1989 (2) TMI 382 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the Government Orders of 1971 constituted an outright exemption from payment of sales tax.
2. Applicability of the doctrine of promissory estoppel.
3. Validity of the assessment orders and the imposition of sales tax.
4. Validity of S.R.O. 448 of 1982 altering the point of levy of sales tax.

Detailed Analysis:

1. Whether the Government Orders of 1971 constituted an outright exemption from payment of sales tax:
The petitioner argued that Government Orders No. 159-Ind. of 1971 and No. 414-Ind. of 1971 provided outright exemption from sales tax. However, the court, referencing Pine Chemicals v. Assessing Authority [1989] 73 STC 101, concluded that these orders were policy decisions and not actual exemptions under Section 5 of the Jammu and Kashmir General Sales Tax Act. The orders required a specific notification under Section 5 to grant exemptions, which was never issued.

2. Applicability of the doctrine of promissory estoppel:
The petitioner claimed that the doctrine of promissory estoppel should prevent the state from collecting sales tax, arguing that they had set up the factory based on the promise of exemption. However, the court found that the petitioner was informed before production began that no exemption was available without a notification under Section 5. The petitioner still collected sales tax from consumers, which negated the applicability of promissory estoppel. The court cited Union of India v. Godfrey Philips India Ltd. [1986] 158 ITR 574, emphasizing that the doctrine requires the promise to be acted upon, which was not the case here.

3. Validity of the assessment orders and the imposition of sales tax:
The petitioner was assessed for sales tax, surcharge, interest, and penalty. The court found that the petitioner had collected sales tax from consumers but did not deposit it with the state, which was inequitable. The court emphasized that statutory remedies should be exhausted before invoking Article 226 of the Constitution. The court cited cases like Titaghur Paper Mills Co. Ltd. v. State of Orissa [1983] 53 STC 315 and Assistant Collector of Central Excise, Chandan Nagar v. Dunlop India Ltd. AIR 1985 SC 330 to underscore that bypassing statutory remedies is generally discouraged.

4. Validity of S.R.O. 448 of 1982 altering the point of levy of sales tax:
The petitioner challenged the validity of S.R.O. 448 of 1982, which altered the point of levy of sales tax from the first to the second point of sale. The court referenced Ram Singh Wine Shop v. State of Jammu and Kashmir 1987 KLJ 286, which upheld the government's power under Section 4(7) of the Act to fix the point of levy. The court found no merit in the petitioner's argument that S.R.O. 448 was issued to circumvent stay orders and held that the petitioner had no locus standi to challenge the S.R.O. since it did not affect the manufacturer directly. Furthermore, the court noted that the petitioner had previously challenged S.R.O. 448 in Writ Petition No. 832 of 1982, which was dismissed, making the current challenge untenable.

Conclusion:
All three writ petitions were dismissed. The court found that the Government Orders of 1971 did not constitute an outright exemption from sales tax, the doctrine of promissory estoppel was not applicable, the petitioner was liable for the sales tax collected, and S.R.O. 448 of 1982 was valid. The interim directions staying the recovery of sales tax were vacated, and no costs were awarded.

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