Court does not disclose a sufficient justification for applying the

exclusion retrospectively from 1.7.2017 to a project which had already

proceeded under IPR 2015. The position would have been different had

the amendment merely prescribed the terms governing incentives for

the future.

50. There is merit in the contention of the petitioners that there is no

justification given by the opposite parties as to why only cement

manufacturing/grinding units and blast furnace slag-based units have

8

(1979) 2 SCC 409

Page 20

been chosen for denial of SGST reimbursement and that too with

retrospective effect, if in fact the idea was to revisit the incentive under

the IPR 2007 as a result of introduction of the GST regime. It will be

recalled that the GST regime was introduced in the country with effect

from 1.7.2017 whereas the retrospective amendment was made more

than three years later on 18.8.2020 and that too only for cement

manufacturing/grinding units and blast furnace slag-based units. In the

absence of a convincing justification provided, a move directed at only

a few industries for denial of SGST reimbursement can only be termed

irrational, arbitrary and discriminatory.

51. This court would first like to take up for discussion the decision of the

Supreme Court of India in MRF Ltd. v. Assistant Commissioner

(Assessment), Sales Tax (supra), which in the considered view of this

court is squarely applicable to the present case. It was held by the

Hon’ble Supreme Court in the said decision as under:

"32. State and its instrumentalities. .. can be made

subject to the equitable doctrine of promissory estoppel in

cases where because of their representation the party

claiming estoppel has changed its position and if such an

estoppel does not fly in the face of any statutory

prohibition, absence of power and authority of the

promisor and is otherwise not opposed to public interest,

and also when equity in favour of the promisee does not

outweigh equity in favour of the promisor entitling the

latter to legally get out of the promise.

…

34.. .. where a right has already accrued, for instance, the

right to exemption of tax for a fixed period and the

conditions for that exemption have been fulfilled, then the

withdrawal of the exemption during that fixed period

Page 21

cannot affect the already accrued right. Of course,

overriding public interest would prevail over a plea based

on promissory estoppel, but in the present case there is

not even a whisper of any overriding public interest or

equity.. .

…

39. MRF made a huge investment in the State of Kerala

under a promise held to it that it would be granted

exemption from payment of sales tax for a period of seven

years. It was granted the eligibility certificate. The

exemption order had also been passed. It is not open to or

permissible for the State Government to seek to deprive

MRF of the benefit of tax exemption in respect of its

substantial investment in expansion in respect of

compound rubber when the State Government had

enjoyed the benefit from the investment made by the MRF

in the form of industrial development in the State,

contribution to labour and employment and also a huge

benefit to the State exchequer.. . The impugned action on

the part of the State Government is highly unfair,

unreasonable, arbitrary and, therefore, the same is

violative of article 14 of the Constitution of India. The

action of the State cannot be permitted to operate if it is

arbitrary or unreasonable... Equity that arises in favour

of a party as a result of a representation made by the State

is founded on the basic concept of 'justice and fair play'.

The attempt to take away the said benefit of exemption

with effect from January 15, 1998 and thereby deprive

MRF of the benefit of exemption for more than five years

out of a total period of seven years, in our opinion, is

highly arbitrary, unjust and unreasonable and deserves

to be quashed. In any event, the State Government has no

power to make a retrospective amendment to SRO No.

1729/93 affecting rights already accrued to MRF

thereunder.

…

43.. .. Amendment notification SRO No. 38/98 (second

notification) has to be read so as not to take away or

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disturb any manufacture's pre-existing accrued right of

exemption for a period of seven years.. .' under first

notification

45. The State Government is restrained from initiating

any proceedings against MRF contrary to or inconsistent

with eligibility certificate and exemption order issued in

terms of first notification."

52. The excuse of financial implication does not stand scrutiny in view of

the observations of the Hon’ble Supreme Court in State of Uttar

Pradesh v. Birla Corporation Limited

9

. The Hon’ble Supreme Court in

the said decision held as under:

"23.. .. the State Government or the executive is

competent to rescind the earlier notification and the

doctrine of promissory estoppel can be no impediment in

that behalf. That, however, is hedged or laced with

condition that the burden is upon the Government to

show that it acted in furtherance to public interest in

issuing such a

notification otherwise than in accordance with the

promise and that the public interest is so overwhelming

that it would be inequitable to hold the Government

bound by the promise. It is well established that the court

would not act on mere ipse dixit of the Government and

must insist on a highly rigorous standard of proof in

discharge of its burden by the Government. Resultantly,

it is not necessary for us to dilate on the precedents

pressed into service by the respondents on the

application of doctrine of promissory estoppel of the State

Government like any other private party or individual.

.. ..

25. The power to retrospectively withdraw a rebate or

concession must be expressly conferred upon the

executive, and in the absence thereof, it is not open to

9

[2019] SCC OnLine SC 1569

Page 23

state to retrospectively withdraw or rescind such

benefits.

………………..

27.. .. all the industrial units set up after February 27,

1998 and before October 14, 2004 which had commenced

commercial production, must continue to qualify for

rebate for specified term mentioned in notification dated

February 27, 1998, subject to fulfilling all other

conditions specified therein.

.. ..

29.. .. It is also indisputable that the industrial units set

up in furtherance of the promise or representation made

in the notification dated February 27, 1998 which had

commenced commercial production in respect of

specified goods before October 14, 2004, would continue

to achieve the same objective as is specified in the

notification dated February 27, 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

February 27, 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

February 27, 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 February 27, 1998.

30. Indeed, the judgment rendered by the High Court

and affirmed by this court in interpreting the

notification dated February 27, 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

Page 24

interest in reference to the activities of the industrial

units who qualify the conditions specified in notification

dated February 27, 1998 in all other respects and had

commenced commercial production of the specified

product before October 14, 2004. Indubitably, an

enforceable right had accrued to and crystallised in

favour of such industrial units which could not be

truncated or snapped unless the dominant purpose for

which the notification dated February 27, 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.. . 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 February

27, 1998 and before October 14, 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 February 27, 1998. That ground cannot be set up

against the industrial units who qualify in all other

respect under the notification dated February 27, 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."

53. In the present case, no material whatsoever has been placed on record

by the opposite parties to establish that the impugned resolution

retrospectively is in public interest. As already pointed out, there was

Page 25

no justification in arbitrarily singling out cement manufacturing units

for denial of the SGST reimbursement.

54. In the circumstances, the reasoning adopted by this Court in Ultratech

Cement (supra) squarely applies to the retrospective operation of the

impugned Resolution qua IPR 2015. The State was competent to review

its policy and prescribe the terms upon which incentives would be

available in the future, subject to law. It could not, however, by the

Resolution dated 18.8.2020, retrospectively exclude the petitioners’ unit

from the incentive for the period preceding the amendment, without

sufficient justification and without regard to the policy under which the

project had been undertaken. The retrospective operation of the

amendment, insofar as it is sought to be applied against the petitioners

for the period preceding 18.8.2020, cannot be sustained.

B. Deemed approval under the Facilitation Act and the Operational

Guidelines:

55. The next issue concerns the effect of the petitioners’ application dated

16.8.2017 for provisional Priority Sector status. The petitioners rely

upon Section 11 of the Facilitation Act, read with Clause 4.2 of IPR 2015

and the Operational Guidelines. The State contends that the forwarding

of the application by the RIC was only an intermediate administrative

step and that no status could arise without a final certificate from the

Director of Industries. The question is not whether the RIC’s

recommendation itself constituted a final certificate, but whether the

failure of the competent authority to decide the application within the

Page 26

prescribed period attracts the statutory consequence as has been

claimed by the petitioners.

56. Section 11 of the Orissa Industries (Facilitation) Act, 2004 (hereinafter

referred to as the “Facilitation Act”) provides for a time-bound process

for issuance of clearances by the concerned Department or Authority.

Under sub-section (1), where a clearance required under the applicable

law is not issued within the specified period, the clearance is “deemed

to have been issued” and the entrepreneur may proceed with the

project. Sub-section (2) provides for continuation of such deemed

approval until formal clearance is issued. Sub-section (3) contemplates

written communication by the Nodal Agency to the entrepreneur, with

a copy to the concerned Department or Authority, informing the

entrepreneur of the deemed approval. The provision must be read as a

whole, having regard to its object of preventing delay on the part of the

authorities from indefinitely obstructing an industrial project.

57. The statutory scheme proceeds on the basis that an application covered

by the provision must be dealt with within the prescribed period. The

consequence contemplated by sub-section (1) is not merely an

administrative reminder to the concerned authority; there is a coercive

consequence attached by the statute in case of failure to issue the

requisite clearance within time. The requirement of communication

under sub-section (3) serves the purpose of informing the entrepreneur

and the concerned Department or Authority of the deemed approval.

It cannot be read in isolation from sub-section (1) so as to permit the

Page 27

consequence expressly contemplated by the statute to be defeated

solely because the authorities failed to communicate it.

58. This does not mean that every application which remains unanswered

must automatically be treated as approved, irrespective of the nature of

the application or the governing statutory provisions. The consequence

of deemed approval can arise only if the application is covered by

Section 11, the prescribed procedure has been followed and the relevant

period has expired without the required decision. The applicability of

the provision must, therefore, be determined on the facts of each case

and with reference to the procedure prescribed under the Operational

Guidelines.

59. Clause 4.2 of IPR 2015 provides the relevant connection between the

policy and the statutory facilitation framework. The Operational

Guidelines for Grant of Priority Sector Status prescribe the procedure

by which an application is to be examined and processed. Clauses 6.1,

6.2, 7.1 and 8.1, read together, contemplate scrutiny by the RIC,

forwarding of the application to the Director of Industries, issuance of

the certificate within the prescribed time and communication of

rejection within the stipulated period. The process is thus subject to

defined timelines and does not contemplate that an application may

remain pending indefinitely without a decision.

60. The record shows that the petitioners submitted their application on

16.8.2017 and that it was acknowledged on 21.8.2017. The unit was

inspected on 22.8.2017. Thereafter, on 22.9.2017, the RIC forwarded the

application to the Director of Industries along with its inspection report

Page 28

and certificate of verification. The application had, therefore,

progressed beyond the stage of initial receipt and had undergone

inspection and verification by the authority entrusted with scrutiny.

61. The contents of the RIC’s verification are also relevant. The report

recorded (a) the date of the first investment, (b)examined whether the

unit fell within the Negative List and (c) recommended provisional

Priority Sector status. The petitioners are not relying merely upon an

acknowledgment of receipt or an unverified assertion of eligibility.

They rely upon the inspection undertaken and the recommendation

made by the authority after examining the relevant particulars. The

application was thereafter forwarded to the Director of Industries, who

was required to act in accordance with the applicable guidelines.

62. No order rejecting the application within the prescribed period has

been shown to have been communicated to the petitioners. The State

relies upon a communication dated 27.5.2020, which stated that the

application had been forwarded to the Director of Industries, it

remained under consideration and some further documents were

sought. The communication does not, on its terms, constitute a rejection

of the application. It instead indicates that the application remained

pending for more than three years after it had been forwarded by the

RIC.

63. The request for additional documents in May 2020 cannot, by itself, be

treated as a timely rejection of an application submitted in August 2017.

If the authorities considered the application deficient or the unit

ineligible, it was incumbent upon them to take an appropriate decision

Page 29

in accordance with the applicable procedure. Nor does the material

referred to by the State demonstrate that the earlier application was

rejected before the communication dated 27.5.2020.

64. The State’s contention that the RIC’s recommendation did not itself

constitute a final certificate is correct to the limited extent that a

recommendation and a certificate are distinct administrative acts. The

petitioners’ case, however, does not rest solely upon treating the

recommendation as equivalent to a final certificate. It rests upon the

statutory consequence claimed to have arisen because the application

was submitted in accordance with the prescribed procedure, was

inspected and forwarded to the competent authority, and was not

rejected within the prescribed period. The absence of a final certificate

must be examined in that context.

65. If the requirement of a formal certificate were treated as conclusive in

every case, notwithstanding the expiry of the prescribed period, the

protection afforded by the deemed-approval provision could be

rendered nugatory. An authority could avoid the consequence of its

default simply by withholding the formal certificate indefinitely. Such

an interpretation would be difficult to reconcile with the object of the

Facilitation Act, which seeks to ensure that industrial projects are not

left indefinitely awaiting action from the concerned authorities. The

provision must, however, be applied only to the extent that the

particular application and the clearance sought are covered by its

terms.

Page 30

66. The subsequent conduct of the petitioners is also consistent with their

case that they continued to pursue the prescribed procedure. They

participated in the inspection, their application was forwarded with the

verification report, and they informed the RIC of the commencement of

commercial production by communication dated 27.7.2020. The

chronology does not disclose an abandonment of the earlier application

or a failure to invoke the prescribed procedure on the part of the

petitioners.

67. At the same time, deemed approval of the application for provisional

Priority Sector status does not dispense with every requirement

governing the subsequent grant and quantification of reimbursement.

The conditions relating to the commencement of production, the

relevant investment, the applicable period and ceiling, and the other

requirements of IPR 2015 continue to govern the incentive. The

statutory consequence claimed by the petitioners addresses the failure

to decide the provisional-status application within time; it does not, by

itself, determine the amount of SGST reimbursement payable.

68. In the present case, on the material placed before this Court, the

petitioners have made out a case for application of the statutory

consequence under Section 11 of the Facilitation Act, read with Clause

4.2 of IPR 2015 and the applicable Operational Guidelines.

69. This Court is, therefore, of the view that the petitioners are entitled to

the benefit of deemed approval in respect of their application dated

16.8.2017 for provisional Priority Sector status in terms of terms of

Section 11 of the Facilitation Act and the relevant guidelines. This

Page 31

finding concerns the provisional-status application and the

consequences of the failure to decide it within the prescribed period.

C. The Negative List and consequential entitlement to SGST

reimbursement:

70. The State has further contended that the petitioners’ unit falls within

the Negative List and is, therefore, not entitled to the incentive. The

petitioners dispute this position and rely upon the relevant entry in the

Negative List, the nature of their manufacturing activity and the RIC’s

verification report. This issue must be examined independently, since

neither the retrospective invalidity of the amendment nor the

consequence of deemed approval can confer an incentive upon an

industrial unit which is otherwise excluded by the applicable policy.

71. The contention of the Opposite Parties that the Petitioners’ unit falls

within Sl. No. 36 of the Negative List under IPR 2015 cannot be accepted

on the material placed before this Court. The said entry excludes size

reducing, size separating, grinding and mixing units having

investment in plant and machinery of less than ₹10 crore, while

expressly excepting the manufacture of cement with clinker. The entry

must be applied having regard to both the nature of the industrial

activity and the investment threshold prescribed therein.

72. In the present case, the Petitioners show that the investment made in

plant and machinery exceeds the prescribed threshold and that the

manufacturing process involves the use of clinker, fly ash and blast

furnace slag as principal raw materials. They further rely upon Clause

15.18 of IPR 2015, under which their industrial activity is stated to fall

Page 32

within the Priority Sector. These circumstances are material to the

determination of whether the unit is covered by the exclusion contained

in Sl. No. 36.

73. Significantly, the certificate of verification issued by the RIC records

that the first fixed capital investment was made on 31.7.2017, that the

unit does not fall within the Negative List under IPR 2015, and that it

may be declared a Priority Sector industrial unit for which provisional

status may be granted. The verification was undertaken by the

authority entrusted with the initial scrutiny of the application. While

the recommendation of the RIC is not, by itself, conclusive of the

Petitioners’ ultimate entitlement to the incentive, its findings cannot be

brushed aside without examining the nature of the manufacturing

activity, the investment in plant and machinery and the terms of the

relevant entry.

74. In these circumstances, the Opposite Parties were required to

demonstrate, with reference to the applicable entry and the particulars

of the Petitioners’ unit, the basis on which the exclusion was sought to

be applied. A mere reference to the fact that the Petitioners’ unit is

engaged in cement manufacturing or grinding does not, by itself,

establish that it falls within Sl. No. 36.

75. On the material placed before this Court, no sufficient basis has been

demonstrated for disregarding the RIC’s verification and treating the

unit as categorically excluded from the benefit of IPR 2015. The

objection founded upon the Negative List, therefore, cannot be

sustained as a ground for denying consideration of the Petitioners’

Page 33

claim for Priority Sector status and consequential reimbursement,

subject to fulfilment of the other applicable conditions.

76. The findings on the retrospective amendment and deemed approval

must now be considered together. The amendment dated 18.8.2020

cannot be applied retrospectively to exclude the petitioners’ unit from

the incentive for the period preceding the date of the Resolution.

Further, the petitioners’ application for provisional Priority Sector

status attracts the consequence of deemed approval on the facts and

material discussed above. The State cannot, therefore, rely upon the

retrospective exclusion or the absence of a formal provisional certificate

to deny consideration of the subsequent application and the claim

arising therefrom.

77. Clause 5.4.5(a) of IPR 2015 and the applicable Operational Guidelines

prescribe the nature and extent of the incentive. The benefit available to

eligible industrial units in the Priority Sector is subject to the specified

period, the ceiling linked to the cost of plant and machinery and the

other conditions contained in the policy. The amount payable must

accordingly be determined by reference to the net SGST eligible for

reimbursement and the limits prescribed under the applicable

provisions.

78. The petitioners have also invoked Articles 14, 19(1)(g) and 300A of the

Constitution. In view of the conclusions reached on the retrospective

operation of the amendment, the application of Section 11 of the

Facilitation Act and the objection founded upon the Negative List.

From the aforesaid discussion it is clear that the arbitrary exclusion of

Page 34

cement manufacturing and grinding units is arbitrary and

unconstitutional. The consequential claim must be dealt with under the

applicable policy, taking account of the findings recorded above.

79. Accordingly, the petitioners are entitled to consideration of their claim

for reimbursement of net SGST under IPR 2015, subject to verification

of the amount actually payable and compliance with the applicable

conditions governing the incentive. The authorities shall not reopen the

question of deemed provisional status or deny the claim solely on the

ground that no formal certificate was issued before the amendment

dated 18.8.2020.

V. CONCLUSION :

80. For all of the aforementioned reasons, the Writ Petition is accordingly

allowed. The petitioners shall be treated as having obtained deemed

approval of their application dated 16.8.2017 in line with the terms of

the applicable policy and the findings recorded in this judgment

81. The Petitioner’s claims with regard to SGST reimbursement under

Clause 5.4.5 (a) of IPR 2015 stood accrued and crystallized. The

amendment Resolution dated 18.08.2020 insofar as it prescribes

retrospective exclusion of cement manufacturing and grinding units

from SGST reimbursement w.e.f. 1.07.2017 is held to be arbitrary,

unconstitutional and contrary to the doctrine of promissory estoppel

and legitimate expectation. Resultantly, this Court sets aside the

impugned Resolution dated 18.8.2020 retrospectively amending IPR

2015.

Page 35

82. This Court consequently directs that the claim of the Petitioner for

reimbursement of SGST in accordance with IPR 2015 along with

applicable interest shall be determined and released within four weeks.

83. Ordered accordingly. There shall be no order as to costs.

84. Interim order, if any, passed earlier stands vacated.

(Dr. Sanjeeb K Panigrahi)

Judge

Murahari Sri Raman, J.- I agree

(Murahari Sri Raman)

Judge

Orissa High Court, Cuttack,

Dated the 16

th

October, 2026/-