AUGUSTAN TEXTILE COLOURS LIMITED (NOW AUGUSTAN v. DIRECTOR OF INDUSTRIES & Anr.

Judgment

) : The power to grant exemption u/s 10(1) is in respect of a class of persons and was never intended for an individual industrial unit like appellant – When this aberration was noticed and it was seen that amongst similarly engaged units in the same business, the appellant was the only one enjoying the benefit of exemption, the 2006 government order was issued withdrawing the exemption granted – Even though appellant was granted benefit of tax exemptions, it cannot be continued for further assessment years, as that would amount to perpetuating and condoning a wrong, which is opposed to public policy – Benefit of equitable doctrine of estoppel cannot be extended to the appellant as in that case the State Authority would be obligated to act in a manner which is contrary to legislative mandate – Judgment of High Court was upheld – (Per K.M Joseph, J.) (concurring): Appellant cannot pitch its case higher than at the limit under Order dated 25.11.1994 – Exemption of sales tax is contemplated for a period of two years – Maximum period in any case is 5 years – In the case of the appellant, the appellant enjoyed the benefit of the exemption till it was withdrawn 104 B C D E F G H AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE COLOURS PVT LTD.) v. DIRECTOR OF INDUSTRIES 105 on 21.11 2006 – Appellant enjoyed the benefit of exemption for nearly 4 years – Appellant is a company which is making profits – Appeal must fail. Dismissing the appeal, the Court HELD: Per Hrishikesh Roy, J.:

#1. The gap between the 2004 Government Order and the Government Order dated 21.11.2006 shows that the appellant was enjoying the benefit for a fair duration. Significantly, the power to grant such tax benefit is not seen in any other State Legislation but only in Section 10(1) of the Kerala General Sales Tax Act, 1963. The power to grant exemption under Section 10(1) is however in respect of a class of persons and was never intended for an individual industrial unit like the appellant. When this aberration was noticed and it was seen that amongst similarly engaged units in the same business, the appellant was the only one enjoying the benefit of exemption, the 2006 government order was issued withdrawing the exemption granted on 20.3.2004. [Para 20][115-G-H; 116-A-B]

#2. Undoubtedly, the government was empowered under Section 10(3) to withdraw the exemption at any time and therefore, it cannot be said that the principle of promissory estoppel by itself, will facilitate the appellant to challenge the 2006 Government Order. It must be pointed out that a number of concessions were offered to the appellant under the 2004 Government order and it is discernible that payments under several heads were not set apart for the appellant, notwithstanding their role in revival of the sick unit. [Para 21][116-B-C]

#3. The present dispute pertinently is only with regard to the exemption relatable to sales tax/works contract tax and it is nobody’s case that past arrears of sales tax/works contract tax payable by the sick units, were completely waived. Factoring this, the writ court as well as the Division Bench opined that sub- clause (1)(b) of 2004 Government Order relating to waiver of tax in the State is of such wide amplitude that the same must be seen as uncertain and vague. Also importantly, such exemption cannot continue indefinitely and particularly not beyond the point at which the revival of the sick unit is seen. [Para 22][116-D-E] A B C D E F G H 106 SUPREME COURT REPORTS [2022] 15 S.C.R.

#4. Section 10(1)(ii) of the KGST Act enables the State to grant exemption from sales tax only with respect to “any specific class of persons in regard to the whole or any part of their turnover” and since the 2004 Government Order benefitted only a single unit i.e. the appellant, it is difficult to accept that the solitary industrial unit which was being revived under the BIFR Scheme, would form a class by itself. Therefore, contention to the contrary by the appellant is considered and rejected with the reasoning that the exemption by 2004 Government Order was not made applicable to all sick industrial units of the state, engaged in the like activities of bleaching, dyeing etc. [Para 23][116-E-G]

#5. On the argument of the appellant based on the principles of promissory estoppel, as earlier noted, the tax exemption in the present matter was not given to a class of persons and the appellant is made the sole beneficiary. This is contrary to Section 10 of the KGST Act. The 21.11.2006 withdrawal order was therefore issued, when it was discovered that this was a case of exemption to an individual unit and that is impermissible under Section 10 of the KGST Act. Such being the position, the benefit of the equitable doctrine of estoppel cannot be extended for the appellant as in that case the State authority would be obliged to act in a manner which is contrary to the legislative mandate. [Para 27][117-E-G]

#6. The equitable principle of promissory estoppel cannot be invoked for enforcing promises in the teeth of the provisions of law. Having concluded that the Government Order (20.03.2004), granting Sales Tax/ Works Contract Tax exemption was ultra vires the Section 10(1) of the KGST Act, the promise, in furtherance of Government Order, in the form of BIFR Scheme dated 17.01.2005 being unlawful, cannot in our view, be enforced on equitable consideration. [Para 31][118-F-G]

#7. Even though the appellant was granted benefit of tax exemptions under the 2004 government order, this was ultra vires the Section 10 KGST Act. Such exemption cannot be continued for further assessment years, as that would amounts to perpetuating and condoning a wrong, which is opposed to public policy. [Para 33][119-B-C] A B C D E F G H AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE COLOURS PVT LTD.) v. DIRECTOR OF INDUSTRIES 107

#8. The Division Bench concluded that the appellant does not form a separate class of its own. Hence, the 2004 government order was held to be ultra vires the Section 10(1) of the KGST Act. The appellant has failed to bring to our attention, any intelligible differentia, based on which it can be said that they constitute a unique, separate class of its own. In absence of such differentiating factor, the benefit of tax exemptions being granted to the appellant, to the exclusion of all other sick industries involved in similar activities, do not appear to be reasonable and should be seen as arbitrary. The 2004 government order was not only ultra vires Section 10(1) of KGST Act, but also falls short by principle of reasonableness, fairness, and non arbitrariness. The 2006 government order withdrawing the tax exemption was in fact issued to remedy this very mischief. Hence, the appellant cannot invoke the principle of legitimate expectation against the 2006 government order. [Para 41][122-B-D] State of Gujarat vs. Arcelor Mittal Nippon Steel India Ltd. (2022) SCC OnLine SC 76 (14); Pournami Oil Mills and Others vs. State of Kerala and Anr. 1986 (Supp) SCC 728 : [1987] 1 SCR 654 (18); M/s. Motilal 20 Padampat Sugar Mills vs. State of Uttar Pradesh & Ors. (1979) 2 SCC 409 : [1979] 2 SCR 641 (28); Amrit Banaspati Co. Ltd. vs. State of Punjab & Anr. (1992) 2 SCC 411 : [1992] 2 SCR 13 (29); Bangalore Development Authority vs. R. Hanumaiah (2005) 12 SCC 508 : [2005] 3 Suppl. SCR 901 (30); Voltas Ltd. vs. State of A.P. (2004) 11 SCC 569 : (34); Monnet Ispat & Energy Ltd. vs. Union of India (2012) 11 SCC 1 : [2012] 7 SCR 644 (36); Pawan Alloys & Casting Pvt. Ltd., Meerut vs. U.P. State Electricity Board and Others (1997) 7 SCC 251 : [1997] 3 Suppl. SCR 266 (42) – referred to. MRF Ltd., Kottayam vs. Asst. Commissioner (Assessment) Sales Tax & Ors. (2006) 8 SCC 702 : [2006] 6 Suppl. SCR 417 (38) – distinguished. Case Law Reference (2022) SCC OnLine SC 76 referred to Para 14 A B C D E F G H 108 SUPREME COURT REPORTS [2022] 15 S.C.R. A [1987] 1 SCR 654 [1979] 2 SCR 641 [1992] 2 SCR 13 referred to referred to referred to [2005] 3 Suppl. SCR 901 referred to (2004) 11 SCC 569 [2012] 7 SCR 644 referred to referred to [2006] 6 Suppl. SCR 417 distinguished [1997] 3 Suppl. SCR 266 referred to Per K.M Joseph, J. (Concurring): Para 18 Para 28 Para 29 Para 30 Para 34 Para 36 Para 38 Para 42

#1. There is merit in the contention of the appellant that the exemption granted initially, dated 20.03.2004, was not one which is premised under Section 10 of the Act. The exemption was granted in terms of the scheme under Section 19 of the Act. This is an exemption which was given under statutory provisions. In other words, consent being forthcoming from the state, a scheme being sanctioned under section 19 providing for financial assistance in the form of tax exemption, inter alia, the Government became obliged to honour its consent and the dictate of the statute. [Para 11][133-F-G]

#2. It will be inequitable to the company and against public interest also, as it frustrates the object of law to allow a scheme to be sanctioned inducing all parties to proceed on the basis that a company would be redeemed from its financial dire-straits and the crucial financial assistance indispensable to the said process is not forthcoming from the State. The aforesaid interpretation placed hereinbefore would harmonise the Central and the State Act. It will also give life to the Sick Companies Act as it would clearly further the object of the law. Therefore, the exemption granted can be understood as springing from the provisions of Section 19(3) read with 19(1) in this regard. Thus, the exemption is not to be treated as falling under Section 10 of the State Act. In other words, Section 10 cannot be treated as the sole repository of power to grant exemption. [Para 12][133-G-H; 134-A-B] B C D E F G H AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE COLOURS PVT LTD.) v. DIRECTOR OF INDUSTRIES 109

#3. It is quite clear that the appellant cannot pitch its case higher than at the limit under Order dated 25.11.1994. Therefore, exemption of sales tax is contemplated for a period of two years. However, it further provides that it cannot be for more than five years or beyond the date the net worth of the company becomes positive whichever is earlier. Therefore, the maximum period in any case is 5 years. In the case of the appellant, the appellant enjoyed the benefit of the exemption till it was withdrawn on 21.11 2006. The said order in turn was withdrawn on 01.10.2007. It is no doubt true that on 29.02.2008, the order dated 01.10.2007 came to be withdrawn. The writ petition was filed by the appellant. It would appear that for a period of nearly 4 years, the appellant enjoyed the benefit of exemption in all. No doubt, the appellant did point out that there is no exercise carried out to find out as to when the net worth has turned positive. [Para 19][135-H; 136-A- C] Mahindra and Mahindra Limited and Ors. vs. State of Andhra Pradesh and Ors. 1986 (63) STC 274 (16) – referred to. Case Law Reference 1986 (63) STC 274 referred to Para 16 CIVIL APPELLATE JURISDICTION : Civil Appeal No.2830 of 2022. A B C D E From the Judgment and Order dated 28.09.2017 of the High Court of Kerala at Ernakulam in Writ Appeal No.2021 of 2012. Ritin Rai, Sr. Adv., Siddhartha Jha, Parth Maniktala, Advs. for the F Appellant. C. K. Sasi, Abdulla Naseeh V. T., Ms. Meena K. P., Advs. for the Respondents. The Judgments of the Court were delivered by HRISHIKESH ROY, J. Leave granted.

#1. Heard Mr. Ritin Rai, the learned Senior Counsel representing the appellant. Also heard Mr. C.K. Sasi, the learned counsel representing the respondents. G H 110 SUPREME COURT REPORTS [2022] 15 S.C.R.

#2. The issue to be considered here is whether the benefit of tax exemption in respect of works contract granted in the process of revival of the industry, under the relevant provisions of the Sick Industrial Companies Act, 1985 (for short “the SICA”) based on the Kerala Government communication dated 20.3.2004 (Ext. P-2) can be withdrawn, by the subsequent government order dated 21.11.2006 (Ext. P-3).

#3. It was the appellant’s say that they had taken over a sick industrial unit by the name of M/s Teak Tex Processing Complex Ltd., which was engaged in dyeing of clothes. The Kerala based unit was not operational for a considerable period when attempt was made, for revival of the unit under SICA. In the proceedings that were pending before the Board for Industrial and Financial Reconstruction (for short “BIFR”), the authorities were assessing the possibility of revival of the unit. At that stage, the appellant offered to make investment for revival of the company following which, discussions were held amongst the stakeholders and various concessions were offered to the appellant.

4.1 In tune with the recommendation of the Empowered Committee constituted for the purpose, the Government Order was issued on 20.3.2004 whereby the recommendations of the Committee were accepted. The relevant clause incorporating the measures relating to Sales Tax/Works Contract Tax, are as under:- “Sales Tax/Works Contract Tax (a) The past arrears of Sales Tax/Works contract tax will be completely waived. (b) Works contract Tax on processing of Fabrics like bleaching and dyeing etc. will be exempted in the State”

4.2 In furtherance of the 2004 Government Order, the revival proposal envisaged the taking over by the appellant entire assets of the sick unit for a sum of Rs.10 crores and the BIFR Sanctioned Scheme dated 17.01.2005 mentioned the relief measures under clause 7.2.1 pertaining to sales tax/works contract tax. They read as follows:- “7.2.1 Sales Tax/Works Contract Tax (a) To waive past arrears of Sale Tax Works Contract Tax completely A B C D E F G H AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE COLOURS PVT LTD.) v. DIRECTOR OF INDUSTRIES [HRISHIKESH ROY, J.] 111 (b) To exempt works contract tax on processing of fabrics like bleaching and dyeing etc. in future.” A

#5. The appellant availed the waiver benefit of past tax arrears of the sick unit on the basis of the BIFR Sanctioned Scheme dated 17.01.2005 (Ext. P-1) which assured waiver of Works Contract Tax on processing of fabrics like bleaching and dyeing etc. After about 30 months of such arrangement, the Government issued another Order on 21.11.2006 exercising the power under Section 10(3) of the Kerala General Sales Tax Act, 1963 (for short “the KGST Act”) where it was said that the benefit of exemption can only be granted to a specified class of goods or a particular class of persons, and the appellant who is one amongst several industrial units doing similar nature of work within the State of Kerala, cannot be allowed the benefits of exemption of Works Contract Tax. After issuance of G.O. order dated 21.11.2006, withdrawing the concession in question, on 1.10.2007, the Government has withdrawn G.O.No.110/06/1D dated 21.11.2006, as the concession was one already allowed in the rehabilitation scheme of the BIFR of the company. However, on 29.02.2008 again, the Government in the Tax Department requested to cancel the GO dated 01.10.2007 as it did not have any legally binding effect and thereupon GO dated 01.10.2007 in turn was cancelled with immediate effect. Accordingly, it was decided to withdraw the tax waiver/exemption granted to the appellant which prompted them to file the W.P.(C) No. 5677 of 2007 before the High Court of Kerala.

#6. It was contended by the appellant that they attempted to revive and nurse back a sick company under BIFR and with due deliberations and the recommendations of the Empowered Committee, the incentive measures to be offered to the appellant, have been worked out and finalized as per the scheme. The appellant is actively working in the process of revival of the sick unit and at that stage, it was not open to the State of Kerala to resile from their promise by issuing the Government Order dated 21.11.2006. According to the appellant, the exemption granted vide the 2004 Government Order was issued as a “package deal” in course of revival of the sick unit in conformity with the relevant provisions of the SICA and once consent was given and proceedings were finalized in terms of Section 19(1) or 19(2), the same would be binding upon all the stakeholders as is provided under Section 19(3) of SICA. It was therefore argued that the benefit of tax exemption granted by the State under the Scheme, is binding on the State under the provisions of Section B C D E F G H 112 SUPREME COURT REPORTS [2022] 15 S.C.R. A B C D E F G H 19(3) of SICA and the State must be held accountable to their promise. It was the say of the appellant that the incentives were not granted under Section 10(1) of the KGST Act, and therefore the tax exemption could not have been withdrawn by invoking the powers under Section 10(3) of the same Act. The appellant unequivocally rejected a suggestion by this Court that the appellant might not constitute a unique class of one, in whose favour a tax exemption under Section 10(1) KGST Act can be granted legally. The appellant however failed to point out any other provision in any statute, which empowered the State Government to grant such tax exemptions. While reviving the sick unit, the appellant earned profit in 2015, but incurred loss in subsequent three years. The recent years i.e., 2019 and 2020 are however profitable years for the appellant.

#7. The respondents, on the other hand, contend that the 20.03.2004 Government Order confers various benefits, and the exemption from sales tax/works contract tax is only one of those benefits offered for revival of the sick unit. According to the learned Government Counsel, the source of power to grant tax exemption is traceable only to Section 10(1) of the KGST Act and merely because the 20.03.2004 Government Order does not specifically refer to the source of power, the same cannot aid the appellant, as specific reference is made to Section 10(3) of the KGST Act, while withdrawing the exemption. The learned government advocate further argues that when exemption is given, it is always open for the government to cancel, vary or modify the same, bearing the public interest in mind, and since no time limit was specified on the liability in respect of sales tax/works contract tax, the withdrawal of benefit by the Government Order dated 21.11.2006, is well within the power and competence of the government.

#8. The records available would show that the following benefits/ concessions were extended to the appellant for revival of the sick unit: “1) Sales Tax/Works Contract Tax 2) Electricity Dues 3) Water Charges 4) Pollution Control Water Cess 5) Panchayat Taxes and Levies 6) The ownership of land” AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE COLOURS PVT LTD.) v. DIRECTOR OF INDUSTRIES [HRISHIKESH ROY, J.] 113

#9. It is further seen that the benefits offered, inter alia, were waiver of past arrears particularly under the Sales Tax/Works Contract Tax. For other charges like electricity dues, water charges, Pollution Control Water Cess, the principal amount in the arrears were to be paid without the obligation to bear the interest or penalty burden, from the date of commencement of the commercial production. Specifically for the Sales Tax/Works Contract Tax, under clause 1(b), it is not very clear as to whether the benefit intended for process of fabrics like bleaching, dyeing etc. will be available individually to the appellant or was intended to be availed by this class of industries, many of which are operating in the State of Kerala. It further raises questions in regard to the scope and extent of exemption that could be provided under Section 10 of the KGST Act.

#10. Adverting to the mandate of Section 10 of the KGST Act, the learned Single Judge of the High Court doubted whether the exemption could have been extended to the appellant alone as opposed to a class of industries and the court commented that “such a course of exemption throughout the State was not brought about”. The learned Judge observed that the 2004 Government Order was based on the recommendation of the Empowered Committee with due discussion amongst the stakeholders, and those were with specific reference to the concessions to be extended to new promoters for revival of sick units, in light of the government order dated 25.11.1994.

#11. It was noted by the learned Single Judge upon perusal of the 1994 Government Order that there are two separate channels of benefits/ reliefs i.e. (a) non-fiscal; and (b) fiscal, and under item no. 2, the exemption was granted for works contract tax on processing of fabrics like bleaching, dyeing etc.

#12. The above would show that the fiscal measures refer to exemption/deferment of sales tax, purchase tax, electricity dues for two years, but not exceeding five years or till the date, the net worth of the company became positive, whichever is earlier. Thus, the outer cap of five years was specified in the 1994 Government order and the benefits could not have been intended to continue without limit.

#13. Even though the 2004 Government Order, and the BIFR Sanctioned Scheme of 2005 were enacted in furtherance of 1994 Government Order, both these documents do not specify the time line for tax exemptions prescribed in the 1994 government order. A B C D E F G H 114 SUPREME COURT REPORTS [2022] 15 S.C.R. A B C D E F G

#14. Recently this Court in the case of State of Gujarat Vs. Arcelor Mittal Nippon Steel India Ltd.1 has held that exemption provisions and notifications are to be strictly interpreted in accordance with legislative intent without any addition or subtraction. A Division Bench of this Court speaking through Justice M. R. Shah held that: “14.2 It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in industrial policy and the exemption notifications.

14.3 The exemption notification should be strictly construed and given meaning according to legislative intendment. The Statutory provisions providing for exemption have to be interpreted in the light of the words employed in them and there cannot be any addition or subtraction from the statutory provisions.

14.4 As per the law laid down by this Court in catena of decisions, in the taxing statute, it is the plain language of the provision that has to be preferred, where language is plain and is capable of determining defined meaning. Strict interpretation to the provision is to be accorded to each case on hand. Purposive interpretation can be given only when there is an ambiguity in the statutory provision or it alleges to absurd results, which is so not found in the present case.”

#15. Accordingly, in the present matter, the 2004 government order granting tax exemptions should be read as a whole and in absence of any time line being prescribed, such a time line in our opinion, cannot be imported from the 1994 government order.

#16. Furthermore, Sales tax in the State of Kerala is chargeable under Section 5 of the KGST Act which makes it obligatory upon the State to realize the tax in respect of sales transaction. Section 10 deals with the power of exemption and sub-Section (3) thereof confers the power to have the order of exemption “varied or modified”, in the manner specified. H 1 (2022) SCC OnLine SC 76. AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE COLOURS PVT LTD.) v. DIRECTOR OF INDUSTRIES [HRISHIKESH ROY, J.] 115

#17. The benefit of exemption to tax must therefore be traceable to powers conferred under the KGST Act and such benefits could not have been granted in terms of the BIFR Scheme dated 17.01.2005 giving effect to the Government Order issued on 20.3.2004. In the 2006 Government Order withdrawing the benefits, the government has specifically adverted to Section 10 of KGST Act and as such the non- mentioning of the provisions of Section 10(1) of the KGST Act in the 2004 Government Order, would not assist the appellant in any significant measure.

#18. In Pournami Oil Mills and Others vs. State of Kerala and Anr.2, Justice Ranganath Misra, as he was then, opined as follows:- “6……It is a well settled principle of law that where the authority making an order has power conferred upon it by statute to make an order made by it and an order is made without indicating the provision under which it is made, the order would be deemed to have been made under the provision enabling the making of it….” The present understanding finds support from the above proposition of law laid down by this Court in Pournami Oil Mills (supra).

#19. Insofar as the benefits of tax exemption from the works contract on processing of fabrics, being in conformity with the stipulations under paragraph 7.2.1 of the BIFR Scheme dated 17.01.2005, it must be noticed that Sub-clause (b) of paragraph 7.2.1 is not exactly the same as paragraph 1(b) of the 2004 Government Order, as in the latter case, it is with reference to proposed plan of action, to provide exemption to similar units within the state of Kerala.

#20. What is of significance is that similarly situated fabric processing units in the state are obliged to meet their tax obligation for the Works Contract Tax and that is why in the 2006 Government Order, it was specifically stated that exemption for such taxable events, cannot be confined to the appellant alone. The gap between the 2004 Government Order and the Government Order dated 21.11.2006 shows that the appellant was enjoying the benefit for a fair duration. Significantly, the power to grant such tax benefit is not seen in any other State Legislation but only in Section 10(1) of the KGST Act. The power to grant exemption under Section 10(1) is however in respect of a class of persons and was 2 1986 (Supp) SCC 728 A B C D E F G H 116 SUPREME COURT REPORTS [2022] 15 S.C.R. A B C D E F G H never intended for an individual industrial unit like the appellant. When this aberration was noticed and it was seen that amongst similarly engaged units in the same business, the appellant was the only one enjoying the benefit of exemption, the 2006 government order was issued withdrawing the exemption granted on 20.3.2004.

#21. Undoubtedly, the government was empowered under Section 10(3) to withdraw the exemption at any time and therefore, it cannot be said that the principle of promissory estoppel by itself, will facilitate the appellant to challenge the 2006 Government Order. It must be pointed out that a number of concessions were offered to the appellant under the 2004 Government Order and it is discernible that payments under several heads were not set apart for the appellant, notwithstanding their role in revival of the sick unit.

#22. The present dispute pertinently is only with regard to the exemption relatable to sales tax/works contract tax and it is nobody’s case that past arrears of sales tax/works contract tax payable by the sick units, were completely waived. Factoring this, the writ court as well as the Division Bench opined that sub-clause (1)(b) of 2004 Government Order relating to waiver of tax in the Stateis of such wide amplitude that the same must be seen as uncertain and vague. Also importantly, such exemption cannot continue indefinitely and particularly not beyond the point at which the revival of the sick unit is seen.

#23. As earlier discussed, Section 10(1)(ii) of the KGST Act enables the State to grant exemption from sales tax only with respect to “any specific class of persons in regard to the whole or any part of their turnover” and since the 2004 Government Order benefitted only a single unit i.e. the appellant, it is difficult to accept that the solitary industrial unit which was being revived under the BIFR Scheme, would form a class by itself. Therefore, contention to the contrary by the appellant is considered and rejected with the reasoning that the exemption by 2004 Government Order was not made applicable to all sick industrial units of the state, engaged in the like activities of bleaching, dyeing etc.

#24. It is also relevant to point out that the government order dated 25.11.1994 clearly reflected the government’s intention to consider each sick industrial unit on a case to case basis.

#25. Next, the Court must examine whether the appellant can raise contention on the validity of 2006 Government Order in the context of AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE COLOURS PVT LTD.) v. DIRECTOR OF INDUSTRIES [HRISHIKESH ROY, J.] 117 the sanctioned scheme of restriction approved by the BIFR and the binding nature of the scheme under Section 19(3) of SICA. This question arises since the contentions in this regard were earlier argued and rejected by the learned Single Judge, and the judgment, dated 13.3.2012 in Writ Petition No.5677 of 2007 has worked itself out with the representations submitted by the appellant pursuant to the Writ Court’s judgment and the speaking order passed thereafter by the government on 5.10.2012 rejecting the appellant’s representation. Significantly, the speaking order was not challenged. Instead, the appellant filed the Writ Appeal against the learned Single Judge’s order, granting limited relief of enabling them to file a representation and directing the State to pass a speaking order after affording hearing to the appellant. As the appellant had presented their representation on the strength of the order of the Writ Court and thereby have accepted the judgment, the appellant cannot thereafter in our view, challenge the said judgment through a Writ Appeal when an adverse order is passed against them, by the government.

#26. One is certain that it would be legally impermissible to grant tax exemption, contrary to the provisions of the KGST Act. The special exemption is provided to a single unit under the BIFR proceeding and the State cannot in our opinion be compelled to act contrary to the provisions of the KGST Act, on the strength of binding nature of the scheme under Section 19(3) of SICA.

#27. On the argument of the appellant based on the principles of promissory estoppel, as earlier noted, the tax exemption in the present matter was not given to a class of persons and the appellant is made the sole beneficiary. This is contrary to Section 10 of the KGST Act. The 21.11.2006 withdrawal order was therefore issued, when it was discovered that this was a case of exemption to an individual unit and that is impermissible under Section 10 of the KGST Act. Such being the position, the benefit of the equitable doctrine of estoppel cannot be extended for the appellant as in that case the State authority would be obliged to act in a manner which is contrary to the legislative mandate.

#28. The equitable principle of promissory estoppel was propounded by this Court in the case of M/s. Motilal Padampat Sugar Mills Vs. State of Uttar Pradesh & Ors.3 In the same very case, it was however observed that the legal principle cannot be invoked to compel anyone to 3 (1979) 2 SCC 409. A B C D E F G H 118 SUPREME COURT REPORTS [2022] 15 S.C.R. A do anything, contrary to law. Justice P. N. Bhagawati for the Division Bench wrote the following:- “28…It may also be noted that promissory estoppel cannot be invoked to compel the Government or even a private party to do an act prohibited by law…”

#29. The above judgment in Motilal Padampat(Supra) was followed in the case of Amrit Banaspati Co. Ltd. Vs. State of Punjab & Anr.4wherein, this Court carved out unlawful/illegal promise as an exception to the principle of promissory estoppel. But, the observation in this case in reference to an unlawful promise was not laid down as a ratio, but at best an Obiter dicta.

#30. In the later case of Bangalore Development Authority Vs. R. Hanumaiah5, it was however specifically declared that the equitable principle of promissory estoppel cannot be invoked for condoning or enforcing a promise, expressly prohibited by a statute. This Court speaking through Justice Ashok Bhan pronounced as under: “34. …In absence of any provision in the Act or the Rules framed thereunder authorizing BDA to reconvey the land, direction cannot be issued to BDA to reconvey a part of the land on the ground that it had promised to do so. The rule of promissory estoppel cannot be availed to permit or condone a breach of law. It cannot be invoked to compel the Government to do an act prohibited by law. It would be going against the statute. The principle of promissory estoppel would under the circumstances be not applicable to the case in hand.”

#31. From the above reading of the relevant judgments, it is abundantly clear that the equitable principle of promissory estoppel cannot be invoked for enforcing promises in the teeth of the provisions of law. Having concluded that the Government Order (20.03.2004), granting Sales Tax/ Works Contract Tax exemption was ultra vires theSection 10(1) of the KGST Act, the promise, in furtherance of Government Order, in the form of BIFR Scheme dated 17.01.2005 being unlawful, cannot in our view, be enforced on equitable consideration.

#32. Further, in Arcelor Mittal Nippon Steel (Supra) this Court