1987 (9) TMI 407 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the State can rescind from its representation of granting exemption from purchase/sales tax to new small-scale industries after the representation was acted upon.
2. Whether the petitioners are entitled to tax exemption by virtue of clause 8 of the Industrial Policy Resolution, 1983 by applying the principle of promissory estoppel.

Analysis:
1. The petitioners, a new oil industry, sought to quash an assessment order under the Orissa Sales Tax Act, 1947, alleging denial of exemption based on the Industrial Policy Resolution of the Government of Orissa. The main issue was whether the State can retract from granting tax exemptions to new small-scale industries after they have relied on such representations. Section 6 of the Sales Tax Act allows the State to exempt goods from tax by notification. The petitioners argued that the State is bound by the principle of promissory estoppel to honor the promises made in the Industrial Policy Resolution. The court considered various notifications and legal precedents supporting the application of promissory estoppel against the Government, ultimately ruling in favor of the petitioners based on the doctrine of promissory estoppel.

2. The second issue revolved around whether the petitioners were entitled to tax exemption under clause 8 of the Industrial Policy Resolution, 1983, by invoking the principle of promissory estoppel. The court examined the concept of promissory estoppel, emphasizing that where a promise is made and relied upon, the promisor cannot act inconsistently with it. Legal precedents were cited to support the application of promissory estoppel against the Government, ensuring fairness and justice. The court held that the petitioners, who had set up their oil mill in accordance with the representations in the Industrial Policy Resolution, were entitled to the tax exemption promised, applying the doctrine of promissory estoppel. The judgment allowed the writ application, quashing the assessment order and granting the petitioners the benefit of the Industrial Policy Resolution.

In conclusion, the Orissa High Court ruled in favor of the petitioners, holding that they were entitled to tax exemption under the Industrial Policy Resolution based on the principle of promissory estoppel. The assessment order was quashed, and the court made no order as to costs.