IN THE HON’BLE SUPREME COURT OF INDIA

NEW DELHI, INDIA

THE CASE REGARDING REVOCATION OF GOVERNMENT SCHEME

Bannari Amman Sugars Ltd.

(Appellant)

Vs

Commercial Tax Officer and Others

(Respondent)

MEMORANDUM FOR THE APPELLANT

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TABLE OF CONTENTS

Index of Authorities…………………………………………………………………….. 3

Books and Articles referred

List of Abbreviations

Statement of jurisdiction……...……………………………….…………………….……4

Synopsis of Facts…………………………………………………………………….……5

Issues raised…………………………...…………………………………………….……8

Summary of Arguments……………………………………………………………….….9

Advanced Arguments……………………………………………………………………10

Prayer.………...……………………………………………...………………………….15

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Index of Authorities

Table of Cases

Council of Civil Service Union V/s. Minister for the Civil Service (1985) AC 374 (408-

409)

Navjyoti Co-Op. Group Housing Society V. Union of India (1992) 4 SCC 477

Food Corporation of India V/s M/s Kamadhenu Cattle Feed Industries (1993) [SSC.7]

Union of India v/s. Hindustan Development Corporation (1993) 3 SCC 499

Books and Articles referred

The principles of Administrative Law by Dr. Avatar Singh

THE CONSTITUTION OF, 1950

List of Abbreviations

Art Article

AIR All India Reporter

Edn. Edition

HC High Court

Para Paragraph

r/w Read with

sec Section

u/s Under Section

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STATEMENT OF JURISDICTION

Invoking the Article 136 of the Constitution of India the Appellant

had filled the petition in the Hon’ble Supreme Court of India.

In the Supreme Court of India[Order XVI Rule 4(1)(a)]

Civil Appellate JurisdictionSpecial Leave Petition

(Under Article 136 of the Constitution of India)Special Leave Petition (Civil No. of )

(against the final Judgment and order dated of the Hon’ble Court of Judicature at on C.I.T. Appeal No. of )

Between................... Bannari Amman Sugars Ltd

And................... Commercial Tax Officer and Others

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SYNOPSIS OF FACTS

The Appellant Bannari Amman Sugar Ltd. set up two industrial units namely GOMs 1294 dated 24.10.1975 and GOMs 989 dated 1.09.1988 based on invocation of withdrawal of Tax Benefits on commercial production. The invocation of withdrawal of Tax Benefits were based on the exemption for purchase on sugarcane granted in favour of sugar mills established in co-operative and public sector which exceeded ceiling of Rs.300 lakhs during the period of five years. The exemption could be discontinued by the Government with retrospective effect. But with a condition that the held Tax Benefit could be withdrawn at any time and appellants had no vested right to claim the exemption.

The dispute arose against the Respondents Commercial Tax Officer and Others before the Division Bench of the Madras High Court which held that the withdrawal of benefits extended to the appellants as subsidy was in order. The appellants questioned legality of the G.O.Ms No. 989 dated 1.9.1988 directing discontinuance of purchase tax exemption in case of mills which exceeded the ceiling of Rs. 300 lakhs during the period of five years, and Government letter dated 28.12.1988 which made the aforesaid G.O.Ms. No. 989 of 1.9.1988 operative retrospectively from 1.4.1988. Division Bench of the Madras High Court which held that the withdrawal of benefits extended to the appellants as subsidy was in order. Initially the writ petitions were filed before the High Court, but after constitution of the Tamil Nadu Taxation Special Tribunal (hereinafter referred to as the 'Tribunal') the writ petitions were transferred to the Tribunal which held that on application of the principles of promissory estoppel and legitimate expectation, the withdrawal of benefit was not sustainable in law.

The State questioned correctness of the judgment before the High Court which, as noted above, held the G.O.Ms. And the Govt. letter to be valid, reversing the conclusions arrived at by the Tribunal. The judgment forms subject matter of challenge in these appeals. The doctrines of promissory estoppel and legitimate expectation were applicable to the facts of the case. There was no material to show existence of any overriding public interest to rule out application of the aforesaid doctrines there was no scope for

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retrospective withdrawal. In any event, before withdrawal of the benefits, no opportunity of hearing was granted. The High Court erroneously came to hold that the State Government had not filed any counter. The materials which were produced before the High Court and on the basis of which it was decided that the decision of the Government is in order were not even pleaded in the pleadings and during arguments. The appellants were taken by surprise by production of materials which were not even disclosed to the appellants. The contents of the files which were produced before the High Court and on which reliance was placed to hold against the appellants are not known to the appellants. In other words, there was clear violation of the principles of natural justice.

The respondent-State submitted that the appellants have failed to adduce any evidence or material to show that they were in any way induced by any governmental action to set up industries. In fact, the Government of Tamil Nadu vide G.O.Ms. No. 1284 dated 24.10.1875 granted exemption from purchase tax on sugarcane in favour of sugar mills established in "co-operative and public sectors" in the form of annual subsidy equivalent to purchase tax on sugarcane. There was no scope for any mis-understanding that it applied to any private sector participation in the sphere of sugar manufacturing in the present case on 22.1.1986. The appellants only made representation to Government subsequently claiming exemption at par with the cooperative and public sector mills. As there was no inducement or assurance, the question of any promissory estoppel did not arise. So far as legitimate expectation aspect is concerned, it is too well known that the benefit extended can be withdrawn and with this knowledge if the units are set up, the principle of legitimate expectation does not apply. The High Court recorded the following findings on the factual aspects.

(1) The respondents have established their units prior to the Government orders granting the subsidy and they have no vested right to claim exemption.

(2) No inducement was made in the Government orders to establish the units.

(3) The respondents have not acted on the basis of the Government Orders for establishing the units…

(4) The grant of subsidy is a concession and the Government has got good reasons for modifying the scheme in public interest.

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(5) No prejudice is caused to the respondents since the scheme was intended to make the units viable and the modified scheme provides for safeguards to that extent,

(6) The Order granting subsidy can be withdrawn in public interest. The Government has exercised their right to modify the scheme in the interest of public revenue.

The stand taken by the present appellants before the Tribunal and the High Court was

rejected. With reference to the files produced, certain factual conclusions were arrived at,

the correctness of those form the core challenge in these appeals. Further on failure on

appellant’s side the dispute had been taken for appeal.

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ISSUES RAISED

1. The Government scheme of which the appellant was benefited was

withdrawn by the Government without any adequate representation of the

appellants.

2. The retrospective effect given to the Government order on the purchase tax

revocation is against the cardinal principal of tax Laws.

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SUMMARY OF ARGUMENTS

1. The Government scheme of which the appellant was benefited

was withdrawn by the Government without any adequate

representation of the appellants.

The doctrines of promissory estoppel and legitimate expectation were applicable to the

facts of the case. There was no material to show existence of any overriding public

interest to rule out application of the aforesaid doctrines there was no scope for

retrospective withdrawal. In any event, before withdrawal of the benefits, no opportunity

of hearing was granted.

2. The retrospective effect given to the Government order on the purchase tax

revocation is against the cardinal principal of tax Laws.

. It is a cardinal principle of the tax law that the law to be applied is that in force in the

assessment year unless otherwise provided expressly or by necessary implication right

claimed by an assessee under the law in force In a particular assessment year is ordinarily

available only in relation to a proceeding pertaining to that years

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ARGUMENTS ADVANCED

1. The Government scheme of which the appellant was benefited was

withdrawn by the Government without any adequate representation of

the appellants.

The concepts of 'Promising Estoppel". Undue Enrichment and restitution and lastly

"Legitimate Expectation are abstract, ambiguous, and nebulous, nonetheless they are

vastly important in administration of administrative and commercial laws and an

enlightened and inquisitive remedy seeker could lift the veil and discover ample legal

relief. The doctrine of promissory estoppel is all too simple. A promissory estopple is

said to arise when there is a promise by which the promisor should reasonably expect

to induce action or forbearance of a definite and substantial character on the part of the

promisee and which does not induce such action or forbearance and such promise is

binding if injustice can be avoided only by enforcement of the promise. The law as

regards unjust enrichment and restitution was evolved in England where it is judge made

in India this law is codified in the contract Act, 1972 as "of relations those resembling as

created by contract". Restitution performs a corrective function where transactions fail, or

are made by mistake. Therefore the law of restitution is the law of failed or mistake

transactions. The phenomenon of undue enrichment deals with over paid income tax,

sales tax and excise duty. However it needs a penetrating vision to make use of these

laws which are more notional than conceptual. With the aforesaid introductory

observations I now come to the theme of this write up i.e. legitimate expectation.

The basic principles in the branch were enunciated by Lord Diplock in Council of Civil

Service Union V/s. Minister for the Civil Service1 it was observed in that case that for

legitimate expectation to arise, the decisions of the administrative authority must affect

the person by depriving him of some benefit or advantage which either

1 (1985) AC 374 (408-409) (commonly known as CCSU case)

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(i) he had in the past been permitted by the decision make to enjoy and which he can

legitimately expect to be permitted to continue to do until there has been communicated

to him some rational grounds for withdrawing it and which he has been given an

opportunity to comment or

(ii) he has received assurance from the decision maker that they will not be withdrawn

without giving him first an opportunity of advancing reason for contending that they

should not be withdrawn. The procedural part of it relates to a representation that a

hearing or other appropriate procedure will be afforded before the decision is made. The

substantive part of the principle is that if representations is made that a benefit a

substantive nature will be granted or if the person is already in receipt of the benefit

that it will be continued and not be substantially varied, then the same could be enforced.

In this case Lord Fracer observed that the civil servants had legitimate expectations that

they would be consulted before their trade union membership was withdrawn because

prior consultation in the past was the standard practice whenever conditions of service

were materially already. Lord Diplock even ruled that they had a legitimate expectation

that they would continue to enjoy the benefits of the trade union

membership, the interest in regard to which was protectable.

The principle of a substantive legitimate expectation, i.e. expectation of favorable

decision of one kind or another, has been accepted as a part of the English law in several

cases. However this doctrine has been rejected by the High Court of Australia and

Canada, but it has been favored in Ireland. The European Court even goes further and

permits the court to apply proportionality and go into balancing of the legitimate

expectation and the public interest. With the aforesaid back ground I shall now examine

the extent to which the principle to substantive legitimate expectation is accepted in our

country.

In the case of Navjyoti Co-Op. Group Housing Society V. Union of India2 on the

doctrine of legitimate expectation it has been held that person enjoying certain

benefits/advantage under the old policy of the Government derive a legitimate

2 (1992) 4 SCC 477

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expectation even though they may not have any legal right under the private law in the

context of its continuance. The doctrine of 'legitimate expectation imposes in essence a

duty on the public authority of act fairly by taking into consideration all the relevant

factors relating to such legitimate expectation that may have a number of different

consequences and one of such consequences is that the authority ought not to act to

defeat the legitimate expectation without some over-riding reasons of public policy to

justify its doing so. Within the conspectus of fair dealing in the case of legitimate

expectation, the reasonable opportunity to make representation by the parties likely to be

affected by any change of consistent past policy came in. In a case of legitimate

expectation if the authority proposes of defeat a person's legitimate expectation it should

afford him an opportunity to make a representation in the matter.

In the case of Food Corporation of India V/s M/s Kamadhenu Cattle Feed Industries3 it

has been held that non-arbitratrariness, fairness in action and due consideration of

legitimate expectation of the affected party are the essential requisities for a valid state

action. It has also been held that whether expectation is

legitimate is a question of fact which has to be determined in the larger public interest.

The Supreme Court in the case of Union of India v/s. Hindustan Development

Corporation4 elaborately considered this law. In the case it has been

held that the principle of legitimate expectation gave the applicant sufficient locus standi

to seek judicial review and that the doctrine was confined mostly to a right to fair hearing

before a decision which resulted in negativing a promise or withdrawing an undertaking

was taken. It did not involve any crystallized right. The protection of such legitimate

expectation did not require the fulfillment of expectation where the overriding public

interest required otherwise. However, the burden lay on the decision maker to show such

an overriding public interest. In this case several English and Australian cases were

referred to and conclusions were then reached.

With the passage of time we are getting enlightened to the various fundamental rights as

guaranteed by the Constitution under Article 14 of the constitution. We have a right to 3 (1993) [SSC.7]4 (1993) 3 SCC 499

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equality but the executive and administrative excesses many a time deprive us of this.

There is therefore a constant demand that the administrative action must be fair,

reasonable and non-arbitrary. This is an enlargement principles of natural justice. The

doctrine of legitimate expectation has its genesis in the field of administrative law.

Precisely speaking the Government and its departments, in administering the affairs of

the country are expected to honour their statements of policy or intention and treat the

citizen equally without any iota of abuse of discretion. The policy statement can not be

disregarded unfairly or applied selectively. Unfairness in the form of unreasonableness is

akin to violation of natural justice. It was in this context that the doctrine of legitimate

expectation finds its origin.

The emerged concept of legitimate expectation in administrative law has now

undoubtedly gained sufficient importance. It is observed that legitimate expectation is the

latest recruit to a long list of concepts fashioned by the courts for the review of

administrative action. The legitimate expectation would arise when there is an express

promise give by a public authority that there is a regular practice of certain thing which

the claimant can reasonably expect to continue. It therefore follows that the concept of

legitimate expectation consists in inculcating an expectation in the citizen that under

certain rules and scheme he would continue to enjoy certain benefits of which he shall

not be deprived unless there is some overriding public interest to deprive him of such an

expectation. This is a procedural right which in certain contingencies becomes

substantive right. It is rather a safety value against the abuse of discretion by the over

zealous administrative authority. Ostensible it may not have a sound and fury but

certainly it signifies a lot on the right of equality in the modern progressive society with

fast changing social values and a new economic order. new concepts have surfaced, their

judicial redress is sought of it legal injury or legal wrong is inflicted by the acts and

omissions of the executive and the administrative authorities. The doctrine of legitimate

expectation is such a concept but judicial attempts need be made to delineate parameters

that embrace both "promissory estoppel" and legitimate expectation so that they may not

interplay and interact to the detriment of the remedy seeker.

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2. The retrospective effect given to the Government order on the purchase tax

revocation is against the cardinal principal of tax Laws.

Retrospective effect of rules and notifications – An authority cannot make rules or issue

notifications adversely affecting the assessee’s rights with retrospective effect, unless the

statute, whether expressly or by necessary intendment, empowers the authority to do so –

Income Tax Officer v Ponnoose5. This principle received statutory recognition in section

295(4) w.e.f. 18.8.1974 inserted by Direct Taxes (Amendment) Act, 1974.

5 [1970] 75 ITR 174 (SC)

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PRAYER

Wherefore, in the light of the issue raised, arguments advanced and authorities cited

above the respondents pray that the Hon’ble court may be please to:

1. Declare the revocation of government scheme is invalid and to allow representation

from the appellant.

2. And to pass any other order or orders at this Hon’ble court may deem fit and proper in

the circumstances of this case and thus render justice.

Respectfully Submitted

Counsel for the Respondents

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