1971 (10) TMI 87 - SC - VAT and Sales Tax

Whether the Himachal Pradesh Government was competent to alter the sales tax law as desired by it without the concurrence of the Central Government? Held that - Appeal dismissed. As the scheme contained merely administrative instructions then the Government having made the representation referred to earlier, on the basis of which the exporters had exported certain goods, the Government was estopped from going back on the representation made by it. In this case, again, there was no question of issuing any direction to make a law or abrogate an existing law. But in the circumstances of the case, we think this is eminently a fit case where the parties should be asked to bear their own costs both before the High Court as well as in this court. There is no doubt that the Deputy Commissioner did give an impression to the bidders that the Government was considering the abolition of sales tax on the sale of Indian-made foreign liquor. Relying on that information the bidders must have given very high bids. The Government of Himachal Pradesh tried its best to persuade the Central Government to agree to change the law but it failed. In the process, the appellant must have suffered financially.

Issues Involved:
1. Representation by the Deputy Commissioner regarding sales tax exemption.
2. Competence of the Himachal Pradesh Government to alter sales tax laws.
3. Authority of the court to mandate legislative changes.
4. Applicability of previous legal precedents.

Issue-wise Detailed Analysis:

1. Representation by the Deputy Commissioner regarding sales tax exemption:
The primary issue revolves around whether the Deputy Commissioner, during the auction, represented that no sales tax would be levied on the sale of Indian-made foreign liquor and beer. The appellant-firm claimed that such an assurance was given, leading them to increase their bid. However, the respondents denied this, stating that the Deputy Commissioner merely mentioned that the Government was considering the removal of sales tax. The court found that the appellant failed to provide positive evidence supporting their claim. The Deputy Commissioner's statement, as per the respondents, did not constitute a definitive assurance but rather indicated a consideration of tax removal. Consequently, the court concluded that the Division Bench erred in assuming a specific and unambiguous announcement by the Deputy Commissioner.

2. Competence of the Himachal Pradesh Government to alter sales tax laws:
The court examined whether the Himachal Pradesh Government had the authority to alter sales tax laws without the Central Government's concurrence. The Government of Himachal Pradesh believed it could not change the sales tax law without the Central Government's approval. The court noted that the power to impose or exempt taxes is a legislative function, which can be exercised by the Legislature or its delegate. The Himachal Pradesh Government's attempt to align its sales tax laws with Haryana's required Central Government approval, which was not granted. Thus, the court found that the Government of Himachal Pradesh was not competent to unilaterally alter the sales tax law.

3. Authority of the court to mandate legislative changes:
The appellant sought a writ to restrain the respondents from enforcing the sales tax levy. The court emphasized that no court can issue a mandate to a Legislature or a subordinate legislative body to enact or change a law. Article 265 of the Constitution stipulates that taxes must be levied and collected by authority of law. The court cannot direct the Government to refrain from enforcing a legal provision or to alter legislative entries. Therefore, the relief sought by the appellant was deemed ungrantable.

4. Applicability of previous legal precedents:
The appellant cited two Supreme Court decisions: Collector of Bombay v. Municipal Corporation of the City of Bombay and Union of India v. Indo-Afghan Agencies Ltd. The court distinguished these cases from the present one. In the Collector of Bombay case, the issue was about adverse possession and not about mandating legislative changes. In Indo-Afghan Agencies, the court dealt with the Government's obligation to adhere to an existing scheme, which was not analogous to altering a tax law. The court clarified that these precedents did not support the appellant's contention for a legislative mandate.

Conclusion:
The court dismissed the appeal, holding that the Deputy Commissioner did not make a definitive representation about sales tax exemption. It affirmed that the Himachal Pradesh Government could not alter the sales tax law without Central Government approval and that the court could not mandate legislative changes. The appeal was dismissed with no order as to costs, acknowledging the financial impact on the appellant due to the Deputy Commissioner's misleading impression.

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