Appeal against judgement of High Court of Gujarat wherein respondent was given benefit of sales tax under a scheme of Gujarat government.
No Acts & Articles mentioned in this case
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO_599_ OF 2012
(Arising out of SLP (C) No.17130/2008)
State of Gujarat & others ...Appellant(s)
- Versus -
Essar Oil Limited and another ...Respondent(s)
J U D G M E N T
GANGULY, J.
1.Leave granted.
2.This appeal is directed against the judgment of the
High Court of Gujarat dated 22.04.2008 in Special
Civil Application No.24233/2007, whereby the
Respondent No. 1 herein, Essar Oil Limited
(hereinafter “Essar”) was given the benefit of Sales
Tax incentive under the Government of Gujarat
1
“Capital Investment Incentive to Premier/Prestigious
Unit Scheme, 1995-2000” (hereinafter “the said
Scheme”)
3.The State Government in the Industries and Mines
Department vide Resolution dated 11.09.1995
introduced the said scheme to accelerate development
of the backward area of the State and to create
large-scale employment opportunities.
4.The operative period of the said scheme was from
16.08.1995 upto 15.08.2000, during which new units
have to go into commercial production.
5.The Scheme envisaged grant of Sales Tax incentives
by way of Sales Tax Exemption or Sales Tax Deferment
or Composite Schemes, for Premier/Prestigious Units
according to the location, investment and status of
the project. Essar fell in the category of premier
unit i.e. new industrial unit having a project cost
2
of more than Rs.1,000/- crores and employing 100
workers on a regular basis and following the
employment policy of the State Government. Clause
(v) of the Scheme defined premier unit in the
following terms:-
“(v) PREMIER UNIT
A new industrial unit or industrial complex
fulfilling the following criteria will be
considered for granting status of a “Premier
Unit”.
(a) The industrial unit shall have a project
cost of Rs.500 crores or more. Such units
having project cost of Rs.1,000 crores and
above shall be entitled for extended period to
avail incentive as provided under para 6 B.
(b) Only one unit per taluka will be eligible
for the Premier Unit status. In banned area no
unit is permitted.
(c) The unit shall employ at least 100 workers
on a regular basis and shall follow the
employment policy of the State Government.”
6.Part II of the said Scheme provided that the rate of
incentive would depend on the location, investment
and status of the project. The incentives offered
3
were sales-tax exemption or sales-tax deferment or
composite scheme. There is no dispute about the fact
that Essar opted for sales-tax deferment scheme. As
per clause 6(i)(B), the rate of incentive applicable
to Essar was the rate available for the most
backward area. The extent of exemption was 125% of
eligible fixed capital investment.
7.Part II Clause (iii) (b) provided that Under the
Sales Tax Deferment incentive scheme, the recovery
of sales tax connected by the unit on sale of goods
manufactured by it including intermediate products,
by products and scrap/waste generated as incidental
to manufacturing activities and turnover tax,
leviable to Government will be deferred and amount
so deferred will be recovered in six equal annual
installments by Sales Tax Department beginning from
the financial year subsequent to the year in which
the unit exhausts limit of incentive granted to it
under the scheme or after the expiry of relevant
period or time limit during which deferment is
available or whichever is earlier.
4
8.Since Essar's investment was going to be more than
Rs.1,000 crores, the duration of incentive of sales-
tax deferment was to be for a period of 17 years
from the date of commercial production.
9.Clause 6(v) of the said Scheme provided for
effective steps for extending date of commercial
production in the following terms :
“6(v) Effective steps for extending date of
commercial production :
The unit which cannot go into commercial
production before expiry of the scheme will be
allowed to go into commercial production beyond
the last date of the scheme provided it has
taken the following effective steps:
(1) The industrial unit should have obtained
provisional registration as a
Prestigious/Premier unit before 15
th
August
2000.
(2) 25% of project cost should have been
incurred before 15
th
August 2000. The unit
which has taken above effective steps will be
allowed to go into commercial production as
shown below:
5
(a) The unit with project cost above Rs.100
crores but below Rs.300 crores should go into
commercial production on or before 15
th
August
2002.
(b) The unit with project cost more than Rs.300
crores should go into commercial production on
or before 15
th
February 2003.
Such units shall have to apply to industries
Commissioner for extending date of commercial
production by 31
st
August 2000.”
10.A High Power State Level Committee (hereinafter
“HPSLC”) was the Sanctioning Authority for granting
permanent registration of all the
Prestigious/Premier Units
11.Part III provides the procedure for Registration for
Premier/Prestigious Status, the relevant clause of
the said Part in respect of instant case is set out
below:
“An Industrial unit eligible for
Prestigious/Premier status under the scheme
will apply to Industries Commissioner in
prescribed form before expiry of the scheme
along with details of following effective
steps.
i)Possession of plot or shed in GIDC Estate.
For units located outside GIDC Estate, the
6
unit must be in legal possession of land
with valid non-agricultural use permission
of industrial use or as per Revenue Act as
modified from time to time.
ii)The Letter of intent/Letter of Approval or
Registration/ obtained receipt against
filling of IEM to the appropriate
authority.
iii)NOC of GPCB (Gujarat Pollution Control
Board)
iv)Detailed Project Report.
The following procedure will be adopted for
granting the temporary and permanent
Prestigious/Premier registration.
(a)The Industries Commissioner shall give
provisional registration to the eligible
prestigious/premier unit after approval of
committee where applicable.
(b)The eligible unit after completion of
project will apply to Industries
Commissioner for permanent
prestigious/premier registration,
Industries Commissioner will carryout the
assets verification and submit a
verification report to the High Power
State Level Committee, for granting
permanent registration.”
12.Some relevant facts which arose prior to the
floating of the Scheme and which are necessary for
appreciating the said Scheme, as contended by Essar
and which the records also shows, are as under.
7
13.Essar was encouraged by the State Government to set
up a major venture at Vadinar in Jamnagar District
of Gujarat as a 100% export oriented unit for
refining of petroleum products with a capacity of 9
Million Tons per annum at an estimated project cost
of Rs. 1900 crores in collaboration with M/s Bechtel
Inc., USA.
14.By letter dated 11
th
April, 1990, the then Chief
Minister of the State of Gujarat wrote to the
Ministry of Planning, Government of India, stating
that the project was expected to generate foreign
exchange earnings of over Rs.3000 crores within a
period of 5 years and that it was expected to be set
up in 36 months. It was anticipated by the State
Government that the project would "completely change
the face of the Vadinar area, which is traditionally
a backward area of Gujarat offering direct and
indirect employment and will encourage growth of
various other ancillary industries in that region".
The letter further said that the project had the
8
full support of the Government of Gujarat and it was
being accorded highest priority and that Essar’s
proposal for setting up the oil refinery should be
cleared by the Government of India urgently. The
clearance for setting up the oil refinery was then
granted by the Government of India.
15.In January, 1993, Essar applied to the Gujarat
Pollution Control Board (GPCB) for grant of a ‘No
Objection Certificate’ to establish the refinery for
manufacturing several kinds of petroleum products.
By letter dated 15
th
February, 1993, the GPCB stated
that it had no objection from the Environmental
Pollution potential point of view in the setting up
of the refinery project subject to certain
environmental pollution control measures to be taken
by the appellant. Essar’s proposal regarding the
environmental pollution control system was approved
by the GPCB on 17
th
April, 1993 and a Site Clearance
Certificate was issued on that date.
9
16.On 10.11.1994, Essar filed an application for right
of way over 15.49 hectares of forest land for laying
Submarine Crude Oil Pipeline, Cooling Water/Return
Water Pipeline and Product Jetty for establishment
of its Refinery Project at Vadinar, District
Jamnagar, to the Conservator of Forests, Marine
National Park, Jamnagar. Undisputedly, 15.49
hectares of forest land applied for includes 8.79
hectares of Jamnagar Marine National Park and
Sanctuary. Therefore, permission under Section 2 of
the Forest Conservation Act (“FCA”) was required for
the entire 15.49 hectares. At the same time,
permission of State Government was required under
the Wildlife Protection Act (“WPA”) for 8.79
hectares.
17.On 13.02.1995, the State Government requested the
Chief Conservator of Forests, Regional Office,
Western Region, Bhopal, to move the Government of
India to issue suitable orders to allow Essar to
make geophysical survey in Marine National
10
Park/Sanctuary area. The proposal was forwarded by
the Chief Conservator of Forests, Bhopal to the
Government of India on 15.05.1995.
18.The Conservator of Forests recommended and forwarded
the proposal of Essar for Right of Way to the Chief
Conservator of Forests (WL) by letter dated 2
nd
June,
1995 along with an application in the prescribed
form seeking prior approval from the Central
Government under Section 2 of FCA. The application
with its enclosures together with the recommendation
of the State Government that 15.49 hectares of
forest land be made available to the appellant, was
forwarded to the Central Government by the Central
Chief Conservator of Forests on 3
rd
February, 1997.
Upon receipt of the proposal of the State
Government, the Central Government constituted a
team for joint inspection of the area. The report of
the joint inspection team was that the proposed
activity of the appellant would not have much
ramification from the forestry point of view and the
11
damage would only be temporary in nature in a
localized area during the construction phase.
19.On 08.09.1995, the State Government in its Forests
and Environment Department informed the Government
of India in the Ministry of Environment and Forests,
inter alia, that the approval “in principle” was
granted to Essar to install Single Buoy Mooring /
Crude Oil Terminal / Jetty and connecting pipeline
in the National Marine Park and Sanctuary area in
Vadinar, District Jamnagar on the terms and
conditions to be decided in due course by the State
Government.
20.On 11.09.1995 the said Scheme was announced and
thereafter on 01.02.1996 Essar applied in the new
format to the Industries Commissioner, Gandhinagar
for registering the Industrial Undertaking as a
“Premier/Prestigious Unit” under the said Scheme.
21.On 29.05.1996 the Forest and Environment Department,
State of Gujarat made a proposal to Government of
12
India seeking approval under Section 2 of FCA for
diversion of 15.49 hectares of forest land for
construction and operation of certain offshore and
onshore facilities for a grass root refinery project
of Essar.
22.On the basis of the letter-dated 30.09.1997 of the
Principal Chief Conservator of Forests, the State
Government conveyed on 16.10.1997 its permission
under section 29 of WPA to Essar’s proposal of right
to way through the National Park and Sanctuary
subject to Essar’s compliance with certain terms and
conditions including obtaining permission of the
Central Government under the FCA, 1980 (which was
granted on 08.12.1999, mentioned later) and also
getting clearance under the Coastal Regulation Zone
(CRZ) Regulations, which was granted on 03.11.2000.
23.This permission was conveyed to Essar by the
Conservator of Forests under cover of his letter-
dated 18.10.1997. The permission was, however,
restricted to the Kandla Port Trust area. Kandla
13
Port Trust granted permission to Essar to install
“marine facilities” on 10.10.1997.
24.On 27.11.1997 the Ministry of Environment & Forest,
Government of India granted “in-principle” approval
to Essar under FCA, 1980 for diverting 15.49
hectares of forest land for non-forest purpose.
25.On 25.06.1999 Essar was issued the provisional
Premier Registration Certificate by the Industries
Commissioner. The provisional certificate was valid
upto 15.08.2000 i.e. the last date of Scheme, within
this time period Essar was obliged to start
commercial production, failing which Essar would
have to apply for extension of date of commercial
production.
26.In the meantime in view of the permissions granted
to install “marine facilities”, Essar started
construction work of laying of water in-take jetty
and product jetty in the forest area of Marine
14
National Park and Marine Sanctuary. Essar’s
grievances are that despite the aforesaid
permissions being given to them for construction,
the State Forest Department forced Essar to stop
work and further lodged on 19.3.1999 a criminal
complaint against Essar and its contractor, for
offence committed under sections 17(A), 29, 35(6),
51(1) and 58 of the WPA and section 26 of the Indian
Forests Act.
27.In April 1999, a writ petition being Special Civil
Application No.2840/1999 in the nature of Public
Interest Litigation was filed before the High Court
of Gujarat by one Halar Utkarsh Samiti (hereinafter
“Samiti”) alleging serious violations of several
environmental legislations on the part of Essar, who
was impleaded as Respondent No.4 in the petition.
28.By interim order-dated 20.04.1999 passed in that PIL
High Court directed Essar not to carry on any
construction activity in the Marine National
Sanctuary and Marine National Park in violation of
15
the statutory provisions including the provisions
contained in Wild life (Protection) Act, 1972.
29.By order-dated 20.08.1999 the High Court disposed of
the said PIL in which Essar undertook to file an
Undertaking to the effect that they would not carry
out any construction activities at the site in
question, without obtaining the approval from the
authorities. Pursuant to the said order, on
28.09.1999 Essar filed an undertaking to the
following effect:
“…no construction activities or marine
facilities will be undertaken without obtaining
the approval from the authorities including
those which are under process before the
authorities.
This undertaking is given without prejudice to
the rights and contentions of the Respondent
No.4.
This undertaking will come to an end as and
when the permission is granted by the
authorities.”
30.In the meantime on 09.09.1999, a charge sheet was
filed against the officers of Essar and its
16
contractor in respect of earlier mentioned offences
allegedly committed by them under the WPA and FCA.
31.On 08.12.1999 the Ministry of Environment and
Forest, Government of India granted approval under
section 2 of the FCA for the total land of 15.49
hectares of forest land.
32.In April 2000, said Samiti filed another PIL being
Special Civil Application No.1778, and subsequently
two other PILs were also filed by one Jan Sangarsh
Manch and one Shri Alpesh Y. Kogje, being Civil
Application Nos.5476 and 5928 of 2000, (hereinafter
“second PILs”) in the High Court of Gujarat
challenging, inter alia, the permission granted by
the State Government to one Bharat Oman Refineries
Ltd. (‘BORL’) to lay pipeline in the Marine National
Park and Sanctuary Area. It is pertinent to note
here that Essar was not a party to these petitions.
33.On 29.04.2000 the Government of Gujarat discontinued
the said Scheme with effect from 01.01.2000.
17
However, vide the same Government Resolution dated
29.04.2000, it was specifically mentioned that
industry units in pipelines cases which have been
registered should start production within two years
from January 1, 2000 failing which such units shall
be rendered ineligible for sales tax incentive.
Therefore, the time to start commercial production
was thus extended to 01.01.2002. It is common ground
that Essar, being a registered unit, was entitled to
the benefit of the said extension.
34.Before the High Court, when proceedings in respect
of the second PILs were going on, the counsel of
Government of Gujarat placed a copy of the letter-
dated 25.07.2000. Relying on the letter, the High
Court noted that there were two more pending
proposals for laying pipeline in the Marine
Park/Sanctuary Area with the State Government – one
from Essar and the other from one Gujarat Poshitra
Port Ltd.
18
35.Before the High Court, the State Government
submitted that the proposal from Essar for laying
down pipelines in Marine National Park and Marine
Sanctuary, Vadinar in Jamnagar District has been
only approved ‘in principle’ vide letter-dated
08.09.1995. However, formal sanction under section
29 of the WPA, 1972 is yet to be given by the State
Government.
36.By judgment and order dated 13.07.2000, 18.07.2000,
20.07.2000, 27.07.2000 and 03.08.2000 the High
Court, in the second PILs, restrained the Government
of Gujarat from granting any more authorization and
permission for laying down any pipeline in any part
of the sanctuary or the national park. As a result
of this order, Essar was not given permission to lay
down pipelines by the State Government.
37.Being aggrieved, inter alia, on the ground that it
was not a party to the second PILs, Essar filed a
review/recall application before the High Court
19
being MCA No.250 of 2011 in SCA No.1778 of 2000,
inter alia, seeking review and recall of the
judgment and order dated 13.07.2000, 18.07.2000,
20.07.2000, 27.07.2000 and 03.08.2000 passed in the
second PILs by the High Court and a further
declaration to the effect that Essar’s project at
Vadinar was not affected in any manner by the said
judgment.
38.By judgment and order dated 23.02.2001 the High
Court rejected the said application for review on
the ground that there was a factual controversy
between Essar and the State Government and that
therefore the grievance of Essar was beyond the
scope of review.
39.Meanwhile, on 12.04.2001 the Government of Gujarat
extended the time for going into commercial
production upto 15.08.2003 for various pipeline
units including Essar, vide Government Resolution
dated 12.04.2001. By that time Essar had obtained
Provisional Premier Unit Registration before
20
15.08.2000 and had also incurred 25% of the Project
Cost before 15.08.2000 and therefore, it was
entitled to the benefit of this extension.
40.Essar challenged the aforesaid judgment and order
dated 13.07.2000, 18.07.2000, 20.07.2000,
27.07.2000, 03.08.2000 and 23.02.2001 of the High
Court delivered in the second PILs and the rejection
of its review petition in that second PILs
respectively by way of filing Special Level Petition
being (SLP) CC No.3654 of 2001 [later SLP No.9454-
9455 of 2001] before this Hon’ble Court.
41.By interim order-dated 11.05.2001 this Court granted
stay of the judgment of the High Court in so far as
Essar was concerned in SLP No.9454-9455 of 2001 i.e.
SLP filed by Essar. The text of the order of this
Court is set out:
“Permission to file Special Leave Petition is
granted.
Issue notice.
Stay of the High Court judgment in so far as
the petitioner is concerned.
21
Counter affidavit be filed within four weeks.
Rejoinder be filed within four weeks
thereafter. List after eight weeks.”
42.In view of the above stay order granted by this
Court, Essar moved the State Government for
permitting it to proceed with the construction of
jetty and laying the pipeline. By letter dated
29.10.2001, the State Government in the Forests and
Environment Department specifically called Essar to
ensure that no construction activities were
commenced before obtaining all necessary clearances
from different Government departments, agencies and
the conditions stipulated by the Ministry of
Environment and Forests, Government of India as well
as the Forests and Environment Department of the
State Government were strictly complied with.
However, Essar did not commence the construction of
jetty or laying down the pipeline in the National
Marine Park/Sanctuary area. One thing which is of
some importance is that despite the stay of this
Court and the Government letter dated 29.10.2001,
Essar did not challenge the Government stand in the
22
pending special leave petition filed by it in this
Court.
43.It is also pertinent to note that the Government of
Gujarat had also challenged the judgment and order
dated 13.07.2000, 18.07.2000, 20.07.2000, 27.07.2000
and 03.08.2000 of the High Court passed in the
second PILs by way of filing Special Leave Petition
being (SLP) CC No.5123-5125 of 2001 (later SLP
No.17694-96 of 2001) before this Court, wherein by
interim order dated 24.09.2001 this Court passed the
following operative order:
“Issue notice.
Tag with SLP(C) 9454-9455/2001.
There will be status quo as of today with the
result that any permission which has been
granted is not stayed. It will be open to the
State Government to consider the granting of
further permission which will be subject to the
outcome of this appeal.”
44.Essar just requested by its letter dated 11.04.2002
the Industries Commissioner to extend the date of
23
commercial production to 30.11.2004 instead of
15.08.2003 for the purpose of availing the incentive
benefit under the Scheme and cited that the delay in
completing the project and consequent delay in
starting commercial production was due to the
factors beyond the control of Essar. Further by
letter-dated 07.05.2002 Essar in continuation of the
letter-dated 11.04.2002 requested the Industries
Commissioner to extend the date of commercial
production to August 2006.
45.The Industries Commissioner refused to grant any
further extension of time vide its letter-dated
28.05.2002 and also made it clear to Essar to go
into commercial production within the specified time
i.e. till 15.08.2003. Essar, therefore, submitted a
representation dated 19.06.2002 to the Chief
Minister pointing out the circumstances which had
delayed the completion of the project. Similar
representations were thereafter made to different
authorities of the State Government on 27.06.2002,
14.03.2003, 30.07.2003, 02.12.2003 and 26.12.2003.
24
It appears that the said representations were not
responded to.
46.By an order-dated 19.01.2004, this Court quashed and
set aside the judgment dated 03.08.2000 of High
Court and directed the State Government to issue the
authorization to Essar in the requisite format under
Sections 29 and 35 of the Wild Life (Protection) Act
within a fortnight after disapproving the
interpretation placed by the High Court on the
provisions of the Wild Life (Protection) Act, 1972.
This Court took the view that the permission granted
by the State Government on 16.10.1997 was the
permission contemplated by Section 29 of the Wild
Life (Protection) Act.
47. In compliance with the above judgment, by letter
dated 12.02.2004, the State Government authorized
the Chief Wild Life Warden, Gujarat State under
Sections 29 and 35 (6) of the Wild Life (Protection)
Act to permit Essar for laying oil pipeline in the
25
National Marine Park/Sanctuary area. The Chief Wild
Life Warden also issued the requisite permission on
27.02.2004.
48. In the meantime, the accused i.e. officials and
contractors of Essar involved in the Criminal Case
of 1999 moved an application for discharge before
the Metropolitan Magistrate at Khambalia. By order-
dated 27.05.2004 the Magistrate allowed the said
application and discharged the accused persons from
all the charges levelled against them.
49.In view of the above permission granted by the Chief
Wild Life Warden under Sections 29 and 35 of the
Wild Life (Protection) Act, Essar again sent
representations dated 06.04.2004, 12.07.2004,
27.07.2004 and 22.12.2004 to the Government
requesting extension of time limit for commencement
of commercial production for the purpose of sales
tax deferment incentive scheme. In view of the above
representations, the State Government in the
Industries and Mines Department vide Resolution
26
dated 10.05.2006 constituted a Committee comprising
of the Advisor to the Chief Minister, the then
Additional Chief Secretary, Finance Department and
the then Principal Secretary, Industries and Mines
department. The Committee was constituted to
consider various such representations of Essar and
other Companies.
50.On 26.11.2006 Essar commenced commercial production
and started paying sales tax on the products sold by
it, under protest.
51.As nothing was heard from the said Committee
constituted in the year 2006 and the representations
made by Essar in respect of granting Sales Tax
Deferment were undecided, Essar filed a writ petition
being Special Civil Application No. 24233/2007 before
the High Court contending that for no fault of it,
Essar was prevented from completing the project and
that it was on account of being so prevented, Essar
27
could not commence the commercial production within
the time limit of 15.08.2003.
52.It is pertinent to note at this stage that before
the High Court, Essar had expressly withdrawn the
allegation that Department of Forest and
Conservation, Government of Gujarat was guilty of
delay. This is noted in para 6.2 of the High Court
judgment which is set out below:
“6.2 While in the memo of the petition some
allegations/submissions have been made
attributing the delay to the Forests and
Conservation Department of State Government,
but the petitioner Company is not interested in
pursuing those allegations and in fact would
like to withdraw those allegations and the
petitioner would like to invoke the following
maxims of equity:-
(i) “An act of the Court shall prejudice no
man”, and
(ii) “The law does not compel a man to do that
which he cannot possibly perform. ”
53.Before the High Court Essar contended that reason
for delay in commencement of commercial production
was on account of the injunction granted by the High
Court on 13.07.2000/03.08.2000, restraining the
28
State from granting further permission under Section
29 of the WPA in the second PILs (where Essar was
not a party). And this situation continued till
27.02.2004, when pursuant to the judgment-dated
19.01.2004 of this Court the Chief Warden granted
the said permission. Therefore Essar was entitled to
get benefit of the exclusion of the said intervening
period of from 13.07.2000 to 27.02.2004 i.e. three
years and 230 days in calculating the time limit for
commencement of commercial production.
54.By impugned order-dated 22.04.2008 the High Court
excluded the aforesaid intervening period and as
such extended the time limit for commencement of
commercial production from 15.08.2003 to 02.04.2007
after observing in the impugned judgment as under:
“17. …In the facts of the present case also,
the State Government had granted the permission
on 16.10.1997 and the Central Government had
granted the permission on 08.12.1999. The very
fact that the Chief Wild Life Warden issued the
permission on 27.02.2004 after the decision of
the Apex Court on 19.01.2004 is itself
sufficient to show that the request made by the
29
petitioner for excluding the intervening period
between 13
th
July/3
rd
August, 2000 and
27.02.2004 is reasonable.”
55.It is also pertinent to note herein that in the
impugned order, a direction was given to the State
Government that while considering Essar’s
application for the incentives, the State Government
shall stipulate the following conditions, provided
the final eligibility certificate is issued within
one month from the date of receipt of the judgment:-
“22. …
(i) The petitioner shall not be given the
benefit of deferment of Sales-tax/Value Added
Tax beyond 14
th
August, 2020.
(ii) The amount of Sales-tax/VAT already
paid/payable by the petitioner for the period
upto today shall not be refunded to the
petitioner.
(The above amount is stated by the
petitioner company to be above Rs.300 crores)
(iii) Without adjusting the Sales-tax/VAT
paid for the period upto today as aforesaid,
the amount otherwise computable under the
Incentive Scheme on the basis of the eligible
capital investment made by the petitioner in
30
the unit under consideration shall be reduced
by Rs.700 crores.“
56. The above direction is based on the submissions of
the counsel of both the parties, which were made
without prejudice to their respective cases. The
counsel of Essar submitted a proposal that Essar was
ready to make the above mentioned concessions no.
(i) & (ii) if the State Government does not
challenge the decision of the High Court and within
one month from that day the State Government grants
Essar the benefit of the Sales Tax/VAT deferment as
per the said scheme. In response to the said
proposal the learned counsel for the State
Government replied that assuming that Essar was
found to be eligible under the said Scheme, the
amount otherwise computable under the Incentive
Scheme on the basis of the eligible capital
investment made by Essar in the unit under
consideration shall be reduced by Rs.700 crores.
57.The learned counsel for the respondents made an
attempt to urge that the judgment of the High Court
31
was virtually rendered by way of a concession and
the impugned judgment is a consent order. As such
the appeal, at the instance of the State, is not
maintainable. Learned counsel for the State strongly
opposed this contention and submitted that the same
contention was raised at the time of admission of
the special leave petition. Then, further affidavit
was filed by the State with the leave of the Court.
The Court was satisfied and then issued notice.
58. Ultimately, the matter was argued on merits before
this Court and it was common ground that the
impugned judgment is not by consent.
59.The impugned judgment of the High Court is based on
two basic line of reasoning that the respondents are
entitled to the benefit of Sales Tax Waiver Scheme
firstly on the principle of restitution and
secondly, that the respondents cannot be made to
lose the benefit under the Sales Tax Waiver Scheme,
for an act of Court. In this regard it has been
urged that the respondents could not set up the
32
plant for the purpose of commercial production
within 15
th
August, 2003 as it was prevented from
doing so by an order of injunction of the High
Court. An order of injunction is an act of Court and
an act of High Court cannot prejudice anyone. The
loss of time suffered by the respondent as a result
of the injunction order cannot cause any prejudice
to the respondent.
60.Examining the aforesaid two contentions, this Court
finds that there is an overlapping area between the
two. The concept of restitution is basically founded
on the idea that when a decree is reversed, law
imposes an obligation on the party who received an
unjust benefit of the erroneous decree to restitute
the other party for what the other party has lost
during the period the erroneous decree was in
operation. Therefore, the Court while granting
restitution is required to restore the parties as
far as possible to their same position as they were
in at the time when the Court by its erroneous
action displaced them. In the case of Lal Bhagwant
33
Singh v. Sri Kishen Das reported in AIR 1953 SC 136,
Justice Mahajan speaking for a unanimous three-Judge
Bench of this Court explained the doctrine of
restitution in the following words:-
“…the principles of the doctrine of
restitution which is that on the reversal of
a judgment the law raises an obligation on
the party to the record who received the
benefit of the erroneous judgment to make
restitution to the other party for what he
had lost and that it is the duty of the
Court to enforce that obligation unless it
is shown that restitution would be clearly
contrary to the real justice of the case…”
61.Subsequently, in Binayak Swain v. Ramesh Chandra
Panigrahi and another (AIR 1966 SC 948) this Court
relied on the principles in Bhagwant Singh (supra)
and explained the concept of restitution as
follows:-
“…The principle of the doctrine of
restitution is that on the reversal of a
decree, the law imposes an obligation on the
party to the suit who received the benefit
of the erroneous decree to make restitution
to the other party for what he has lost.”
62.The concept of restitution is virtually a common law
principle and it is a remedy against unjust
34
enrichment or unjust benefit. The core of the
concept lies in the conscience of the Court which
prevents a party from retaining money or some
benefit derived from another which he has received
by way of an erroneous decree of Court. Such remedy
in English Law is generally different from a remedy
in contract or in tort and falls within a third
category of common law remedy which is called quasi
contract or restitution.
63.If we analyze the concept of restitution one thing
emerges clearly that the obligation to restitute
lies on the person or the authority that has
received unjust enrichment or unjust benefit (See
Halsbury’s Laws of England, Fourth Edition, Volume
9, page 434).
64.If we look at Restatement of the Law of Restitution
by American Law Institute (1937 American Law
Institute Publishers, St. Paul) we get that a person
is enriched if he has received a benefit and
similarly a person is unjustly enriched if the
35
retention of the benefit would be unjust. Now the
question is what constitutes a benefit. A person
confers benefit upon another if he gives to the
other possession of or some other interest in money,
land, chattels, or performs services beneficial to
or at the request of the other, satisfies a debt or
a duty of the other or in a way adds to the other’s
security or advantage. He confers a benefit not only
where he adds to the property of another but also
where he saves the other from expense or loss. Thus
the word “benefit” therefore denotes any form of
advantage (page 12 of the Restatement of the Law of
Restitution by American Law Institute).
65.Ordinarily in cases of restitution if there is a
benefit to one, there is a corresponding loss to
other and in such cases; the benefiting party is
also under a duty to give to the losing party, the
amount by which he has been enriched.
66.We find that a person who has conferred a benefit
upon another in compliance with a judgment or whose
36
property has been taken thereunder, is entitled to
restitution if the judgment is reversed or set-
aside, unless restitution would be inequitable (page
302 of the Restatement of the Law of Restitution by
American Law Institute).
67.Equity demands that if one party has not been
unjustly enriched, no order of recovery can be made
against that party. Other situation would be when a
party acquires benefits lawfully, which are not
conferred by the party claiming restitution, Court
cannot order restitution.
68. From the facts of the case which has been discussed
above it is debatable whether the respondent’s
inability to avail benefit under the said Scheme is
because of its own act or because of the act of the
appellant. There is a reasonable basis in the
argument of the appellant that after this Court
granted the stay order on 11.5.2001 on the special
leave petition filed by Essar, the respondents
should have made an effort of obtaining the
37
necessary licence by again coming to the Court.
Admittedly Essar did not do it. Essar merely
represented to the State for grant of licence.
Assuming that the State had not responded favourably
to the representation of Essar by giving the
clearance, it was open to Essar to approach this
Court for some order as its special leave petition
was pending before this Court. Essar did not do it.
Therefore, the question remains whether Essar acted
with due diligence in obtaining the equitable remedy
of restitution. It is well known that due diligence
must be exhibited by the party to seek equity.
69.Now, if we take the case of Essar on a higher plain
that it has done its duty even then it has been
denied of the benefit of the said scheme, even then
there is no question of restitution by the State for
the simple reason that it is nobody’s case that
State has received any unjust benefit or any unjust
enrichment in view of stay order given by the High
Court in the second PILs filed in the High Court. On
the contrary, it is clear from the record that the
38
State contested those proceedings and specially,
challenging the orders of the Gujarat High Court
dated 13.07.2000, 18.07.2000, 20.07.2000, 27.07.2000
and 03.08.2000 on the second PILs, the State has
filed its SLP. Therefore, the State has not at all
gained or received any benefit as a result of the
orders passed by the High Court on the second PILs.
Therefore, the principle of restitution cannot be
applied against the State, the appellant before us.
The judgment of the High Court to that extent is
erroneous.
70.The second principle that an act of court cannot
prejudice anyone, based on latin maxim “actus curiae
neminem gravabit” is also encompassed partly within
the doctrine of restitution. This actus curiae
principle is founded upon justice and good sense and
is a guide for the administration of law.
71.The aforesaid principle of “actus curiae” was
applied in the case of A.R. Antulay v. R.S. Nayak &
another reported in (1988) 2 SCC 602, wherein
39
Sabyasachi Mukharji, J (as his lordship then was)
giving the majority judgment for the Constitution
Bench of this Court, explained its concept and
application in para 83, page 672 of the report. His
lordship quoted the observation of Lord Cairns in
Rodger v. Comptoir D'escompte De Paris, [(1869-71)
LR 3 PC 465 at page 475) which is set out below:
“Now, their Lordships are of opinion, that
one of the first and highest duties of all
Courts is to take care that the act of the
Court does no injury to any of the Suitors,
and when the expression 'the act of the
Court' is used, it does not mean merely the
act of the Primary Court, or of any
intermediate Court of appeal, but the act of
the Court as a whole, from the lowest Court
which entertains jurisdiction over the
matter up to the highest Court which finally
disposes of the case. It is the duty of the
aggregate of those Tribunals, if I may use
the expression, to take care that no act of
the Court in the course of the whole of the
proceedings does an injury to the suitors in
the Court.”
72.In the Antulay case (supra), it was found that
directions of this Court in its order-dated
16.02.1984 in the previous Antulay Case {R.S. Nayak
v. A.R. Antuley, (1984) 2 SCC 183} was given per
incuriam and without noticing the provisions of
40
section 6 and 7 of the Criminal Law Amendment Act,
1952 and also the binding nature of the Larger Bench
decision in The State of West Bengal v. Anwar Ali
Sarkar & another (AIR 1952 SC 75).
73.It was made clear in the Antulay Case [(1988) 2 SCC
602] that when Court passes an order, which is
rendered per incuriam, and the party suffered
because of the mistake of the Court, it is the
Court’s duty to rectify the said mistake. It is in
that context that the concept of actus curiae can be
invoked. In the instant case the order passed by the
High Court in the second PILs was overturned by this
Court by its order-dated 19.01.2004 on a different
interpretation of section 29 of the WPA.
74.This Court while giving a different interpretation
of section 29 of WPA never held that High Court
acted per incuriam in rendering its judgment on
second PIL filed by the Samiti. Therefore in the
case of a mere erroneous judgment of a Court the
principle of “actus curiae” cannot be invoked.
41
75.The learned counsel for Essar in support of the
applicability of Doctrine of Restitution has cited
the case of South Eastern Coalfields Ltd. v. State
of M.P. & others reported in (2003) 8 SCC 648
wherein this Court through R.C. Lahoti, J (as his
Lordship then was) in para 27 had observed that:
“Section 144 C.P.C. is not the fountain source
of restitution, it is rather a statutory
recognition of a pre-existing rule of justice,
equity and fair play. That is why it is often
held that even away from Section 144 the Court
has inherent jurisdiction to order restitution
so as to do complete justice between the
parties.”
76.His Lordship at para 28 observed as under:
“That no one shall suffer by an act of the
court is not a rule confined to an erroneous
act of the court; the 'act of the court'
embraces within its sweep all such acts as to
which the court may form an opinion in any
legal proceedings that the court would not have
so acted had it been correctly apprised of the
facts and the law. The factor attracting
applicability of restitution is not the act of
the Court being wrongful or a mistake or error
committed by the Court; the test is whether on
account of an act of the party persuading the
Court to pass an order held at the end as not
sustainable, has resulted in one party gaining
42
an advantage which it would not have otherwise
earned, or the other party has suffered an
impoverishment which it would not have suffered
but for the order of the Court and the act of
such party. The quantum of restitution,
depending on the facts and circumstances of a
given case, may take into consideration not
only what the party excluded would have made
but also what the party under obligation has or
might reasonably have made. ”
77.As discussed earlier a mere mistake or error
committed by Court cannot be a ground for
restitution. Now in view of the above, two questions
arise for consideration:
(i) Whether the orders dated 13.07.2000,
18.07.2000, 20.07.2000, 27.07.2000 and 03.08.2000
of the High Court whereby the appellant was
restrained from giving any further permission for
laying pipelines has resulted in any undue
advantage to appellant?
(ii)Whether in respect of the order dated
13.07.2000, 18.07.2000, 20.07.2000, 27.07.2000 and
03.08.2000 of the High Court, later on reversed by
this Court on 19.01.2004 on a different
43
interpretation of Section 29 of WPA, the actus
curiae principle can be invoked.
78.Coming to the first question, as mentioned above, it
is clear that the appellant had also challenged this
restraining order before this Court. It cannot be
said by this restraining order the appellant had
gained any undue advantage. On the contrary, twin
objects of development of the backward areas and
employment opportunities, which were sought to be
achieved by the appellant by floating the said
scheme, were adversely affected.
79.Therefore the principles in South Eastern Coalfield
Ltd. (supra) are not attracted here.
80.In Mumbai International Airport Pvt. Ltd v. Golden
Chariot Airport & another, (2010) 10 SCC 422, after
a Civil Court returned the plaint filed by
respondent, the respondent came up in appeal against
the said order before the High Court and expressly
gave up its claim of irrevocable license in order to
44
revive the suit and on such stand, the High Court
remanded the suit for trial. Thereafter the
respondent therein tried to urge the same plea of
irrevocable license before the Trial Court and this
Court. This Court did not accept the plea holding
that the common law doctrine of approbation and
reprobation is well established in our jurisprudence
and applicable in our laws too. That principle has
no application to the facts of this case.
81.The principles decided in the case of Karnataka Rare
Earth & Anr. v. Senior Geologist, Department of
Mines & Geology and Anr . , reported in (2004) 2 SCC
783 is equally of no assistance to Essar. In that
case both the doctrines of “actus curiae” and
“restitution” were discussed together. We have
already held that these equitable doctrines are not
applicable in the facts of the present case. In
Karnataka Rare Earth (supra), the appellants, on the
basis of an interim order granted by this Court,
extracted minerals and disposed of the same.
Ultimately the interim order was vacated by this
45
Court and the appeal filed by Karnataka Rare Earth
was dismissed. In that context this Court held that
the appellants cannot enjoy the benefits earned by
them under the interim order of this Court and this
Court held that the demand of the State for the
price of mines and minerals from the appellant is
neither unreasonable nor arbitrary.
82.Reliance was placed on the judgment of this Court in
Bareilly Development Authority v. Methodist Church
of India & Anr., reported in (1988) Supp SCC 174. In
that case no principle was decided but the case was
decided on its facts. In Bareilly Development
Authority (supra), a commercial complex was to be
constructed within a time schedule. During the said
period of construction, the work had to be stopped
in view of the demolition order passed by the
authority. This Court held that the said period has
to be excluded in computing the period of
completion. It was not a case of construing any
exemption scheme. What was construed was condition 6
of the construction sanction plan. Therefore
46
principles of Bareilly Development Authority (supra)
cannot be applied.
83.In the case of Hitech Electrothermics & Hydro Power
Ltd. v. State of Kerala & Ors., reported in (2003) 2
SCC 716 it is true that this case is one relating to
grant of concessional tariff rate. However the fact
shows that in that case the Electricity Board
provided power to the appellant only in the year
1998 and the Court found that the delay in giving
power was for sheer inaction on the part of
Electricity Board. In that context this Court held
that literal construction to the entitlement of
concessional tariff rate should not be done and the
Court also noted that the appellant enjoyed
concessional tariff rates on the basis of interim
order of Court.
84.In the instant case, no inaction on the part of
appellant was pleaded by Essar. In fact before the
High Court, Essar expressly gave up its plea of
delay against the appellant. In fact the High Court
47
passed the injunction order not because of the
inaction of the appellant but the said order was
passed in a proceedings which was opposed by
appellant right upto this Court. Therefore, the case
of Hitech Electrothermics (supra) is clearly
distinguishable on facts.
85.The learned counsel for Essar relied on a decision
of this Court in Ishwar Dutt v. Land Acquisition
Collector & another reported in (2005) 7 SCC 190.
But no question of issue estoppel was argued before
the High Court and no such question actually has
fallen for consideration in the course of argument
before this Court. Therefore reliance on the
principle of issue estoppel on the basis of Ishawar
Dutt (supra) is not relevant at all.
86.In this case we are to interpret the provisions of
exemption scheme.
87.In Novopan India Ltd. Hyderabad v. Collector of
Central Exercise and Customs, Hyderabad [(1994) Supp
48
3 SCC 606] the question for consideration before
this Court was that, in case of ambiguity, which
rule of construction will be applicable to exemption
provision. This Court relied on the case of Union of
India & others v. Wood Papers Ltd & another reported
in (1990) 4 SCC 256, wherein at para 4, page 260
this Court observed as under:
“…Truly speaking liberal and strict
construction of an exemption provision are
to be invoked at different stages of
interpreting it. When the question is
whether a subject falls in the notification
or in the exemption clause then it being in
nature of exception is to be construed
strictly and against the subject but once
ambiguity or doubt about applicability is
lifted and the subject falls in the
notification then full play should be given
to it and it calls for a wider and liberal
construction.”
88.This Court held that the principle that in case of
ambiguity, a taxing statute should be construed in
favour of the assessee, does not apply to the
construction of an exception or an exempting
provision, as the same have to be construed
strictly. Further this Court also held that a person
49
invoking an exception or an exemption provision to
relieve him of the tax liability must establish
clearly that he is covered by the said provision and
in case of doubt or ambiguity, benefit of it must go
to the State.
89.In this case, Essar was categorically told by letter
dated 28.05.2002, which is much prior to the expiry
of the period, that time for availing the exemption
cannot be extended. Admittedly, Essar failed to meet
the deadline. In that factual scenario, the exercise
undertaken by the High Court in the impugned
judgment by directing various adjustments which
virtually re-wrote the State’s exemption scheme, is
an exercise which is, with great respect, neither
warranted in law nor supported by precedents. There
is no question of equity here, an exemption is a
stand alone process. Either an industry claiming
exemption comes within it or it does not.
90.For the reasons aforesaid we allow the appeal. The
High Court judgment is set aside.
50
91.The parties are left to bear their own costs.
.......................J.
(ASOK KUMAR GANGULY)
.......................J.
New Delhi (JAGDISH SINGH KHEHAR)
January 17, 2012
51
Legal Notes
Add a Note....