# STATE OF UTTAR PRADESH & ANR v. M/S. BIRLA CORPORATION LIMITED

- **Citation:** [2019] 14 S.C.R. 128
- **Court:** Supreme Court of India
- **Decided:** 2019-11-20
- **Case number:** Civil Appeal No. 1579 of 2019
- **Bench:** A. M. Khanwilkar, Dinesh Maheshwari
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-uttar-pradesh-anr-v-m-s-birla-corporation-limited-33289
- **Pages:** 28

## Headnote

Uttar Pradesh Trade Tax Act, 1948: s. 5 - Rebate of tax on
certain purchases or sale - Notification providing for rebate on tax
- Power of the State to rescind the Notification - On facts, issuance
of notification dated 27.02.1998 by State Government whereby
exemption available to Cement Manufacturing units using fly ash
in State of UP - State issuing Notification dated 14.10.2004,
rescinding the earlier Notification - Challenge to, by the industrial
units who had commenced production complying with the conditions
for grant of rebate in terms of Notification dated 27.02.1998,
entitling them to avail rebate of tax facility for ten years - Writ
petition partly allowed to the extent petitioner's entitlement for tax
exemption for the period available under original notification -
On appeal, held: Stand of the State Government about the
supervening public interest qua the respondents and similarly placed
persons cannot be accepted - Notification dated 14.10.2004 can
have no application to the settled enforceable right accrued to
industrial units who fulfill all other conditions specified in the
notification dated 27.02.1998, having commenced commercial
production of the specified goods before 14.10.2004 - Notification
dated 14.10.2004 cannot be construed as having retrospective or
retroactive effect to whittle down the accrued rights in favour of
such industrial units - Thus, the respondents and similarly placed
persons entitled to rebate for the relevant period prescribed in the
notification dated 27.02.1998 - Respondents to pursue their claim
for refund of the rebate amount for the relevant period.
Dismissing the appeals, the Court
HELD : 1.1. It is well established that the Court would not
act on mere ipse dixit of the Government and must insist on a
 [2019] 14 S.C.R. 128
128
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highly rigorous standard of proof in discharge of its burden by
the Government. [Para 23] [150-F]
1.2. On a bare reading of section 5 of the Uttar Pradesh
Trade Tax Act, 1948, it is evident that there is no express authority
given to the Executive to issue notification for "withdrawing or
rescinding the rebate facility" from a date prior to the date of
notification. Section 5(2) merely constrict that power only for
"allowing" rebate with effect from a date prior to the date of
notification. That does not include, by necessary implication or
otherwise, power to "withdraw" or "rescind" the rebate from a
date prior to the date of the notification [Para 25] [151-C-D]
1.3. Section 21 of the 1897 Act also will be of no avail.
Section 21 of the 1904 Act, is pari materia to the above provision
and will be of no avail for withdrawing the rebate from a date
prior to the date of the notification. The plain language of the
notification dated 14th October, 2004, itself expressly rescinds
notification dated 27th February, 1998 with effect from 14th
October, 2004. There is no express or tacit intent manifested
from this notification, so as to construe it as bestowing power to
withdraw the rebate facility with effect from a date prior to the
date of notification as such. On this finding, nothing more is
required to be said as the concomitant of this finding would
necessarily be that all the industrial units set up after 27th
February, 1998 and before 14th October, 2004 which had
commenced commercial production, must continue to qualify for
rebate for specified term mentioned in notification dated 27th
February, 1998, subject to fulfilling all other conditions specified
therein. [Para 26, 27] [151-E, G-H; 152-A]
1.4 In the case of BCL, the rebate ought to continue up to
13th December, 2008 and in the case of JPAL, up to 17th
September, 2014. Any other interpretation of the impugned
notification dated 14th October, 2004, would entail in giving
retrospective or retroactive effect thereto. That is not predicated
by Section 5 of the 1948 Act or the impugned notification itself.
Having said this, it would necessarily follow that the challenge to
the

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SUPREME COURT REPORTS
[2019] 14 S.C.R.
STATE OF UTTAR PRADESH & ANR.
v.
M/S. BIRLA CORPORATION LIMITED
(Civil Appeal No. 1579 of 2019)
NOVEMBER 20, 2019
[A. M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]
Uttar Pradesh Trade Tax Act, 1948: s. 5 - Rebate of tax on
certain purchases or sale - Notification providing for rebate on tax
- Power of the State to rescind the Notification - On facts, issuance
of notification dated 27.02.1998 by State Government whereby
exemption available to Cement Manufacturing units using fly ash
in State of UP - State issuing Notification dated 14.10.2004,
rescinding the earlier Notification - Challenge to, by the industrial
units who had commenced production complying with the conditions
for grant of rebate in terms of Notification dated 27.02.1998,
entitling them to avail rebate of tax facility for ten years - Writ
petition partly allowed to the extent petitioner's entitlement for tax
exemption for the period available under original notification -
On appeal, held: Stand of the State Government about the
supervening public interest qua the respondents and similarly placed
persons cannot be accepted - Notification dated 14.10.2004 can
have no application to the settled enforceable right accrued to
industrial units who fulfill all other conditions specified in the
notification dated 27.02.1998, having commenced commercial
production of the specified goods before 14.10.2004 - Notification
dated 14.10.2004 cannot be construed as having retrospective or
retroactive effect to whittle down the accrued rights in favour of
such industrial units - Thus, the respondents and similarly placed
persons entitled to rebate for the relevant period prescribed in the
notification dated 27.02.1998 - Respondents to pursue their claim
for refund of the rebate amount for the relevant period.
Dismissing the appeals, the Court
HELD : 1.1. It is well established that the Court would not
act on mere ipse dixit of the Government and must insist on a
 [2019] 14 S.C.R. 128
128
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highly rigorous standard of proof in discharge of its burden by
the Government. [Para 23] [150-F]
1.2. On a bare reading of section 5 of the Uttar Pradesh
Trade Tax Act, 1948, it is evident that there is no express authority
given to the Executive to issue notification for "withdrawing or
rescinding the rebate facility" from a date prior to the date of
notification. Section 5(2) merely constrict that power only for
"allowing" rebate with effect from a date prior to the date of
notification. That does not include, by necessary implication or
otherwise, power to "withdraw" or "rescind" the rebate from a
date prior to the date of the notification [Para 25] [151-C-D]
1.3. Section 21 of the 1897 Act also will be of no avail.
Section 21 of the 1904 Act, is pari materia to the above provision
and will be of no avail for withdrawing the rebate from a date
prior to the date of the notification. The plain language of the
notification dated 14th October, 2004, itself expressly rescinds
notification dated 27th February, 1998 with effect from 14th
October, 2004. There is no express or tacit intent manifested
from this notification, so as to construe it as bestowing power to
withdraw the rebate facility with effect from a date prior to the
date of notification as such. On this finding, nothing more is
required to be said as the concomitant of this finding would
necessarily be that all the industrial units set up after 27th
February, 1998 and before 14th October, 2004 which had
commenced commercial production, must continue to qualify for
rebate for specified term mentioned in notification dated 27th
February, 1998, subject to fulfilling all other conditions specified
therein. [Para 26, 27] [151-E, G-H; 152-A]
1.4 In the case of BCL, the rebate ought to continue up to
13th December, 2008 and in the case of JPAL, up to 17th
September, 2014. Any other interpretation of the impugned
notification dated 14th October, 2004, would entail in giving
retrospective or retroactive effect thereto. That is not predicated
by Section 5 of the 1948 Act or the impugned notification itself.
Having said this, it would necessarily follow that the challenge to
the notification on the ground of being hit by doctrine of promissory
STATE OF UTTAR PRADESH & ANR. v. M/S. BIRLA
CORPORATION LIMITED
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SUPREME COURT REPORTS
[2019] 14 S.C.R.
estoppel need not detain this Court any further. Similarly, the
argument regarding the circumstances in which the Government
could stave off from the dispensation under notification dated
27th February, 1998 has become irrelevant. [Para 28] [152-B-C]
1.5 The dominant intent behind notification dated 27th
February, 1998 was to invite the investors to set up industrial
unit in the designated areas within the State of Uttar Pradesh
which were known to be underdeveloped or backward areas and
more importantly to address the environmental issue because of
the fly ash generated by the thermal power stations situated in
Uttar Pradesh and incidentally to generate job opportunities and
employment to the locals. It is one thing to argue that because
of the interpretation given to the notification dated 27th February,
1998 by the High Court and affirmed by this Court, the industrial
units situated in the neighbouring States may not be able to fulfill
the underlying intent behind the notification dated 27th February,
1998 in its letter and spirit. That is not the plea of the State.
Furthermore, it is undeniable that the thermal power stations in
the State of Uttar Pradesh are still operational and are generating
fly ash in the same manner and quantity as was happening in
February, 1998, if not more. It is also indisputable that the
industrial units set up in furtherance of the promise or
representation made in the notification dated 27th February, 1998
which had commenced commercial production in respect of
specified goods before 14th October, 2004, would continue to
achieve the same objective as is specified in the notification dated
27th February, 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 27th February, 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 27th February, 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
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Government to be bound by the promise given in notification
dated 27th February, 1998. [Para 29] [152-F-H; 153-A-D]
1.6 The judgment rendered by the High Court and affirmed
by this Court in interpreting the notification dated 27th February,
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
interest in reference to the activities of the industrial units who
qualify the conditions specified in notification dated 27th February,
1998 in all other respects and had commenced commercial
production of the specified product before 14th October, 2004.
Indubitably, an enforceable right had accrued to and crystalised
in favour of such industrial units which could not be truncated or
snapped unless the dominant purpose for which the notification
dated 27th February, 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. The question of future revenue loss
would not arise as the industrial units established in the
neighbouring States would not be eligible to avail of the rebate
because of rescinding the earlier notification. 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 27th February, 1998 and before 14th
October, 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 27th February, 1998. That ground cannot be
set up against the industrial units who qualify in all other respect
under the notification dated 27th February, 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
STATE OF UTTAR PRADESH & ANR. v. M/S. BIRLA
CORPORATION LIMITED
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standard of proof in the discharge of the burden and onus upon
the State to justify its action as supervening public interest.
[Para 30] [153-E-H; 154-A-C]
1.7 The impugned notification dated 14th October, 2004
can have no application to the settled enforceable right accrued
to industrial units who fulfill all other conditions specified in the
notification dated 27th February, 1998, having commenced
commercial production of the specified goods before 14th October,
2004. The stand of the State Government about the supervening
public interest qua the respondents and similarly placed persons
is rejected. The notification dated 14th October, 2004 cannot be
construed as having retrospective or retroactive effect to whittle
down the accrued rights in favour of such industrial units.
[Para 31] [154-D-E]
1.8 The grievance of the appellant that the High Court has
not elaborately dealt with the argument of supervening public
interest justifying the issuance of notification dated 14th October,
2004 is disposed of because, the argument of the respondents
are convincing that no material fact has been pleaded in the
response filed before the High Court or in the present
proceedings by the State Government in that regard. [Para 32]
[154-G]
1.9 The State Government was permitted to articulate the
reasons which it did in the written submissions. The said reasons
are analysed and are of the considered opinion that the same
singularly or taken together would be of no avail to the State
Government, to justify the application of the impugned notification
dated 14th October, 2004, to industrial units already set up
which had commenced commercial production of the specified
goods in the designated areas before 14th October, 2004.
[Para 33] [154-H; 155-A-B]
1.10. A priori, the respondents and similarly placed persons
would be entitled to rebate for the relevant period prescribed in
the notification dated 27th February, 1998 which would continue
to remain in vogue until the expiry of the specified period, namely,
ten years. In the case of BCL up to 13th December, 2008 and in
the case of JPAL up to 17th September, 2014 respectively. The
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amount of rebate, however, would depend on the verification of
their refund claim pending before the concerned authorities and
would be subject to just exceptions including the principle of
unjust enrichment. The respondents should be able to
substantiate that the amount claimed by them has not been passed
on to their consumers. Only then, they would be entitled for
refund. The competent authority may verify the claim for refund
of each of the respondent(s) in accordance with law and pass
appropriate orders, including about the interest for the relevant
period. [Para 34] [155-B-D]
State of Jammu & Kashmir v. Trikuta Roller Flour Mills
Pvt. Ltd. & Anr. (2018) 11 SCC 260 ; Sales Tax Officer
& Anr. v. Shree Durga Oil Mills & Anr. (1998) 1 SCC
572 - distinguished.
State of Uttar Pradesh & Ors. v. Jaiprakash Associates
Limited (2014) 4 SCC 720 ; Shree Digvijay Cement Co.
Ltd. & Anr. v. Union of India & Anr. (2003) 2 SCC
614 ; Kazi Lhendup Dorji v. Central Bureau of
Investigation & Ors. (1994) Suppl. 2 SCC 116 ;
Industrial Infrastructure Development Corporation
(Gwalior) Madhya Pradesh Limited v. Commissioner of
Income Tax, Gwalior, Madhya Pradesh (2018) 4 SCC
494 ; MRF Limited, Kottayam v. Assistant Commissioner
(Assessment) Sales Tax & Others (2006) 8 SCC 702 ;
Southern Petrochemical Industries Co. Ltd. v. Electricity
Inspector & ETIO & Others (2007) 5 SCC 447 ;
Pournami Oil Mills & Ors. v. State of Kerala & Anr.
(1986) Suppl. SCC 728 ; Director General of Foreign
Trade & Anr. v. Kanak Exports & Anr. (2016) 2 SCC
226 ; M/s. Motilal Padampat Sugar Mills Co. Ltd. v.
State of Uttar Pradesh & Others (1979) 2 SCC 409 ;
Manuelsons Hotels Pvt. Ltd. v. State of Kerala & Others
(2016) 6 SCC 766 ; State of Bihar & Others v. Kalyanpur
Cement Limited (2010) 3 SCC 274 ; Lok Prahari
Through Its General Secretary v. State of Uttar Pradesh
& Others (2018) 6 SCC 1 - referred to.
STATE OF UTTAR PRADESH & ANR. v. M/S. BIRLA
CORPORATION LIMITED
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Case Law Reference
(2014) 4 SCC 720
referred to
Para 3
(2003) 2 SCC 614
referred to
Para 16
1994 Suppl. (2) SCC 116
referred to
Para 17
(2018) 4 SCC 494
referred to
Para 17
(2006) 8 SCC 702
referred to
Para 18
(2007) 5 SCC 447
referred to
Para 18
1986 Suppl. SCC 728
referred to
Para 18
(2016) 2 SCC 226
referred to
Para 18
(1979) 2 SCC 409
referred to
Para 19
(2016) 6 SCC 766
referred to
Para 19
(2010) 3 SCC 274
referred to
Para 21
(2018) 6 SCC 1
referred to
Para 21
(2018) 11 SCC 260
distinguished
Para 35
(1998) 1 SCC 572
distinguished
Para 35
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1579
of 2019.
From the Judgment and Order dated 16.04.2010 of the High Court
of Judicature at Allahabad, Lucknow Bench in Writ Petition No. 6176
(MB) of 2004.
With
Civil Appeal No. 1580 of 2019.
Ms. Aishwarya Bhati, Sr. Adv., Chitrangada R., Nitin Choudhary
P., Damodar Solankhi, B. Dash, Ms. Tanuja Patra, Bhakti Vardhan Singh,
Advs. for the Appellant.
S.K. Bagaria, S.B. Upadhyay, Sr. Advs., Praveen Kumar,
Kumar Ajit Singh, Pawan Upadhyay, Ms. Anisha Upadhyay, Nishant
Kumar, Sarvjit Pratap Singh, Ms. Sharmila Upadhyay, Advs. for the
Respondents.
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The Judgment of the Court was delivered by
A. M. KHANWILKAR, J.
1. The seminal question involved in both these appeals is about
the power of the State to rescind the notification providing for rebate in
respect of tax payable under the Uttar Pradesh Trade Tax Act, 1948
(for short, "the 1948 Act") and thus withdrawing the facility even in
respect of industrial units, which had commenced production and had
complied with the conditions for grant of such rebate in terms of
Notification dated 27th February, 1998.
2. Briefly stated, the appropriate authority, in exercise of power
under Section 5 of the 1948 Act issued notification dated 18th June, 1997,
to declare the goods having fly ash contents of 10% or more by weight
to be notified goods for the purpose of Section 5, and to grant a rebate of
25% in respect of the goods having fly ash contents between 10 to 30%
by weight and a rebate of 50% in respect of the goods having fly ash
contents exceeding 30% by weight on the tax levied under the Act in the
districts notified thereunder. In due course, the feedback received by
the Government was that neither any new industrial unit was established
within the State nor the consumption of the fly ash had increased by the
existing units. Resultantly, there was no extra disposal/consumption of
fly ash which was being produced by the thermal power stations situated
within the State of Uttar Pradesh. In other words, the avowed objective
for issuing the notification to extend rebate did not fructify. In light of
such feedback, the appropriate authority issued fresh notification dated
27th February, 1998 bearing No.T.I.F-2-592/XI-9(226)94-U.P.Act-1548-Order-98 to rescind the earlier notification and instead to grant a
rebate of 25% in respect of the goods having fly ash contents between
10% to 30% by weight and a rebate of 50% in respect of the goods
having fly ash contents exceeding 30% by weight on the tax levied under
the Act in the districts mentioned thereunder, subject to certain conditions.
The said notification reads thus:
"[S. No. 1289]
Notification No.T.I.F - 2-592/XI-9(226)94-U.P. Act-15-48-Order98, dated 27.02.1998
Whereas, the State Government is satisfied that it is expedient
in the public interest so to do:
STATE OF UTTAR PRADESH & ANR. v. M/S. BIRLA
CORPORATION LIMITED
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Now, therefore, in exercise of the powers under Section 5 of
the Uttar Pradesh Trade Tax Act, 1948 (U.P. Act No. XV of
1948), read with section 21 of the Uttar Pradesh General Clauses
Act, 1904 (U.P. Act No.1 of 1904), the Governor, with effect
from March 1, 1998 is pleased:
(a) to rescind the Notification No.TT-2-1885/XI-9(226)/94-UPAct-15-48 Order-97, dated June 18, 1997;
(b) to grant a rebate of twenty five percent on goods having flyash contents between ten to thirty percent by weight and a rebate
of fifty percent on the goods having fly-ash contents exceeding
thirty percent by weight on the tax levied under the Act in the
district mentioned in column-2 Annexure given below for the period
mentioned in column-3 of the said Annexure subject to the following
condition:-
CONDITIONS
(i) such goods shall be manufactured in a unit established in the
area mentioned in coloumn-2 of the Annexure;
(ii) such goods shall be manufactured by using fly-ash purchased
or received from the thermal power stations situated on Uttar
Pradesh;
(iii) the dealer claiming rebate under this notification shall keep
records in which following informations will be shown:
(a) date;
(b) name of thermal power stations from which fly-ash is
purchased or received;
(c) weight of fly-ash;
(d) name of manufactured goods;
(e) weight of manufactured goods;
(f) weight of fly-ash used in manufacturing of such goods;
(g) weight of other goods used in manufacture of such goods;
(iv) the total weight of manufactured goods and percentage of
fly-ash used, should be mentioned on goods of packing of such
goods as far as possible.
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ANNEXURE
Explanation:- The verification of percentage of fly-ash used
by fly-ash based industries shall be made of the basis of
Government orders issued in this behalf from time to time."
Ser ial
Nu m b er
N am e of D istrict
P eriod for
which the
rebate will be
allow ed
1
2
3
1
Ban da, Ham irp ur, Jalau n, M ah oba,
Jhansi, L alitp ur and Sh ahu ji Nagar.
Tw elve Ye ars
2
Alm ora,
C h am oli,
B ageshw ar,
D eh radu n,
Fateh pur ,
Jau npu r,
K an pur
(Dehat),
N ainital,
P auri
G arhwal,
Pithorag arh ,
S ultanpu r,
Ch am paw at, Te h ri Garh w al, Ud h am
Sing h N ag ar, U ttar Kashi and Gro wth
Cen tre.
Tw elve year s
3 .
(i)
The
D is trict
of
A zam g arh ,
Am b edk ar-N agar,
B ehraich ,
Ballia,
Barabank i,
B asti,
B adaun ,
Bu land sh ah r, D eoria, Etah , Etaw ah,
F aizabad ,
F ar ru k hab ad,
G hazipu r,
G on d a, H ard oi, M ain p u ri, M ath ura,
M au, M oradab ad, Pad rauna, Pillibhit,
Pr atap garh,
Raibare illi,
R am p ur,
Shahjahanpur ,
S idh arath
N ag ar,
Sitapu r,
Unnao,
K ausham bhi,
Jy otiba-Ph ule
Nag ar,
M aham aya
Nagar an d S h rav asti.
Te n Y ears
(ii) The area of Allahabad D is trict in
Sou th
o f
the
r ive r
Jam una
and
co nflue n t Gan ga (E xclu ding the area
includ ed
unde r
M un icipal
Co rporatio n, A llahabad).
Te n Y ears
(iii) The Taj Tr ap eziu m A rea
Te n Y ears
(iv)
G reater
N oida
In d ustrial
D evelopm ent Area
Te n Y ears
The D is tricts of Ag ra (exclu din g Taj
Tr apeziu m ar ea), Aligar h (ex clud ing
Taj
Trap eziu m
ar ea),
A llah abad
(ex clu ding the ar ea in so uth of river s
Jam u na and co nflu ent Ganga bu t
includ in g the area included un de r
M un icip al
Co rp or ation
A llahabad),
Bareilly , B hado hi, B ijn or, F irozabad
(ex clu ding
T aj
Trap eziu m
area),
G h aziabad (e xc lu d in g G reater N o ida
Ind u str ial
D eve lopm e nt
Area),
G or akhpur ,
H aridw ar ,
K anpur
(Nag ar), Lakh imp ur K heri, Lu cknow ,
M aharajganj, M eer u t, M uzaffarnag ar,
Sah aranpur, V aran asi, G autam Bu dh
Nagar,
C han d auli,
M irzapur
and
Son bhadra
STATE OF UTTAR PRADESH & ANR. v. M/S. BIRLA
CORPORATION LIMITED [A. M. KHANWILKAR, J.]
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SUPREME COURT REPORTS
[2019] 14 S.C.R.
3. This notification came to be issued with intent to promote and
encourage the industrial activities in the identified backward and
underdeveloped areas. This notification, however, was assailed in two
writ petitions filed before the High Court of Judicature at Allahabad (for
short, 'the High Court'). The challenge was essentially on the ground
that the conditions specified in the notification resulted in causing
discriminatory treatment to the producers and suppliers of the sale product
imported from neighbouring States as opposed to the goods manufactured
and produced in the State of Uttar Pradesh. Such dispensation
contravened the constitutional provisions of Articles 301 and 304(a) of
the Constitution of India. The High Court vide order dated 29th January,
2004 upheld the said challenge. The State of Uttar Pradesh carried the
matter in appeal against the said decision of the High Court, which
eventually culminated with the judgment of this Court, affirming the
challenge, in State of Uttar Pradesh & Ors. vs. Jaiprakash Associates
Limited1. This Court held that rebate of tax granted by the State
Government only to the cement manufacturing units using fly ash as
raw material in the units established in the districts of the State of Uttar
Pradesh, is violative of the provisions contained in Articles 301 and 304(a)
of the Constitution of India. The Court further declared that notification,
therefore, would also apply to the cement manufacturing units of the
neighbouring States who were using fly ash as raw material.
4. After the decision of the High Court dated 29th January, 2004,
the appropriate authority was advised to rescind the Notification dated
27th February, 1998. The Principal Secretary of the Tax and Registration
Department processed the proposal for rescinding the said notification
and submitted for comments of Council of Ministers which read thus:
"CONFIDENTIAL
COMMENTS FOR THE HONORABLE COUNCIL OF
MINISTERS.
SUB : Repealing the exemption (rebate) available to units based
on fly ash
Industries established in certain districts have been granted
exemption on tax levied under the Act for eight, ten, twelve years
vide Govt. Notification No.vya.ka./592/gyarah-9(226)/94, dated
27 February 1997, under Section 5 of the Trade Tax Act on the
following grounds:-
1 (2014) 4 SCC 720
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(a) Where the content of fly ash is 10% to 30% of the total
weight of goods - 25% rebate on tax.
(b) Where the content of fly ash is more than 30% of the total
weight of goods -50% rebate on the tax.
2. Accordingly under Section 8 (5) of the Central Sales Tax Act,
by the Govt. Notification No.vya.ka/-2-593/gyaraha-9 (226)94,
dated 27th February 1998, similar rebate has been allowed. A
condition was prescribed in the above notifications that such goods
shall be manufactured within the units established in the area
mentioned in column No.2 of the annexure and such goods shall
be manufactured from Fly Ash purchased from or received from
the thermal power stations situated in Uttar Pradesh. Above
notifications were challenged before the Hon'ble High Court by
the writ petition.
3. Commissioner, Trade Tax has informed that in the writ petitions
No.957/99M/sBela Cement Ltd. Vs. State and writ petition
No.958/99 M/s Jai Prakash Industries Vs State, Bench of the
Hon'ble High Court has by the order dated 29.1.2004 declared
the above conditions mentioned in the notification as
unconstitutional. It has also been mentioned that effect of the
above judgment shall be that henceforth facility of rebate will not
only be available to the above types of industrial units situated in
Uttar Pradesh only, but above rebate shall also be available to the
unit situated outside the Uttar Pradesh. It is also apprised that
in regard to above, Addl. Advocate General has given the
legal opinion that considering the revenue loss being caused
in future above notifications can be repealed. In case above
notifications have to be repealed from retrospective effect
then the same can be done by way of an ordinance. In
accordance with the legal opinion tendered by the Hon'ble
Add. Advocate General, a recommendation has made to
proceed further expeditiously.
4. It appears that the main objective of providing the rebate vide
the above notifications was that the Industrial units of the Uttar
Pradesh should utilize more and more fly ash available for disposal
in the state, in view of the above rebates. In the light of above
judgment of the Hon'ble High Court, now above rebate shall also
STATE OF UTTAR PRADESH & ANR. v. M/S. BIRLA
CORPORATION LIMITED [A. M. KHANWILKAR, J.]
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be available to the unit situated outside the state. Therefore it
deems to be fit that above notifications should be repealed.
In this regard the proposal of Commissioner Trade Tax
seems to be proper.
5. Therefore it is proposed that notifications issued under
section 5 of the Trade Tax Act and Section 8 (5) of Central
Sales Tax Act, related to rebate applicable to industries
based on the fly ash should be repealed.
6. Finance department has expressed the consent to the
above proposal.
7. Law department has expressed the view that it had been
advised by the Add. Advocate General that to prevent the
revenue loss notification dated 22.7.1998 can be repealed.
In view of the above the proceedings for repealing the
impugned notifications is legally possible.
8. Honorable Minister has examined these comments.
9. Order of the Hon'ble Cabinet is prayed for on the Para 5 above.
Sd/-
(Rita Sinha)
Principal Secretary
Tax & Registration Department
File No.9 (63)/2001
Lucknow dated 19 August, 2004"
(emphasis supplied)
5. The appropriate authority of the State eventually took decision
on the said proposal, as a result of which a notification dated 14th October,
2004 came to be issued rescinding the earlier notification dated 27th
February, 1998. The said notification reads thus :-
"NOTIFICATION
No.KA.NI.-2-2996/XI-9(63)/2001-Act, 74-56 Order - (38) 2004
Dated Lucknow : : October 14, 2004
WHEREAS, the State Government is satisfied that it is expedient
so to do in public interest.
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Now, therefore, in exercise of the powers sub-section (5) of
Section 8 of the Central Sales Tax Act, 1956 (Act No.74 of 1956)
read with Section 21 of the General Clauses Act, 1897 (Act No.10
of 1897) the Governor is pleased to rescind, with effect from
October 14, 2004, the government notification No.T.I.F - 2593/X-9(226)/94-Act-74-56-Order-98, dated February 27, 1998."
(emphasis supplied)
6. This notification is the subject matter of challenge in the present
proceedings.
7. The respondents in the respective appeals preferred separate
writ petitions asserting that because of the representation made to the
stake holders vide notification dated 27th February, 1998, they had
commenced production of the specified goods and complied with the
requisite conditions provided under the said notification entitling them to
avail rebate of the Uttar Pradesh Tax facility. They had commenced
commercial production before coming into effect of the impugned
notification on 14th October, 2004. However, due to coming into effect
of stated notification they have been denied of the rebate which they
could have earned for ten years.
8. In the case of respondent in Civil Appeal No. 1579/2019 - M/s.
Birla Corporation Limited (for short, 'the BCL'), the factory was set up
by the said respondent at Raibareli and it had commenced commercial
production from 14th December, 1998. As the said respondent had
complied with all the conditions specified in the notification dated 27th
February, 1998, it availed the rebate facility from 14th December, 1998
until 13th October, 2004. It could have continued to avail of that facility
for a period of ten years, i.e., upto 13th December, 2008, but that
arrangement has been disrupted because of the issuance of the impugned
notification dated 14th October, 2004. In other words, denial of rebate to
respondent-BCL is for the period from 14th October, 2004 to 13th
December, 2008.
9. In the case of respondent in Civil Appeal No. 1580/2019 - M/s.
Jai Prakash Associates Limited (for short, 'the JPAL'), it was operating
its factory outside the State and because of the condition specified in the
notification dated 27th February, 1998, had challenged the said notification
which, as aforesaid, was upheld by the High Court and later by this
Court. In terms of the said decision, this respondent could have continued
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with its business and also avail of the rebate but for the impugned
notification issued on 14th October, 2004. However, despite the said
respondent (JPAL) having succeeded before the High Court in Writ
Petition No.958 (Tax) of 1999 vide judgment dated 29th January, 2004,
out of abundant precaution, it decided to set up a factory of its own in
the area specified in the notification dated 27th February, 1998, to avoid
any further controversy or dispute regarding tax rebate facility. In
furtherance of that decision, after seeking necessary approvals, the said
respondent (JPAL) commenced commercial production in the factory
set up in the notified area in the State of Uttar Pradesh w.e.f 18th
September, 2004 and in terms of the notification dated 27th February,
1998, in vogue, became entitled to avail rebate facility for a period of ten
years, i.e., up to 17th September, 2014. However, because of the
intervening notification dated 14th October, 2004, the said respondent
(JPAL) has been denied of that facility even though it had invested almost
over Rs. 100 crores to set up a new factory within the notified area in
the State of Uttar Pradesh.
10. In this background, both the respondents filed separate writ
petitions before the High Court asserting that the State could not have
resiled from the promise or representation it had made in terms of
notification dated 27th February, 1998, and the impugned notification dated
14th October, 2004, therefore, suffered from the vice of being violative
of promissory estoppel. It was asserted that the State, in exercise of its
executive power, cannot resile from the promise it had made by inviting
setting up of industry within the designated areas in the State of Uttar
Pradesh and in the process, withdraw the rebate facility with retrospective
effect. That could be done only by the legislature by enacting a law in
that behalf or by issuing ordinance as was suggested in the note submitted
to the Council of Ministers referred to above. It was also asserted that,
in fact, the notification, as issued on 14th October, 2004, specified that
the same would come into effect from the date it is issued. There is no
indication whatsoever that the intention behind issuing the said notification
was to withdraw the facility of stake holders who had already set up
their industrial units and commenced commercial production prior to 14th
October, 2004. The thrust of the challenge was that the decision to
rescind the notification dated 27th February, 1998 was to discontinue the
rebate to industry that would be set up on and from 14th October, 2004
and to other industrial units in the neighbouring States on account of the
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decision of the High Court. However, that decision cannot be implemented
or enforced against the industries which had already commenced
commercial production within the designated areas in the State of Uttar
Pradesh after 27th February, 1998 but before 14th October, 2004. Taking
any other view would result in giving retrospective or retroactive effect
to the notification dated 14th October, 2004. That is impermissible in
law.
11. The writ petitioners had also contended that in any case, the
State Government had failed to make out a case of inevitable supervening
circumstances warranting cancellation and withdrawal of the rebate
facility with retrospective effect. The fact that the High Court decided
the issue against the State and extended the benefit to other industrial
units in the neighbouring States, by itself cannot be the basis much less a
supervening circumstance to justify the act of resiling from the
commitment flowing from the notification dated 27th February, 1998.
12. The appellant-State had resisted the writ petitions by filing
affidavit before the High Court. The stand taken by the State before the
High Court essentially was that the State had power to rescind its
notification dated 27th February, 1998 and withdraw rebate facility to all
industrial units because of the supervening circumstances. The emphasis
to invoke that power was essentially because of the judgment of the
Allahabad High Court dated 29th January, 2004 and the inability of the
State to verify the claims of the industrial units in the neighbouring States
which was beyond the territorial jurisdiction of the State authorities.
13. The High Court vide impugned judgment, in the first place
held that the State had given assurance about the rebate on the specified
goods produced in the designated areas within the State on complying
with other conditions specified in notification dated 27th February, 1998.
It then proceeded to hold that the State Government in the Indian context
and the Indian jurisprudence was amenable to the doctrine of promissory
estoppel like any other private party or individual. On that finding, the
High Court concluded that the notification issued on 14th October, 2004
cannot stand the test of judicial scrutiny qua the claim of the industrial
units which were already established within the designated area in the
State and had commenced commercial production of the stated goods
before 14th October, 2004. It also rejected the stand taken by the State
Government that it was justified in doing so because of supervening
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public interest and resultantly allowed the writ petitions preferred by the
concerned respondents herein. The conclusion recorded by the High
Court reads thus:-
"SUMMARY
121. Supervening public interest may not be established merely
by pleading in the counter affidavit. It shall not be sufficient to
meet out the requirement of law. The supervening public interest
should be adjudged on the basis of material placed by the State
Government during the course of judicial review. Nothing has been
brought on record to establish as to what prompted the government
to revoke earlier notification more so when the situation has not
been changed and flyash remain an ecological hazard release by
thermal power stations.
122. Since, before issuance of the impugned notification the
petitioner had started production establishing the factory in Tanda,
the principle of promissory estopple attracted in view of catena of
judgement of Hon'ble Supreme Court particularly Kalyanpur
Cement Ltd (supra) as well as world wide settled proposition of
law, it shall be fitness of thing and to maintain the people's
confidence in the administration, ordinarily government should be
abide by its assurance or promise and person should not be deprived
of the benefit available from such assurance, in case it acted on.
Though the government has got right to change its policy but that
too is subject to judicial review and the courts have got ample
power to ensure that because of change of policy fundamental or
statutory rights of the citizen is not infringed. Equitable relief under
the principle of promissory estopple may be given by courts for
the ends of justice.
123. The impugned notification should be given prospective effect
with regard to tax rebate. Thus, industries which were established
relying upon the assurance given in the notification dated 27.2.1998
and started production are entitled for tax rebate for the period
which they were entitled at the time of production or before the
issuance of impugned notification.
124. In view of above, writ petition deserves to be allowed partly
and petitioner seems to be entitled for benefit of tax exemption in
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view of original notification dated 27.2.1998. However, keeping
in view the law on the subject that government has got right to
change the policy on one hand and on the other hand, petitioner's
right may be protected by applying the impugned notification
prospectively, the right available under the principle of promissory
estoppel may be protected by applying the impugned notification
prospectively. The prayer for quashing the impugned notification
is refused and the relief is moulded accordingly.
ORDER
125. The writ petition is allowed in part to the extent petitioner's
entitlement for tax exemption for the period available under the
original notification dated 27.2.1998. Accordingly, a writ in the
nature of mandamus is issued directing the opposite parties to
provide tax exemption to the petitioner industry from the date of
production for the period of entitlement under original notification
dated 27.2.1998.
Writ petition is allowed in part. Cost easy."
14. The State of Uttar Pradesh has assailed the decision of the
High Court. The argument canvassed on behalf of the State concedes
the legal position that even if the State Government is bestowed with the
executive power to withdraw the rebate facility, it is obliged to justify
before the court of law that the circumstances were so overwhelming
that it will be inequitable to hold the Government bound by the promise.
In other words, the intent behind the impugned notification dated 14th
October, 2004 was replete with supervening public interest. To buttress
that, the State has relied upon following reasons, stated to be supervening
public interest:
"i). The judgment dated 29.01.2004 of Allahabad High Court in
the earlier round of litigation by the same petitioners and others
had quashed condition No.1 of notification dated 27.02.1998, by
which Units situated outside the State of U.P. were also made
entitled to the tax rebate. This judgment was subsequently affirmed
by this Hon'ble Court vide its judgment dated 12.04.2004 reported
in (2014) 4 SCC 720 titled as State of U.P. & Ors. Vs Jai Prakash
Associated Ltd. etc. etc.
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ii). The effect of the judgment nullified the public interest in granting
the tax rebate.
iii). State had no territorial jurisdiction to ascertain fly ash
consumption and source of Units operating outside the State of
U.P.
iv). Utilization of fly ash was promoted in terms of Government
of India Notifications dated 14.09.1999 & 27.08.2003, as also
directions given by Hon'ble Delhi High Court in a PIL from 2003
to 2005. State was taking all steps for disposal of fly ash by
promoting its use.
v). Future revenue loss."
15.