1988 (1) TMI 337 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of the doctrine of promissory estoppel.
2. Determination of the petitioner's investment amount.

Issue-wise Detailed Analysis:

1. Applicability of the Doctrine of Promissory Estoppel:

The petitioner challenged the order dated 30th May/1st June, 1987, which reduced the sales tax exemption period from five years to three years. The petitioner argued that the State Government had made a specific and clear representation through Government Notification No. 8244 dated 30th September, 1982, promising a five-year exemption. The petitioner contended that the State Government was estopped from reducing the exemption period by a subsequent notification (No. 6468 dated 27th August, 1984) under the principle of promissory estoppel.

The petitioner relied on the Supreme Court decision in Pournami Oil Mills v. State of Kerala, where the Court held that industries set up in response to a government notification promising tax exemption for a certain period could invoke promissory estoppel if the government later attempted to reduce the exemption period. The Supreme Court stated, "If in response to such an order and in consideration of the concession made available, promoters of any small-scale concern have set up their industries... they would certainly be entitled to plead the rule of estoppel in their favour when the State... purports to act differently."

The respondent argued that the doctrine of promissory estoppel was not applicable as the subsequent notification was statutory. They cited the Supreme Court decision in Shri Bakul Oil Industries v. State of Gujarat, which stated that the government could withdraw tax exemptions unless it violated the rule of promissory estoppel.

However, the Court found that the petitioner had indeed set up the industry based on the representation made by the State Government under the earlier notification. Thus, the doctrine of promissory estoppel applied, and the petitioner was entitled to the five-year exemption as initially promised.

2. Determination of the Petitioner's Investment Amount:

The second issue was whether the petitioner's investment in the new unit exceeded Rs. 3 lacs. The petitioner provided a certificate from the General Manager, District Industries Centre, Agra, dated 2nd April, 1984, stating that the total investment was Rs. 3,09,005.22. Additionally, a subsequent report by the Joint Director of Industries on 7th March, 1987, confirmed that the investment was more than Rs. 3 lacs.

The impugned order reduced the exemption period based on the finding that the investment was less than Rs. 3 lacs, citing a bill dated 10th March, 1984, for motors purchased by the petitioner. The Court examined the records and found that the petitioner had made the payment for the motors by a bank draft dated 8th March, 1984, and the supplier had received the payment by 9th March, 1984. Thus, the investment was indeed more than Rs. 3 lacs by the relevant date.

Conclusion:

For the reasons stated above, the writ petition was allowed. The order dated 30th May/1st June, 1987, was quashed, and any proceedings pursuant to the order were also quashed. The petitioner was entitled to a five-year exemption from payment of sales tax with effect from 12th March, 1984. There was no order as to costs.

Writ petition allowed.