1984 (12) TMI 275 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality and constitutionality of SRO No. 118 of 1984.
2. Application of the principle of promissory estoppel.
3. Alleged discrimination against the petitioners.
4. Withdrawal of sales tax exemption.

Detailed Analysis:

1. Legality and Constitutionality of SRO No. 118 of 1984:
The petitioners challenged SRO No. 118 of 1984, which superseded SRO No. 671 of 1979 and withdrew the exemption from the payment of sales tax on the finished goods manufactured by their small-scale industrial units. The respondents contended that the impugned SRO is neither illegal nor unconstitutional. They argued that the exemption is a policy matter and a legislative function of the State, which can change the policy from time to time without violating Article 14 of the Constitution of India. The court upheld the SRO, stating that the power of exemption is derived by the Government in exercise of its legislative function under section 5 of the Jammu and Kashmir General Sales Tax Act, 1962, and thus, SRO No. 118 of 1984 is intra vires the powers of the State Government and is neither unconstitutional nor illegal.

2. Application of the Principle of Promissory Estoppel:
The petitioners argued that the respondents are estopped on the principles of promissory estoppel from superseding SRO No. 671 of 1979, which initially granted a ten-year exemption from sales tax. They claimed that the withdrawal of the exemption is illegal, unconstitutional, discriminatory, and opposed to the principles of promissory estoppel. The court, however, held that the principle of estoppel is not applicable against law, especially in matters of taxation. It cited the Supreme Court's decision in Jit Ram Shiv Kumar v. State of Haryana, which stated that the plea of promissory estoppel is not available against the Government in the exercise of its legislative, sovereign, or executive powers or the statutory functions of the State. The court concluded that the doctrine of promissory estoppel is not applicable to the case of the petitioners' units.

3. Alleged Discrimination Against the Petitioners:
The petitioners contended that the action of the respondents in withdrawing the exemption for their industry while continuing it for others is discriminatory and hence ultra vires the provisions of Article 14 of the Constitution of India. The respondents argued that the Government has classified the units and dealt with the periods differently in the notifications, and thus, the action is not discriminatory. The court found no merit in the petitioners' argument, stating that the Government is fully empowered to legislate upon the subject and the withdrawal of the exemption is within its legislative function.

4. Withdrawal of Sales Tax Exemption:
The petitioners claimed that the withdrawal of the sales tax exemption would financially ruin them and force them to close down their units. They argued that the statutory power under the Jammu and Kashmir General Sales Tax Act, 1962, cannot be arbitrarily used by the State to deprive them of rights already vested in them. The respondents contended that the exemption is a policy matter and can be changed by the Government. The court held that the Government is not estopped from withdrawing the exemption and that the words "No unit shall be entitled to exemption for a period exceeding 10 years" in SRO No. 671 of 1979 are wide enough to empower the Government to withdraw the notification relating to the grant of sales tax even before the period of 10 years expires.

Conclusion:
The court dismissed all the writ petitions, upholding SRO No. 118 of 1984 as intra vires the powers of the State Government and neither unconstitutional nor illegal. The petitions were dismissed with no order as to costs, and the connected C.M.Ps. were also accordingly disposed of.