1990 (1) TMI 292 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Retrospective Amendment of Section 6B(2)(e) of the BFST Act, 1941
2. Doctrine of Promissory Estoppel
3. Validity of Retrospective Operation
4. Exemption from Turnover Tax for S.S.I. Units

Detailed Analysis:

1. Retrospective Amendment of Section 6B(2)(e) of the BFST Act, 1941
The applicants challenged the amendment that omitted clause (e) of section 6B(2) with retrospective effect, arguing that it deprived them of the promised tax holiday. The court noted that the amendment was intended to remove ambiguity and was clarificatory in nature, not imposing a fresh tax. The legislative intent was to ensure that exemptions under rule 3(66) were not considered "generally exempt" from turnover tax.

2. Doctrine of Promissory Estoppel
The applicants argued that the State Government was estopped from demanding turnover tax due to the initial promise of a tax holiday. The court referred to several Supreme Court decisions, including Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., which established that promissory estoppel cannot bind the Legislature. The court concluded that while the doctrine can be invoked against the Government's executive actions, it cannot prevent the Legislature from enacting laws.

3. Validity of Retrospective Operation
The applicants contended that the retrospective amendment violated Article 14 of the Constitution. The court held that the Legislature has the power to enact laws with retrospective effect, provided they do not contravene fundamental rights. The amendment was seen as a minor repair to clarify the legislative intent and not as an imposition of a new tax. Thus, the retrospective operation was deemed valid.

4. Exemption from Turnover Tax for S.S.I. Units
The applicants, being small-scale industrial units (S.S.I.), claimed exemption from turnover tax based on their eligibility certificates under rule 3(66). The court clarified that rule 3(66) provided conditional exemptions and did not qualify as "generally exempt" under section 6B(2)(e). The amendment aimed to clarify this position, ensuring that only sales of goods generally exempt from tax were considered for exemption from turnover tax.

Conclusion:
The court dismissed all applications, holding that the 1987 amendment to the BFST Act was valid both prospectively and retrospectively. The challenge under Article 14 failed as the amendment did not impose a fresh tax but merely clarified existing provisions. The amounts deposited by the applicants were directed to be adjusted against the turnover tax demand. The doctrine of promissory estoppel could not be invoked to restrict the legislative functions of the State Legislature.