1997 (1) TMI 496 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Validity of the assessment orders for the years 1980-81 to 1983-84.
2. Applicability of the doctrine of promissory estoppel.
3. Entitlement to sales tax exemption under the first notification.
4. Retrospective effect of the second notification.
5. Refund of sales tax collected under coercion.
6. Applicability of Section 72 of the Indian Contract Act, 1872.
7. Availability of relief under Article 226 of the Constitution.

1. Validity of the Assessment Orders for the Years 1980-81 to 1983-84:

The petitioner, a small-scale industrial unit, sought to quash the assessment orders passed under the Kerala General Sales Tax Act for the years 1980-81 to 1983-84. The petitioner argued that the assessment orders were unauthorized and illegal as they were entitled to full exemption from sales tax under the first notification issued on April 11, 1979. The court held that the assessments/revised assessments for the said years were without any authority of law and thus, liable to be set aside.

2. Applicability of the Doctrine of Promissory Estoppel:

The petitioner contended that the Government is bound by the promise given in the first notification and cannot resile from it, invoking the principles of promissory estoppel. The court elaborated on the doctrine of promissory estoppel, citing various landmark cases such as the High Trees case and Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh. The court concluded that the petitioner was entitled to full exemption from sales tax for five years based on the first notification, applying the principles of promissory estoppel.

3. Entitlement to Sales Tax Exemption Under the First Notification:

The first notification exempted new small-scale industrial units set up after April 11, 1979, from payment of sales tax for five years. The petitioner's unit, set up after this date and having started production on June 9, 1980, was entitled to this exemption. The court held that the petitioner was entitled to total exemption from payment of sales tax for a period of five years under the first notification.

4. Retrospective Effect of the Second Notification:

The second notification, issued on September 29, 1980, limited the exemption to 90% of the capital investment and was deemed to have come into force from April 1, 1979. The court held that the second notification did not have retrospective effect and was only prospective in operation. Therefore, the petitioner's unit, set up prior to October 21, 1980, was entitled to the full exemption under the first notification.

5. Refund of Sales Tax Collected Under Coercion:

The petitioner sought a refund of Rs. 52,782.04 collected towards sales tax. The court noted that the tax was paid under coercion due to revenue recovery proceedings and that the assessments were unauthorized. The court held that the petitioner was entitled to a refund of the sales tax collected.

6. Applicability of Section 72 of the Indian Contract Act, 1872:

Under Section 72 of the Indian Contract Act, 1872, a person to whom money has been paid by mistake or under coercion must repay it. The court held that the tax was paid under coercion and thus, the petitioner was entitled to a refund under Section 72.

7. Availability of Relief Under Article 226 of the Constitution:

The court discussed the applicability of Article 226 for seeking a refund of tax collected without authority of law. It held that the petitioner could claim a refund either by a civil suit or by filing a petition under Article 226. The court found no delay or laches in the petitioner's claim and granted the relief sought.

Conclusion:

The court set aside all the assessment proceedings for the years 1980-81 to 1983-84 and directed the assessing authority to refund the tax collected from the petitioner without delay. The writ petition was allowed, with no order as to costs.