1990 (2) TMI 284 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of the contingency deposit collected by the Coffee Board.
2. Jurisdiction and authority of the Coffee Board to levy such contingency deposits.
3. Discrimination in the collection of contingency deposits from internal sales versus export sales.
4. Applicability of the doctrine of promissory estoppel.
5. Appropriate forum for resolving the dispute.

Detailed Analysis:

1. Legality of the Contingency Deposit Collected by the Coffee Board
The petitioner, a coffee manufacturing company, challenged the legality of the contingency deposit collected by the Coffee Board. The petitioner argued that the Coffee Board had no jurisdiction to levy such deposits, as there was no provision under the Coffee Act or its Rules authorizing this levy. The petitioner contended that the collection was illegal and without jurisdiction, as the Coffee Board could only make levies permissible under the Coffee Act.

2. Jurisdiction and Authority of the Coffee Board to Levy Such Contingency Deposits
The Coffee Board, in its counter-affidavit, claimed that the contingency deposit was collected to meet the potential liability of purchase tax imposed by the Karnataka Sales Tax Act. The Board argued that this measure was taken after discussions with pool sale dealers, including the petitioner, who agreed to this arrangement. The Board stated that the collection of the contingency deposit was a precautionary measure to ensure funds were available to pay the purchase tax if the court upheld the tax liability.

3. Discrimination in the Collection of Contingency Deposits from Internal Sales Versus Export Sales
The petitioner alleged that the Coffee Board's conduct was discriminatory, as it collected contingency deposits from internal sales but not from export sales. The Coffee Board countered this by stating that the minimum reserve price for export auctions was based on international market prices, which were higher than the prices for pool sales. Therefore, there was no need to collect contingency deposits separately from exporters. The Board further argued that export sales were not assessed for purchase tax by the Karnataka State Government, negating any claim of discrimination.

4. Applicability of the Doctrine of Promissory Estoppel
The Coffee Board argued that the petitioner was estopped from seeking a refund of the contingency deposit, as the petitioner had benefited from the reduced reserve price and had agreed to the collection of the deposit. The Board cited legal precedents to support its claim that the petitioner could not go back on its agreement. The petitioner countered by stating that no question of estoppel arose, as the collection of the deposit was without authority of law.

5. Appropriate Forum for Resolving the Dispute
The court noted that the issue at hand was whether the Coffee Board was liable to refund the contingency deposit collected during the sale of coffee. The court observed that the petitioner had participated in the auction with the knowledge that the contingency deposit was a condition of sale. The court held that the matter fell within the ambit of a breach of contract between the Board and the petitioner and was not suitable for resolution under Article 226 of the Constitution. The court cited legal precedents to support its view that a writ petition was not the proper remedy for this dispute.

Conclusion
The court dismissed Writ Petition No. 3675 of 1985, holding that the petitioner could not challenge the collection of the contingency deposit after having participated in the auction and benefited from it. The court found that the collection was not without authority of law and that the petitioner was estopped from seeking a refund. The court also dismissed Writ Petition No. 3674 of 1985 as infructuous, noting that the Coffee Board had stopped collecting the contingency deposit. There was no order as to costs.

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