1994 (10) TMI 289 - HC - VAT and Sales Tax

Summary

Issues:
1. Entitlement to sales tax exemption under the sales tax incentive scheme.
2. Application of the doctrine of promissory estoppel in tax exemption cases.

Detailed Analysis:

Issue 1: Entitlement to sales tax exemption under the sales tax incentive scheme.
The petitioner, engaged in the manufacture of A.C. pipes and fittings, established a new industry in 1981 and became eligible for sales tax exemption benefits under the Gujarat Sales Tax Act, 1969. The petitioner received an eligibility certificate for exemption from sales tax. However, a subsequent notification dated August 17, 1982, excluded cement-based industries from the list of eligible industries for the exemption scheme. The Sales Tax Officer informed the petitioner that they were not entitled to claim the benefit and issued a recovery notice demanding sales tax for a specific period. The petitioner contended that once they became eligible for exemption during the scheme, subsequent exclusion from eligibility should not deprive them of the benefit for the entire period. The court held that the exemption granted under the Sales Tax Act constituted a promise to entrepreneurs to avail benefits upon fulfilling the scheme's terms. The petitioner, having become eligible before the exclusion notification, was entitled to the benefits for the full period of eligibility.

Issue 2: Application of the doctrine of promissory estoppel in tax exemption cases.
The court referred to previous decisions and the doctrine of promissory estoppel to support the petitioner's claim. Citing the case of Pournami Oil Mills v. State of Kerala, the court highlighted that once an industry became eligible for exemption under a scheme, subsequent changes should not affect their vested rights to claim the benefit. The court emphasized that the withdrawal of benefits should operate prospectively and not impact rights already vested in entrepreneurs. Applying the principles of promissory estoppel, the court concluded that the petitioner, having fulfilled the conditions for exemption before the exclusion notification, was entitled to the benefits for the entire period of eligibility. The court quashed the recovery notice and restrained the authorities from withdrawing the benefit of the sales tax incentive scheme from the petitioner.

In conclusion, the judgment affirmed the petitioner's entitlement to sales tax exemption benefits under the scheme, emphasizing the application of the doctrine of promissory estoppel to protect vested rights of entrepreneurs in such cases.