Swamijee Mills Limited vs The State of Tamil Nadu and Others

Ramanujam, J.—The Petitioner is a spinning mill at Sivakasi having lets than 20,000 spindless in 1969. It was paying tax under Rule 18 of the Tamil Nadu General Sales Tax Rules, 1959 on the sales of cotton yarn and also on the purchase of cotton inside the State of Tamil Nadu. In G.O. Ms. No. 2871, Revenue dated, 30th September, 1969, the spinning mills with installed capacity of 20,000 spindless and below were allowed to retain 50 percent of the sales tax payable by them as interest free loans for a period of five years with effect from 1st June, 1969 and to pay the arrears in half-yearly installments from the sixty years As the Petitioner mill fell under the category of mills having less than 20,000 spindless, they were allowed to pay 50 percent of the tax due on the first sales of cotton yarn from May, 1970 retaining the other 50 percent as interest free loans. Subsequently, the Government passed G.O. Ms. No. 2111, Industries dated 8th September, 1971 under which a scheme of advancement of cash loans to the sick mills by the Handlooms Department to cover the collection of 50 percent sales tax deferred in the earlier G.O. was introduced. Under the second G.O. of the year 1971, the Director of Handlooms was instructed to disburse loans to the respective mills and to give credit to the Commercial Taxes Department by book adjustment towards sales tax dues of the respective mills. In view of the second G.O. referred to above, the first G.O., namely, G.O. No. 2171, Revenue, dated 30th September 1969 was cancelled in G.O. Ms. No. 1878, Revenue dated 26th June 1972. In view of last G.O. of the year, 1972 canceling the earlier G.O. of the year 1969 permitting the retention of 50 percent of the sales tax as interest free loan, the third Respondent, by a notice dated 31st July 1972, called upon the Petitioner mill to pay the arrears of tax from April, 1972 onwards. The Petitioner contended that G.O. of the year 1972 will be applicable only to sick mills and not to the mills having less than 20,000 spindless. The third Respondent, however, did not agree with the objections put forward by the Petitioner and, therefore, issued B-2 notices on the basis of A-2 returns submitted by the Assessees for the period subsequent to 1972. Against such action of the third Respondent the Petitioner preferred a revision petition to the Deputy Commissioner (Commercial Taxes), Madurai, who dismissed the revision petition holding that the Petitioner is not eligible to retain 50 percent of the tax after the issuance of the G.O. Ms. No. 1878, Revenue, dated 26th June 1972. Thereafter, the third Respondent issued notice on 12th December 1972 calling upon the Petitioner to remit the arrears of tax within three days from the date of the receipt of the notice. At this stage, the Petitioner has approached this Court, praying for a writ of mandamus directing the Respondents not to give effect to the G.O. Ms. No. 1878, Revenue, dated 26th June 1972.

The contentions advanced by the Petitioner in this writ petition are two-fold. Firstly, G.O. Ms. No. 1878, Revenue, dated 26th June, 1972 will apply only to the sick mills, that the original G.O. Ms. No. 2171, Revenue, dated 30th September, 1969 is still applicable to the mills having less than 20,000 spindles s and that therefore, the Petitioner is still entitled to retain 50 percent of the sales tax as per the 1969 G.O. Secondly, it is contended that even assuming that the said 1972 G.O. is applicable to the mills having less than 20,000 spindless, the benefit given under the 1969 G.O. to the Petitioner cannot be withdrawn, as the Petitioner has suffered a detriment by way of investment of the said 50 percent of the tax retained by it for the purchase of machinery and for improvement of the mills and that, therefore, the Government is estopped from taking away the benefit unilaterally and calling upon the Petitioner to pay the tax retained under the said G.O. Thus the first contention of the Petitioner involves an interpretation of the G.O. Ms. No. 1878, Revenue dated 26th June, 1972 and the other is based on the plea of estoppel.

G.O. Ms. No. 2171, dated 30th September 1969 (hereinafter referred to as the 1969, G.O.) permits the retention of 50 percent of the sales tax on sale of yarn as interest free loan with effect from 1st June 1969 for a period of five years by the following milk:

(a) Mills with installed capacity of 20,000 spindles and below.

(b) Mills given guarantee by the Government, and

(c) Mills taken over by the Tamil Nadu Textile Corporation.

In accordance with this G.O. the Petitioner is said to have retained 50 percent of the sales tax as interest free loan. Later, the Government introduced a new scheme of advancement of cash loan to the sick mills by the Handloom Department to cover the extent of 50 percent of sales tax deferred in the 1969 G.O. In execution of that scheme, the Government directed the Director of Handlooms to disburse the loan to the respective textile mills and to given credit to the Commercial Taxes Department by book adjustment towards sales tax dues of the respective mills. In view of the introduction of the new scheme in 1971 of advancement of cash loan by the Director of Handlooms, the 1969 G.O was cancelled by G.O. Ms. No. 1878, Revenue, dated 26th June 1972 (hereinafter referred to as the 1972 G.O.). According to the Petitioner, since the scheme of advancement of cash loan is applicable only to the sick mills, i.e., the mills taken over by the Tamil Nadu Textile Corporation, the cancellation G.O. of 1972 should be taken to apply only to the sick mills and not to the other two categories referred to in 1969 G.O. But, however, a perusal of the 1971 G.O. which introduced a new scheme of advancement of cash loan clearly indicates that the scheme of advancement of cash loan applies to all the three categories of mills referred to in the 1969 G.O. which have been referred to as sick mills in the said G.O. The 1971 G.O. refers to the recommendation of the Director of Handlooms and Textiles that since all the Co-operative Spinning Mills in the State are having less than 20,000 spindles each, the concession offered to the sick textile mills in the payment of sales tax may be extended to the Co-operative Spinning mills also which had been accepted by the Government. Thus the recommendation of the Director of Handlooms and Textiles proceeds on the basis that all the mills to whom concession has been given under the 1969 G.O. are sick mills and those concessions should also be extended to the co-operative spinning mills. The G.O. also refers to the legal and administrative problems in the implementation of the above concession granted under the 1969 G.O. and the necessity for introducing a new scheme under which cash loans are to be advanced to all the three categories of mills referred to in the 1969 G.O. as also the co-operative spinning mills. As the original scheme of retention of 50 percent by the mills has been replaced by a new scheme of advancement of cash loans from the Director of Handlooms, the earlier G.O. of 1969 had been cancelled. As a matter of fact, the Petitioner had also a vailed of the subsequent scheme for one year and the 50 percent of the sales retained has been treated as cash loan by the Director of Handloom. That also shows that the mills which have less than 20,000 spindles are also entitled to the cash loan from the Director of Handlooms in pursuance of the 1971 G.O. It is not, therefore, possible to accept the case of the Petitioner hat the 1971 G.O. will not apply to the Petitioner-mill. The words sick mills referred to in the 1971 G.O. have to be taken to refer to all the categories of mills referred to in the 1969 G O. and as such the Petitioner''s stand that the original scheme as contemplated in the 1969 G.O. has not been substituted by another scheme in relation to the mills having less than 20,000 spindles, is not correct.

Coming to the second contention based on the plea of estoppel, the Petitioner''s case is that it has utilized 50 percent of the sales tax retained by it for the purpose of purchase of the machinery and for improvement of the mills and therefore, the original scheme cannot be withdrawn. Even assuming that what the Petitioner says is true, the question is whether that will enable him to contend that a benefit given in the 1969 G.O. cannot at all be withdrawn once the Petitioner has utilized those amounts retained. As already stated, the scheme permitting retention of 50 percent of the sales tax introduced by the 1969 G.O. has been continued in a different form in the 1971 G.O. The 50 percent of tax retained by the Petitioner is treated as cash loan disbursed by the Director of Handlooms. Therefore, it is not possible to accept the case of the Petitioner that the benefit granted under the 1969 G.O. has totally been withdrawn which the Government are estopped from doing. The benefit given in the 1969 G.O. has in fact been continued in a different form. As already stated, the Petitioner also took advantage of the 1971 G.O. for one year by making the necessary application to the Director of Handloom for the disbursement of cash loan to the extent of 50 percent of the sales tax allowed to be retained under the 1969 G.O. But, however the Petitioner has not subsequently applied for the cash loan by making the necessary application and, therefore, it has not got the benefit of the 1971 G.O. Though on these facts, the question of estoppel may not strictly arise when the benefit under the 1971 G.O. has not been claimed by the Petitioner by making the necessary application to the Director of Handlooms for the disbursement of cash loans, since the point was argued at length, it is necessary to dispose of that point also. According to the Petitioner, on the faith of the 1969 G.O. the amounts retained by the Petitioner have been utilised for the purchase of machinery and for the improvement of the mills which the Petitioner would not have done otherwise and that, therefore, the Government is estopped from withdrawing the benefit conferred under the 1969 G.O. In support of his contention, the learned Counsel refers to the two decisions of the Supreme Court, Union of India v. Anglo Afghan Agencies AIR 1968 S.C. 718 and Century Spinning and Manufacturing Company Ltd. and Another Vs. The Ulhasnagar Municipal Council and Another, . In the first case, the Supreme Court held that the Government are not exempt from the equity arising out of the acts done by citizens to their prejudice, relying upon the representations as to its future conduct made by the Government, relying on the following observations of Denning J., in Robertson v. Minister of Pension (1949) 1 K.B. 227:

The Crown cannot escape by saying that estoppels do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the Crown cannot bind itself so as to better its future executive action

In Century Spinning and Manufacturing Company Ltd. and Another Vs. The Ulhasnagar Municipal Council and Another, it was held that public bodies are as much bound as private individuals to carry out representations of facts and promises made by them, relying on which other persons have altered their position to their prejudice, and that the obligation arising against an individual out of his representation amounting to a promise may be enforced ex contractu by a person who acts upon the promise. In those two cases, the public authorities had originally given a promise to act in a particular manner and the citizens acting on those representations have altered their position to their prejudice. The Supreme Court, therefore, held that the authorities, who made the representations which have been acted upon by the parties, are bound to make good those representations. In those cases, on the representations made by the public authorities, the parties have acted to their prejudice which they would not have done, but for the representations.

In Asst. Custodian E.P. v. B.K. Agarwalal AIR 1974 S.C. 2325 the Supreme Court has doubted the view expressed in the two earlier cases where the observation of Denning J., was held applicable to India. In the above decision, their Lordships of the Supreme Court have specifically referred to the observations of Denning J. and stated "we are of opinion that the view taken by the House of Lords Howell v. Falmouth Boat Construction Co. (1951) A.C. 837 is the correct one and not the one taken by Lord Denning Robertson v. Minister of Pension (1949) 1 K.B. 227.

In this case, I do not see as to how the principles laid down in the earlier two cases referred to above will apply to the facts of this case. With a view to help the textile mills to pass over the crisis in textile industry, retention of sales tax was permitted as a relief measure by the 1969 G.O. The grant of the said relief cannot be said to be a representation on the basis of which the mills were expected to act to their prejudices. If the Petitioner has purchased machinery and also improved the mills, it has done so in the course of carrying out its objects. That is not a step taken by the mill on the suggestion or at the instruction of the Government, who introduced the relief measure. The relief was given without reference to the conduct of the mill and without imposing any condition. If the relief has been given on the basis of certain conditions and the conditions have been fulfilled by the party it may be possible to say that the benefit cannot be withdrawn subsequently. But where the grant of relief is without reference to any future conduct on the part of the mill, no plea of estoppel could arise when the relief is sought to be withheld or withdrawn. I have to, therefore, hold that the principle of estoppel will not apply to the facts of this case.

The writ petition, therefore, fails and is dismissed. There will, however, be no order as to costs.