STATE OF BIHAR & ORS. versus KALYANPUR CEMENTS LTD.

Citation: [2010] 1 S.C.R. 928 · Decided: 08-01-2010 · Supreme Court of India · Bench: TARUN CHATTERJEE · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
[2010] 1 S.C.R. 928 
STATE OF BIHAR & ORS. 
v. 
KALYANPUR CEMENTS LTD. 
(Civil Appeal No. 5181 of 2002) 
JANUARY 8, 201.0 
[TARUN CHATTERJEE AND SURINDER SINGH 
NIJJAR JJ.] 
Industrial Policy, 1995 - Clauses 22(2)(i) and 24 - Sales 
C tax exemption - Sick company .:... Assistance to the company 
for restructuring agreed by financial institutions, on the 
condition that it obtained sales tax exemption from State 
Government - Repeated assurance by State Government to 
issue sales tax exemption Notification - Writ petition seeking 
D direction to issue the Notification - State first informed the 
High court that it would issue Notification after approval of 
proposal of Notification - Later informed the Court that State 
has decided not to grant sales tax incentives to sick 
companies - High Court quashed the decision of the State 
E 
and directed it to issue the Notification - On appeal, Supreme 
Court by interim order directing the company to deposit an 
amount equivalent to sales tax payable by it in a Bank - The 
amount to be payable to the party which ultimately succeeded 
- State issuing the Notification - Failure of company to 
F 
deposit the amount taking the plea that it was sick - Held: 
Denial of sales tax exemption is arbitrary - The State initially 
having given repeated assurances, was estopped from 
denying the grant of exemption at later stage - Company 
rightly invoked the doctrine of promissory estoppel - State 
G cannot take advantage of its own lapses in implementing the 
Industrial Policy for denying the claim of the company - The 
decision making process culminating into orders denying 
grant of exemption is seriously flawed - However, the 
company, in view of its financial condition, cannot be permitted 
H 
928 
. 
. 
STATE OF BIHAR & ORS. v. KALYANPUR CEMENTS 929 
LTD_ 
to retain the amount collected from the customer on sale of A 
its product -
This would amount to unjust enrichment -
Direction to release the amount deposited by the company 
pursuant to interim order of Supreme Court, to the State -
Doctrine of Promissory estoppel - Unjust Enrichment. 
Administrative Law - Doctrine of promissory estoppel -
lnvokabi/ity of - Discussed. 
Taxation - exemption of tax and refund of tax - Difference 
between. 
Words and Phrases - 'Sick unit' - Meaning of, in the 
context of Industrial Policy, 1995. 
Respondent-Company was declared as a sick unit, 
B 
c 
by the Board for Industrial and Financial Reconstruction. 
0 
The company, in order to rehabilitate itself sought 
assistance from financial institutions for restructuring 
package. The proposal for financial assistance and 
restructuring was approved by various financial 
institutions subject to the condition that the company 
obtained a sales tax exemption for a period of 5 years 
E 
from the State Government, in terms of Industrial Policy, 
1995. The company applied for grant of sales tax 
exemption. Thereafter the matter remained pending for 
consideration by the State Government and financial 
institutions. In various meetings of the State, the 
F 
Company and the financial institutions, categoric 
assurances were given by the State that necessary sales 
tax exemption Notification would be issued. However, no 
such Notification was issued. 
The company filed a writ petition seeking direction 
to the State to issue necessary Notification. The State 
stated that it would be possible to issue the Notification 
after approval of proposal of Notification by the Chief 
G 
H 
930 
SUPREME COURT REPORTS 
[2010] 1 S.C.R. 
A (Finance) Minister. Thereafter the State informed the Court 
that the State by order dated 6.1.2001 had decided not to 
grant any sales tax incentives to sick industrial units, and 
therefore the claim of the company was rejected. The 
company, therefore, amended the petition, challenging 
B the decision dated 6.1.2001. The State in its further 
affidavit stated that the decision of the State was later 
considered by the Cabinet on 5.3.2001 and it was decided 
not to issue any Notification. High Court allowed the writ 
petition quashing the decisions dated 6.1.2001 and 
c 5.3.2001. The Court directed the State to issue follow up 
Notification to give effect to the provisions of the Policy. 
Hence the present appeal. 
Supreme Court by an interim order dated 18.11.2002 
directed the respondent-company to deposit an amount 
D equivalent to the sales tax payable by it as and when it 
became due, in an interest bearing account of a Ba

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