2006 (9) TMI 278 - SC - VAT and Sales Tax

SALES TAX EXEMPTION INCENTIVES, CONCESSIONS AND BENEFITS FOR INDUSTRIAL UNITS FOR SUBSTANTIAL EXPANSION OR DIVERSIFICATION

Issues Involved:
1. Promissory Estoppel
2. Legitimate Expectation
3. Retrospective Amendment of Notifications
4. Interpretation of Exemption Notifications
5. Jurisdiction of Tax Authorities

Detailed Analysis:

1. Promissory Estoppel:
The appellant argued that the High Court erred in dismissing the plea of promissory estoppel, which was specifically pleaded in the writ petition. The appellant had made substantial investments based on the promises and assurances from the State Government, as evidenced by the Memorandum of Understanding (MOU) and subsequent addendum. The court found that the High Court's finding that "there is no factual foundation" for promissory estoppel was incorrect. The doctrine of promissory estoppel has been repeatedly applied to statutory notifications, and the appellant had altered its position based on the State's representations.

2. Legitimate Expectation:
The appellant contended that the principle of legitimate expectation, based on Article 14, was violated by the State's actions. The appellant had a legitimate expectation that the tax exemptions would be honored for the full period of seven years, as per the eligibility certificate and exemption order. The court agreed, stating that any administrative or executive action of the State that is arbitrary or unjust cannot be sustained as it violates Article 14 of the Constitution of India.

3. Retrospective Amendment of Notifications:
The appellant argued that the State Government did not have the power to make a retrospective amendment to S. R. O. No. 1729/93, affecting the rights already accrued to the appellant. The court held that the retrospective operation of statutes or notifications is not intended unless expressly stated. The court found that S. R. O. No. 38/98 was prospective in operation and did not affect the appellant's pre-existing and accrued right to tax exemption for the full period of seven years.

4. Interpretation of Exemption Notifications:
The appellant argued that the High Court misconstrued the true purpose and meaning of the notifications S. R. O. 1729/93, S. R. O. 38/98, and S. R. O. 1092/99. The court found that the intention of the Government was not to take away the benefits of exemption for units that had commenced commercial production before the amendment. The court held that the appellant's right to exemption was not affected by the amending notification S. R. O. No. 38/98, which was expressly made prospective.

5. Jurisdiction of Tax Authorities:
The appellant challenged the jurisdiction of the Assistant Commissioner of Sales Tax to issue notices contrary to the eligibility certificate and exemption order. The court agreed, stating that the authorities under the Act could not sit in judgment over or ignore the order granting exemption from payment of sales tax by the highest tax authority, i.e., the Board of Revenue. The court issued a writ of mandamus restraining the respondents from taking any proceedings against the appellant contrary to the eligibility certificate and exemption order.

Conclusion:
The appeal was accepted, and the order of the High Court was set aside. The court issued a writ of mandamus restraining the respondents from taking any proceedings against the appellant contrary to the eligibility certificate dated January 10, 1997, and the exemption order dated June 10, 1998. The court found that the State Government's actions were highly unfair, unreasonable, arbitrary, and violative of Article 14 of the Constitution of India. The appellant's accrued right to tax exemption for the full period of seven years was upheld.

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