1994 (10) TMI 273 - HC - VAT and Sales Tax

Summary

Issues:
Taxation of raw materials and end-products under the Tamil Nadu General Sales Tax Act, 1959, withdrawal of exemption on end-products, application of promissory estoppel, validity of notifications, assessment orders.

Analysis:

The petitioners, steel rolling mills, purchased raw materials and manufactured end-products falling under the same entry of the Tamil Nadu General Sales Tax Act, 1959. The State had the power to tax both raw materials and end-products as established by the Supreme Court. A notification exempted end-products manufactured by rolling mills if tax was paid on raw materials, but this exemption was withdrawn in a subsequent notification dated March 17, 1986. Consequently, end-products became taxable from that date onwards, even if manufactured from raw materials purchased before the notification. The petitioners argued for continued exemption based on promissory estoppel, citing previous court decisions like Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh and Union of India v. Godfrey Philips India Ltd., but the court found no grounds for applying promissory estoppel in this case.

The State Government had the authority to tax both raw materials and end-products under the Act. The exemption on end-products was subject to conditions specified in the notifications. The withdrawal of the exemption in the March 17, 1986 notification made end-products taxable while exempting raw materials. The court emphasized that no promise was made for perpetual exemption, and the State had the legal right to collect tax on end-products even if raw material tax was paid earlier. The notification did not grant perpetual exemption until raw materials were sold as end-products, negating the application of promissory estoppel.

The validity of the March 17, 1986 notification was upheld, and its terms were to be followed. The notification exempted raw materials but made end-products taxable from the specified date. The court clarified that there was no need to investigate whether end-products sold after the notification were made from taxed raw materials. The respondent pointed out that assessments had been made on the petitioners previously, and unless these assessments were challenged, the tax liability remained. Consequently, the writ petitions were dismissed, and each party was directed to bear their respective costs.

In conclusion, the court held that the State had the authority to tax both raw materials and end-products, and the withdrawal of exemption on end-products was valid. The doctrine of promissory estoppel did not apply in this case, and the petitioners were liable to pay tax on end-products sold after the specified date in the notification.