1976 (12) TMI 171 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of purchase tax on imported raw nuts under the Kerala General Sales Tax Act, 1963.
2. Validity of the cancellation of tax exemption notification.
3. Application of equitable estoppel against the government.
4. Jurisdiction of the court under Article 226 to interfere with assessment orders.
5. Nature of the transactions (whether they are "outside sales" or "sales in the course of import/export").

Issue-wise Detailed Analysis:

1. Liability of Purchase Tax on Imported Raw Nuts:
The petitioners, cashew processors, contended that their transactions of purchasing imported raw nuts through the Cashew Corporation of India were exempt from purchase tax under Article 286(1)(a) or (b) of the Constitution. They argued that the purchases were in the course of import/export and thus not liable to tax. The court noted that the petitioners' transactions were conducted under a scheme where the Cashew Corporation acted as an agent of the Government of India to import and distribute raw nuts to actual users like the petitioners.

2. Validity of the Cancellation of Tax Exemption Notification:
The petitioners were initially granted an exemption from purchase tax via a notification dated 12th October 1973 (Exhibit A), which was later cancelled by another notification dated 9th November 1973 (Exhibit B). The court examined whether the cancellation was valid and concluded that the government had the power to cancel the exemption under Section 10(3) of the Kerala General Sales Tax Act, 1963. The court found that the cancellation was not retrospective and did not violate any principles of law.

3. Application of Equitable Estoppel Against the Government:
The petitioners argued that they were assured by government officials that no tax would be levied on the turnover of African nuts, and they acted on these assurances to their detriment. The court rejected the plea of equitable estoppel, stating that the power to tax is a legislative power and cannot be estopped by assurances given by government officials. The court cited precedents indicating that there can be no estoppel against the exercise of legislative power.

4. Jurisdiction of the Court Under Article 226 to Interfere with Assessment Orders:
The court addressed the objection raised by the respondents that the court should not interfere under Article 226 of the Constitution as the assessment proceedings were pending before appellate authorities. The court agreed that it was not proper to interfere with the assessment orders at this stage and emphasized that the determination of the nature of the transactions should be left to the statutory authorities.

5. Nature of the Transactions:
The petitioners claimed that their transactions were "outside sales" or "sales in the course of import/export," thus exempt from taxation under Article 286(1)(a) and (b) of the Constitution. The court held that it was not within its jurisdiction to determine the nature of the transactions in the first instance and that this task should be left to the taxing authorities. The court directed the Sales Tax Appellate Tribunal to dispose of the pending appeals and determine the nature of the transactions based on the evidence presented.

Conclusion:
The court upheld the validity of the cancellation notification (Exhibit B) and directed the Sales Tax Appellate Tribunal to dispose of the pending appeals regarding the assessment proceedings. The court also provided for the discharge of the existing bank guarantees furnished by the petitioners, subject to the condition that they furnish a new bank guarantee for one-third of the amount covered by the discharged guarantee. The writ petition was dismissed with no order as to costs.