1980 (4) TMI 284 - HC - VAT and Sales Tax

Issues Involved:
1. Doctrine of promissory estoppel
2. Violation of Article 19(1)(f) and (g) of the Constitution
3. Confiscatory nature of the amending Act and violation of Article 31 of the Constitution
4. Violation of Article 20 of the Constitution

Issue-wise Detailed Analysis:

1. Doctrine of Promissory Estoppel:
The petitioners argued that the doctrine of promissory estoppel invalidates the U.P. Sales Tax (Amendment and Validation) Act, 1976. The court referred to the Supreme Court's decision in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, which established that promissory estoppel applies where a clear and unequivocal promise intended to create a legal relationship is made and acted upon. However, the court noted that promissory estoppel cannot prevent the government from fulfilling its legal duties, compel it to act unlawfully, or restrict legislative power. The court concluded that the levy of sales tax was a legislative act, and thus, the doctrine of promissory estoppel could not be invoked against it. The notifications issued by the State Government on 1st December 1973 were subordinate legislations, and their amendment by the 1976 Act was a legislative exercise. Therefore, the doctrine of promissory estoppel did not apply.

2. Violation of Article 19(1)(f) and (g) of the Constitution:
The petitioners contended that the amending Act imposed unreasonable restrictions on their fundamental rights to practice any profession or to carry on any occupation, trade, or business, as guaranteed by Article 19(1)(f) and (g) of the Constitution. The court found no substance in this submission. It noted that the State Government had changed its policy to levy sales tax on exercise books while exempting the raw material (paper) used for their manufacture. This policy shift was aimed at addressing the hardship caused by a previous court ruling. The court emphasized that the retrospective levy of tax was not per se confiscatory or unreasonable. The court distinguished the present case from a Calcutta High Court decision where a 27-year retrospective tax imposition was deemed unreasonable. Here, the retrospectivity was less than three years, and the levy aimed to validate past collections and ensure compliance with the law. The court concluded that the amending Act did not violate Article 19(1)(f) and (g).

3. Confiscatory Nature of the Amending Act and Violation of Article 31:
The petitioners argued that the amending Act was confiscatory in nature and violated Article 31 of the Constitution. The court rejected this argument, stating that the retrospective levy of tax was not confiscatory or extortionate. The court referred to the Supreme Court's observations in Hira Lal Rattan Lal v. Sales Tax Officer and Assistant Commissioner of Urban Land Tax, Madras v. Buckingham and Carnatic Co. Ltd., which held that the reasonableness of a tax cannot be questioned as long as it retains its character as a tax and is not confiscatory. The court noted that the amending Act aimed to validate past levies and collections, and the inability to pass on the tax to buyers did not render the enactment unconstitutional. The court concluded that the amending Act was reasonable and did not violate Article 31.

4. Violation of Article 20 of the Constitution:
Towards the end, the petitioners faintly submitted that the amending Act violated Article 20 of the Constitution because the provisions of the Sales Tax Act relating to prosecution of dealers could be invoked against them. The court noted that the petitioners did not complain of prosecution, and the situation did not arise in this case. Therefore, the court did not consider whether the amending Act violated Article 20 of the Constitution.

Conclusion:
The court dismissed the writ petitions, holding that the various submissions raised in support of the petitions had failed. The amending Act of 1976 was upheld, and the petitions were dismissed with costs.

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