# THE STATE OF JHARKHAND AND ORS v. BRAHMPUTRA METALLICS LTD., RANCHI AND ANR

- **Citation:** [2020] 14 S.C.R. 45
- **Court:** Supreme Court of India
- **Decided:** 2020-12-01
- **Case number:** Civil Appeal Nos. 3860-3862 of 2020
- **Bench:** Dr. Dhananjaya Y Chandrachud, Indu Malhotra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-state-of-jharkhand-and-ors-v-brahmputra-metallics-ltd-ranchi-and-anr-34407
- **Pages:** 41

## Headnote

Bihar Electricity Duty Act, 1948 - s.9 - Jharkhand Industrial
Policy, 2012 - The Industrial Policy 2012 was notified by the State
government on 16.06.2012 providing an exemption from payment
of 50 per cent of the electricity duty for a period of five years - The
policy envisaged that the industrial units will be entitled for
reimbursement/payment of subsidy etc. under the different categories
only from the next financial year of the date of production - It was
also stipulated in the policy that notifications enforcing the terms
of the industrial policy would be issued within a period of one month
by the Departments of the State government - The Departments of
the State government failed to comply with the one month time
schedule - Eventually, the State government issued an exemption
notification on 08.01.2015 but made it effective from the date on
which it was issued - Writ petition by the respondent - Before the
High Court, the respondent claimed that the clause in the notification
making it prospective should be effaced since it was contrary to the
representation that was held out by the Industrial Policy 2012 -
Alternately, the respondent sought a direction that it would be entitled
to an exemption from electricity duty for a period of five years from
the date of the issuance of the notification - High Court held that
there was no specific reason for delay and that 'but for the lethargic
approach of the state authorities' the exemption should have been
issued within a month of the issuance of the Industrial Policy 2012
- The High Court concluded that the notification dated 08.01.2015
issued by the Commercial Tax Department of the State government
ought not to be construed with prospective effect and the clause
making it prospective would have to be struck down - The
notification was deemed to be in effect from the date of the Industrial
Policy 2012 (1 April 2011) - The electricity duty deposited for FYs
2011-12, 2012-13 and 2013-14 was directed to be adjusted against
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the future liability of the respondent towards electricity duty - On
appeal, held: The State government issued a statutory notification
u/s. 9, but by doing so prospectively with effect from 08.01.2015 it
negated the nature of the representation which was held out in the
Industrial Policy 2012 - Absolutely no justification bearing on
reasons of policy or public interest has been offered before the
High Court or before the Supreme Court for the delay in issuing a
notification - Since the State has offered no justification for the
delay in issuance of the notification, or provided reasons for it being
in public interest, such a course of action by the State is arbitrary
and is violative of Art.14 - In the instant case, the respondent is
entitled to a rebate/deduction from electricity duty - However, the
respondent would not be entitled to a rebate/deduction for FY 201112 - In terms of the Industrial Policy 2012, the entitlement ensues
from the financial year following the commencement of production
- The respondent commenced production on 17.08.2011 - Therefore,
the order of the High Court for the FYs 2012-13 and 2013-14 is
confirmed.
Principles/Doctrines - Promissory estoppel - Origins and
evolution - discussed.
Principles/Doctrines - Promissory estoppel and legitimate
expectation - Difference between - discussed.
Disposing of the appeals, the Court
HELD: Expectations breached by the State of Jharkhand
1. In the present case, this Court is unable to perceive any
substance in the submission of the State which was urged in
defense before the High Court. Not only did the State in the
present case hold out a solemn representation, this
representation was founded on its stated desire to encourage
industrialization in the State. The policy document spelt out:
(i)
The nature of the incentives;
(ii)
The period during which the incentives would be
available; and
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(iii)

## Text

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THE STATE OF JHARKHAND AND ORS.
v.
 BRAHMPUTRA METALLICS LTD., RANCHI AND ANR.
(Civil Appeal Nos. 3860-3862 of 2020)
DECEMBER 01, 2020
[DR. DHANANJAYA Y CHANDRACHUD AND
INDU MALHOTRA, JJ.]
Bihar Electricity Duty Act, 1948 - s.9 - Jharkhand Industrial
Policy, 2012 - The Industrial Policy 2012 was notified by the State
government on 16.06.2012 providing an exemption from payment
of 50 per cent of the electricity duty for a period of five years - The
policy envisaged that the industrial units will be entitled for
reimbursement/payment of subsidy etc. under the different categories
only from the next financial year of the date of production - It was
also stipulated in the policy that notifications enforcing the terms
of the industrial policy would be issued within a period of one month
by the Departments of the State government - The Departments of
the State government failed to comply with the one month time
schedule - Eventually, the State government issued an exemption
notification on 08.01.2015 but made it effective from the date on
which it was issued - Writ petition by the respondent - Before the
High Court, the respondent claimed that the clause in the notification
making it prospective should be effaced since it was contrary to the
representation that was held out by the Industrial Policy 2012 -
Alternately, the respondent sought a direction that it would be entitled
to an exemption from electricity duty for a period of five years from
the date of the issuance of the notification - High Court held that
there was no specific reason for delay and that 'but for the lethargic
approach of the state authorities' the exemption should have been
issued within a month of the issuance of the Industrial Policy 2012
- The High Court concluded that the notification dated 08.01.2015
issued by the Commercial Tax Department of the State government
ought not to be construed with prospective effect and the clause
making it prospective would have to be struck down - The
notification was deemed to be in effect from the date of the Industrial
Policy 2012 (1 April 2011) - The electricity duty deposited for FYs
2011-12, 2012-13 and 2013-14 was directed to be adjusted against
 [2020] 14 S.C.R. 45
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the future liability of the respondent towards electricity duty - On
appeal, held: The State government issued a statutory notification
u/s. 9, but by doing so prospectively with effect from 08.01.2015 it
negated the nature of the representation which was held out in the
Industrial Policy 2012 - Absolutely no justification bearing on
reasons of policy or public interest has been offered before the
High Court or before the Supreme Court for the delay in issuing a
notification - Since the State has offered no justification for the
delay in issuance of the notification, or provided reasons for it being
in public interest, such a course of action by the State is arbitrary
and is violative of Art.14 - In the instant case, the respondent is
entitled to a rebate/deduction from electricity duty - However, the
respondent would not be entitled to a rebate/deduction for FY 201112 - In terms of the Industrial Policy 2012, the entitlement ensues
from the financial year following the commencement of production
- The respondent commenced production on 17.08.2011 - Therefore,
the order of the High Court for the FYs 2012-13 and 2013-14 is
confirmed.
Principles/Doctrines - Promissory estoppel - Origins and
evolution - discussed.
Principles/Doctrines - Promissory estoppel and legitimate
expectation - Difference between - discussed.
Disposing of the appeals, the Court
HELD: Expectations breached by the State of Jharkhand
1. In the present case, this Court is unable to perceive any
substance in the submission of the State which was urged in
defense before the High Court. Not only did the State in the
present case hold out a solemn representation, this
representation was founded on its stated desire to encourage
industrialization in the State. The policy document spelt out:
(i)
The nature of the incentives;
(ii)
The period during which the incentives would be
available; and
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(iii)
The time limit within which follow-up action would be
taken by the State government through its
departments for implementing the Industrial Policy
2012. [Para 43][78-F-H]
2. The State having held out a solemn representation in
the above terms, it would be manifestly unfair and arbitrary to
deprive industrial units within the State of their legitimate
entitlement. The State government did as a matter of fact, issue
a statutory notification under Section 9 of the Bihar Electricity
Duty Act, 1948 but by doing so prospectively with effect from 8
January 2015 it negated the nature of the representation which
was held out in the Industrial Policy 2012. Absolutely no
justification bearing on reasons of policy or public interest has
been offered before the High Court or before this Court for the
delay in issuing a notification. The pleadings are completely silent
on the reasons for the delay on the part of the government and
offer no justification for making the exemption prospective,
contrary to the terms of the representation held out in the
Industrial Policy 2012. [Para 44][79-A-C]
3. It is one thing for the State to assert that the writ
petitioner had no vested right but quite another for the State to
assert that it is not duty bound to disclose its reasons for not
giving effect to the exemption notification within the period that
was envisaged in the Industrial Policy 2012. Both the accountability
of the State and the solemn obligation which it undertook in terms
of the policy document militate against accepting such a notion of
state power. The state must discard the colonial notion that it is
a sovereign handing out doles at its will. Its policies give rise to
legitimate expectations that the state will act according to what it
puts forth in the public realm. In all its actions, the State is bound
to act fairly, in a transparent manner. This is an elementary
requirement of the guarantee against arbitrary state action which
Article 14 of the Constitution adopts. A deprivation of the
entitlement of private citizens and private business must be
proportional to a requirement grounded in public interest. This
conception of state power has been recognized by this Court in a
consistent line of decisions. [Para 45][79-C-F]
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS
LTD.
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4. Therefore, it is clear that the State had made a
representation to the respondent and similarly situated industrial
units under the Industrial Policy 2012. This representation gave
rise to a legitimate expectation on their behalf, that they would
be offered a 50 per cent rebate/deduction in electricity duty for
the next five years. However, due to the failure to issue a
notification within the stipulated time and by the grant of the
exemption only prospectively, the expectation and trust in the
State stood violated. Since the State has offered no justification
for the delay in issuance of the notification, or provided reasons
for it being in public interest, such a course of action by the State
is arbitrary and is violative of Article 14. [Para 46][80-A-C]
5. The narrow issue is whether the respondent is entitled
to a rebate/deduction from electricity duty which is answered in
the affirmative. It is necessary, however, to clarify that the
respondent would not be entitled to a rebate/deduction for FY
2011-12. In terms of Clause 35.7(b) of the Industrial Policy 2012,
the entitlement ensues from the financial year following the
commencement of production. The respondent commenced
production on 17 August 2011. Hence, the order of the High Court
would have to be confirmed for FYs 2012-13 and 2013-14. In
conclusion, this Court in agreement with the conclusion of the
High Court that the respondent was entitled to an exemption
from electricity duty, although for the reasons indicated in this
judgment. Further, the relief granted would stand confined to FYs
2012-13 and 2013-14. [Para 51][85-B-D]
National Buildings Construction Corporation vs S.
Raghunathan (1998) 7 SCC 66 : [1998] 1 Suppl. SCR
156; Monnet Ispat and Energy Ltd. vs Union of India
(2012) 11 SCC 1 : [2012] 7 SCR 644; Union of India
vs Lt. Col. P.K. Choudhary (2016) 4 SCC 236 : [2016]
2 SCR 426; Food Corporation of India vs Kamdhenu
Cattle Feed Industries (1993) 1 SCC 71 : [1992]
2 Suppl. SCR 322; NOIDA Entrepreneurs Assn. vs
NOIDA (2011) 6 SCC 508 : [2011] 8 SCR 25; Indian
Council for Enviro-Legal Action vs Union of India (2011)
8 SCC 161: [2011] 9 SCR 146 - relied on.
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State of Bihar v. Kalyanpur Cement Limited (2010) 3
SCC 274 : [2010] 1 SCR 928 Manuelsons Hotels
Private Limited vs State of Kerala (2016) 6 SCC 766
: [2016] 3 SCR 718; Motilal Padampat Sagar Mills Co.
Ltd. v. State of UP (1979) 2 SCC 409: [1979] 2 SCR
641 ; State of Madhya Pradesh v. Bhailal Bhai AIR
1964 SC 1006 : [1964] SCR 261; Suganmal v. State of
Madhya Pradesh AIR 1965 SC 1740; Mafatlal
Industries Ltd. v. Union of India (1997) 5 SCC
536:[1996] 10 Suppl. SCR 585; Amarjit Singh
Ahluwalia (Dr) vs State of Punjab, (1975) 3 SCC 503 :
[1975] 3 SCR 82; Sukhdev Singh vs Bhagatram Sardar
Singh Raghuvanshi, (1975) 1 SCC 421 : [1975] 3 SCR
619 (concurring opinion of Justice K K Mathew) and
Ramana Dayaram Shetty vs International Airport
Authority of India, (1979) 3 SCC 489 : [1979]
3 SCR 1014; High Court of Judicature of Patna vs
Madan Mohan Prasad (2011) 9 SCC 65 :[2011]
13 SCR 972; Dayal Singh vs Union of India (2003) 2
SCC 593 : [2003] 1 SCR 714; Hindustan Petroleum
Corporation Ltd. vs Dolly Das (1999) 4 SCC 450 -
referred to.
Crabb v. Arun DC [1976] 1 Ch 179 27;Combe v. Combe
[1951] 2 K.B. 21529; Wyvern Development, Re, [1974]
1 W.L.R. 1097 Tungsten Electric Co Ltd. vs Tool Metal
Manufacturing Co. Ltd., [1955] 1 W.L.R. 761,Baird
Textiles Holdings Ltd. vs Marks and Spencer Plc.,
[2002] 1 All ER (Comm) 737, Waltons Stores
(Interstate) Ltd vs Maher, (1988) 164 CLR 387. 30; R
vs North and East Devon Health Authority, ex p
Coughlan [2001] QB 213; Regina (Bibi) vs Newham
London Borough Council [2002] 1 W.L.R. 23734;
Vitarelli vs Seton 359 US 535 (1959); East Sussex County
Council [2003] 1 WLR 348; Attorney General for New
South Wales vs. Quinn (1990) 64 Aust LJR 327 : (1990)
170 CLR 1; Regina (Reprotech (Pebsham) Ltd) vs East
Sussex County Council [2003] 1 WLR 348 - referred
to.
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS
LTD.
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Hugh Beale, Chitty on Contracts (32nd edn., Sweet &
Maxwell 2017). Harry Woolf and others, De Smith's
Judicial Review (8th edn, Thomson Reuters 2018).
M.P. Jain and S.N. Jain, Principles of Administrative
Law (7th edn., EBC 2013) - referred to.
Case Law Reference
[2010] 1 SCR 928
referred to
Para 11
[2016] 3 SCR 718
referred to
Para 11
[1979] 2 SCR 641
referred to
Para 11
[1964] SCR 261
referred to
Para 14(x)
AIR 1965 SC 1740
referred to
Para 14(x)
[1996] 10 Suppl. SCR 585
referred to
Para 14(xii)
[1975] 3 SCR 82,
referred to
Para 38
[1975] 3 SCR 619
referred to
Para 38
[1979] 3 SCR 1014
referred to
Para 38
[1998] 1 Suppl. SCR 156
relied on
Para 39
[2012] 7 SCR 644
relied on
Para 40
[2016] 2 SCR 426
relied on
Para 41
[1992] 2 Suppl. SCR 322
relied on
Para 42
[2011] 8 SCR 25
relied on
Para 42
[2011] 13 SCR 972
referred to
Para 42
[2003] 1 SCR 714
referred to
Para 42
(1999) 4 SCC 450
referred to
Para 48
[2011] 9 SCR 146
relied on
Para 50
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 38603862 of 2020
From the Judgment and Order dated 11.12.2019 of the High Court
of Jharkhand in Writ Petition (T) No. 4274 of 2019, Writ Petition (T) No.
4275 of 2019 and Writ Petition (T) No. 4320 of 2019
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Tapesh Kumar Singh, AAG, Aditya Pratap Singh, Ms. Bhashwati
Singh, Devashish Bharuka Mrs. Jaya Bharuka, Ravi Bharuka, Ms.
Sarvshree, Justine George, Ms. Srishti Agarwal, Advs. for the appearing
parties.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
A
The appeal
B
The issue
C
Captive power plant : assessment to electricity duty
D
Industrial Policy 2012
E
Exemption from Electricity Duty
F
Before the High Court
G
Submissions of Counsel
H
Analysis
H.I
A State in breach of policy commitments
H.2
Building on Motilal Padampat
H.3
Promissory estoppel - origins and evolution
H.4
From estoppel to expectations
H.5
Indian Law and the doctrine of legitimate
expectations
H.6
Expectations breached by the State of
Jharkhand
H.7
The technical defences to the claim
I
Conclusion
1. Leave granted.
A. The appeal
2. This appeal arises from a judgment of the High Court of
Jharkhand. While allowing a petition instituted by the respondents under
Article 226 of the Constitution, the Division Bench:
(i)
struck down the last paragraph of a notification dated 8
January 2015 issued by the State government in its
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS
LTD.
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Department of Commercial Taxes, giving prospective effect
to the rebate/deduction from electricity duty offered under
the Jharkhand Industrial Policy, 20121;
(ii)
directed that the notification shall be deemed to be in effect
from 1 April 2011, when the Industrial Policy 2012 was
enforced with retrospective effect; and
(iii)
upheld the claim of the respondent that it was entitled to a
rebate/deduction from electricity duty in terms of the
representation held out in the Industrial Policy 2012, and
that the denial of the exemption by the State government
for FYs2011-12, 2012-13 and 2013-14 was contrary to the
doctrine of promissory estoppel.
The State is in appeal to challenge the judgment dated 11
December 2019.
B. The issue
3. The issue for determination is whether the respondent is entitled
to claim a rebate or deduction of 50 per cent of the amount assessed
towards electricity duty for FYs 2011-12, 2012-13 and 2013-14.The
respondent claims its entitlement on the basis of the Industrial Policy
2012 (notified by the appellant on 16 June 2012) and a statutory
notification dated 8 January 2015 issued under Section 9 of the Bihar
Electricity Duty Act 19482. The Bihar Act 1948 was adopted with effect
from 15 November 2000 for the State of Jharkhandunder the provisions
of the Bihar Reorganization Act 2000.
C. Captive power plant : assessment to electricity duty
4. The respondent was granted a certificate of commencement
of commercial production on 31 May 2013. The certificate records that
the integrated manufacturing unit of Sponge Iron and Mild Steel Billets,
together with a captive thermal plant of 20 MW capacity set up by the
respondent commenced commercial production on 17 August 2011. A
certificate of registration was granted to the respondent on 22 November
2011 under Rule 4 of the Bihar (Jharkhand) Electricity Duty Rules 19493,
according to which it was liable to pay duty for distribution and/or
1 "Industrial Policy 2012"
2 "the Bihar Act 1948"
3 "the Bihar Rules 1949"
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consumption of the energy from 1 October 2011. On the basis of the
returns submitted by the respondent in Form-III, read with Rule 9 of the
Bihar Rules 1949, assessment orders were passed by the assessing
officer for FY 2011-12 on 9 December 2014, for FY 2012-13 on 18
December 2015 and for FY 2013-14 on 16 December 2016.
D. Industrial Policy 2012
5. The Industrial Policy 2012 was notified by the State government
on16 June 2012. Some of the salient features of the Industrial Policy
2012need to be visited:
(i)
Clause 32.10 provided an exemption from the payment of
50 per cent of the electricity duty for a period of five years,
for captive power plants established for self-consumption
or captive use:
"32.10 Incentive for captive power plant
New or existing industrial units setting up captive power
plant shall be exempted from the payment of 50% of
electricity duty for a period of five years for selfconsumption or captive use (i.e. in respect of power
being used by the plant) from the date of its
commissioning".
(ii)
Clause 35.7(b) envisaged that the entitlement would ensue
from the financial year following the Date of Production
(DoP):
"35.7(b) Industrial units will be entitled for
reimbursement/ payment of subsidy / incentives under
different categories only from the next financial year of
DoP."
(iii)
Clause 38(b) stipulated that notifications enforcing the terms
of the industrial policy would be issued within a period of
one month by the Departments of the State government:
"38. Monitoring and Review
(b)
All concerned departments and organizations
would issue necessary follow up notifications within a
month to give effect to the provisions of this Policy. The
implementation of this policy will be duly monitored by
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
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Government at the level of Chief Secretary atleast once
in a quarter, so that the State Government may carry
out a mid-term review of this Policy."
E. Exemption from Electricity Duty
6. Though the Industrial Policy 2012 which was notified on 16
June 2012 envisaged that notifications by the Departments of the State
government would be issued within one month, there was a failure to
comply with the time schedule. In order to give effect to the exemption
from electricity duty, a notification under Section 9 of the Bihar Act
1948 was necessary. Section 9 recognizes the power of the State
government to grant exemptions4.
7. Rule 6 of the Bihar Rules1949 casts a duty on every assessee
to pay the duty which falls due within two calendar months of the month
to which it relates. Rule 9 requires the submission of a return in Form-III
within a period of two calendar months from the expiry of the month to
which the return relates5.
8. Since an exemption notification was not issued by the State of
Jharkhand under Section 9, a writ petition was filed under Article 226 of
the Constitution before the High Court of Jharkhand by a company by
the name of Usha Martin Limited6. Eventually, the State government
issued an exemption notificationon 8 January 2015 but made it effective
from the date on which it was issued. The exemption notification is
extracted below:
"S.O.67 dated 8th January, 2015 - In the light of Para 32.10 of
Jharkhand Industrial Policy, 2012 and in exercise of the powers
4 "Section 9. Power of State Government to grant exemptionsThe State Government shall have power to exempt any person or class of persons
notified in this behalf from the duty payable under this Act and such exemptions, may
be subject to such conditions and exemptions if any, as may be mentioned in the said
notification."
5 Rule 6. Payment of duty. - Every assessee shall pay the full amount of the duty due
from him under section 4 within two calendar months of the month to which the duty
relates.
Rule 9. Submission of Returns. - Every assessee shall submit to the appropriate
inspecting authority of the Circle or sub-circle as the case may be, a return in Form III,
within two calendar months from the expiry of the month to which the return relates.
The return shall be verified in the manner indicated therein and shall be signed by the
assessee or by his authorised agent. When an assessee holds more than, one license,
separate returns shall be submitted in respect of each license.
6 WP (T) No. 6008 of 2014, decided on 3/4 February 2015.
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conferred by the Section 9 of the adopted Bihar Electricity Duty
Act, 1948, the Governor of Jharkhand is pleased to exempt new
or existing industrial units setting up captive power plant for selfconsumption or captive use (in respect of power being used by
the plant) from the payment of 50% of Electricity Duty from the
date of the commissioning of the power plant.
This notification shall be effective from the date of issue and shall
remain effective till the period mentioned in the relevant provisions
of the Jharkhand Industrial Policy, 2012."
9. The Industrial Policy 2012 announced an incentive in the form
of a rebate or deduction on electricity duty for a period of five years
from the commencement of production. If a notification under Section 9
had been issued by the State government within a month,in terms of the
representation held out by the Industrial Policy 2012, the respondent
would have had the benefit of almost the entire period of exemption
contemplated by the policy. But since the exemption notification dated 8
January 2015 was made prospective, the respondent (and other similar
units) would receive the benefit of the exemption from electricity duty
for a much lesser period. Faced with this situation, the respondent
instituted writ proceedings before the High Court of Jharkhand in August
2019.
F. Before the High Court
10. Placing reliance on the doctrine of promissory estoppel,the
respondent sought, in its submissions before the High Court, one of two
reliefs or directions. First, the respondent claimed that the clause in the
notification making it prospective should be effaced since it was contrary
to the representation that was held out by the Industrial Policy 2012.
Alternately, the respondent sought a direction that it would be entitled to
an exemption from electricity duty for a period of five years from the
date of the issuance of the notification (the period of five years being the
envisaged period under the Industrial Policy 2012).
11. The High Court accepted the first of the two courses of action
noted above, placing reliance on the decisions of this Court in State of
Bihar vs Kalyanpur Cement Limited7 ("Kalyanpur Cement Ltd.")
and Manuelsons Hotels Private Limited vs State of Kerala8
7 (2010) 3 SCC 274.
8 (2016) 6 SCC 766.
THE STATE OF JHARKHAND v. BRAHMPUTRA METALLICS
LTD. [DR. DHANANJAYA Y CHANDRACHUD, J.]
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("Manuelsons Hotels Pvt. Ltd."). These decisions are premised on
the doctrine of promissory estoppel enunciated in Motilal Padampat
Sagar Mills Co. Ltd. vs State of UP9 ("Motilal Padampat"). The
High Court held that a promise was made by the State government to
give the benefit of an exemption of 50 per cent in electricity duty for a
period of five years, for self-consumption or captive use, to all new and
existing industrial units setting up captive power plants in the State of
Jharkhand. The High Court observed that it was not the case of the
State government that it did not intend to give the benefit to these industrial
units since, as a matter of fact, it had issued a notification, though
belatedly, on 8 January 2015.
12. Finding fault with the delay on the part of the government in
issuing an exemption notification, the High Court held that there was no
specific reason for the delay and that "but for the lethargic approach of
the state authorities" the exemption should have been issued within a
month of the issuance of the Industrial Policy 2012. The effect of the
belated notification was to deny industrial units of the benefit of the
promise held out by the State government. The High Court noted that
the benefit was to be given with effect from FY 2011-12 for a period of
five years which ended in FY 2015-16. Since the exemption notification
was issued on 8 January 2015, the unit of the respondent and similarly
placed units would receive the benefit for only one or two years instead
of promised five years,as the Industrial Policy 2012 envisaged. In this
backdrop, the conclusion of the High Court was that the failure of the
State to issue an exemption notification within time should not stand in
the way of the industrial units getting the benefit which was promised
and its denial of such benefit for FYs 2011-12, 2012-13 and 2013-14
was contrary to the doctrine of promissory estoppel. The issuance of
an exemption notification being a ministerial act, the High Court held
that it should not stand in the way of industrial units obtaining relief
under the doctrine as a result of the unconscionable delay caused by the
State government. It was on this rationale that the High Court concluded
that the notification dated 8 January 2015 issued by the Commercial Tax
Department of the State government ought not to be construed with
prospective effect and the clause making it prospective would have to
be struck down. The notification was deemed to be in effect from the
date of the Industrial Policy 2012 (1 April 2011). The electricity duty
9 (1979) 2 SCC 409.
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deposited for FYs 2011-12, 2012-13 and 2013-14 was directed to be
adjusted against the future liability of the respondent towards electricity
duty. Since the amount has already been deposited no refund, but an
adjustment of future payments was directed.
13 The State is in appeal.
G. Submissions of Counsel
14. Mr Tapesh Kumar Singh, Additional Advocate General
appearing for the State of Jharkhand submits that:
(i)
In terms of the rebate/concession admissible under the
Industrial Policy 2012, the respondent was required by
Column 6(iv) of Form-III to raise a claim for exemption
from the payment of electricity duty;
(ii)
In all the three returns which were furnished by the
respondent, a rebate/deduction was sought only towards
"auxiliary consumption", which was accepted and allowed
by the assessing officer;
(iii)
In the absence of a claim for rebate/deduction sought before
the assessing officer, the assessing officer could not have
granted a concession to the respondent;
(iv)
The three assessment orders demonstrate that the
respondent paid electricity duty without protest or demur,
and the computation made by the assessing officer of the
payable amount was accepted;
(v)
The three returns filed by the respondent for the
corresponding assessment years were belated and an
amount of Rs 2000/- was levied as penalty;
(vi)
The submission that the notification under Section 9 of the
Bihar Act 1948 was belatedly issued on 8 January 2015 is
not available to the respondent since two of the three
assessment orders were issued eleven months and twentythree months after the issuance of the notification.Hence,
in the assessment orders of FYs 2012-13 and 2013-14, no
prejudice has been caused to the respondent by the belated
issuance of the notification;
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(vii)
For FY 2011-12, it has been conceded during the course of
the hearingby the respondent that upon a correct construction
of the relevant terms of the Industrial Policy 2012, it is not
entitled in law to claim a rebate/deduction or adjustment in
view of Clause 35.7(b);
(viii) The relief which has been granted by the High Court to
another similarly situated writ petitioner on 4 February 2015
shall operate erga omnes;
(ix)
In 2019, the respondent instituted three writ petitions for
the corresponding three assessment years - FYs 2011-12,
2012-13 and 2013-14 with a view to overcome the period
of limitation under the general law and these have
erroneously been allowed by the common judgment and
order of the High Court;
(x)
The law laid down in the judgments of the Constitution
Bench in State of Madhya Pradesh vs Bhailal Bhai10
("Bhailal Bhai") and Suganmal vs State of Madhya
Pradesh11 ("Suganmal") continues to hold the field;
(xi)
The above judgments hold that any claim for refund could
be made only within the period of limitation prescribed under
the general law for the filing of suits for the recovery of
amounts due and the High Court ought not to entertain a
petition under Article 226 in the exercise of its extra-ordinary
writ jurisdiction;
(xii)
In the absence of any pleading before the High Court,there
is a presumption in law against the respondent that the
amount claimed as rebate/deduction from electricity duty
has already been passed on to its customers.Hence,the
adjustment which has been granted by the High Court would
result in unjust enrichment to the respondent. Reliance was
placed on the decision of this Court in Mafatlal Industries
Ltd. vs Union of India12 ("Mafatlal Industries");
(xiii) An alternative and efficacious statutory remedy of an appeal
under Section 9A of the Bihar Act 1948 was available to
10 AIR 1964 SC 1006.
11 AIR 1965 SC 1740.
12(1997) 5 SCC 536.
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the respondent against the orders of assessment,and hence
the High Court should have refused to allow recourse to
the extra-ordinary writ jurisdiction; and
(xiv) Since the unit of the respondent commenced commercial
production on 17 August 2011, whereas the Industrial Policy
is of 2012, the doctrine of promissory estoppel cannot be
extended "backwards in favour of the respondent".
15. On the other hand, opposing these submissions on behalf of
the respondent and in support of the judgment of the High Court,
Mr.Devashish Bharuka, learned Counsel urged the following submissions:
(i)
The act of the State government in making the exemption
notification prospective in effect from 8 January 2015 is in
derogation to the promise held out by the State in its
Industrial Policy 2012. The High Court in placing reliance
on the doctrine of promissory estoppel has correctly relied
upon the decisions of this Court in Motilal Padampat
(supra), Kalyanpur Cement Ltd (supra) and Manuelsons
Hotels Pvt Ltd. (supra);
(ii)
As regards the claim of exemption by the first respondent:
(a)
The benefit of a rebate/deduction could not have been
claimed in the returns for FYs 2011-12, 2012-13 and
2013-14. The exemption notificationwas issued only
on 8 January 2015, and that too with prospective
effect;
(b)
The first respondent has,as a matter of fact, received
a rebate/deduction only for the period 8 January 2015
to 31 March 2015 and for FY 2015-16;
(iii)
As regards the submission that there has been a delay in
instituting the writ petitions before the High Court under
Article 226:
(a)
The issue of delay has not been raised by the State
government either before the High Courtor in the
Special Leave Petition;
(b)
Once the High Court entertained the writ petition on
merits, this Courtought not to interfere on the ground
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of delay alone, particularly when the judgment of the
High Court is legally sustainable;
(c)
Delay by itself in filing a Writ Petition may not defeat
theclaim unless the position of the opposite party has
been so alteredthat it cannot be retracted on account
of a lapse of time orinaction of the writ petitioner.
The State has neither pleaded nor arguedany change
in its position;
(d)
This is a case where the opposite party has not been
put through any hardship by reason of the delay in
approaching the High Court; and
(iv)
The decisions in Bhailal Bhai (supra) and Suganmal
(supra) are distinguishable as they relate to a writ petition
seeking refund of illegally collected tax.
16. On the above grounds, it has been submitted that the
respondent is entitled to the benefit of a rebate for a period offive years
as held out in clause 32.10 of the Industrial Policy 2012.
17. The respondent has submitted that the period of five years
may commence from 17 August 2011 (the date of commercial
production) or from FY 2012-13 (in accord with clause 35.7(b) of
Industrial Policy 2012) or from 8 January 2015(the date of the notification).
H. Analysis
18. The rival submissions will now be considered.
H.I A State in breach of policy commitments
19. The Industrial Policy 2012 refers to the earlier Industrial Policy,
which was formulated in 2001 after the formation of the State of
Jharkhand. The policy notes that "considerable progress in industrialization
has been achieved during the policy period". Yet, according to Clause
1.8, there is a need to "boost economic activities to sustain the current
level of growth and achieve even better pace of development". Clause
1.9 takes notice of the fact that "there has been large scale change in
(the) industrialization environment (sic) due to economic liberalization,
privatization and globalization". The policy document states in Clause
1.12 that it "aims at creating (an) industry-friendly environment for
maximizing investment":
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"1.12. The present policy aims at creating industry-friendly
environment for maximizing investment especially in mineral and
natural resource based industries, MSMEs, infrastructure
development and rehabilitation of viable sick units.The objective
here is to maximize the value addition to state's natural resources
by setting up industries across the state, generating revenue and
creating employment."
Clause 1.13 stipulates that the policy was drafted after intensive
interaction with stakeholders and to accommodate their views. It was
expected that the policy would, upon implementation, facilitate
industrialization of the State, generate employment and add to its overall
growth.
20. As an integral component of the policy, Clause 32.10 envisages
the grant of an exemption from the payment of 50 per cent of the
electricity duty for a period of five years both for new and existing
industrial units setting up captive power plants for self-consumption or
captive use The period of five years was to be reckoned from the date
of the commissioning of the plant. Under Clause 35.7(b), the entitlement
would ensue from the financial year following the date of production.
The State government was cognizant of the need to implement the policy
immediately to secure the benefit to eligible units over the entire term of
five years. Recognizing this need, Clause 38(b) envisaged that
notifications by its diverse departments to enforce the terms of the policy
would be issued within a period of one month.
21. The alacrity expected by the Industrial Policy 2012 of the
State of Jharkhand did not find a resonance in its administrative apparatus.
The High Court has justifiably referred to this as a case of bureaucratic
lethargy. As a matter of first principle, there can be no gainsaying the
fact that when a statute, such as the Bihar Act 1948, empowers the
state to grant an exemption from its provisions, the State has the discretion
to determine the date from which and the period over which the
exemption will operate. An individual or entity cannot compel the State
to issue a notification providing for an exemption or to insist upon the
terms on which the government does so. Whether an exemption should
be issued and if so, the terms for the exemption, have to be determined
by the State. But this case does not rest on that principle nor did the
claim of the respondent require the High Court to make a departure
from it. The Industrial Policy 2012 contained a representation that a
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rebate/deduction would be granted. It held out a representation that a
notification would be issued in a month. These were solemn commitments
made by the State of Jharkhand. What remained was their implementation
by issuing a notification, which was to be done within one month. The
State government evidently intended to implement and act in pursuance
of its commitment. For, ultimately, it did issue a notification. But it did so
on 8 January 2015 - after a period of a month envisaged under the
Industrial Policy 2012 had dragged on for nearly three years.
22. It is time for the State government to take notice of the
observations of the High Court in regard to administrative lethargy. If
the object of formulating the industrial policy is to encourage investment,
employment and growth, the administrative lethargy of the State apparatus
is clearly a factor which will discourage entrepreneurship. The policy
document held out a solemn representation. It contemplated the grant of
a rebate/deduction from the payment of electricity duty not only to new
units but to existing units as well who had or would set up captive power
plants. The State, in the present case, held out inter alia a solemn
representation in terms of Clauses 32.10 and 35.7(b) of the entitlement
of the exemption for a period of five years from the date of production.
Besides this, it also contemplated in Clause 38(b) that a follow-up
exemption notification would be issued within one month. That period of
one month stretched on interminably with the result that the purpose and
object of granting the exemption would virtually stand defeated. The net
result was that when belatedly, the State government issued a notification
under Section 9 of Bihar Act 1948 on 8 January 2015, it was prospective.
As a consequence, by the time that the exemption notification was issued,
a large part of the term for which the exemption was to operate in terms
of the Industrial Policy 2012 had come to an end.
23. The State government was evidently inclined to grant the
exemption. This is not a case where due to an overarching requirement
of public interest, the State government decided to override the
representation which was contained in the Industrial Policy 2012. To the
contrary, it sought to implement the representation albeit in fits and starts.
Firstly, there was a delay of three years in the issuance of the notification.
Secondly, by making the notification prospective, it deprived units such
as the respondent of the full benefit of the exemptionwhich was originally
envisaged in terms of the Industrial Policy 2012.
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H.2. Building on Motilal Padampat
24. In this backdrop, the High Court has, with justification, adverted
to two decisions of this Court. In Kalyanpur Cement (supra), an
industrial policy had been notified in 1995 in the State of Bihar. The
policy contained a provision for monitoring and reviewing and envisaged
that all departments and organizations would issue a follow-up notification
to give effect to the policy within one month. This was similar to clause
38(b) of the policy in the present case. No notification was issued by the
State of Bihar to give effect to the industrial policy, which lapsed on 31
August 2000. The claim to sales tax exemption by the unit was rejected
by the State government on the ground that it had decided not to grant
an incentive to a sick industrial unit. A follow-up notification was issued
during the pendency of the case before this Court. In the backdrop of
these facts, this Court speaking through Justice S S Nijjar, observed:
"85. Even if we are to accept the submissions...that the provisions
contained in Clause 24 were mandatory, the time of one month
for issuing the notification could only have been extended for a
reasonable period. It is inconceivable that it could have taken the
Government three years to issue the follow-up notification. We
are of the considered opinion that failure of the appellants to issue
the necessary notification within a reasonable period of the
enforcement of the Industrial Policy, 1995 has rendered the
decisions dated 6-1-2001 and 5-3-2001 wholly arbitrary. The
appellant cannot be permitted to rely on its own lapses in
implementing its Policy to defeat the just and valid claim of the
Company. For the same reason we are unable to accept the
submissions of the learned Senior Counsel for the appellant that
no relief can be granted to the Company as the Policy has lapsed
on 31-8-2000. Accepting such a submission would be to put a
premium and accord a justification to the wholly arbitrary action
of the appellant, in not issuing the notification in accordance with
the provisions contained in Clause 24 of the Industrial Policy, 1995."
25.