"60. On the basis of the aforesaid discussion, it is held that the petitioner is entitled to the exemption from the sales tax for a period of 8 years from the date ofstarting production i.e. 19.6.1991, on the basis of the principles laid down in A.I.R. 1968 S.C. 718, A.I.R. 1979 S.C. 621 and 1992 S.C.M.R. 1652."
From the above, it may he stated that the learned Judge in the High Court was mostly, if not wholly, persuaded by the aforementioned judgments, two of which are from Indian jurisdiction. It seems appropriate here to point out that the ease reported as "M.P. Sugar Mills Ltd. us. State of U.P. " (AIR 1979 SC 621) is no longer good law in India insofar as it laid down that it is not necessary, in order to attract the applicability of doctrine of promissory estoppel, that the promisee should suffer in detriment and what is necessary is only that the promisee should have altered his position in reliance on the promise. This view was over ruled by Supreme Court, of India in "Union of India vs. Godfrey Philips India Ltd." (AIR 1986 SC 806).
Apart from enforcing the doctrine of promissory estoppel, the High Court has also held that doctrine of legitimate expectancy, which is almost to the same effect as the doctrine of promissory estoppel, was also applicable to the case.
Before us the learned counsel for the appellants did not dispute the soundness of the doctrine of promissory estoppel as pronounced by the Supreme Court of Pakistan. His whole argument was that the doctrine was not applicable to the present case. Therefore what we are called upon to decide in the present appeal is whether the doctrine is applicable to the present case or not.
|
|
The doctrine of promissory estoppel is
new to Azad Jammu and Kashmir and has been pressed into service for the first
time in the present case by the High Court. In the judgment under appeal the
High Court has discussed at length a large number of cases from the Supreme Court of Pakistan and Supreme
Court of India but. as mentioned above, followed "The. Union of 
again in 1947 by Mr. Justice Denning,
as ne men was, in
Sales Tax Act was enacted in Pakistan in 1951 and was subsequently adopted in Azad Jammu and Kashmir by referential legislation. The respondent company owns an industrial unit in Mirpur (AJK). It manufactures polyester yarn which is subject to payment of sales tax. However under section 7 of the Sales Tax Act 1951. the Government is empowered to exempt any goods or any person from the tax payable under the aforesaid Act. On 22nd of October 1988 the Azad Government, of the State of Jammu arid Kashmir issued a notification that all goods produced by industries set up between 1st July 1988 and 30th June 1991 anywhere in Azad Kashmir shall be exempt from the sales tax. The notification was to be effective for a period of eight years commencing from 1st of July 1988. The obvious effect of the notification was that the exemption was to corne to an end on 30th of June 1996 irrespective of the date of production of any particular unit. This notification was challenged by the respondent company in the writ petition on the ground that the brochure under reference held out a promise that the newly set up industries would be entitled to exemption from sales tax for eight years from the commencement of production. Since the case of the respondent company was that it had set up its plant in Azad Kashmir in response to the promise contained in the brochure, the date on which the brochure was published was the most important point to be resolved by the High Court.
In para 9 of the judgment under appeal the learned Judge in the High Court observed that the first question which was to be resolved was the date or the period when the brochure was published but, before we advert to the finding of the High Court on this point we would like to notice the standtaken by the respondent company on this point. Position taken by the respondent company on this point was in para 2 of the writ petition which consists of clauses (a) to (k). Clauses (b), (c), (f) and (g) are relevant and are re-produced below:-
"(b) In and around the year 1988 the Government of Azad Jammu & Kashmir (Respondent No. 1) announced a policy for industrial investment offering various facilities and incentives to the Investors.
(copy of the Policy Statement is attached as Annex C)
(c) The Clause 3-A of the Policy Statement
provided an exemption from whole of the Sales Tax to the industries set up during the
period of July. 1988 to June 1991, for a period of eight <'8) years starting from
the date of commencement of their production.(f) The petitioner having set up its unit within the
prescribedperiod i.e., July
1988 to June 199J
and having taken
definitive steps and fulfilled all the necessary requirements enumerated
in the said Policy was entitled to avail the ~~~ aforesaid exemption from the sales tax and income
tax for
eight years from the date of production i.e.. from 19.06.1991 to 19.06.1999. (g) The Respondent No
2, in pursuance
of the aforesaid Policy,
issued a Notification No.
dated 22.10.1998. However this Notification stated that exemption of
sales shall be available for eight
years starting from 1st July 1988
(as opposed to the said Policy which provided for such Exemption to be available for a period of eight
years from
the date of commencement). * (copy
of the Notification is attached as Annex. E.)." Policy statement mentioned in the averments
reproduced above is the brochure of which a photostat copy forms
annexure C in the High Court file (hereinafter
called as the brochure). The averments reproduced above are to the effect that the promise which created
estoppel was made through the
brochure "in and around the year 1988". The effect of averments made
in clauses (b) and (g) reproduced
above is that the brochure holding out the promise was issued first and then exemption notification was issued in pursuance of the brochure on 22nd of October
1988.In order to determine the date of
publication of the brochure the High
Court conducted inquiiy by recording evidence, apart from perusing the documents which were already on the file.
Documents forming part of an inquiiy
held by the learned Judge in the High Court in absence of the parties in another context were transferred to the
file of the writ petitionwith the consent of the learned counsel for
the parties. The learned Judge came to the conclusion that brochure was printed in
November 1989. This finding is contained in para 10 of the judgment which will
be presently reproduced. This finding is vehemently contested before us by the
learned ccmnsel for the appellants by contending that, the brochure was
published many months later
in 1990 Imt even if the finding given by the High Court is assumed to be true it shows that the stand taken by
the respondent company that the
brochure was published in and around the year 1988 firmly stands falsified. It is the exemption notification of
22nd of October 1988, challenged in
the writ petition, which was published in the year 1988. There is no other
order or promise in that year since the brochure was. as found hy the High Court, published in the end of November 1989. The
whole edifice of the case pleaded by the respondent company thus fell to
the ground when the learned Judge in the High
Court, after a thorough probe, reached the aforementioned finding of fact. This finding has been
challenged by the appellants by claiming
that in fact the brochure was issued many months later but this finding
has not been challenged by the respondent. This finding falsifies the claim that the promise was made in and around 1988
that eight years exemption shall be counted from the date of production.
It also falsifies the claim that exemption
notification was issued after the brochure because the brochure, as found by
the High Court, was published in November 1989 hut the exemption notification had already been issued
more than a year earlier on 22nd of
October 1988. The only promise made by the Government in 1988 was
contained in the notification of 22nd of October 1988 and the Government has
not gone back from that promise as its position remain unchanged. !t appears that the learned Judge in the High Court did not notice that the stand taken on both these points
stood falsified by the finding recorded
by the learned Judge. This matter goes to the root of the case because the whole case of the respondent company
was based on this question of fact,.We may now turn to the objection raised by the
appellants about the finding given by
the learned Judge in the High Court that the brochure was published towards the
end of November 1989. The finding is contained in para 10 which is necessary to reproduce. It is as
follows: -"10. The initial
impression as shown in the order dated 16.12.1996
is not correct because on the basis of the record, it is proved that the brochure was printed twice.
The record of Industries Department
relating to the brochure was also summoned.
There is a note dated 22.11.1989 showing that "proof of the brochure was received by the Press which was found correct, except two words. From this it can
be concluded that the brochure was
printed in November 1989 as after preparation of "proof much time
was not needed for printing process."It was vehemently contended by the learned counsel
for the appellants that the finding
about the date of publication was conjectural. The only fact which was
proved was that on 22nd of November 1989 the proof reading of the brochure had
been completed. From this fact it was concluded by the learned Judge that the brochure was published in November 1989.In
our opinion the learned counsel for the appellants is correct in his
submission. If the proof reading of the brochure had been completed before 22nd of November 1989 it cannot be assumed that the
brochure was printed in November
1989. It is a question of fact which must be independently proved, but
no proof is on the record. It is well settled that a finding of fact cannot be based on conjectures and surmises. It
must rather be based on admissible
evidence. The finding is therefore unsustainable that the brochure was published in November 1989. However
the finding that proof reading of the
brochure was completed on 22nd November 1989 is undisputed and even
otherwise based on solid evidence.On the
other hand, on behalf of the appellants, our attention has been drawn to annexures I and II in the High Court
file which have been over looked by
the High Court. Armexure I (on page 120 of the High Court file) is a letter
written on 25th of June 1989 by the Director of Industries and Commerce addressed to the Controller Government
Printing Press in which request was
made for publication of the brochure It was requested in the letter that the cost incurred on the publication
may be intimated to the Directorate of
Industries so that money could be transmitted to the printing press before the close of the financial year
Annexiire II (page 121 of the High Court file) is a letter written on
10th of March 1990 by the Directorate of Industries
and Commerce to the Manager Government Printing Press in continuation of
the letter of 25th of June. 1989 in which it was stated that the brochure has been sent for publication and an
amount of Rs. 10,000/ was paid
through a crossed cheque on 29th of June 1989. It was requested that the total expenditure incurred on the publication
of the brochure may be intimated to the Directorate of Industries so
that the price per copy of the brochure may be fixed which could be charged
from the investors. The letter does not
show that printed copies of the brochure had been received in the Directorate of Industries but even if it is assumed
that it was so that letter shows that
the brochure had not yet been distributed, and at that, stage its price
was being fixed. Thus it stands proved that it was distributed at. a date subsequent to 10th of March 1990. In other words
the brochure could have, if at all,
reached the sponsors of the respondent company in April 1990, at the earliest. The exemption notification had been
issued sixteen months earlierNow we turn to the tune when it was decided to set
up a plant at Mirpur The record
shows that, Spintex Limited was incorporated iinde> the Companies Ordinance 1984. as adopted in Azad Jamnui
and
(1)
Land
50 Acres
(2)
Electricity
500 KW for 1% years.
(3)
Furnace
Oil 7000 tons per years.
(4)
Telephone
12 lines.
(5)
Octroi
Exemption for a period of five years.
Upon our detailed checking we found some mistakes in our calculations, and now we need some changes in the above items as follows:
(1.) Land 50 Acres.
(2)
Electricity
500 KW for 1& years.
(3)
Furnace
Oil 10,532 tons per year.
(4)
Telephone
12 lines.
(5)
Octroi
Exemption for a period of five years.
(b) Further to our Feasibility Report submitted during Facility Board Meeting dated 14.11.1989, in Section 3 item 3.1, names of sponsors in seriatim may be read as under:-
1.
Mr.
Allahuddin J. Feerasta
2.
Mr.
Nooruddin B. Feerasta
3.
Mrs.
Aziza A. Feerasta
We would like to point out that by mistake the name was written as Mr. Nooruddin B. Feerasta (Sr.) instead of Mr. Nooruddin B. Feerasta (Jr.),"The letter reproduced above shows that the sponsors of the project had already held a meeting with the Facility Board of Azad Jammu and Kashmir on 14th of November 1989. It also shows that in the meeting feasibility report of the project, was placed before the Facility Board and was discussed. It follows that even the feasibility report was ready before 14th of November 1989. Since feasibility report of a project like polyester plant cannot be prepared within a short time it can be safely inferred that the idea f-l putting up this plant, had matured many weeks, if not months, before Facility Board meeting held on 14th of November 1989. Leaving aside al! •iiiier details, the meeting of the Facility Board of Azad Jammu andKashmir, which was attended by the sponsors with complete feasibility report, was held on 14Lh of November 1989 on which date, as found by the High Court, even the proof reading of the brochure had not taken place. It should go without saying that the brochure had not yet been printed. The date of incorporation of the company is 17th of February 1990 while the sale deed was executed on 22nd of February 1990. A short period which elapsed between the meeting of the Facility Board on the one hand and the dates of incorporation and execution of the sale deed on the other hand unmistakably show that things went according to the plan which had been firmly finalised much before the first letter of Mr. Badaruddin J. Feerasta written on 16th of October 1989, which is earlier than the proof reading of the brochure. These facts cleaiy negative the stand taken by the respondent company that it is due to the offer made in the brochure that the plant was set up.The exemption notification challenged in the writ petition was issued on 22nd of October 1988. The letters mentioned above and the different stages of preparation evidenced by these letters are all subsequent to 22nd October 1988. the dace of exemption notification. It is clear to us, therefore, that the plant was set up in response to the incentive given in the exemption, when the brochure had not been written.There is a broader aspect of the matter which is of great significance. In Pakistan a notification under section 7 of the Sales Tax Act was issued on 26th of June .1988 which was to the following effect:-"Notificatimi No. S.R.O. 529(l-)/88. dated 26th June, 1988.--ln exercise of the powers conferred by sub-sections (1) and (2) of section 7 of the Sales Tax Act, 1951 ail of 1951), the Federal Government is pleased to direct that all goods produced or manufactured by such industries which are set up between the 1st. of July. 1988. and the 30th June. 1991. in the following areas shall be exempt from rhe tax payable under (he said Act:-
• i) Province of Baluchistan except in Hub Chovvki area: 11)1 The Noith West Frontier Province.
2.
Sales Tax under the said Act shall also not be levied on such goods produced or manufactured by the
industries set up in the Federally Administered Tribal Areas. Northern Areas adminisreied by
the Administrator, Northern Areas and Azad Kashmir aviti^g the period
specified above.
3. This N'oi.'Vat.iou shall bt- effective fen- a period of eight years commencing from the 1st July. 1988industry go into production including trial production, which date shall be intimated, in writing, by an intending manufacturer to the authorised officer of Central Excise and Sales Tax at least fifteen days before commencing such production.]"Tuis notification shows that a policy decision was taken at the Federal level that exemption from sales tax will be given for a period of eight years from 1st of July 1988 to the industries set up in Azad Jammu and Kashmir during the specified periodOn 22nd of October 1988, the Azad Government of the State of Jammu and Kashmir also issued a notification on the same lines. It reads as
follow;
"Notification No. FD-E/11Q) Tax-11 dated 22.10.1988.
In exercise of the powers conferred by Sub-Sections (1) and (2) of Section 7 of the Sales Tax Act, 1951 (III of 1951), as'inforce in Azad Jammu and Kashmir. The Azad Government of the State of Jammu and Kashmir is pleased to direct that all goods produced or manufactured by such industries which are set up between the 1st July, 1988 and the 30th June, 1991, anywhere in Azad Kashmir shall be exempt from the tax payable under the said Act.
2. This notification shall be effective for a period of eight years commencing from 1st July, 1988. A comparison of the two notifications would show that exemption from sales tax in Azad Jammu and Kashmir had already been declared in the notification issued by the Federal Government, and the Azad Kashmir notification was in pursuance of the policy decision mentioned in the notification of Federal Government. It also shows that the exemption from sales tax was available for eight years commencing from 1st of July 1988 which was to corne to an end on 30th June 1996 irrespective of the dates on which production was commenced by industries set up during the specified time.
These two notifications were issued in continuation of the policy decisions taken at the Federal level. Being outstanding businessmen in Pakistan, the sponsors of the respondent company should have in ordinary course known about this policy decision which was clearly to the effect that the exemption from sales tax will come to an end on 30th of June 1996 and will not be available for eight years form the date of production. These notifications were issued under a statute and their ignorance was neither pleaded nor is legally acceptable. These notifications did hold out a promise which bound the Government and created promissory estoppel that has, however, been fulfilled.It is also our view that in presence of the clear provisions made in the notification of 22nd of October 1988 that the exemption from sales tax will come to an end on 30th of June 1996 the brochure cannot have the sanctity of a promise even if it is assumed that it had been distributed to the businessmen in Pakistan before the initial idea of setting up of a plant at Mirpur attained finality. In presence of the notifications issued in Pakistan as well as in Azad Jammu and Kashmir the brochure published under the authority of the Directorate of Industries of Azad Jammu and Kashmir would have given rise to the question as to how the Directorate of Industries was holding out a promise which was contradictory to the two notifications under reference. However in the correspondent conducted by the sponsors of the respondent-company with the authorities of Azad Jammu and Kashmir, referred earlier, no question about this aspect of the matter was raised. In fact this matter was not agitated till llth of July 1991, the date on which the first letter was written by the respondent-company to the Director of Industries to agitate this point.For the reasons stated above it stands disproved that the respondent acted on the promise made in the brochure. The doctrine of legitimate expetency is also not applicable for the same reasons.
The High Court has also directed the Chief Secretary and Secretary Finance to issue an appropriate order to implement the order of the Prime Minister giving exemption to the respondent company. In the writ petition no such direction was prayed for. In fact a perusal of the writ petition shows that there is no averment about the aforesaid order of the Prime Minister. However some photostat copies were attached with the writ petition and the learned Judge in the High Court felt advised to requisition the relevant files to check up the authenticity of the documents. The photostat copies forming part of the High Court file show that Prime Minister of Azad Jammu and Kahsmir accepted a proposal submitted to him by Secretary of Industries and Commerce through the Minister of Industries that notification of 22nd of October 1988 may be amended to the extent that exemption from sales tax may be given for eight years from the date of production. We will deal with the legality or otherwise of this order, but we must begin by noting that the High Court committed two procedural mistakes going to the root of the case in issuing a direction that the Secretary Finance and the Chief Secretary should implement the order passed by the Prime Minister. The basic point is that the Chief Secretary and Secretary Finance were not arrayed as respondents in the writ petition. There were five respondents before the High Court which were as follows:-
1. Azad Government of the State
of
1-A. Secretary Industries & Commerce, Azad J&K Government, Muzaffarabad.
2.
Azad Jammu & Kashmir Council through its Secretary, Azad J&K Council Secretariat,
Islamabad.
3.
Under Secretary Finance, Government of Azad Jammu & Kashmir, Muzaffarabad.
4. Collector Sales & Taxation, Azad J&K Government, Muzaffarabad. It will be seen that the Chief Secretary was not arrayed as respondent and is only mentioned as the officer on whom the notice addressed to the Government was to be served. It is well settled that a writ of any kind cannot be issued to a State functionaiy unless she is arrayed as respondent and is given adequate opportunity to present his case. There is a chain of judgments of this Court on this point. Some of them are Liaquat All vs. Municipal Corporation (1997 SCMR 37), Barkat Hussain us. Sardar Misri Khan (1992 PSC 724), Muhammad Nazir vs. Muhammad Ashraf (PLD 1987 SC (AJK) 16), Abdul Hamid vs. Muhammad-Zameer (1990 PSC 1014), and Muhammad Resham Khan vs. Chairman Inspection Team (PLJ 1990 SC(AJK) 38).The second procedural mistake is that a Court has to go by the pleadings of the parties and should not allow the parties to travel beyond them. The order of the Prime Minister which the learned Judge has ordered to be implemented does not find any mention in the writ petition. The mere fact that a photostat copy of the order was appended with the writ petition does not warrant that it should have been brought under consideration. This Court has upheld this principle in an unreported case Civil Appeal No. 36 of 1994 titled "Raja Muhammad Azam vs. Azad Jammu & Kashmir Cooperative Bank Ltd. and anothers". The relevant portion may be usefully reproduced."38. Ch. Muhammad Riaz Alam submitted that the very constitution of the Commission of Inquiry is linked with the publication of the notification in the official gazette and therefore the High Court should have quashed the setting up of the Commission as well as the proceedings taken by it. On the other hand Raja Muhammad Hanif Khan submitted that although the certificate issued by the Government Printing Press was attached with the writ .petition but there was no averment to that effect in the writ petition. He relied on the known principle that only that evidence can be read while pronouncing a decision which is in support of an averment in the pleadings and that no person can be allowed to produce evidence beyond his pleadings.
39. So far as para 17 is concerned the contention of Raja Muhammad Hanif Khan is correct that there was noaverment in the writ petition that the notification had not been published in the official gazette. This point does not, find mention in the judgment of the High Court which shows that this point was not raised before the High Court. It is well settled that only that evidence can be considered by the Court while deciding a case which is in support of the pleadings of the parties. In absence of pleading to that effect no decision can be recorded on this point. No other convincing reason has been advanced before us to show that the High Court was not right in holding the order setting up the Commission of Inquiry was bad in law. We, therefore, maintain para 17 of the High Court Judgment.Even on merits the High Court fell in legal error in ordering the implementation of the order of the Prime Minister. The order was passed in the background that Secretaiy Industries wrote a note on 25th of August 1994 in which he stated that M/s. Spintex Limited should be given benefit of exemption from sales tax for a period of eight years from the date it started production and for that purpose notification of 22nd of October 1988 should be a'mended. In para 3 of the note it is specifically mentioned that the matter was taken up with the Finance Department but that Department had not agreed with this proposal. He proposed to the Minister Industries that the sanction of the Prime Minister may be obtained for the aforementioned amendment in the notification of 22nd of October 1988. The Minister sent the file for approval of the Prime Minister who approved it. Mr. Umar Mahmood Kasuri, the learned counsel for the appellants, rightly contended that under sub-rule (1) of Rule 15 of the Rules of Business 1985 no Department of'the Azad Government of the State of Jammu and Kashmir can issue an order without previous consultation with the Finance Department which directly or indirectly affects the finance of the Government or which, in particular, involves remission or assignment of revenue, actual or potential. The sub-rule is as follows:-"15. Consultation with Finance Department.-d) No Department shall, without previous consultation with the Finance Department, authorise any orders, other than orders in pursuance of any general or special delegation made by the Finance Department, which directly or indirectly affect that finance of the Government or which in, particular, involve:
(a) Relinquishment, remission or assignment of revenue, actual or potential, or grant of guarantee against it orgrant of lease of land or mineral, forest of water power rights;
(b)
expenditure
for which no provision exists;
(c)
a
change in the number of grading of posts or in terms and conditions of service of Government servants or their
statutory rights and
privileges which have
financial implications;
(d)
levy of taxes, duties, fees, or cesses;
(e)
floatation of loans;
(f)
re-appropriations within budget grants;
(g)
alteration in financial procedure in the method of compilation of accounts or of the budget
estimates;
(h) interpretation of rules made by the Finance Department." It is obvious that the proposal was covered by sub-rule (1) reproduced above but still it was submitted for approval of the Prime Minister which was an illegal exercise. The consequent approval accorded by the Prime Minister was also illegal. Under the Rules of Business by-passing of Finance Department in such matters is not allowed.Not only that, the order passed by the Prime Minister was illegal also in view of sub-rule (3) of the same Rule which runs as follows:-"(3) No proposal, which requires previous consultation with the Finance Department under sub-rule (1) but in which the Finance Department has not concurred, shall be proceeded with unless a decision to the effect has been taken by the Cabinet. Formal orders shall, nevertheless, issue only after the Finance Department has exercised scrutiny over the details of the proposal."
It, is
clear from the sub-rule extracted above that if it was necessary to over-rule the
Finance Department it could only be done by the Cabinet and not by the Prime
Minister. Since the order of the rime
Minister was clearly against law, it was not right for the High Court to enforce it
in exercise
of its Constitutional jurisdiction, which is equitable in nature and cannot be exercised to implement an
illegal order even f it be of the Prime Minister. It was held by this Court in "Major
Muhammad Aftab Ahmad (Retired)
vs. Azad Jammu and
"(iii) Even if it is assumed for the sake of arguments that the Prime Minister had made the order for the appointment of the appellant, in the post of Superintendent of Police still it cannot be given efect to or enforced by way of issuing writ directing the respondent to issue the order of his appointment to the said post as it is a settled law that the writ jurisdiction cannot be exercised to direct a person to give effect to an unlawful order of any authority even though it is competent authority to pass such an order in a lawful manner. Since, as said earlier, the appointment of the appellant could not be made to the post of Superintendent of Police under the rules the orders of the Prime Minister claimed by the rnpellant to be the orders of his appointment to the said post being violative of the relevant rules were unlawful and conseque/tly were not enforceable by the High Court in its writ jurisdiction which is discretionary in nature and its exercise is always refused where the ends of justice and facts of the case do not justify and call for to do so."
For the reasons enumerated above, the direction given by the High Court that order of the Prime Minister for amendment of the notification of 22nd "f October 1988 was not warranted and we have no hesitation in setting it aside.
As an upshot of the above analysis, the appeal is accepted and the writs issued by the High Court are recalled. Consequently the writ petition filed by Spintex Limited shall stand dismissed. Costs will follow.
(K.A.B.) Appeal accepted