1997 (4) TMI 471 - HC - VAT and Sales Tax

Summary

Issues:
Constitutional validity of G.O. Ms. No. 625 dated July 31, 1996 - Exemption withdrawal for lime manufacturing industries - Discriminatory action - Violation of Article 14 of the Constitution of India - Legitimate expectation and promissory estoppel principles - Power of Government to rescind exemption under A.P.G.S.T. Act - Doctrine of legitimate expectation and promissory estoppel applicability - Directive principles of State policy under Article 43 of the Constitution of India - Fundamental rights violation - Industrial policy under G.O. Ms. No. 108 dated May 20, 1996 - Double jeopardy claim.

Analysis:
The writ petitions challenged the constitutional validity of G.O. Ms. No. 625 dated July 31, 1996, which removed the exemption granted to village industries engaged in lime manufacturing, leading to the imposition of purchase and sales tax. The petitioners argued that the withdrawal of exemption was arbitrary, illegal, and discriminatory, violating Article 14 of the Constitution. They contended that the removal of exemption caused double jeopardy, as it impacted their viability. The petitioners invoked the principles of legitimate expectation and promissory estoppel, arguing that once an exemption is granted, it cannot be rescinded. However, the Government argued that it had the authority to withdraw exemptions under the A.P.G.S.T. Act, emphasizing public interest in augmenting financial resources.

The Court considered the scope of Section 9 of the A.P.G.S.T. Act, which empowers the State Government to grant or rescind exemptions. Referring to a previous judgment, the Court held that the Government had the power to rescind exemptions for public interest reasons, rejecting the applicability of legitimate expectation and promissory estoppel in this context. The Court distinguished a previous case where the doctrine of promissory estoppel was upheld, noting that in the present case, there was no reliance on a promise by the Government to start industries.

The petitioners also argued that the withdrawal of exemption violated Article 43 of the Constitution, which mandates the promotion of village and cottage industries. However, the Court clarified that while directive principles are fundamental, they do not create enforceable rights akin to fundamental rights. The Court cited Article 31-C, which protects laws made to implement directive principles from being challenged on grounds of violating fundamental rights.

Regarding the industrial policy under G.O. Ms. No. 108 dated May 20, 1996, the Court noted that the exclusion of lime industry from the benefits was not before them. The Court rejected the claim of double jeopardy, stating that the petitioners could seek entitlement under the new policy separately. Ultimately, the Court found no merit in the writ petitions and dismissed them, emphasizing that the Government had the authority to rescind exemptions in the interest of public finance.