M/s. MAKS Casting Private Limited V. Govt. of A.P. rep., by its Principal Secretary, Revenue (CT II) Department, Secretariat, Hyderabad and four others

WP/14636/2009

AI Insights

The case involves multiple writ petitions filed by various industrial units against the Government of Andhra Pradesh, challenging the amendment to Rule 67 of the A.P. VAT Rules, 2005, by G.O.Ms. No.503 dated 08.05.2009. The petitioners argued that the amendment was illegal, arbitrary, and violated their rights under the Constitution, as it altered the terms of tax exemption and deferment previously granted under the industrial policy 'Target-2000'. The Government defended the amendment as necessary to ensure parity between different classes of tax deferment units and to prevent undue advantages previously enjoyed by some units. The court examined the legal provisions, the historical context of the industrial policy, and the specific terms of the tax exemption and deferment granted to the petitioners.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 799740 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 09-09-2010
• Assessment Year: misc
• Other Referred Cases: Murthy Match Works v. CCE, American Jurisprudence 2nd Edition Vo.16 para 504, Ombalik Das v. Hulisa Shaw, Basheer v. State of Kerala, G.K. Krishnan v. State of Tamil Nadu, State of U.P. v. Kamla Palace, Ganga Sugar Corpn. Ltd. v. State of U.P., P.M. Ashwathanarayana Setty v. State of Karnataka, Kerala Hotel and Restaurant Assn. v. State of Kerala, Punjab University v. Subash Chander, Shiv Bahadur Singh v. State of Vindhya Pradesh, Union of India v. Madan Gopal Kabra, State of Bombay v. Vishnu Ramchandra, Sajjan Singh v. State of Punjab, Kapur Chand v. B.S. Grewal, Financial Commissioner, Punjab, Chandigarh, T.K. Lakshmana Iyer v. State of Madras, Bombay Conducts & Electricals v. Chandramouli, M/s. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, Union of India v. Godfrey Phillips India Ltd, M/s. Pine Chemicals Ltd. v. Assessing Authority, M/s. Vadilal Chemicals Limited v. State of A.P, Mahabir Vegetable Oils (P) Ltd. v. State of Haryana, U.P. Power Corporation Ltd. v. Sant Steels & Alloys (P) Ltd, Sharma Transport v. Government of A.P., Narinder Chand Hem Raj v. Lt. Governor, Administrator, Union Territory, Himachal Pradesh, Roxy Roller Flour (P) Ltd v. Govt. of A.P., M/s. MRF Ltd., Kottayam v. Asst. Commissioner, State of Punjab v. Nestle India Ltd
• Laws Referred To: Constitution of India, APGST Act, 1957, A.P. VAT Act, 2005
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: GP FOR COMMERCIAL TAXES
• Assessee Lawyers: D RAO
• Keywords: Delegated legislation; Industrial Policy; Legislative power; Promissory Estoppel; Sales Tax; Tax Exemption; Tax deferment
• Section: 14; 265; 78; 19(1)(g); 69(1); 78(2)(a); 69(3)

Judgement Text

"* THE HON'BLE SRI JUSTICE GODA RAGHURAM AND * THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN + WRIT PETITION Nos. 12804, 12439, 12595, 13223, 13353, 13259, 13661, 14083, 14398, 14558, 14636, 14945, 14955, 15304, 15286, 15296, 15315, 15491, 15499, 15523, 15754, 16041, 16414, 16552, 17227, 17366, 17732, 18059, 18819, 18820, 18823, 18828, 18839, 18902, 19261, 19302, 19312, 19378, 19465, 19535, 19615, 19976, 20142, 20143, 20175, 20352, 20444, 20514 20520, 21241, 21289, 21684, 22990, 23665, 27364, OF 2009 AND 28, 2300, 2313, 2314, 2322, 2324, 2342, 2343, 2345, OF 2010 W.P. No.12804 OF 2009: % Dated -09-2010 # M/s. MAKS Casting Private Limited. …. Petitioner Vs. $ Govt. of A.P. rep., by its Principal Secretary, Revenue (CT II) Department, Secretariat, Hyderabad and four others. …. Respondents ! Counsel for the Petitioner: Mr. D. Hanumanth Rao ^ Counsel for the Respondents: G.P. for Commercial Taxes HEAD NOTE: ? Cases referred 1. (1974) 4 SCC 428 2. (2002) 4 SCC 539 3. (2004) 3 SCC 609 4. (1975)1 SCC 375 5. 411 US 1 6. (1964) 5 SCR 975 7. (2007) 5 SCC 447 8. (2000) 1 SCC 557 9. (1980) 1 SCC 223 10. (1974)4 SCC 656 11. 1989 Supp (1) SCC 696 12. (1990) 2 SCC 502 13. AIR 1996 SC 869 14. (1989) 3 SCC 634 15. (1993) 3 SCC 677 16. (1970)1 SCC 189 17. (1976) 1 SCC 834 18. AIR 1971 SC 2145 19. (1985) 4 SCC 237 20. (1992) 2 SCC 515 21. Vol.18 (1994) APSTJ 139 22. (2005) 7 SCC 348 23. (2005) 1 SCC 625 24. AIR 1984 SC 1415 25. AIR 1953 SC 394 26. AIR 1954 SC 158 27. AIR 1961 SC 307 28. AIR 1964 SC 464 29. AIR 1965 SC 1491 30. 2002(2) ALD 96 (DB) 31. AIR 1968 SC 1489 32. (1990) 4 SCC 594 33. (1985) 3 SCC 398 34. (1990) 3 SCC 223 35. 1981(2) SCR 866 36. (2006) 4 SCC 517 37. (1989) 3 SCC 396 38. (2007) 13 SCC 673 39. (1979) 2 SCC 409 40. 1985 (4) SCC 369 41. 2010 (28) VST 1 (SC) 42. 986 (Supp) SCC 728 43. AIR 1991 SC 14 44. Vol. 16 (1993) APSTJ 227 45. (1995) 1 SCC 274 46. AIR 1968 SC 718 47. (1992) 2 SCC 683 48. (2005)6 SCC 292 49. (2006) 3 SCC 620 50. (1996) 8 SCC 702 51. (2008) 2 SCC 777 52. 2002(2) SCC 188 53. Vol. 29 (1972) STC 169 (SC) 54. (1962)2 SCR 169 55. (2006) 12 SCC 753 56. (2004) 6 SCC 465 THE HON'BLE SRI JUSTICE GODA RAGHURAM AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION Nos. 12804, 12439, 12595, 13223, 13353, 13259, 13661, 14083, 14398, 14558, 14636, 14945, 14955, 15304, 15286, 15296, 15315, 15491, 15499, 15523, 15754, 16041, 16414, 16552, 17227, 17366, 17732, 18059, 18819, 18820, 18823, 18828, 18839, 18902, 19261, 19302, 19312, 19378, 19465, 19535, 19615, 19976, 20142, 20143, 20175, 20352, 20444, 20514 20520, 21241, 21289, 21684, 22990, 23665, 27364, OF 2009 AND 28, 2300, 2313, 2314, 2322, 2324, 2342, 2343, 2345, OF 2010 ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan) The validity of G.O.Ms. No.503 Revenue (CT-II) Department dated 8.5.2009, whereby Rule 67 of the A.P. VAT Rules, 2005 was amended, is under challenge in this batch of writ petitions as being illegal, arbitrary, in violation of Articles 14, 19(1)(g) and 265 of the Constitution of India, contrary to the industrial policy of the State Government in G.O.Ms. No.108 dated 20.05.1996, and the final eligibility certificate issued to the petitioners. The consequential demand notices, whereby the petitioners were called upon to pay the deferred sales tax immediately, are also under challenge. 2. It would suffice, for the disposal of this batch of writ petitions, if the facts in W.P. No.2324 of 2010 are noted. The petitioner, a partnership firm, is also a small scale industry engaged in the business of purchasing bengal gram and manufacturing fried gram known as ‘putnalu’. It is a dealer registered under the APGST Act, 1957 and the A.P VAT Act, 2005 (hereinafter referred to as the “Act”). 3. In order to accelerate industrial development in the State, the State Government introduced a new industrial policy called “Target- 2000” which was notified in G.O.Ms. No.108, Industries & Commerce (I.P) Department, dated 20.05.1996. Under “Target – 2000” all new industrial units, whether large, medium or small, which had commenced production on or after 15.11.1995 were eligible for certain incentives including sales tax concessions. Under para 6.03 of “Target – 2000” each industry was given two options. The first option was that they were entitled for sales tax deferment, limited to 135% of the fixed capital investment, for a period of 14 years. The deferred amount was to be treated as a deemed loan on the security of the fixed assets of the industry pari-passu with the financial institutions, and on finalization of assessment by the commercial tax authorities each year. The second option was sales tax exemption for a period of seven years, limited to a ceiling of 135% of the fixed capital investment during the entire holiday period, effective from the date of commencement of commercial production. All industrial units, in this batch of Writ Petitions, opted for sales tax exemption. The petitioner in W.P. No.2324 of 2010 was issued a final eligibility certificate by the 4th respondent on 28.04.2000 for Rs.16,55,175/- to be availed over a period of seven years commencing from 04.10.1999 and ending on 03.10.2006. The petitioner availed Rs.11,68,625/- as tax exemption upto 31.03.2005 and the balance sales tax deferment to be availed, as on 01.04.2005, stood at Rs.4,86,550/-. 4. The APGST Act, 1957 was repealed and the A.P. VAT Act, 2005 came into force with effect from 01.04.2005. Section 69(1) of the Act required an industrial unit, availing tax exemption on the date of commencement of the Act, to be treated as a unit availing tax deferment. Consequently, the petitioner was also treated as a unit availing tax deferment. Rule 67 of the A.P. Value Added Tax Rules, 2005 (for brevity “Rules”) prescribes the manner in which tax incentives are required to be treated. The petitioner had availed tax exemption for a period of 4 years 5 months 27 days upto 31.03.2005 from out of the original period of 7 years of tax exemption. The remaining period, under the earlier scheme of tax exemption, stood at 2 years 6 months and 3 days as on 01.04.2005. After doubling the remaining period, as stipulated by Rule 67, the remaining period available to the petitioner for availing tax deferment was 5 years and 6 days i.e., the petitioner could avail tax deferment upto 07.04.2010. It is the petitioner’s case that, in accordance with G.O.Ms. No.108 dated 20.05.1996, they were required to repay the deferred tax over a period of 14 years without interest, and that repayment of the monthly tax would start only from the year 2019 onwards. On being assessed to tax for the years 2005-06 and 2006-07 on 17.10.2008, the petitioner claims to have been informed that repayment should start from April, 2019 onwards. 5. The illustration appended to Rule 67 was substituted, and Sub- Rule (5) inserted to Rule 67, by G.O.Ms. No.503 Revenue (CT-II) Department dated 08.05.2009. Pursuant thereto the 5th respondent, by proceedings dated 16.06.2009, called upon the petitioner to pay Rs.2,05,271/- immediately as the said amount had become due in terms of the amended Rules. A demand notice was issued on 19.01.2010. 6. Oral submissions were made, and written arguments filed, by Sri P.S. Rajasekhar, Sri S. Dwarakanath and Sri V. Bhaskar Reddy, learned counsel for the petitioners and Sri A.V. Krishna Koundinya, learned special standing counsel for commercial taxes. The rival contentions can conveniently be classified under the following heads: I. CLASSIFICATION IS ARBITRARY AND IN VIOLATION OF ARTICLE 14 OF THE CONSTITUTION OF INDIA: 7. It is contended on behalf of the petitioners that, under G.O.Ms. No.108 dated 20.05.1996, the sales tax deferred during the first year had to be repaid in a lumpsum at the end of 14 years without interest; as the petitioners had opted for sales tax holiday they were not required to pay sales tax till they had exhausted the sales tax incentives fixed in their eligibility certificate; the sales tax incentives offered to tax holiday units was dual in nature; one was with a view to pass on the benefit to the ultimate consumers, and the other was to enable these units to sell their products at a competitive price thereby increasing their sales turnover compared to the units which did not have the incentive of sales tax holiday; the tax holiday units were prohibited from collecting sales tax during the tax holiday period; the amendment, by G.O.Ms. No.503 dated 08.05.2009, puts those who had not completely availed the benefit of tax exemption before 31.03.2005 at a disadvantage compared to those who had completely availed the benefit before 31.03.2005; the “Act” required the tax holiday units, on their conversion into the tax deferment scheme, to be treated on par with the original tax deferment units from 01.04.2005; the amendment, by G.O.Ms. No.503 dated 08.05.2009, differentiates them; and, as persons similarly situated are treated differently, the impugned G.O. is arbitrary and in violation of Article 14 of the Constitution of India. 8. Sri A.V. Krishna Koundinya, learned special standing counsel for commercial taxes, would submit that on conversion, into the tax deferment scheme from the tax holiday scheme with effect from 01.04.2005, the petitioners were permitted to collect tax from their customers and utilize the amounts; the tax so collected was to be repaid only after completion of the deferment period as contemplated under the amended Rule; the petitioners have not been asked to pay any tax for the period prior to their conversion as tax deferment units; they enjoyed tax exemption till 01.04.2005; industrial units, which were originally under the tax deferment scheme, were required to pay the year-wise deferred tax after expiry of 14 years; the unamended illustration conferred an undue advantage on the petitioners as, apart from enjoying the benefits of tax holiday, they were also getting an extended time of 14 years from the date of conversion for repayment of the tax collected by them; and under these circumstances, as the petitioners were better placed than the units which were originally under the tax deferment scheme, amendment of Rule 67 was considered necessary. The learned standing counsel would submit that Courts would not interfere with the fiscal policies of the government which ought to be left free to determine its priorities in the matter of utilization of finances, and to act in the public interest, while issuing or modifying or withdrawing an exemption notification; it is open to the legislature to classify dealers for raising revenues and granting exemptions; it is open to the legislature to leave it to the executive to determine details relating to the working of tax laws; the scheme of repayment has been amended, taking away the undue advantage which the petitioners had in comparison with the original tax deferment units; and the amendment only regulates repayment and would apply till the entire amount is repaid. 9. The tax holiday units, which before 31.03.2005 were exempted from payment of sales tax, were statutorily required by Section 69(1) of the Act to be converted as tax deferment units. Prior to 1.4.2005 (when the Act came into force) the tax holiday units and the tax deferment units formed two distinct and different classes whose period of entitlement, repayment period etc, were at variance from one another. Treating the erstwhile tax holiday units and the original tax deferment units as one class after 01.04.2005 would require the benefits which the tax holiday units were extended prior to 1.4.2005, and which the tax deferment units were disentitled, to be ignored. These two classes continue to retain their distinctive birth marks even after the Act came into force. Section 69(1) of the Act has neither erased these birthmarks nor has it brought about fusion of these two distinct classes into a single homogenous class. Section 69(1) merely requires a high degree of parity to be maintained, between these two classes, after the Act came into force. 10. Classification, in law, is the grouping of persons/things because they agree with one another in certain particulars, and differ from other persons/things in those particulars. The modern State, while exercising its sovereign power of taxation, has to deal with complex factors. The machinery of the Government would not work if it were not allowed a little play in its joints. A large latitude is allowed to the State for classification upon any reasonable basis, and what is reasonable is a question of practical details into which fiction cannot enter. The Court cannot strike down a law because the classification does not commend to it as proper. ((Murthy Match Works v. CCE[1]; American Jurisprudence 2nd Edition Vo.16 para 504). Classification, for the purpose of legislation, cannot be done with mathematical precision. If the classification withstands the test of Article 14 of the Constitution, its validity cannot be questioned on the ground that one was given more benefit than the other. (Ombalik Das v. Hulisa Shaw[2]). As long as the extent is marginal, the constitutional vice of infringement of Article 14 would not infect the legislation. (Basheer v. State of Kerala[3]). 11. The lack of perfection in a legislative measure does not necessarily imply its unconstitutionality. In such a complex arena, in which no perfect alternatives exist, the Court does well not to impose too rigorous a standard of criticism, under the equal protection clause, reviewing fiscal provisions. (G.K. Krishnan v. State of Tamil Nadu[4]; San Antonio Independent School District v. Rodriguez[5];). The law of taxation is, in the ultimate analysis, the result of the balancing of several complex considerations, and it would be unreasonable to insist upon the application of a general rule. (Khyerbari Tea Co. v. State of Assam[6]; Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector & ETIO[7]). In the field of taxation, if the test of Article 14 is satisfied by generality of the provisions, Courts would not substitute judicial wisdom for that of the legislature. (State of U.P. v. Kamla Palace[8]). Classification for taxation, and the application of Article 14 in that context, must be viewed liberally, not meticulously. (Ganga Sugar Corpn. Ltd. v. State of U.P.,[9]). In tax cases, there are good reasons for judicial self-restraint if not official deference to legislative judgment. The complexity of economic regulation, the uncertainty, and the bewildering conflict of expert opinion, would show that self-limitation is the path to judicial wisdom. (State of Gujarat v. Ambica Mills Ltd[10]; P.M. Ashwathanarayana Setty v. State of Karnataka[11]). In view of the inherent complexity of fiscal adjustments, Courts give a larger discretion to the legislature in these matters and effectuate the chosen system in all possible and reasonable ways. If two or more methods of adjustment are available, the legislative preference in favour of one of them cannot be questioned on the ground of lack of legislative wisdom or that the method adopted is not the best or that there are better ways of adjusting the competing interests and claims. The legislature possesses the greatest freedom in such areas. (P.M. Ashwathanarayana Setty11). The test applicable for striking down a taxing provision is one of “palpable arbitrariness” applied in the context of the felt needs of the times and societal exigencies informed by experience’. (Kerala Hotel and Restaurant Assn. v. State of Kerala[12]). 12. The power of the State Government to issue G.O.Ms. No.108 dated 20.5.1996, whereby the benefit of tax exemption and tax deferment was extended to new industrial units in the State, is referable to Section 9 of the APGST Act, 1957. Unlike Section 9 of the APGST Act, the VAT Act does not confer power on the State Government either to exempt a unit from payment of sales tax or extend to them the benefit of tax deferment. However Section 69 (1) of the Act provides that, notwithstanding anything contained in the Act, any industrial unit availing tax holiday or tax exemption on the date of commencement of the Act (i.e., 1.4.2005) shall be treated as a unit availing tax deferment. Under Section 69(3), the period of eligibility, the method of debiting the eligibility amount, the repayment and any other benefits for units availing tax deferment shall be in the manner prescribed. Section 2 (24) of the Act defines “prescribed” to mean prescribed by Rules made under the Act. Section 78 of the Act confers power on the State Government to make Rules and, under sub-section (1) thereof, the Government may, by notification, make rules to carry out the purposes of the Act. Section 78(2)(a) stipulates that such a rule may provide for all matters expressly required or allowed by the Act to be prescribed. As such the period of eligibility, the method of debiting the eligibility amount, the repayment and other benefits for units availing tax deferment is required, under Section 69(3) of the Act, to be prescribed by Rules made by the State Government in exercise of its powers under Section 78(2)(a) of the Act. 13. It is in exercise of the powers under Section 78 of the Act that the A.P. Value Added Tax Rules, 2005 (hereinafter called the “Rules”) were made and notified in G.O.Ms. No. 394, Revenue (CT-II), Department dated 31.03.2005. Rule 67of the Rules relates to tax deferment and sub-rules (1) to (3) and sub-rule (4) thereof read as under: “1)Where any unit is availing a tax holiday on the date of commencement of the Act, it shall be treated as converted as the unit availing tax deferment. The balance period available as on 31st day of March 2005 to such units shall be doubled. The eligibility amount shall be the balance available to such unit as on that date. Balance period means the difference of period between date of completion of eligibility shown in the certificate of eligibility and the 1st day of April 2005. 2) The units already availing tax deferment, prior to commencement of the Act, shall continue to be eligible to avail the balance amount available as on the 31st day of March, 2005 and for the period as mentioned in the eligibility certificate. 3) The tax payable and the tax to be claimed as deferment for each period shall be the net tax (i.e., output tax less input tax) which shall be debited to the eligibility amount. Where the input tax exceeds output tax for the period and the deferment unit made any export sales or sales in the course of exports in the same tax period, the unit shall carry forward such excess input tax upto the month of March every year and shall be eligible to claim refund in the tax return for the month of March every year. 4) Where any VAT dealer is availing deferment, a declaration in Form VAT 502 shall be filed for every tax period in addition to the return in Form VAT 200. 14. The illustration to Rule 67 was substituted and sub-rule (5) was inserted by G.O.Ms. No.503 dated 08.05.2009. Sub-rule (5), as inserted, reads: “(5) The amount availed in the first year, in which the unit is converted from tax holiday scheme to deferment scheme, shall be paid in the months succeeding the month in which the period for which the unit is eligible for availment of incentive is completed and the amount availed in the second year, shall be paid in the year, subsequent to the year in which the amount, availed in the first year is paid or payable and so on” 15. As the dispute revolves mainly around the amended illustration and its scope, it is necessary to refer to the illustration to Rule 67 as it stood prior to, and after its substitution by, G.O.Ms. No.503 dated 08.05.2009 in juxta- position with each other. Prior to substitution by G.O.Ms. No.503 dated 08.05.2009 After substitution by G.O.Ms. No.503 dated 08.05.2009 Illustration: CDL Industries was granted tax holiday for a period of 7 years from 10.0.1999 to 09.10.2006 for an amount of Rs.65,22,000/-. As on 31.3.2005, the dealer has availed an amount of Rs.45,10,000/-. The period originally available as on 1.4.2005 is 18 months & 9 days. As per the above sub-rule the dealer now is eligible to avail tax deferment for the balance amount of Rs.20,12,000/- for a period of 36 months and 18 days i.e., 1.4.2005 to 18.4.2008. The amount of deferment availed for each month shall be paid at the end of fourteenth year i.e., the amount of tax deferred for the month of April 2005 shall be paid on or before 30th April 2019. Illustration: CDL industries was granted tax holiday for a period of 7 years from 10.10.1999 for an amount of Rs.65,22,000/-. As on 31.3.2005, the dealer has availed an amount of Rs.45,10,000/-. The period originally availed is 5(five) years, 5(five) months and 21 days. The period of availment prior to 1.4.2005, when worked out on doubling the same, is 10(ten) years (11) months and 12 days. Deduct this period from total period of 14 (fourteen) years, as availed to the units under Deferment Scheme originally. The balance period to be availed after 1.4.2005 is 36 months and 18 days. As per the above sub-rule (1) of this Rule, the dealer now is eligible to avail Tax Deferment for the balance amount of Rs.20,12,000/- for a period of 36 months and 18 days i.e., 1.4.2005 to 18.4.2008. The amount of deferment, availed for each year, shall be paid after the end of the period of availment, available to the dealer after conversion from Tax holiday Scheme to Deferment Scheme. The Calculation is as follows: 1. Actual period of availment under Tax Holiday Scheme: 10.10.1999 to 9.10.2006 2. Period left as on 1.4.2005: 1.4.2005 to 9.10.2006 3. Period left 1 year 6 months 9 days 4. Period doubled as per rule: 3 years and 18 months 5. Period upto which the unit is eligible for incentive: 18.4.2008 6. The month and year in which the tax availed in the year 2005-06 is payable: May 2008 7. The month & year in which the Tax Deferment availed in subsequent year is payable: May 2009 and so on. 16. Rule 67(2) stipulates that units which were already availing tax deferment, prior to commencement of the Act (i.e., prior to 01.04.2005), would continue to be eligible to avail the balance amount, available as on 31.03.2005, for the period mentioned in the eligibility certificate. It is only those tax holiday/tax exempted units, under G.O.Ms. No.108 dated 20.5.1996, which are treated as units availing tax deferment, and a degree of parity is sought to be brought between tax holiday/tax exempted units (now converted as tax deferment units) on the one hand and the original tax deferment units on the other. Under G.O.Ms. No.108 dated 20.5.1996, while the tax holiday/tax exempted units were given the benefit of tax exemption for a period of seven years, and were required not to collect tax for the said period, the tax deferment units were extended the benefit of tax deferment for 14 years, (i.e., double the period for which exemption was granted to the tax holiday units), and were permitted to collect tax. The tax so collected by them each year was required to be repaid at the end of the availment period of 14 years. These tax holiday/tax exempted units had already availed the benefit of tax exemption for a certain period prior to 01.04.2005. It is for this reason that Rule 67(1) provides that the balance period available to such units as on 31.03.2005 shall be doubled, and the amount eligible as tax deferment would be the balance available to such units as on 31.03.2005. Rule 67 (1) defines “balance period” to mean the difference of the period between the date of completion of eligibility, shown in the certificate of eligibility, and the 1st day of April, 2005. It is only for this balance period, (i.e., the period of tax exemption unavailed as on 01.04.2005), are the units, hitherto availing tax exemption, required to be treated as tax deferment units. As the ratio of the period of eligibility, under G.O.Ms. No.108 dated 20.5.1996, between tax holiday units and tax deferment units was 1:2, the balance period available to these converted tax deferment units has also been doubled. 17. The petitioners have no quarrel with the eligibility period, prescribed by Rule 67(1), for these converted tax deferment units. What is in dispute is the period of repayment. A perusal of the records placed before this Court would show that the Commissioner of commercial taxes, vide letter dated 08.01.2008, had informed the Principal Secretary (Revenue), that the existing illustration under Rule 67 was found not to be in consonance with the letter and spirit of the Rules, and it conferred an undue advantage on the tax holiday units by extending to them the dual benefits of availment of sales tax holiday during the period prior to 01.04.2005, and also granting time for a period of 14 years for repayment of tax, availed in the first year of their conversion to the deferment scheme, by way of stretching artificially the period of availment beyond what was envisaged under the said Rule. The Commissioner proposed that Rule 67, including the illustration, be amended. While the pre-amended illustration required the amount of deferment availed each month to be paid at the end of the 14th year i.e., the amount of tax deferred for the month of April, 2005 was required to be paid on or before 30.04.2019, the amended illustration requires the amount of deferment, availed each year, to be repaid at the end of the period of availment available to these units after conversion from the tax holiday scheme to the tax deferment scheme. 18. As noted hereinabove the tax deferment units, under G.O.Ms. No.108 dated 20.5.1996, were required to repay the tax collected by them on completion of the availment period of 14 years. The amended illustration to Rule 67, therefore, requires the converted tax deferment units, whose remaining period of eligibility has been doubled, also to commence repayment soon after completion of their availment period. The Rule making authority has, thereby, brought about a high degree of parity between the converted units and the original tax deferment units under G.O.Ms.No.108 dated 20.5.1996. 19. Section 69(1) of the VAT Act has no application to those tax holiday units whose period of availment expired by 31.03.2005. In such cases, as the entire period of exemption expired before the Act came into force, the question of such units being treated as tax deferment units under the Act does not arise. As the converted units and the original tax deferment units constitute two distinct and separate classes, the contention that the persons similarly situated are treated differently does not merit acceptance. The challenge to the validity of the amendment, by G.O.Ms. No.503 dated 08.05.2009, on the ground of arbitrariness and violation of Article 14 of the Constitution of India must, therefore, fail. II. THE AMENDED RULE IS CONTRARY TO THE PARENT ACT: 20. Learned Counsel for the petitioners would submit that, as the converted units are statutorily treated on par with the original tax deferment units, Section 69(3) of the Act does not enable the executive to prescribe a mode of repayment of the deferred tax, by the converted tax deferment units, other than the mode prescribed for units which had opted for tax deferment originally; therefore VAT levied in the year 2005-06 has to be repaid by the converted units only after 14 years on par with the original tax deferment units; the amended rule is contrary to Section 69(1), and is beyond the powers conferred on the State Government under Section 69(3); while the Government has the power to make a rule, amending or withdrawing a benefit granted earlier, the power can only be exercised subject to the condition that the amended Rule fits into the scheme of the Act; and Rule 67(5), as amended by G.O.Ms. No.503 dated 8.5.2009, is ultra vires Section 69(1) of the VAT Act. 21. While a degree of parity has been statutorily brought about, by Section 69(1), between converted and original tax deferment units, both these classes cannot be equated with mathematical exactitude, for the tax holiday units are not being called upon to pay tax for the period prior to 01.04.2005, which they would otherwise have been liable to pay but for the tax exemption benefit extended to them under G.O.Ms. No.108 dated 20.05.1996. It is only for the unavailed tax exempted period were the tax holiday units required to be treated as tax deferment units. The legislature, in its wisdom, has left it to the rule making authority to decide the manner in which this degree of parity should be brought about and, since the amended Rule does bring about a high degree of parity between the converted and the original tax deferment units, it cannot be said to fall foul of Section 69(1) of the Act. This contention is also rejected. III. THE “ILLUSTRATION” IS ITSELF CONTRARY TO RULE 67: 22. Learned Counsel for the petitioners would submit that Rule 67 does not contemplate repayment of the deferred tax immediately after expiry of the availment period; it is the illustration appended to the Rule, inserted by the impugned G.O, that prescribes repayment at the end of the availment period; and the illustration cannot provide something not provided for under the Rules. 23. Illustrations to a Section/Rule form part of the Section/Rule and help to elucidate the principle of the Section/Rule. (Mahesh Chand Sharma v. Raj Kumari Sharma[13]). The illustration to Rule 67 forms part of, and helps to better understand, the said Rule. It is necessary to note that, by G.O.Ms. No.503 dated 08.05.2009, not only was the illustration to Rule 67 substituted, but sub-rule (5) was also inserted thereto. Rule 67(5) makes it clear that the amount of tax deferment availed in the first year of conversion shall be repaid in the succeeding month in which the period for which the unit is eligible for availment of incentives is completed. Since Rule 67 (5) stipulates that repayment of the deferred tax would commence on completion of the balance period of availment, the mode of repayment is prescribed by the Rules and not merely by the amended illustration. This contention also necessitates rejection. IV. RIGHT OF TAX DEFERMENT FOR 14 YEARS CAN BE TAKEN AWAY ONLY BY PLENARY LEGISLATION: 24. Learned Counsel for the petitioners would contend that any law which has a bearing on the liability, such as exemption, deferment of tax, rate of tax, levy of duty/penalty, confer a substantive benefit/right and cannot be taken away without a legislation to that effect; and the right of deferment for a period of 14 years is a substantive right and cannot be altered or taken away except through an express provision. 25. This contention is only to be noted to be rejected. The legislature, in its wisdom, has chosen to delegate the power, to prescribe the mode of repayment of deferred tax, to the rule making authority. The constitutional validity of Section 69(3) of the Act is not under challenge in this batch of writ petitions. Since the VAT Act has itself delegated the power to the rule making authority, the contention that the right of deferment can only be taken away by plenary legislation does not merit acceptance. V. THE ILLUSTRATION TO RULE 67, AS SUBSTITUTED BY G.O.Ms.NO.503 DATED 8.5.2009, IS DISCRIMINATORY: 26. Learned Counsel for the petitioners would submit that the earlier illustration in Rule 67 was in pari materia with the scheme of deferment under G.O.Ms. No.108 dated 20.5.1996; G.O.Ms. No.108 dated 20.05.1996 is a beneficial scheme, and was properly understood when the original illustration to Rule 67 was introduced whereby both existing deferment units and converted deferment units were treated alike; consequent to the amendment of Rule 67, by G.O.Ms. No.503 dated 8.5.2009, while the original tax deferment units were permitted to retain the deferred tax for the entire period of availment of 14 years, and were required to repay the deferred tax amount only after expiry of the period of 14 years, the converted units were required to pay the deferred sales tax even before expiry of 14 years from the date of availment; thereby converted units are treated differently from the original tax deferment units though Section 69(1) of the Act requires both of them to be treated on par; and differential treatment of similarly situated units amounts to discrimination. 27. On the other hand, Sri A.V. Krishna Koundinya, learned standing counsel for commercial taxes would submit that there is no hostile discrimination between dealers converted into the tax deferment scheme and dealers who were enjoying tax deferment from the beginning. 28. Every differentiation is not discrimination. If the classification rests on a difference which bears a fair and just relation to the object for which it is proposed, it is constitutional. To put it differently, the means must have nexus with the ends. Even so, a large latitude is allowed to the State for classification upon a reasonable basis and what is reasonable is a question of practical details, and a variety of factors, which the Court will be reluctant and perhaps ill-equipped to investigate. In this imperfect world, perfection even in grouping is an ambition hardly ever accomplished. A power to classify being extremely broad, and based on diverse considerations of executive pragmatism, the Judicature cannot rush in where even the Legislature warily treads. All these operational restraints on judicial power must weigh more emphatically where the subject is taxation. (Murthy Match Works1). The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. (Federation of Hotel & Restaurant Assn. of India v. Union of India[14]). No scheme of taxation has yet been devised which is free of all discriminatory impact. In such a complex arena in which no perfect alternatives exist, the Court does well not to impose too rigorous a standard of scrutiny lest all fiscal schemes become subjects of criticism under the equal protection clause. (Venkateshwara Theatre v. State of A.P.,[15]; San Antonio Independent School District5). The burden of proving discrimination is always heavy, and heavier still when a taxing provision is under attack. The burden is on the person complaining of discrimination. The burden is proving not possible “inequality” but hostile “unequal” treatment. (Twyford Tea Co. Ltd. V. State of Kerala[16]). 29. As noted hereinabove, the converted tax deferment units do not form part of the same class to which the original tax deferment units belong. Since the converted and the original tax deferment units constitute two different and distinct classes, the question of similarly situated persons being treated differently, or equals being treated unequally, resulting in discrimination does not arise. VI. THE AMENDED RULE, NOTIFIED IN G.O.MS.NO.503 DATED 8.5.2009, HAS BEEN APPLIED RETROSPECTIVELY: 30. Leaned Counsel for the petitioners would submit that the rule making authority substituted the illustration in Rule 67 with limited retrospective effect of seven days. The illustration contained in Rule 67, though substituted with a new illustration which reduced/curtailed the benefit of deferral to such units as on 31.03.2005 from 14 years to twice the balance period available under the tax holiday scheme, is, nevertheless, effective only from 01.05.2005 and, thus, inapplicable for the earlier period; the said amendment is, therefore, not applicable to those units whose period of availment, as doubled in terms of the unamended Rule 67, expired before 01.05.2009; giving effect to the substituted illustration for periods prior to 01.05.2009 is impermissible as it would result in giving greater retrospectivity than that intended by the rule making authority; a provision relating to a substantive right, or a substantive provision under a taxing statute, is governed by the law prevailing on the date on which the taxable event occurs; the taxable event, under the Act, is sale and not payment of tax and, as such, the law obtaining on the date of sale would govern the rights and obligations of the petitioner-assessees; deferment of tax alters the levy by postponing the liability to pay, and is a substantive right which gets vested on the sale being effected; even if the Government is held to have the power to treat the converted units differently, from the originally deferred units, the amendment cannot be given retrospective effect and must he held only to have prospective application. 31. Sri A.V. Krishna Koundinya, learned standing counsel for commercial taxes, would submit that the power of the State to grant exemption would include the power to withdraw the same in public interest; the tax now sought to be recovered from the petitioners is the tax collected by them from their customers; on the specious plea that the deferred tax has been utilized in the development of their industry, the petitioners cannot postpone payment in view of the changed law; and the amended Rule has not been given retrospective effect. 32. While it is urged on behalf of the petitioners that, in sales tax laws, the taxable event is “sale”, (State of T.N. v. P.L. Malhotra[17]) the moment a dealer either purchases or sells goods, which are subject to taxation, the tax liability is attracted; the liability to pay sales tax arises during the year of assessment even though it is to be discharged at a future date (The Kedarnath Jute Mgf. Co. Ltd. v. The Commissioner of Income Tax, (Central), Calcutta[18]); and an assessee would be liable to be taxed, under the sales tax laws, at the rate prevailing at the time when the purchases/ sales were made (Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) v. Padinjarakara Agencies[19]; C.I.T. v. Onkar Saran and sons[20]); learned special standing counsel for commercial taxes would submit that, under Section 15 of the A.P. General Clauses Act, the power to exempt includes the power to rescind or revoke; the power of the Government to grant exemption/deferment includes the power to rescind and revoke the exemption/deferment granted earlier (Roxy Roller Flour (P) Ltd v. Govt. of A.P.[21]) ; the State Government, having the power and competence to grant exemption, is equally empowered to withdraw it (Rom Industries Ltd. v. State of J&K[22]); and, if any concession has been given, it can be withdrawn at any time. (Bannari Amman Sugars Ltd. v. Commercial Tax Officer[23]). 33. What is, however, in issue in this batch of writ petitions is not the levy of tax but its collection. The tax which the petitioners were liable to pay in the assessment years concerned is, by virtue of Section 69 of the Act read with Rule 67 of the Rules, required to be collected only on completion of the period of availment. \"Retrospective\", according to the “Shorter Oxford English Dictionary, (Third Edition, in relation to Statutes etc)”, means \"operative with regard to past time\". (Punjab University v. Subash Chander[24]). A statute/rule cannot be said to be retrospective merely because a part of the requisites for its actions is drawn from a time antecedent to its passing. (Maxwell on Interpretation of Statutes, 11th Edition, p. 211; Shiv Bahadur Singh v. State of Vindhya Pradesh[25]; Union of India v. Madan Gopal Kabra[26]; State of Bombay v. Vishnu Ramchandra[27]; Sajjan Singh v. State of Punjab[28]; and Kapur Chand v. B.S. Grewal, Financial Commissioner, Punjab, Chandigarh[29]). The distinction between retro-active legislation and retrospective legislation must be borne in mind. A retro-active legislation is one which deals with matters which occurred long prior to the passing of the legislation, and retrospective legislation is one which operates and is enforced in relation to such situations anterior to the passing of the legislation or the making of rules, but not with reference to actions and conduct long prior thereto. (B. Meenakshi v. Government of Andhra Pradesh[30]). 34. It is wrong to characterise the operation of a rule as retrospective only for the reason that it applies to assessees who have already received the benefit of tax deferment. G.O.Ms. No.503 dated 08.05.2009 has been brought into force with effect from 01.05.2009 and the said amendment to Rule 67, by substitution of the illustration and insertion of the sub-rule (5), is applicable only from the date on which the rule was brought into force i.e., 01.05.2009. A rule which advances the date of re-payment of the deferred tax, undoubtedly, operates on those who had been extended the benefit of tax deferment before the Rule was made, but it operates in future in the sense that it governs the future re-payment of the deferred tax. The impugned Rules neither recall the tax exemption granted earlier to the assessees, nor does it deny them the benefit of tax deferment for the un-availed period. The amended illustration to Rule 67 is, in its direct operation, prospective as it authorises only future recovery, of the tax deferment, after the said illustration came into force. It is not properly called retrospective \"because a part of the requisites for its action is drawn from a time antecedent to its passing”. (T.K. Lakshmana Iyer v. State of Madras[31]). The contention that the Rules have been applied with retrospective effect must, therefore, fail. VII. NO REASONS ARE ASSIGNED FOR AMENDING RULE 67: 35. Learned Counsel for the petitioners would submit that the amended rule suffers from non-application of mind; no reasons were recorded for introduction of the amendment; and, even if it is held that the amendment was brought in public interest, reasons should be assigned for treating the converted units differently when compared to the original tax deferred units. 36. The requirement of recording reasons forms part of the rules of natural justice which govern exercise of power by administrative authorities. (S.N. Mukherjee v. Union of India[32]). The rules of natural justice are not cast in a rigid mould nor can they be put in a legal strait-jacket. They are not immutable but flexible. These rules can be adapted and modified by statutes and statutory rules. (Union of India v. Tulsiram Patel[33]). 37. The making of a Rule is a legislative act. An act which is legislative in character, as contrasted from an executive act or a judicial/quasi-judicial function, does not oblige the observance of rules of natural justice. (Shri Sitaram Sugar Co. Ltd. v. Union of India[34]; Ramesh Chandra Kachardas Porwal v. State of Maharashtra[35]; State of T.N. v. P. Krishnamurthy[36]). The rules of natural justice are not applicable to legislative action, plenary or subordinate. (Sundarjas Kanyalal Bhatija v. Collector, Thane[37]) . Subordinate legislation cannot be questioned on the ground of violation of principles of natural justice on which administrative action may be questioned. (J.K. Industries Ltd. v. Union of India[38]). A statutory rule cannot, therefore, be struck down for failure to record reasons or on the ground of non-application of mind. VIII. PROMISSORY ESTOPPEL: 38. It is contended on behalf of the petitioners that the State has gone back on its promise on two occasions; the first was when the State had promised, in G.O.Ms.No.108 dated 20.5.1996, that the petitioners would be entitled to a tax holiday if they set up an industry; acting on this promise the petitioners had set up industries investing huge amounts; the second occasion was when the State, under Section 69(1) read with Rule 67, had assured that the tax holiday units, which were converted into tax deferment units, would be treated on par with the original tax deferment units, and the sales tax payable by them would be collected only after expiry of 14 years from the date of availment; relying on this promise, the petitioners had altered their position and had rearranged their financial affairs; the Government had resiled from its promise substituting the illustration to Rule 67; the amended Rule treats converted units differently, and requires them to pay the deferred sales tax even before expiry of 14 years, despite the promise made by the earlier rule; the doctrine of promissory estoppel operates against delegated legislation also; and, as such, the petitioners cannot be compelled to pay the deferred tax for a period of 14 years from the date of availment of tax deferment. 39. On the other hand, Sri A.V. Krishna Koundinya, learned standing counsel for commercial taxes would submit that, as the State Government has the power to grant tax deferment, it also has the power to withdraw it; the amendment of Rule 67 is a legislative act, and there can be no promissory estoppel against exercise of legislative functions; the deferred tax, which is now sought to be recovered from the petitioners, is the tax collected by them from their customers; the petitioners cannot postpone payment of the deferred tax in the light of the changed law; there cannot be any estoppel against the Government in exercise of its sovereign, legislative and executive functions; legislative power can be exercised by the legislature either directly or through its delegate or any other authority; and the doctrine of promissory estoppel cannot be invoked to prevent the Government from acting in discharge of its duty or obligation under the law. 40. When the Government makes a promise knowing or intending that it would be acted upon by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Govt. would be held bound by the promise, and the promise would be enforceable against the Govt. at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Art. 299 of the Constitution. (M/s. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh[39]; Union of India v. Godfrey Phillips India Ltd[40]). To attract the doctrine of promissory estoppel it is not necessary that the promisee, acting in reliance on the promise, should suffer any detriment. What is necessary is only that the promisee should have altered his position in reliance on the promise. The alteration of position need not involve any detriment to the promisee. (M/s. Motilal Padampat Sugar Mills Co. Ltd.39). 41. In order to invoke the doctrine of promissory estoppel it must be established that (a) a party has made an unequivocal promise or representation by word or conduct to the other party; (b) the representation was intended to create legal relations, or affect legal relationships to arise in future; (c) a clear foundation has been laid, in the petition, with supporting documents; and (d) the party invoking the doctrine has altered its position relying on the promise. The Court will not apply the doctrine in the abstract. (State of Bihar v. Kalyanpur Cements Ltd (SC)[41]). 42. While taxation is indeed a sovereign function, no distinction can be made between exercise of a sovereign function and a trading or business activity of the Government in so far as the doctrine of promissory estoppel is concerned. Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and, if the essential ingredients of this rule is satisfied, the Government can be compelled to carry out the promise made by it. (M/s. Motilal Padampat Sugar Mills Co. Ltd.39). 43. There can be no promissory estoppel against exercise of legislative functions. (Pournami Oil Mills v State of Kerala[42]). The Legislature can never be precluded from making laws by resort to the doctrine of promissory estoppel. (Vasantkumar Radhakisan Vora v. Board of Trustees of the Port of Bombay[43]; Godfrey Phillips India Ltd40; and Sree Rayalaseema Alkalies & Allied Chemicals Ltd. v. Government of Andhra Pradesh[44]). The Government cannot also be debarred, by promissory estoppel, from enforcing a statutory prohibition. Promissory estoppel cannot be used to compel the Government to carry out a representation or a promise which is contrary to law or which is outside the authority or power of the officer of the Government to make. (Godfrey Phillips India Ltd40; Kasinka Trading v. Union of India[45]). 44. In so far as the plea of promissory estoppel, with regards the assurance given by the Government under G.O.Ms. No.108 dated 20.05.1996, is concerned, the said G.O. was issued by the Government in exercise of its powers under Section 9 of the APGST Act. As the APGST Act has been repealed and the VAT Act, which does not provide for any such exemption, is a law made by the State Legislature, the Government cannot be compelled to carry out a representation which is contrary to law. After the VAT Act came into force on 01.04.2005, the Government can no longer be bound by the promise, if any, made by it under G.O.Ms. No.108 dated 20.05.1996, except to the extent provided for in the VAT Act itself. 45. The second promise is said to be the assurance given by the Government by way of Rule 67 and its pre-amended illustration. In support of their contention that promissory estoppel applies even to delegated legislation, learned counsel for the petitioners have relied on certain judicial pronouncements of the Supreme Court. It is, therefore, necessary to refer to them. 46. In Union of India v. Indo-Afgan Agencies Ltd[46], the Textile Commissioner published a scheme called the “Export Promotion Scheme” providing incentives to exporters of woolen goods. M/s. Indo-Afghan Agencies, a firm dealing in woolen goods at Amritsar, exported woolen goods to Afghanistan. The Deputy Director, in the office of the Textile Commissioner, issued an import entitlement certificate for a part of the exports only. M/s. Indo-Afgan Agencies submitted representations to the Deputy Director, and to the Union of India, requesting that they be granted an import entitlement certificate for the full value of the goods exported by them. Their representations failed to elicit any response, resulting in their invoking the doctrine of estoppel. 47. In M/s. Motilal Padampat Sugar Mills Co. Ltd.39, a news item, based on the statement of the Secretary, Industries Department, was published to the effect that the State of Uttar Pradesh had decided to exempt all new industrial units in the State from sales tax, for a period of three years, under Section 4-A of the U.P. Sales Tax Act. Relying on this assurance, the appellant entered into agreements for supply of plant and machinery to their vanaspati factory. The Chief Secretary confirmed that the State Government would consider the appellant’s request for grant of exemption, asked them to submit a formal application and, in the meanwhile, to go ahead with arrangements for setting up the vanaspati factory. The State Government, however, went back on the assurance and informed the appellant that it had taken a policy decision that vanaspati units would only be given partial sales tax concessions. While holding that Section 4 of the U.P. Sales Tax Act, 1948 conferred power on the Government to grant exemption from sales tax, and the Government could, therefore, be bound by its promise to exempt the appellant from payment of sales tax, the Supreme Court made it clear that, if the U.P. Sales Tax Act, 1948 had not contained a provision enabling the Government to grant exemption, it would not be possible to enforce the representation against the Government as the Government could not be compelled to act contrary to the Statute. 48. In Pournami Oil Mills42, a notification was issued whereby the State Government, in exercise of its powers under Section 10 of the Kerala General Sales Tax Act, 1963, exempted the sales turnover of new small-scale industrial units from sales tax for a period of five years. Section 10 of the Kerala General Sales Tax Act conferred power on the Government to grant exemption from sales tax. It is in this context that the Supreme Court held that the ratio of M.P. Sugar Mills applied, and the plea of estoppel was unanswerable. 49. In M/s. Pine Chemicals Ltd. v. Assessing Authority[47], the Government issued orders announcing a package of incentives, for large and medium scale industries, including grant of exemption from sales tax. The appellant acted on the assurance and set up a factory. Section 5 of the J&K General Sales Tax Act conferred power on the Government to exempt any class of dealers from payment of tax. The Supreme Court held that the exemption orders, issued by the Government, fell within the scope of Section 5 of the General Sales Tax Act. The appellants were held entitled to the benefit of exemption under the said Government orders. 50. In M/s. Vadilal Chemicals Limited v. State of A.P[48], an order was issued by the State Government granting tax deferment/tax holiday for new industries. The appellant set up a small scale industry for production of liquor ammonia and commenced commercial production. The State Government granted a final eligibility certificate exempting them from sales tax. The Deputy Commissioner of commercial taxes issued notices informing the appellant that the assessing officer had irregularly allowed them sales tax exemption. He later passed an order confirming the demand. It is in this context that the Supreme Court held that the State, which is represented by departments, should speak only in one voice and, having regard to the language of the Government order, it was the view expressed by the Department of Industries which must be taken to be that voice. The order of the Deputy Commissioner of commercial taxes was quashed. 51. In Mahabir Vegetable Oils (P) Ltd. v. State of Haryana[49], the appellants were owners of solvent extraction plants. The State of Haryana announced an industrial policy granting sales tax exemption to industries set up in the backward areas of the State. The appellant purchased land in a backward area, entered into an agreement for supply and erection of machinery, and paid advances to the suppliers. It also started civil construction work at the site. The appellant’s application for grant of exemption from payment of sales tax was, however, rejected. The Supreme Court held that, when the appellant started investment, Rule 28-A was operative; the appellant’s representation was in terms of the said rule; the State intended to grant incentives to industrial units by way of waiver and deferment of payment of sales tax wherefor Rule 28-A was made; the sales tax laws enacted by the State contained a provision empowering the State to grant such exemption; and the doctrine of promissory estoppel operated even in the legislative field. 52. In M/s. MRF Ltd., Kottayam v. Asst. Commissioner[50], the Government of Kerala issued notifications to give effect to its declared policy of industrial promotion granting exemptions, concessions or reduction in sales tax etc. The appellant entered into a memorandum of understanding with the Kerala Government whereby they were held entitled to the tax exemptions available for existing industries undertaking expansion/diversification. Thereafter a notification was issued by the Kerala Government, in exercise of its powers under Section 10 of the Kerala General Sales Tax Act, providing tax exemption to industries going in for expansion/diversification/modernization. Subsequently, an addendum to the MOU was entered into which confirmed that the appellant was entitled to tax incentives and exemptions provided in the notification. Pursuant to the MOU, the appellant invested Rs.80 crores and carried substantial expansion of its existing industrial units. When the assessing authority proposed to levy purchase tax, on the ground that the exemption under the notification was not available with effect from a subsequent date, the appellant raised objections which were rejected. The Supreme Court observed that, under Section 10(1) of the Kerala General Sales Tax Act, the State Government had the power to grant exemption in respect of tax payable under the Act. A mandamus was issued restraining the respondents from taking action against the appellant contrary to or inconsistent with the eligibility certificate, and the exemption order. 53. In U.P. Power Corporation Ltd. v. Sant Steels & Alloys (P) Ltd[51], pursuant to the industrial policy of the State of U.P, the appellant power corporation framed its tariff by way of two notifications whereby 33.33% hill development rebate was allowed to new industrial units for a period of five years from the date of commencement of supply of electricity. The respondents established industries in the hill areas incurring huge investment, and entered into agreements with the appellant corporation. Subsequently, by two notifications, the concession which was given earlier was reduced from 33.33% to 17%. The Supreme Court held that a notification issued by the State Government, in exercise of its powers under Section 49 of the Electricity Supply Act, 1948, for giving the benefit of exemption for hill areas was in the nature of delegated legislation; the State Government had invited entrepreneurs extending various benefits and thereby encouraging them to invest; the entrepreneurs, on the representations so made, had bonafide invested huge sums; and the State Government could not resile or withdraw from its representation, and deny benefits to such units, as it was a matter of faith. 54. In Sharma Transport v. Government of A.P.[52], the State Government issued a notification, under Section 9(1)(b) of the A.P. Motor Vehicles Taxation Act, 1963, cancelling an earlier notification. The appellants were operators of tourist buses originating from Karnataka, and plying in adjacent States including the State of Andhra Pradesh. The Supreme Court held that promissory estoppel could not be used to compel the Government or the public authority to carry out a representation or promise which was prohibited by law, or which was devoid of the authority or power of the officer of the Government to make; and the doctrine of promissory estoppel, being an equitable doctrine, must yield place to equity if larger public interest so required. The plea of promissory estoppel was held to be without substance. 55. While Indo Afgan Agencies46 relates to a non-statutory export promotion scheme, all the other judgments, referred to hereinabove, relate to the exercise of statutory power by the Government to grant exemption from payment of sales tax/electricity rebate and later resiling there-from. In Mahabir Vegetable Oils (P) Ltd49, and in U.P. Power Corporation Ltd51, exercise by the Government, of the powers conferred on it (by delegated legislation/plenary legislation respectively) to grant exemption/deferment/rebate was held to be in the legislative field/in the nature of delegated legislation. 56. The power to impose or collect a tax is a legislative power which the legislature can exercise directly or, subject to certain conditions, delegate that power to another. Exercise of that power, whether by the legislature or by its delegate, is an exercise of a legislative power. The fact that the power was delegated to the executive does not convert that power into an executive or administrative power. No court can issue a mandamus to a legislature to enact a particular law. Similarly no court can direct a subordinate legislative body to enact or not to enact a law which it may be competent to enact. (Narinder Chand Hem Raj v. Lt. Governor, Administrator, Union Territory, Himachal Prdesh[53]. 57. In Roxy Roller Flour (P) Ltd.21, a Division Bench of this court held:- “………….In Bombay Conducts & Electricals v. Chandramouli : (1984) 55 STC 162. There, it is held by the Full Bench of Delhi High Court that where a law is made by legislation, the same is of legislative character and a subordinate legislation made by virtue of the power conferred under the taxing statute is also legislative in nature, once they are required to be published in the gazette. In the present case, the impugned G.O. was published in the gazette as per the provisions of the A.P. General Sales Tax Act. Therefore, it is to be held that passing of impugned G.O. is a legislative act. When once it is of legislative nature, the doctrine of promissory estoppel is not applicable……….” (emphasis supplied) 58. The distinction between exercise by the Government of its statutory power of granting exemption from tax, and a statutory rule made in exercise of the powers conferred by plenary legislation, must be borne in mind. The nature of delegated legislation can be broadly classified as: (i) the rule-making power; (ii) grant of exemption from the operation of a statute. In the latter category, the scope of judicial review would be wider, including on those grounds on which administrative action may be questioned. (P.J. Irani v. State of Madras[54]; Vasu Dev Singh v. Union of India[55] a n d J.K. Industries Ltd.38). 59. While the doctrine of promissory estoppel would apply to a promise made by the Government, in the exercise of its statutory power of exemption, (which power has been held to be in the nature of delegated legislation), application of the said doctrine cannot be extended to statutory rules, made under a taxing statute, as such rules are ‘law” being legislative in character. As no promise can be enforced contrary to law, the doctrine of promissory estoppel canot be pressed as an aid to invalidate the illustration to Rule 67 as substituted by G.O.Ms. No.503 dated 08.05.2009. 60. Even otherwise a vague and bald averment, in the affidavits filed in support of these writ petitions, that the petitioners had altered their position and had arranged their financial affairs in the belief that the earlier rule would be available to them, would not suffice for application of the doctrine of promissory estoppel. To invoke the said doctrine, clear, sound and positive foundation must be laid in the petition itself by the party invoking it, and bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not suffice to press into aid the doctrine. The doctrine of promissory estoppel cannot be invoked in the abstract. (Kasinka Trading45; Kalyanpur Cements Ltd41). 61. Reliance placed by the learned counsel for the petitioners on State of Punjab v. Nestle India Ltd[56] is misconceived. In Nestle India Ltd56, the Supreme Court held:- “…………the decision in Bakul Cashew Co. V. Sales Tax Officer, Quilon (1986 (2) SCC 365) was a case dealing with the preconditions on the fulfilment of which a plea of promissory estoppel can be raised viz. , that the representation must not only be definite but must be satisfactorily established. The alteration of the petitioner's position acting upon such representation must also be pleaded with particularity and sufficiently supported with material. The Court found that it had not been established that any prejudice had been suffered by the petitioner. As we have noted earlier, each of the respondents in these appeals has given a detailed account of how the monies which were otherwise payable on account of purchase tax have been expended on the milk shed areas and producers of milk. No dispute has been raised by the appellants to this………” (emphasis supplied) 62. Unlike in Nestle India Ltd.56 the affidavits, filed in this batch of writ petitions, lack details as to how the petitioners had altered their position and had rearranged their affairs on the assurance of the pre- amended illustration. No supporting material in this regard has been placed before this Court. The contention, that the Government is not entitled to resile from its promise, by substituting the illustration to Rule 67, is not tenable and necessitates rejection. IX. NOTICE OF DEMAND IS ARBITRARY: 63. Learned Counsel for the petitioners would submit that the impugned notice of demand is arbitrary and illegal as the substituted illustration can be applied only in respect of deferment of tax for periods subsequent to 01.05.2009, from which date the amendment came into force; the respective assessing authorities are insisting on payment of sales tax, deferred during the years 2005-06 to 2008-09, immediately even from those units which had exhausted the incentives before 01.05.2009 even though the earlier illustration governed all rights and obligations during the said period; as the substituted illustration is effective only from 01.05.2009, any demand ought to be made only in consonance with the original illustration which existed during the relevant period; it is impermissible to apply the substituted illustration for periods prior to 01.05.2009; and the demand is contrary to Rule 67 and suffers from the vice of arbitrariness. 64. On the other hand Sri A.V. Krishna Koundinya, learned standing counsel for commercial taxes, would submit that the demand notice was issued only after Rule 67 was amended and sub-rule (5) was inserted vide G.O.Ms. No.503 dated 08.05.2009. 65. The Commercial Tax Officer, Siddipet, by his notice dated 16.6.2009, (enclosed as part of the documents annexed to W.P. No.2324 of 2010), informed the petitioner that, on conversion of sales tax exemption into sales tax deferment by virtue of Rule 67, they had availed Rs.4,86,570/- as tax deferment for the years 2005-06 to 2007- 08; as a result of the amendment to Rule 67, by G.O.Ms.No.503 dated 8.5.2009, the amount of tax deferment each year was required to be paid at the end of the period of availment; the deferment period of the petitioner, after conversion into sales tax deferment, was from 1.4.2005 to 4.4.2008; the petitioners had already availed tax deferment of Rs.4,86,570/-; consequent upon the amendment to Rule 67, the tax deferred for the year 2005-06 of Rs.1,27,336/- was payable by May, 2008; the deferred tax of Rs.77,935/- for the assessment year 2005-06 was payable by May, 2009 and the tax deferment of Rs.2,81,299/- for the assessment year 2007-08 was payable by May, 2010. The commercial tax officer further informed the petitioner that, as the due date of payment for the years 2005-06 and 2006-07 was already over, they should pay Rs.2,05,271/- immediately and produce proof of payment. The petitioners were also requested to note the date of payment for the year 2007-08 and arrange for payment within time. It is evident that, though the tax deferred for the year 2005-06 was payable in May, 2008 and the tax deferred for 2006-07 was payable in May, 2009, the petitioner had not paid the said deferred tax even till 16.6.2009 when the notice was issued. Consequent upon the amendment of Rule 67, by G.O.Ms.No.503 dated 8.5.2009, the tax deferred for the aforesaid two assessment years was already overdue. It is in such circumstances that the petitioners were called upon to repay the said amount immediately. It is not as if the deferred tax was collected at any time anterior to the date on which G.O.Ms.No.503 dated 8.5.2009 came into force. It is only after G.O.Ms.No.503 dated 8.5.2009 came into force was the notice issued on 16.6.2009 calling upon the petitioners to pay the tax deferred for the assessment years 2005-06 and 2006-07 which was payable by the petitioner in May, 2008 and May, 2009 respectively. The demand notice dated 16.6.2009 accords with the substituted illustration and Rule 67(5) as notified in G.O.Ms.No.503 dated 8.5.2009. The contention that the demand is contrary to Rule 67, and suffers from the vice of arbitrariness, necessitates rejection. X. OTHER CONTENTIONS: 66. Learned counsel for the petitioners would submit that, if an industry is granted tax exemption for a particular period and the industry is established within that period, the industry is then entitled to avail tax exemption for the entire period even if the exemption is withdrawn subsequently; as long as the final eligibility certificates and the original scheme have not been cancelled or varied, the benefits granted thereunder cannot be withdrawn; the relevant paragraphs in G.O.Ms. No.108 dated 20.5.1996 have not been amended and are still in force; the final eligibility certificates issued to the petitioners have also not been varied or amended; and the impugned G.O. cannot, therefore, take away the benefits that were available to the petitioners without amending, canceling or varying the final eligibility certificate, and G.O.Ms.No.108 dated 20.5.1996. 67. G.O.Ms. No.108 dated 20.5.1996 issued by the State Government is referable to its power of exemption under Section 9 of the APGST Act. As noted hereinabove the APGST Act was repealed in its entirety, and the A.P.VAT Act, 2005 came into force on 1.4.2005. The mere fact that G.O.Ms.108 dated 20.5.1996 has not been amended, or the final eligibility certificate issued thereunder was not cancelled or varied, would not enable the petitioners to either claim tax exemption or that the period for repayment of the deferred tax should be 14 years. Neither an executive order nor a statutory rule can fall foul of the provisions of the Statute and, since Section 69(1) of the Act requires tax holiday units to be treated as tax deferment units, the petitioners are not entitled to claim the benefit of tax exemption after the Act came into force from 1.4.2005 irrespective of the fact that G.O.Ms.No.108 dated 20.5.1996 has not been amended, and the final eligibility certificates issued thereunder have not been cancelled or varied. 68. Viewed from any angle, the challenge to the validity of the illustration and sub-rule (5) of Rule 67 of the A.P VAT Rules, 2005, and the demand notices issued pursuant thereto, must fail. The Writ Petitions are, accordingly, dismissed. However, in the circumstances, without costs. ______________________ GODA RAGHURAM, J ____________________________ RAMESH RANGANATHAN, J Date: .09.2010 Note: L.R. copy to be marked. 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