1986 (2) TMI 323 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to concessions under the Industrial Policy Resolution dated 18th July, 1979.
2. Application of the doctrine of promissory estoppel.
3. Competence of the State Government to revise its policy.
4. Authority of municipalities to levy octroi duty.
5. Exemption from sales tax under the Industrial Policy Resolution.

Detailed Analysis:

1. Entitlement to Concessions under the Industrial Policy Resolution:
The petitioners, entrepreneurs who set up rolling mills, claimed concessions related to octroi and sales tax for five years from the start of commercial production, as per the Industrial Policy Resolution of 18th July, 1979. They argued that they were lured by these concessions to establish their units. Despite the policy's revision on 31st July, 1980, they believed they were entitled to the original benefits.

2. Application of the Doctrine of Promissory Estoppel:
The petitioners contended that the State Government was estopped from denying the promised concessions. The doctrine of promissory estoppel, as elucidated in several Supreme Court cases, holds that a clear and unequivocal promise intended to create legal relations, if relied upon and acted upon by the promisee, binds the promisor. The court affirmed that the doctrine applied, as the petitioners had altered their position based on the government's promise. The doctrine is applicable against the government unless enforcing the promise would be inequitable due to subsequent facts or jeopardize public interest.

3. Competence of the State Government to Revise its Policy:
The opposite parties argued that the State Government could revise its policy and that the petitioners were aware of the revised policy before commencing production. The court, however, found that the government could not retract the promise without showing that public interest would be jeopardized. The revision was not based on new facts or public interest concerns but on a reassessment of the need for such incentives.

4. Authority of Municipalities to Levy Octroi Duty:
Municipalities argued that they were empowered to levy octroi under the Orissa Municipal Act, 1950, and were not bound by the State Government's industrial policy. The court noted that while municipalities could levy octroi, the State Government had the power to exempt new industries from such levies under sections 131-A and 188-A of the Act. The government's promise of exemption was within its competence and should have been implemented according to the statutory procedure.

5. Exemption from Sales Tax under the Industrial Policy Resolution:
The court observed that the State Government had issued a notification on 31st July, 1980, under section 6 of the Orissa Sales Tax Act, 1947, exempting certain goods from sales tax for five years from the date of certification by the Director of Industries. The petitioners' units met the conditions for this exemption. The court directed that the petitioners were entitled to sales tax exemptions as specified in the Industrial Policy Resolution of 1979-83.

Conclusion:
The court concluded that the petitioners were entitled to the concessions promised in the Industrial Policy Resolution of 1979-83, notwithstanding the subsequent revision. The State Government was directed to exempt the petitioners' units from octroi and sales tax as initially promised, within three months. An appropriate writ of mandamus was issued, and the writ applications were partly allowed.