1994 (12) TMI 302 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Scope and Ambit of Government Order Ms. No. 500 dated May 14, 1990.
2. Effect of Government Order Ms. No. 92 dated February 22, 1991, on G.O. Ms. No. 500 and industries commenced pursuant to it.
3. Applicability of Promissory Estoppel against the State Government in light of G.O. Ms. No. 92.

Summary:

Issue 1: Scope and Ambit of Government Order Ms. No. 500 dated May 14, 1990

The court examined G.O. Ms. No. 500 dated May 14, 1990, which aimed to correct regional imbalances in industrialization by identifying 30 most backward taluks and offering full waiver of sales tax dues for new industries for five years, subject to the total investment in fixed assets. The court clarified that "sales tax" includes tax on both purchase of raw materials and sale of finished products. The G.O. provided additional incentives for new industries and expansion/diversification of existing industries in the 30 most backward taluks and 75 backward taluks. Paragraph 5 of the G.O. was interpreted to apply only to expansion/diversification and not to new industries, thereby granting new industries full waiver of sales tax for five years.

Issue 2: Effect of Government Order Ms. No. 92 dated February 22, 1991, on G.O. Ms. No. 500

G.O. Ms. No. 92 dated February 22, 1991, restricted the full waiver of sales tax granted under G.O. Ms. No. 500 to the sales tax payable on the sale of finished products. The court held that this modification affects only those industries established after the notification of G.O. Ms. No. 92 on April 24, 1991. Industries established and commenced production before this date are entitled to the full benefits of G.O. Ms. No. 500 without the restrictions imposed by G.O. Ms. No. 92.

Issue 3: Applicability of Promissory Estoppel against the State Government

The court held that the State Government is estopped from applying G.O. Ms. No. 92 to industries that were set up and commenced production before April 24, 1991, based on the promise made in G.O. Ms. No. 500. The court emphasized that the State Government, acting under its executive power u/s 162 of the Constitution, made a lawful promise to industrialists, who acted upon it by establishing new industries. Therefore, the State Government cannot withdraw or restrict the concession retrospectively. The court directed the State Government to annul actions against such industries and issue fresh orders in accordance with G.O. Ms. No. 500.

Conclusion:

The writ petitions were allowed, with directions for the State Government to review and issue fresh orders in line with the findings. The court upheld the principle of promissory estoppel against the State Government concerning the concessions promised in G.O. Ms. No. 500.