Simplified Explanation of the Judgment
The Patna High Court recently delivered an important judgment that brings relief to industrial units set up under the Bihar Industrial Incentive Policy, 2011. A plastic furniture manufacturing company (petitioner) approached the Court after being denied reimbursement of SGST/VAT for the period April 2021 to September 2021. The denial was based on the ground that the production of the petitioner’s unit was less than 25% of its installed capacity.
The petitioner had started its commercial operations on 08.11.2011 after obtaining all requisite permissions under the 2011 Industrial Policy. The company was issued an eligibility certificate for VAT/SGST reimbursement and had earlier been granted reimbursements for prior periods. However, when it sought reimbursement for the six-month period in 2021, the authorities rejected the claim citing a revised policy (Resolution No. 108 dated 20.01.2020), which mandated a minimum 25% production threshold for eligibility.
The Court found this approach flawed. The bench, led by Hon’ble Mr. Justice A. Abhishek Reddy, held that since the petitioner’s unit was established and had begun production under the 2011 Policy, it was entitled to incentives as originally promised. Any amendment made later cannot retrospectively affect these rights.
The Court emphasized that such retrospective denial of promised benefits violates the legal principle of promissory estoppel. It ruled that a promise made by the government, especially when acted upon by an industrial unit, binds the government to uphold it. The Court referred to several Supreme Court decisions, including Pournami Oil Mills vs. State of Kerala, and Motilal Padampat Sugar Mills vs. State of UP, which reinforce this doctrine.
Further, it was noted that the 2020 amendment cited by the State applied to the Industrial Policy, 2016 and not to the 2011 Policy. Hence, applying this to the petitioner was held to be legally unsound.
Significance of the Judgment
This judgment is a significant development for businesses operating under government incentive schemes. It reinforces the security of investments made in reliance on government policies. Entrepreneurs can now feel assured that once an incentive is promised under a policy, it cannot be arbitrarily withdrawn or altered to their disadvantage after they've acted on it.
For the common man and industry in Bihar, this promotes a stable and predictable industrial policy environment, essential for attracting investments and generating employment.
Legal Issues Decided and Decision of the Court
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Whether the petitioner was entitled to SGST reimbursement for April 2021 to September 2021 under the 2011 Policy?
✔ Yes, the Court ruled in favor of the petitioner. -
Whether the amendment made in 2020 requiring 25% minimum production applies retrospectively?
❌ No, the amendment was held inapplicable to units established under the 2011 Policy. -
Whether the government can deny incentives post facto by changing policy terms?
❌ No, the Court held that promissory estoppel binds the government.
Judgments Relied Upon or Cited by the Court
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Pournami Oil Mills And Others v. State of Kerala, 1986 SUPP SCC 728
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Motilal Padampat Sugar Mills Co. Ltd. v. State of UP, (1979) 2 SCC 409
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M/s Gangotri Iron & Steel Co. Ltd. v. State of Bihar, 2021(3) PLJR 73
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Kasinka Trading Case
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Rom Industries v. State of Jammu & Kashmir, (2005) 7 SCC 348
Case Title
Shree Saibaba Plasto Products Pvt. Ltd. vs. State of Bihar & Ors.
Case Number
CWJC No. 8907 of 2023
Citation(s)
2024(4)PLJR 575
Coram and Names of Judges
Hon'ble Mr. Justice A. Abhishek Reddy
Names of Advocates
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For the Petitioner: Mr. Abhishek Kumar
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For the Respondents: Mr. Vikash Kumar (SC11)
Link to the Judgment
https://patnahighcourt.gov.in/viewjudgment/MTUjODkwNyMyMDIzIzEjTg==-UHiUR--am1--FED1U=
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