Case Note & Summary
The case arose from a dispute over eligibility for industrial incentives announced by the State of Madhya Pradesh for entrepreneurs setting up new industries in backward areas. The respondent, M/s Bindal Agro Chemical Ltd., purchased a vanaspati factory from 5-S Ltd. in 1986, which was originally established under an industrial licence dated January 18, 1971 granted to Nand Vanaspati Indore for a 50-tonne-per-day unit at Dewas. The Central Government had permitted transfer of that licence to 5-S Ltd. in 1980. The respondent sought and obtained permission from the Central Government to change the location of the unit from Dewas to Mandideep in Raisen district, a backward area, while operating under the same licence. The State Government issued a notification on October 16, 1986, offering incentives such as sales tax exemption, entry tax exemption, power subsidy, and investment subsidy to new industrial units in backward areas, but excluded units set up by transferring, shifting, dismantling, or closing an existing unit within the State under Para XIII E. The respondent applied for an eligibility certificate, but the State Government by letter dated August 1, 1987 refused and returned the case, citing the shifting of the unit from Dewas to Mandideep and stating that the industry was not eligible for central investment subsidy. The High Court, in writ proceedings, allowed the respondent's claim, holding that the plant and machinery were not shifted, the unit at Mandideep was completely new, and the notification did not permit interpreting an old licence as making the unit old. The State appealed. Before the High Court, the respondent argued that it acquired new land at Mandideep and purchased new plant and machinery, so the unit was new. The State countered that no new licence was obtained for Mandideep, the unit operated under the same licence granted for Dewas after location change, the Dewas unit could no longer manufacture, and hence the Mandideep unit was set up by transferring or shifting the existing unit, attracting the Para XIII E exclusion. The Supreme Court examined the correspondence between the parties. The respondent had itself stated in its application for change of location that the present plant was obsolete and would be discarded, and a new plant under the same licence would be set up at Mandideep. The State Government had communicated on March 3, 1987 that the transferred unit would not be allowed concessions because it would be transfer of capacity and not creation of capacity. The respondent replied on March 6, 1987 agreeing that it would not claim concession if not allowed. On the basis of that commitment, the State Government recommended the application to the Government of India, which by communication dated April 22, 1987 permitted the change of location and amended the licence to be operative at Mandideep. The Court held that the High Court committed a patent error. Since no new licence was granted, the licence remained only for the Dewas unit; the respondent could manufacture vanaspati at either Dewas or Mandideep, and after permission, manufacture at Dewas stopped with transfer of the licence to Mandideep. Thus the Mandideep unit was set up by transferring or shifting the Dewas unit and fell within the exclusion clause. The Supreme Court allowed the appeals with costs, set aside the High Court judgment, dismissed the writ petitions, quantified costs at Rs 20,000, and directed that any subsidy availed as a result of the High Court judgment be recovered in installments as the State Government may consider.
Headnote
A) Industrial Incentives - Eligibility of New Industrial Units - Exclusion for Units Set Up by Transfer/Shifting - Madhya Pradesh State Incentive Notification dated 16.10.1986, Para XIII E - Respondent shifted its vanaspati unit from Dewas to Mandideep under same industrial licence after change of location; High Court held unit new because plant and machinery were not physically shifted; Supreme Court found High Court committed patent error as licence remained the same, Dewas unit closed, and Mandideep unit was set up by transferring/shifting existing unit; Held that such unit is not eligible for incentives under Para XIII E (Paras Not mentioned). B) Industrial Regulation - Licensing Requirement for Vanaspati Units - Industrial (Development and Regulation) Act, 1956 - No new licence was obtained for Mandideep unit; original licence for Dewas unit was amended to be operative at Mandideep after Central Government permission; Since manufacturing could continue only at one location under one licence, the process of manufacture at Dewas stopped; Held that unit at Mandideep was not a new unit but a transferred/shifted unit (Paras Not mentioned). C) Administrative Law - Promissory Undertaking and Estoppel - State Incentive Notification - Respondent had agreed in writing not to claim concession if not allowed because change of location would be transfer of capacity; State Government relied on that commitment to recommend permission; Held that respondent could not claim eligibility contrary to its undertaking and the State could recover any subsidy availed (Paras Not mentioned).
Issue of Consideration
Whether the respondent industrial unit at Mandideep was eligible for incentives under the State Government notification dated October 16, 1986, or whether it was excluded under Para XIII E as a unit set up by transferring/shifting an existing unit.
Final Decision
Appeals allowed with costs; impugned judgment of High Court set aside; writ petitions dismissed; costs quantified at Rs 20,000; any subsidy availed by respondent as a result of High Court judgment to be recovered by State Government in installments; Mandideep unit held to be set up by transferring/shifting Dewas unit and excluded from incentives under Para XIII E.
Law Points
- Eligibility for industrial incentives under state notification is determined by whether unit is new or transferred/shifted
- a unit set up after change of location under same industrial licence is not a new unit
- exclusion clause Para XIII E applies to units set up by transferring/shifting/closing an existing unit
- written undertaking not to claim concessions binds the industrial unit
- recovery of wrongly availed subsidy permissible
