1992 (1) TMI 330 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to exemption from sales tax on raw materials, including sugarcane.
2. Applicability of the doctrine of promissory estoppel.
3. Interpretation of government resolutions dated 22nd December 1977 and 27th August 1980.
4. Validity of the notification dated 5th February 1981 under section 49 of the Gujarat Sales Tax Act, 1969.
5. Effect of eligibility certificates and government promises on tax exemptions.

Issue-wise Detailed Analysis:

1. Entitlement to Exemption from Sales Tax on Raw Materials, Including Sugarcane:
The petitioners contended that, based on government resolutions dated 22nd December 1977 and 27th August 1980, they were entitled to purchase raw materials, including sugarcane, free of sales tax. They argued that the resolutions provided for exemption from sales tax on raw materials, packing materials, and processing materials used in manufacturing khandsari. However, the respondents refused to grant this benefit for the purchase of sugarcane.

2. Applicability of the Doctrine of Promissory Estoppel:
The petitioners based their claim on the doctrine of promissory estoppel, arguing that the government had made a clear representation through its resolutions that new industrial units would be entitled to purchase raw materials without payment of purchase tax. The petitioners claimed that they had acted on this promise and invested in their industries.

3. Interpretation of Government Resolutions Dated 22nd December 1977 and 27th August 1980:
The court examined the relevant parts of the resolutions to determine whether the government had promised exemption from purchase tax under any section, including section 18 of the Gujarat Sales Tax Act. The resolutions stated that new small-scale industrial units could purchase raw materials free of tax upon obtaining eligibility and sales tax exemption certificates. However, the court found no words of limitation suggesting that raw materials excluded sugarcane.

4. Validity of the Notification Dated 5th February 1981 Under Section 49 of the Gujarat Sales Tax Act, 1969:
The petitioners initially challenged the validity of the notification dated 5th February 1981, which granted exemption from purchase tax under section 15 but not under section 18. However, they later withdrew this challenge, focusing instead on the doctrine of promissory estoppel.

5. Effect of Eligibility Certificates and Government Promises on Tax Exemptions:
The court noted that the eligibility certificates were granted based on the resolutions, which did not explicitly promise exemption from purchase tax under section 18. The court observed that the petitioners had not sought clarification or raised concerns about the lack of exemption under section 18 until much later. The court concluded that the government had only promised exemption from purchase tax under section 15, not section 18.

Conclusion:
The court held that the government had not made a representation or promise that exemption from payment of purchase tax under section 18 of the Act was available for purchases of raw materials, including sugarcane. The petitioners did not understand the government's representation in that manner and did not alter their position based on such a promise. Therefore, the petitions were dismissed, and the rule issued in each petition was discharged with no order as to costs. The interim relief was vacated.