STATE OF RAJASTHAN AND ANR. versus M/S. MAHAVEER OIL INDUSTRIES AND ORS.

Citation: [1999] 2 S.C.R. 798 · Decided: 22-04-1999 · Supreme Court of India · Bench: SUJATA V. MANOHAR, R.C. LAHOTI, D.P. MOHAPATRA · Disposal: Disposed off

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
STATE OF RAJASTHAN AND ANR. 
v. 
M/S. MAHA VEER OIL INDUSTRIES AND ORS. 
APRIL 22, 1999 
B 
[MRS. SUJATA V. MANOHAR, D.P. MOHAPATRA AND 
R.C. LAHOTI, JJ.] 
Administrative Law : 
C 
Promissory estoppel-Oil extraction and manufacturing industry-
Exemption notification dated 23.5.1987-!ncentive scheme to new industries 
exempting from payment of sales tax-Failure of the scheme to achieve its 
object in oil industry-Notification dated 7. 5.1990, withdrawing benefit of 
exemption from oil industries-Validity of-Held; supervening public interest 
to prevail over promissory estoppel-Government not precluded from 
D withdrawing benefit of sche"Je in public interest-Notification dated 7.5.1990 
issued in valid exercise of power by State Government-Oil industries not 
entitled to claim exemption-Rajasthan Sales Tax Act, 1954-Sec. 4(2)-
Central Sales Tax Act, 1956. 
E 
Respondent-industry was engaged in the business of oil extraction and 
.manufacture. Appellant-State issued a notification dated 23.5.1987, under 
Sec. 4(2) of the Rajasthan Sales Tax Act, 1954, exempting inter alia, new 
industrial units from payment of sales tax. Oil extracting and manufacturing 
industries were eligible for the benefits of the said scheme. During the 
subsistence of the said scheme the State Government by a notification dated 
F 7.5.1990, amended the notification dated 23.5.1987. The benefits ofincentiVe 
scheme was withdrawn from oil extracting and manufacturing industries 
both under the State Sales Tax Act and Central Sales Tax Act, 1956. 
Respondents, application for eligibility certificate was rejected. Thus, writ 
petition before High Court was filed challenging the notification dated 
G 7.5.1990. Single Judge of the High Court quashed the said notification and,_ 
directed· the appellant to issue eligibility certificate to respondents. In the 
meantime, High Court in Gopal Oil Mills* case allowed the benefit of 
incentive scheme, which on appeal was stayed by this Court on 4.4.1994 .. 
Subsequently, this Court in the said case upheld the validity of notification 
dated 7.5.1990 under the State Sales Tax Act and set aside the one issued 
H under the Central Sales Tax Act. The Division Bench of the High Court, in 
798 
STATE v. MAHA VEER OIL INDUSTRIES 
799 
the instant case, without noticing the judgment of this Court in Gopal Oil A , 
Mills *case dismissed the appeal of State. Hence the present appeal. 
On behalf of the appellant-State it was contended that it was open in 
public interest to withdraw any concession which it may have granted under 
the incentive scheme. 
B 
On the other hand, the contention of the respondents was that by 
framing the incentive scheme, the State had held out a promise and relying 
upon that promise they had taken out effective steps to set up the new 
industrial unit within that period. Hence on the doctrine of promissory 
estoppel, it would not be open to the State to withdraw the benefit of the 
scheme by the notification of 7.5.1990. 
C 
Disposing of the appeal, this Court 
HELD: 1. The notification dated 7.5.1990, withdrawing the benefits 
under the incentive scheme, was issued in valid exercise of power by the D 
appellant-State. Thus, respondent-industries were not entitled to the benefit 
of the incentive scheme, exempting payment of sales tax under the Rajasthan 
Sales Tax Act, 1954. (807-G] 
2.1. Public interest requires that the State be held bound by the promise 
held out by it. But this does not preclude the state from withdrawing the E 
benefit prospectively even during the period of the scheme, if public interest 
so requires. Even in a case where a party has acted on the promise, if there 
is any supervening public interest which requires that the benefit be 
withdrawn or the scheme be modified, that supervening public interest would 
prevail over any promissory estoppel. (805-F-GJ 
• 
Kasinka Trading & Anr. v. Union of India & Anr., (1995J 1 SCC 274; 
Union of India & Ors. v. Godhawani Brothers & Anr., (1997) 11 SCC 173 
and Shrijee Sales Corporation & Anr. v. Union of India, (1997) 3 SCC 398, 
relied on. 
F 
2.2. In the instant case, appellant-State has pointed out in their affidavit, G 
the experience with regard to implementation of the said incentive scheme 
during the years 1988 and I 989 revealed that the object of having more new 
industries in the areas specified could not be achieved, particularly in the 
case of oil industry and cotton industry. On the contrary, the policy had 

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