1990 (4) TMI 277 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of the Bombay Sales Tax (Amendment and Validating Provisions) Act, 1987.
2. Doctrine of Promissory Estoppel.
3. Retroactive operation of the Act and its reasonableness.
4. Classification of "edible oil units" and its implications.

Detailed Analysis:

1. Constitutional Validity of the Bombay Sales Tax (Amendment and Validating Provisions) Act, 1987:
The primary issue in these writ petitions was the challenge to the constitutional validity of the Bombay Sales Tax (Amendment and Validating Provisions) Act, 1987. The petitioners contended that the Act was violative of Article 14 of the Constitution of India, arguing that it was arbitrary, unreasonable, and not in public interest. The State defended the Act, asserting that it was a fiscal statute within the legislative competence and that the edible oil units formed a distinct class by themselves. The court upheld the validity of Section 41A of the Act, though it struck down its retroactive operation as violative of Article 14, deeming it to be effective from August 1, 1985, for the edible oil units who were petitioners before the court.

2. Doctrine of Promissory Estoppel:
The petitioners invoked the doctrine of promissory estoppel, arguing that they had established their units based on the incentives promised by the State. However, the court noted that the doctrine of promissory estoppel cannot be used to challenge the validity of legislation. The court observed that the State had valid reasons for withdrawing the incentives, including the harm caused to old units and the loss of revenue. The court emphasized that the Legislature is free to withdraw exemptions if it deems it necessary for public interest.

3. Retroactive Operation of the Act and its Reasonableness:
The petitioners challenged the retroactive operation of the Act from August 1, 1985, as being arbitrary and unreasonable. They argued that they had not collected the tax from consumers and that imposing the tax liability retroactively would result in financial hardship. The court, however, found that the retroactive operation of the Act was not unreasonable. It noted that the Legislature has the power to enact laws with retrospective effect, provided it is within its legislative competence. The court referred to several Supreme Court judgments which upheld the validity of retrospective taxation, emphasizing that the reasonableness of such laws depends on the circumstances of each case.

4. Classification of "Edible Oil Units" and its Implications:
The definition of "edible oil unit" was a significant issue in these petitions. Initially, the definition did not include units refining washed cotton seed oil into edible oil. However, after the court's judgment in Narendra Oil Refineries v. State of Maharashtra, the State amended the definition to explicitly include such units. The petitioners argued that the retroactive inclusion of their units in the definition was arbitrary. The court found that the amendment was necessary to rectify an inadvertent omission and to align with the Legislature's intention to withdraw exemptions from all edible oil units. The court held that the amendment was neither arbitrary nor unreasonable and that the Legislature was competent to clarify its intent through retrospective legislation.

Conclusion:
The court dismissed the petitions, upholding the validity of the Bombay Sales Tax (Amendment and Validating Provisions) Act, 1987, and its retroactive application from August 1, 1985. The court found that the legislative action was justified, reasonable, and within the competence of the Legislature. The doctrine of promissory estoppel could not be invoked to challenge the legislative act, and the classification of "edible oil units" was found to be based on valid grounds. The court emphasized that financial hardship alone is not a sufficient ground to invalidate a fiscal statute.

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