1994 (3) TMI 359 - HC - VAT and Sales Tax

Issues Involved:
1. Doctrine of promissory estoppel.
2. Doctrine of legitimate expectation.
3. Principles of natural justice.
4. Want of enabling provision in the statute to withdraw the exemption granted.
5. Implicit waiver of right to rescind the beneficial exemption before the lapse of the fixed period.

Issue-wise Detailed Analysis:

1. Doctrine of Promissory Estoppel:
The petitioners argued that the impugned G.O. rescinding the exemption from sales tax violated the doctrine of promissory estoppel. The court outlined the necessary ingredients for promissory estoppel: a clear and unequivocal promise, intent to create a legal relationship, and the promisee acting upon the promise. It was found that the petitioners did not establish these elements. The court noted that the exemption was not a promise to any individual petitioner, and there was no evidence that new industries were established based on the exemption. Furthermore, the exemption was obtained through misrepresentation by the Roller Flour Mills Association regarding the tax status in neighboring states. The court concluded that promissory estoppel does not apply to legislative acts, as established in multiple Supreme Court rulings, including Narinder Chand Hem Raj v. Lt. Governor and Excise Commissioner, U.P. v. Ram Kumar.

2. Doctrine of Legitimate Expectation:
The petitioners contended that the rescinded G.O. violated their legitimate expectation of a five-year tax exemption period. The court noted that the exemption was withdrawn in public interest to augment state financial resources following the prohibition of arrack. The doctrine of legitimate expectation does not apply when overriding public policy justifies the action, as held in Navjyoti Co-group Housing Society v. Union of India and Union of India v. Hindustan Development Corporation. The court concluded that the doctrine of legitimate expectation did not apply in this case due to the public interest involved.

3. Principles of Natural Justice:
The petitioners argued that the rescission of the exemption without notice violated principles of natural justice. The court held that in matters involving legislative functions, natural justice principles do not require individual notice or hearing. The impugned G.O. was a legislative act, and thus, the principles of natural justice were not applicable.

4. Want of Enabling Provision in the Statute to Withdraw the Exemption Granted:
The court examined whether the statute provided the government with the power to rescind the exemption. Section 9 of the General Sales Tax Act empowers the government to grant exemptions, and Section 15 of the General Clauses Act includes the power to rescind such exemptions. The court referenced several cases, including Subramania Iyer v. Travancore-Cochin State and State of Kerala v. Velayudhan, which supported the view that the power to grant exemptions includes the power to rescind them. The court concluded that the government had the statutory authority to withdraw the exemption.

5. Implicit Waiver of Right to Rescind the Beneficial Exemption Before the Lapse of Fixed Period:
The petitioners claimed that specifying a five-year period in the rescinded G.O. implied a waiver of the right to withdraw the exemption early. The court noted that this contention was not pleaded in the writ petitions and lacked a factual foundation. Even if considered, the public interest in augmenting financial resources justified the withdrawal. The court cited Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, emphasizing that waiver must be properly pleaded and proved.

Conclusion:
The court found no merit in the writ petitions and dismissed them without costs. The judgment upheld the validity of the impugned G.O., affirming the government's authority to rescind the exemption in the public interest.

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