1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1977 OF 2011

[Arising out of SLP (C) No. 16227 of 2009]

lState of

Haryana

& Others

….

Appellants

Versus

M/s. Mahabir Vegetable Oils Pvt. Ltd. … Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

2

1.Leave granted.

2.The issue that falls for our consideration in this appeal is

whether the Respondent is entitled to the benefit of Sales Tax

exemption on the entire investment made by them in setting up the

industrial unit i.e. Solvent Extraction Plant, or on the investments

made up

till

16.12.1996, the date on which the exemption granted under Rule 28A

of the Haryana Sales Tax Rules (“HSTR” for short) was withdrawn by

the State by putting the Solvent extraction plant in the negative list.

3.The basic facts which are not in dispute, are as follows:-

The State enacted the Haryana General Sales Tax Act, 1973 (for short

“the Act”). Section 64 of the Act provides for rule-making power. The

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said provision was amended by inserting sub-section (2-A) therein

which reads as under:

“64. (2-A) The power to make rules under sub-sections (1)

and (2) with respect to clauses (ff) and (oo) of sub-section

(2) shall include the power to give retrospective effect to

such rules i.e. from the date on which policy for incentives

to industry is announced by the State and for this purpose

Rules 28-A, 28-B and 28-C of the Haryana General Sales

Tax Rules, 1975, shall have retrospective effect i.e. with

effect from 1st April, 1988, 1st August, 1997 and 15th

November, 1999 respectively, but such retrospective

operation shall not prejudicially affect the interest of any

person to whom such rules may be applicable.”

4.Clause (ff) of sub-section (2) of Section 64 of the Act provides for

the class of industries, period of exemption and conditions of such

exemption, under Section 13-B; whereas clause (oo) thereof provides

for class of industries, period of deferment and the conditions to be

4

imposed for such deferment under Section 25-A.

5.Pursuant to or in furtherance of the said rule-making power, the

State made rules known as the Haryana General Sales Tax Rules,

1975 (for short “the Rules”). Rule 28-A occurring in Chapter IV-A of

the Rules provide for the class of industries, period and other

conditions for exemption/deferment from payment of tax as envisaged

both

under

Sections

13-B and

25-A of

the Act.

“Operative period” has been defined in sub-rule (2)(a) of Rule 28-A of

the Rules to mean “the period starting from the 1st day of April, 1988

and ending on the 31st day of March, 1997”. Sub-rule (2)(c) thereof

defines “New industrial unit” to mean:

“a unit which is or has been set up in the State of

Haryana and comes or has come into commercial

production for the first time during the operative period

and has not been or is not formed as a result of purchase

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or transfer of old machinery except when purchased in

the course of import into the territory of India, or when

the cost of old machinery does not exceed 25% of the

total cost of machinery re-establishment, amalgamation,

change of lease, change of ownership, change in

constitution, transfer of business, reconstruction or

revival of the existing unit”.

6.“Negative list” has been defined in sub-rule (2)(o) to mean

“a list of class of industries as specified in Schedule III

appended

to these

Rules”.

7.The

State of

Haryana

announced an industrial policy for the period 1-4-1988 to 31-3-1997

wherein inter alia incentive by way of sales tax exemption was to be

given for the industries set up in backward areas in the State.

Schedule III appended to the Rules provides for a negative list of the

industries and/or class of industries which were not to be included

therein. At the initial stage the Solvent extraction plant was

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admittedly not included in the negative list.

8.On or about 3-1-1996, notice was given as regards the intention

of the State to amend the Rules in respect whereof a draft was

circulated for information of persons likely to be affected thereby so as

to enable them to file objections and suggestions thereto.

Amendments in the terms of the said draft rules were notified on 16-

12-1996

substituting Schedule III appended to the Rules whereby and

whereunder the solvent extraction plant was included therein. Note 2

appended thereto reads as under:

“The industrial units in which investment has been

made up to 25% of the anticipated cost of the project

and which have been included in the above list for the

first time shall be entitled to the sales tax benefits

related to the extent of investment made up to 3-1-1996.

Only those assets will be included in the fixed capital

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investment which have been installed or erected at site

and have been paid for. The anticipated cost of the

project will be taken on the basis of documents

furnished to a financial institution or banks for drawing

a loan and which have been accepted by the financial

institution or bank concerned for sanction of loan.”

9.On or about 28-5-1997 the said Rules were

amended inter alia by omitting Note 2 deeming to have

always been omitted.

10.Yet

again on

3-6-1997

in clause

(a) of sub-

rule (2) of

Rule 28-A

of the

Rules instead and in place of “31-3-1997” the words “date on which

new policy for incentive to industry is announced by the Government

of Haryana in Industries Department” was substituted.

11.On 26-6-2001 in Section 13-B after the words “for such period”,

the words “either prospectively or retrospectively” were inserted.

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12.It is only after the notice dated 3.1.1996 that the respondent

Mahabir Vegetable Oils (P) Limited purchased land measuring 30

kanals 17 marlas in the month of August 1996 to set up a solvent

extraction plant. It also obtained registration under the provisions of

the Act and the Central Sales Tax Act, 1956 on 6-9-1996. On 13-8-

1996 it applied for a no-objection certificate from the Haryana State

Pollution

Control

Board

which is a

condition

precedent

for setting

up a

solvent

extraction plant. On 15-8-1996, the appellant entered into an

agreement with M/s Saratech Consultants and Engineers, Karnal for

supply and erection of the plant for a sum of Rs. 55,55,000.00 and

Rs 22,75,000 respectively and advances were paid on different dates.

Furthermore, on 6-9-1996, civil construction work started at site.

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Plans submitted by the appellant for getting permission for storage of

hexane were sanctioned by the Explosives Department on 19-9-1996

and licence was finally given on 11-3-1997. On 26-9-1996, process of

installation of the plant started at the site. On or about 18-11-1996, a

250 kVA power-generating set costing Rs 9,91,000 was installed, no-

objection certificate wherefor was granted on 22-11-1996. The

appellant

applied to

the

Haryana

State

Electricity

Board for

release of

the power

connection vide application dated 12-12-1996 and also deposited the

security of Rs. 68,700 for the same. On 26-3-1997, the appellant

started the trial production and commercial production commenced

on 29-3-1997.

13.The respondent had applied for grant of exemption from

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payment of sales tax as on 16-12-1996 which was rejected the

following terms: -

“… The solvent extraction plants were included in the

negative list with effect from 16-12-1996. The industrial

unit has made 45% of total investment. In the notification it

was stipulated that the industrial unit in which investment

has been made up to 25% of the anticipated cost of the

project which has been included in the negative list for the

first time shall be entitled to sales tax benefit, however, this

condition has been deleted vide notification dated 28-5-

1997. The Committee was of the view that this condition

has already been deleted and certain parties have

challenged it in the Punjab and Haryana High Court. The

Director of Industries was of the view that in case a

particular industry is put in the negative list, benefit on

account of investment made before the date of putting the

unit in the negative list should be available to the unit for

sales tax exemption/deferment. Though the Higher Level

Screening Committee broadly agreed with this view, yet in

view of the fact that such cases were not covered in the

existing notification of the Commercial Taxation

Department, it was decided to reject the claim of the party.”

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Andthe writ petition filed by the Respondent before the

High Court was dismissed holding: -

“(i) The power to grant exemption from the payment of

sales tax is an exercise of the powers conferred by the

statute on the State Government and is, thus, a delegated

legislative function. The delegated legislation can be

struck down if it is established that there is manifest

arbitrariness. It must be shown that it was not reasonable

or manifestly arbitrary.

(ii) As per the records made available, a Standing

Committee was constituted by the State of Haryana for

revising the negative list periodically keeping in view the

industrial scheme of the State and its neighbourhood.

Such Standing Committee considered the revision of

negative list in its meeting held on 15-9-1995 wherein it

was decided to include highly polluting industries, power-

intensive industries, conventional type of industries where

sufficient capacity has already come up and any further

increase in the capacity would jeopardise the health of

existing industry in the negative list. There is no challenge

to the decision or proceedings of such Committee on any

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ground indicating arbitrariness, bias, mala fide or any

such like reason.

(iii) In view of certain decisions of this Court, the benefit of

exemption can be withdrawn in public interest.

(iv) There is no allegation of exercise of such power to

include solvent extraction plant which is actuated by any

mala fides, fraud or lack of bona fides. It is a matter of

fiscal policy of the State Government as to which

industries should be granted exemption.

(v) Mahabir Vegetable Oils (P) Ltd. only invested

Rs. 4,44,000 in the land and purchased machinery worth

Rs.16,90,000 on 14-12-1996.

(vi) Thus, we hold that there is no representation on behalf

of the State Government that the scheme of granting

incentives by way of exemption or deferment will not be

modified, amended or varied during the operative period.

There cannot be any restraint on the State Government to

exercise the delegated legislative functions within the

parameters laid down by the statute.”

14.Against the said dismissal the Respondent approached this

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Court by filing Special Leave Petition which was converted into

Civil Appeal 1635 of 2006. The said Appeal of the respondent was

allowed by this Court vide its judgment dated 10-3-2006 which

was reported at (2006) 3 SCC 620. This Court by applying the

Doctrine of Promissory Estoppel held that the

promises/representations made by way of a statute, continued to

operate

in the

field. This

Court

noted

that it

may be

true that

the

Respondent altered their position only from August 1996 but it

has neither been denied nor disputed that during the relevant

period, namely, August 1996 to 16-12-1996 not only have they

invested huge amounts but also the authorities of the State

sanctioned benefits, granted permissions. The Respondent had

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also taken other steps which could be taken only for the purpose

of setting up of a new industrial unit. This Court further noted

that an entrepreneur who sets up an industry in a backward area

unless otherwise prohibited, is entitled to alter his position

pursuant to or in furtherance of the promises or representations

made by the State.

15.

However

this

Court, at

that

stage, did

not

interfere

with the issue of the quantum of exemption which can be granted to

the Respondent and the said issue was kept open and the matter was

remanded to the Director Industries for fresh adjudication. The Writ

Petition filed by the Respondent under Article 32 was also disposed

off. The relevant portion of the said judgment is as follows:-

“38. The promises/representations made by way of a

15

statute, therefore, continued to operate in the field. It

may be true that the appellants altered their position

only from August 1996 but it has neither been denied

nor disputed that during the relevant period, namely,

August 1996 to 16-12-1996 not only have they

invested huge amounts but also the authorities of the

State sanctioned benefits, granted permissions. Parties

had also taken other steps which could be taken only

for the purpose of setting up of a new industrial unit.

An entrepreneur who sets up an industry in a

backward area unless otherwise prohibited, is entitled

to alter his position pursuant to or in furtherance of the

promises or representations made by the State. The

State accepted that equity operated in favour of the

entrepreneurs by issuing Note 2 to the notification

dated 16-12-1996 whereby and whereunder solvent

extraction plant was for the first time inserted in

Schedule III i.e. in the negative list.

39. Both the provisions contained in Schedule III and

Note 2 formed part of subordinate legislation. By

reason of the said note, the State did not deviate from

its professed object. It was in conformity with the

purport for which original Rule 28-A was enacted.

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40. We, in this case, are not concerned with the

quantum of exemption to which the appellants may be

entitled to, but only with the interpretation of the

relevant provisions which arise for consideration

before us.

41. We may at this stage consider the effect of

omission of the said note. It is beyond any cavil that a

subordinate legislation can be given a retrospective

effect and retroactive operation, if any power in this

behalf is contained in the main Act. The rule-making

power is a species of delegated legislation. A delegatee

therefore can make rules only within the four corners

thereof.

42. It is a fundamental rule of law that no statute shall

be construed to have a retrospective operation unless

such a construction appears very clearly in the terms

of the Act, or arises by necessary and distinct

implication. (See West v. Gwynne14.)

43. A retrospective effect to an amendment by way of

a delegated legislation could be given, thus, only after

coming into force of sub-section (2-A) of Section 64 of

the Act and not prior thereto.

44. By reason of Note 2, certain rights were conferred.

17

Although there lies a distinction between vested rights

and accrued rights as by reason of a delegated

legislation, a right cannot be taken away. The

amendments carried out in 1996 as also the

subsequent amendments made prior to 2001, could

not, thus, have taken away the rights of the appellant

with retrospective effect.

45. For the reasons aforementioned, the impugned

judgment cannot be sustained which is set aside

accordingly. The appeals are allowed and the matter is

remitted to the Director of Industries to consider the

matter afresh.

46. In view of our findings aforementioned no direction

is required to be issued in the writ petition filed by the

appellants. The writ petition is disposed of

accordingly.”

16.The Lower Level Screening Committee (“LLSC” for short) After

considering the matter in the light of the abovementioned judgment

passed by this Court made a recommendation for grant of eligibility

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certificate to the extent of Rs.94,48,911/- for a period of nine years

i.e. from 29.03.1997 to 28.03.2006. The said amount was calculated

with reference to the investment made by the petitioner up to

16.12.1996 i.e. date of amendment, putting the unit in the negative

list. On appeal, the Appellate Authority affirmed the said view with

the following observations :-

“.....The Committee examined the judgment relied

upon and observed that the Hon'ble Supreme Court

has not found fault with the amendment dated

16.12.1996 whereby the solvent extraction plant have

been put into negative list (schedule III). The effect of

enlargement of the negative list is that the unit has

ceased to be eligible for exemption/deferment with

effect from 16.12.1996. Besides, it is further observed

that tax concessions, as repeatedly held by the

Hon'ble Supreme Court, are a defeasible, not an

indefeasible, right but the withdrawal is always

prospective.”

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17.The respondent challenged the said order & judgment before the

High Court of Punjab & Haryana by filling a writ petition. The High

Court by the impugned judgment allowed the writ and held once the

Respondent has been treated to be eligible for exemption, there was

no valid reason to further classify the benefit of investment up to the

date of

amendment, putting the unit in the negative list. The relevant paras

of the impugned judgment are follows:-

“13. Admittedly, on the date of commercial production

and also on the date of issue of entitlement/exemption

certificate, the petitioner was in negative list and could

not be considered to be eligible unless applicability of

notification dated 16.12.1996 was confined to units

which started investment before the said date.

14. The respondents themselves have extended the

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benefit by not treating the notification dated 16.12.1996

to be applicable to the petitioner. Once the petitioner has

been treated to be eligible, there was no valid reason to

further classify the benefit of investment up to the date

of amendment, putting the unit in the negative list.

14. In view of above, we allow this petition and quash

the impugned orders to the extent of restricting the

benefit to the date of notification i.e. 16.12.1996.

15. The Appellate Authority may now pass a fresh order

in accordance with law, within four months from the

date of certified copy of this order.”

18.It is against the said judgment that the appellants have

approached this Court. We heard the learned Senior Counsel for the

parties. However, before we deal with the respective submission we

may specify that this Court in the year 2006 has already held that the

Respondent is entitled to the exemption, and the only issue which

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remains to be decide is whether the exemption has to be granted

upon the entire investment or the investment made up till 16.12.1996

i.e. date of amendment, putting the unit in the negative list.

19.The learned Senior Counsel appearing for the State vehemently

argued that the exemption granted to solvent extraction plant was

legally withdrawn by the State Government on 16.12.1996 as the

same was

deemed

necessary

in the

public

interest It

was

further

submitted that it is within the prerogative of the State to withdraw an

exemption if the same is deemed necessary in the public interest. It

was also submitted that the Respondent does not have a vested right

in their favour and the exemption granted cannot go beyond the date

of withdrawal by the State. It was also contented that as now the

benefit of exemption has been granted on the investment made up till

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16.12.1996 the question of retrospective effect also does not arise.

20.On the other hand, it was submitted by the Learned Senior

Counsel appearing for the Respondent that the respondent has taken

a decision to establish its industrial unit in the said area of the State

of Haryana, only on the basis and footing that the respondent would

be entitled to the benefit of sales tax exemption @ 150% on the total

capital

investment made in that industrial unit. In order to supplement the

said submission, the learned Senior Counsel placed strong reliance

on the doctrine of promissory estoppel and submitted that once the

Respondent, based on the representation of the State has initiated the

steps to establish the unit and has made substantial investment in

that regard, the State now cannot turn around and deny the said

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benefit of exemption.

21.We have considered the submission made by the learned senior

counsel for the parties and have also perused the relevant provision,

as amended from time to time and the documents placed on record.

22.The judgment of this Court dated 10-3-2006 in Civil Appeal

1635 of 2006 reported at (2006) 3 SCC 620 only considered the

retrospective operation of the amendments made on 16.12.1996 and

subsequent amendments which sought to take away certain rights of

the Respondents. This Court in the said judgment had only held that

the amendment to Rule 28A could not have any retrospective effect,

in the sense that it could not affect an assessee’s pre-existing rights.

It is also important to note that the said judgment clearly clarified

24

that the question of quantum of exemption to which the appellants

may be entitled to was not considered. It may also be pointed out that

this Court did not go into the challenge made to the validity of the

Amendments made which was challenged by the Respondent by way

of a Writ Petition. The reliance placed on the said Judgment is

therefore misplaced. The issue that falls for our consideration in this

appeal is

on the

quantum

of

exemption to which the Respondent is entitled and that too for the

period subsequent to the date of the amendment. In other words, the

question before us pertains to whether the Respondent is entitled to

the benefit of Sales Tax exemption on the entire investment made by

them in setting up the industrial unit i.e. Solvent Extraction Plant,

made prospectively after 16.12.1996.

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23.It has been urged on behalf of the Respondents that benefit of

the exemption is required to be advanced to them on the principle of

the Doctrine of Promissory Estoppel. We are not in agreement with

the said argument. This Court in M/s. Motilal Padampat Sugar Mills

Co. (P) Ltd. vs. State of Uttar Pradesh and Ors. Reported in (1979)

2 SCC 409 held as under:

“24. This Court finally, after referring to the decision in the

Ganges Manufacturing Co. v. Sourujmull, Municipal

Corporation of the City of Bombay v. Secretary of State for

India and Collector of Bombay v. Municipal Corporation of

the City of Bombay summed up the position as follows:

“Under our jurisprudence the Government is not

exempt from liability to carry out the representation

made by it as to its future conduct and it cannot on

some undefined and undisclosed ground of

necessity or expediency fail to carry out the promise

solemnly made by it, nor claim to be the Judge of its

own obligation to the citizen on an ex parte

appraisement of the circumstances in which the

obligation has arisen.”

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The law may, therefore, now be taken to be settled as a

result of this decision, that where the Government makes a

promise knowing or intending that it would be acted on by

the promisee and, in fact, the promisee, acting in reliance on

it, alters his position, the Government would be held bound

by the promise and the promise would be enforceable

against the Government at the instance of the promisee,

notwithstanding that there is no consideration for the

promise and the promise is not recorded in the form of a

formal contract as required by Article 299 of the

Constitution. It is elementary that in a republic governed by

the rule of law, no one, howsoever high or low, is above the

law. Everyone is subject to the law as fully and completely

as any other and the Government is no exception. It is

indeed the pride of constitutional democracy and rule of law

that the Government stands on the same footing as a private

individual so far as the obligation of the law is concerned:

the former is equally bound as the latter. It is indeed

difficult to see on what principle can a Government,

committed to the rule of law, claim immunity from the

doctrine of promissory estoppel. Can the Government say

that it is under no obligation to act in a manner that is fair

and just or that it is not bound by considerations of

“honesty and good faith”? Why should the Government not

be held to a high “standard of rectangular rectitude while

dealing with its citizens”? There was a time when the

doctrine of executive necessity was regarded as sufficient

justification for the Government to repudiate even its

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contractual obligations; but, let it be said to the eternal glory

of this Court, this doctrine was emphatically negatived in

the Indo-Afghan Agencies case and the supremacy of the

rule of law was established. It was laid down by this Court

that the Government cannot claim to be immune from the

applicability of the rule of promissory estoppel and

repudiate a promise made by it on the ground that such

promise may fetter its future executive action. If the

Government does not want its freedom of executive action to

be hampered or restricted, the Government need not make a

promise knowing or intending that it would be acted on by

the promisee and the promisee would alter his position

relying upon it. But if the Government makes such a

promise and the promisee acts in reliance upon it and alters

his position, there is no reason why the Government should

not be compelled to make good such promise like any other

private individual. The law cannot acquire legitimacy and

gain social acceptance unless it accords with the moral

values of the society and the constant endeavour of the

Courts and the legislature, must, therefore, be to close the

gap between law and morality and bring about as near an

approximation between the two as possible. The doctrine

of promissory estoppel is a significant judicial contribution

in that direction. But it is necessary to point out that since

the doctrine of promissory estoppel is an equitable

doctrine, it must yield when the equity so requires. If

it can be shown by the Government that having regard to

the facts as they have transpired, it would be inequitable to

28

hold the Government to the promise made by it, the Court

would not raise an equity in favour of the promisee and

enforce the promise against the Government. The doctrine of

promissory estoppel would be displaced in such a case

because, on the facts, equity would not require that the

Government should be held bound by the promise made by

it. When the Government is able to show that in view of the

facts as have transpired since the making of the promise,

public interest would be prejudiced if the Government were

required to carry out the promise, the Court would have to

balance the public interest in the Government carrying out a

promise made to a citizen which has induced the citizen to

act upon it and alter his position and the public interest

likely to suffer if the promise were required to be carried out

by the Government and determine which way the equity

lies. It would not be enough for the Government just to say

that public interest requires that the Government should not

be compelled to carry out the promise or that the public

interest would suffer if the Government were required to

honour it. The Government cannot, as Shah, J., pointed out

in the Indo-Afghan Agencies case, claim to be exempt from

the liability to carry out the promise “on some indefinite and

undisclosed ground of necessity or expediency”, nor can the

Government claim to be the sole Judge of its liability and

repudiate it “on an ex parte appraisement of the

circumstances”. If the Government wants to resist the

liability, it will have to disclose to the Court what are the

facts and circumstances on account of which the

29

Government claims to be exempt from the liability and it

would be for the Court to decide whether those facts and

circumstances are such as to render it inequitable to enforce

the liability against the Government. Mere claim of change

of policy would not be sufficient to exonerate the

Government from the liability: the Government would have

to show what precisely is the changed policy and also its

reason and justification so that the Court can judge for itself

which way the public interest lies and what the equity of the

case demands. It is only if the Court is satisfied, on proper

and adequate material placed by the Government, that

overriding public interest requires that the Government

should not be held bound by the promise but should be free

to act unfettered by it, that the Court would refuse to enforce

the promise against the Government. The Court would not

act on the mere ipse dixit of the Government, for it is the

Court which has to decide and not the Government whether

the Government should be held exempt from liability. This is

the essence of the rule of law. The burden would be upon

the Government to show that the public interest in the

Government acting otherwise than in accordance with the

promise is so overwhelming that it would be inequitable to

hold the Government bound by the promise and the Court

would insist on a highly rigorous standard of proof in the

discharge of this burden. But even where there is no such

overriding public interest, it may still be competent to the

Government to resile from the promise “on giving reasonable

notice, which need not be a formal notice, giving the

30

promisee a reasonable opportunity of resuming his position”

provided of course it is possible for the promisee to restore

status quo ante. If, however, the promisee cannot resume

his position, the promise would become final and

irrevocable. Vide Emmanuel Avodeji Ajaye v. Briscoe”.

24.The doctrine of Promissory Estoppel is an equitable remedy and

has to be moulded depending on the facts of each case and not

straight jacketed into pigeon holes. In other words, there cannot be

any hard

and fast

rule for

applying

the

doctrine

of

Promissory Estoppel but the doctrine has to evolve and expand itself

so as to do justice between the parties and ensure equity between the

parties i.e. both the promissor and the promisee.

25.The principles of promissory estoppel is not applicable in the

instant case as the decision to put the Solvent Extraction Plant in the

negative list was taken in public interest since the industry is in the

31

category of polluting industry. It has never been the case of the

Respondent that the Solvent Extraction Plant is a non polluting

industry. There is also no allegation that the decision to put the

Solvent Extraction Plant in the negative list was actuated by fraud or

that the said decision was not bona fide. In cases where the

Government on the basis of material available before it, bona fide, is

satisfied

that

public

interest

would be

served by

granting,

withdrawing, modifying or rescinding an exemption already granted, it

should be allowed a free hand to do so. The withdrawal of exemption

“in public interest” is a matter of policy and the Courts should not

bind the government in its policy decision. The Courts should not

normally interfere with fiscal policy of the government more so when

such decisions are taken in public interest and where no fraud nor

32

lack of bona fide is alleged much less established.

26.An exemption is nothing but a freedom from an obligation which

an assessee is otherwise liable to discharge. In a fiscal statute, an

exemption has been held to be a concession granted by the state so

that the beneficiaries of such concession are not required to pay the

tax or the duty they are otherwise liable to pay under such statute.

The

beneficiary of a concession has no legally enforceable right against the

government to grant a concession except to enjoy the benefits of the

concession during the period of its grant. The right to exemption or

concession is a right that can be taken away under the very power in

exercise of which the exemption was granted.

27.Furthermore, in the fact of the instant case, it cannot be said

33

that the Respondent had altered its position relying on the promise in

as much as even before steps were taken by the Respondent for laying

the Solvent Extraction Plant, the Petitioner had made its intention

clear through its notice dated 3.1.1996 that it was likely to amend the

law/rules in respect whereof a draft was circulated for information of

persons likely to be affected thereby so as to enable them to file

objections

and

suggestions thereto. Amendments in the terms of the said draft rules

were notified on 16-12-1996 substituting Schedule III appended to

the Rules whereby and where under the solvent extraction plant was

included therein.

28.It cannot be denied that an investment was made by the

Respondent in the said area of the State of Haryana, probably on the

34

belief that it would be entitled to the exemption. However, the said

factor alone, in the absence of any specific confirmation cannot stop

the State to amend the policy and withdraw the exemption if the same

is deemed necessary and expedient in the Public Interest. Moreover,

the said policy which was for the period of 1-4-1988 to 31-3-1997 was

nearing its end.

29.The

Note 2,

appended

to the

amendment made to Schedule III (extracted hereinabove),

categorically state that the industrial units in which investment has

been made up to 25% of the anticipated cost of the project and which

have been included in the above list for the first time shall be entitled

to the sales tax benefits related to the extent of investment made up

to 3-1-1996. On or about 28-5-1997 the said Rules were amended

35

inter alia by omitting Note 2 deeming to have always been omitted.

30.The LLSC, while arriving at the quantum of exemption

considered the conditions enumerated in the Note 2 and keeping in

view the observation made by this Court in the abovementioned

judgment, granted the exemption till 16.12.1996 i.e. date of the

amendment instead of 3-1-1996 as mentioned in the said Note. The

said

finding

was

upheld by

the

Appellate

Authority

which

found that the quantification was in accord with abovementioned

judgment passed by this Court and other principles of law.

31.If one goes by the wording of Note 2, it appears that in order to

balance the equities and protect the interest of the investor the

benefit of the exemption was granted for the investments made up till

16-12-1996. Moreover, as the benefit has already been granted till 16-

36

12-1996 in terms of the ratio of the judgment passed by this Court, in

the Mahabir Vegetable case (supra) reported at (2006) 3 SCC 620 it

cannot be said that even now an attempt has been made to give

retrospective effect to the said amendment.

32.The High Court has gone on the premise that once the Appellant

have themselves extended the benefit to the Respondent they cannot

further

classify

the

benefit of

investment up to the date of amendment, putting the unit in the

negative list. It appears that the High Court while arriving at the said

finding has failed to appreciate the fact that the case of the

Respondent was considered for exemption in the light of the judgment

passed by this Court in the Mahabir Vegetable case (supra) reported

at (2006) 3 SCC 620 wherein it was held that the Respondent is

37

entitled to exemption. However, the issue of quantum was kept open.

The High Court while giving the said finding has altogether closed

itself in considering the said issue and on the contrary has held that

only because the Respondent has been considered for grant of

exemption, there is no issue of quantum and the Respondent is

entitled to entire exemption. In our opinion the said finding is not in

line with

the

observations made by this Court in the Mahabir Vegetable case

(supra) reported at (2006) 3 SCC 620. The quantification made by the

LLSC is in accord with the ratio laid by this Court.

38

33.

Accordingly, we allow the appeal and set aside the impugned

judgment passed by the High Court leaving the parties to bear their own

costs.

............................................J

[Dr. Mukundakam Sharma ]

39

.......................................J

[ Anil R. Dave ]

New Delhi,

February 21, 2011.