1991 (7) TMI 306 - HC - VAT and Sales Tax

Summary

Issues:
1. Legislative competence to enact the law
2. Application of the principle of promissory estoppel
3. Validity of the levy and retrospective taxation

Analysis:

Issue 1: Legislative Competence
The appellant challenged the legislative competence to enact the impugned law, Karnataka Act 27 of 1985. The learned single Judge upheld the validity of the levy under entry 54 of List II of Schedule VII of the Constitution. The Commissioner of Commercial Taxes' clarification was considered binding from April 1, 1980, to December 8, 1981. The court emphasized that there can be no estoppel against a statute and that the power to enact legislation could be exercised both prospectively and retrospectively. The court dismissed the writ petitions challenging the legislative competence.

Issue 2: Promissory Estoppel
The appellant contended that the principle of promissory estoppel should apply due to the understanding that seeds would be treated as cereals based on the Commissioner's clarification. However, the court cited legal precedents to establish that promissory estoppel does not apply when the legislature exercises its legislative function. The court highlighted that the principle cannot compel the government to act contrary to law or beyond its authority. The court dismissed the appellant's reliance on promissory estoppel in challenging the levy.

Issue 3: Validity of Levy and Retrospective Taxation
The appellant argued that the retrospective effect of the law adversely impacted them, as the surcharge and additional tax demanded were not passed on to purchasers. The court referred to legal precedents to establish that the legislature has the power to enact retrospective legislation, especially in taxation matters. The court emphasized that the retrospective nature of the law does not render it invalid. The court held that the appellant would be liable for the tax on sales regardless of whether it was collected from purchasers or not. The court dismissed the appeals, affirming the validity of the levy and retrospective taxation.

In conclusion, the High Court dismissed the appeals, upholding the legislative competence to enact the law, rejecting the application of promissory estoppel, and affirming the validity of the levy and retrospective taxation. The judgment emphasized the plenary power of the legislature in taxation matters and the binding nature of legislative enactments, even when applied retrospectively.