1996 (1) TMI 387 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Validity of the impugned notification dated May 21, 1994.
2. Whether exemption was granted under the recognition certificate.
3. Whether the impugned notification violates the doctrine of promissory estoppel.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Notification Dated May 21, 1994:

The petitioners challenged the validity of the notification dated May 21, 1994, which levied a 2% purchase tax on raw materials used in the manufacture of notified goods. The petitioners argued that their recognition certificate, which was valid up to 1995-96, granted them full exemption from such taxes. However, the court held that the exemption did not emanate from the recognition certificate but from the notification published in the Gazette by the State Government. The court stated, "The exemption-either whole or part--not being emanating from the recognition certificate, but from the notification, published in the Gazette by the State Government." Therefore, the State Government was within its rights to issue the impugned notification under section 4-B, read with section 21 of the General Clauses Act, which allows for the amendment or rescission of statutory instruments.

2. Whether Exemption Was Granted Under the Recognition Certificate:

The court clarified that the recognition certificate was merely a prerequisite for qualifying for exemption and not the source of the exemption itself. The exemption was granted by the notification dated August 29, 1987, and not by the recognition certificate. The court noted, "Recognition certificate is merely a pre-requisite condition to qualify for exemption either wholly or partly, but the exemption is not founded in the recognition certificate." Therefore, the State Government could revoke the exemption by issuing a new notification, which is what was done by the impugned notification dated May 21, 1994.

3. Whether the Impugned Notification Violates the Doctrine of Promissory Estoppel:

The petitioners argued that the impugned notification violated the doctrine of promissory estoppel. However, the court rejected this contention, stating that the exemption was granted as a matter of concession and not as a promise. The court observed, "In the notification dated August 29, 1987, no period of full exemption is stated. Also, there is nothing to indicate that the petitioner acted, to its detriment pursuant to any promise held out by respondent No. I." Therefore, the doctrine of promissory estoppel could not be applied in this case.

Conclusion:

The court upheld the validity of the impugned notification dated May 21, 1994, and dismissed all the writ petitions. The court stated, "For the reasons, we uphold the validity of the impugned notification dated May 21, 1994 (annexure '2' to the writ petition). Only up to that date, the petitioners will be entitled to full exemption and for future they will be liable to pay tax at 2 per cent on the purchases of specified raw material being used in the manufacture of the notified goods." The interim orders passed in all the writ petitions were also vacated.