1988 (9) TMI 325 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the 1971 Order amounts to an order of exemption from payment of sales tax.
2. Whether the petitioner acted upon the representation made by the State Government.
3. Application of the doctrine of promissory estoppel.
4. Legality of the assessment orders made by the respondent.

Detailed Analysis:

Issue 1: Whether the 1971 Order amounts to an order of exemption from payment of sales tax.
The court examined whether the 1971 Order by itself constituted an exemption under Section 5 of the General Sales Tax Act. Section 5 states: "The Government may, subject to such restrictions and conditions as may be prescribed, by order exempt in whole or in part from payment of tax any class of dealers or any goods or class or description of goods." The court concluded that the Government Order was not an outright exemption but a policy decision requiring a formal notification under Section 5 of the Act. The petitioner's own communications confirmed that they understood the need for a formal notification to claim exemption.

Issue 2: Whether the petitioner acted upon the representation made by the State Government.
The petitioner claimed to have acted upon the 1971 Order by setting up the factory. However, the court found that the petitioner was not sure about the availability of the incentives even after setting up the factory, as evidenced by their letter dated 28th May 1979. The petitioner's conduct, including collecting sales tax from consumers, indicated that they did not act on the assumption of an exemption.

Issue 3: Application of the doctrine of promissory estoppel.
The court analyzed the doctrine of promissory estoppel, which requires a clear and unequivocal representation intended to create legal relations, acted upon by the other party. The court cited Union of India v. Godfrey Philips India Ltd., which held that promissory estoppel cannot be used to compel the Government to carry out a representation contrary to law. The court found that the petitioner failed to establish that they acted upon the representation and did not collect sales tax, thereby failing to meet the requirements for invoking promissory estoppel.

Issue 4: Legality of the assessment orders made by the respondent.
The court noted that the petitioner had filed returns and admitted liability to pay sales tax. The assessment orders were based on these returns, and the petitioner had collected sales tax from consumers. The court found no equity in favor of the petitioner to allow retention of the collected sales tax, as it would result in manifest injustice to the exchequer.

Conclusion:
The court dismissed the writ petition, finding that the petitioner failed to establish that the 1971 Order was an outright exemption or that they acted on it. The petitioner also failed to lay down an acceptable foundation for invoking the doctrine of promissory estoppel. The interim directions staying the recovery of sales tax and penalty were vacated.