1994 (7) TMI 337 - HC - VAT / Sales Tax

Summary

Issues Involved:

1. Liability for payment of purchase tax on rejected wheat.
2. Applicability of the Essential Commodities Act, 1955.
3. Doctrine of promissory estoppel against the government.
4. Issuance of form III-C(2) under the U.P. Sales Tax Act, 1948.

Detailed Analysis:

1. Liability for Payment of Purchase Tax on Rejected Wheat:

The primary issue in this case was determining who bears the liability for the payment of purchase tax on rejected wheat. The petitioner, who operates a Roller Flour Mill, argued that the liability should fall on the Regional Food Controller, as they were the first purchaser of the wheat. This argument was based on sub-section (7) of section 3-D of the U.P. Sales Tax Act, which states that every purchase within Uttar Pradesh by a dealer is deemed to be the first purchase unless proven otherwise. The court noted that the Regional Food Controller is registered as a dealer under the U.P. Sales Tax Act and hence, should be liable for the tax.

2. Applicability of the Essential Commodities Act, 1955:

The respondents contended that the orders for purchasing rejected wheat were issued under section 3 of the Essential Commodities Act, 1955, which would make the roller mills the first purchaser liable for the tax. However, the court found no evidence that the orders were issued under the Essential Commodities Act. The court emphasized that the respondents failed to produce any orders from the State or Central Government authorizing the purchase under the Act. Therefore, the court concluded that the Regional Food Controller should be considered the first purchaser.

3. Doctrine of Promissory Estoppel Against the Government:

The petitioner invoked the doctrine of promissory estoppel, arguing that the State Government had assured the roller mills that the Regional Food Controller would bear the tax liability. The court supported this view, citing previous judgments that the government cannot resile from promises or assurances made to individuals or entities. The court referenced the case of Union of India v. Godfrey Philips India Ltd., which upheld the doctrine of promissory estoppel against the government in its executive functions.

4. Issuance of Form III-C(2) Under the U.P. Sales Tax Act, 1948:

The petitioner sought the issuance of form III-C(2) from the Regional Food Controller, which would exempt them from the tax liability. The court ordered the respondents to issue form III-C(2) to the petitioner, as the government had previously promised that the purchase tax liability would not fall on the roller mills. The court directed the issuance of the forms within six weeks from the date of the judgment, thus granting the writ petition in favor of the petitioner.

In conclusion, the court held that the Regional Food Controller was liable for the purchase tax on the rejected wheat, and the doctrine of promissory estoppel prevented the government from shifting this liability to the petitioner. The court mandated the issuance of form III-C(2) to the petitioner, reinforcing the principle that governmental assurances must be honored.