1996 (6) TMI 341 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Section 2(4)(b)(ii) of the West Bengal Taxation Laws (Amendment) Act, 1987
2. Applicability of the Doctrine of Promissory Estoppel
3. Validity of Retrospective Legislation
4. Scope and Interpretation of Tax Exemption Provisions

Issue-wise Detailed Analysis:

1. Constitutionality of Section 2(4)(b)(ii) of the West Bengal Taxation Laws (Amendment) Act, 1987
The primary issue revolves around the constitutionality of Section 2(4)(b)(ii) of the 1987 Amendment Act, which deleted Section 6B(2)(e) of the Bengal Finance (Sales Tax) Act, 1941. The learned trial Judge had declared the amendment unconstitutional under Article 304 of the Constitution of India. However, the appellate court held that the amending Act cannot be said to be violative of Article 304, which allows the Legislature of a State to impose reasonable restrictions on trade in public interest. The court emphasized that fiscal legislation is generally not interfered with by the judiciary unless it is confiscatory in nature, which was not the case here. The court also referenced the Supreme Court's decision in Hoechst Pharmaceuticals Ltd. v. State of Bihar, which upheld the validity of turnover tax.

2. Applicability of the Doctrine of Promissory Estoppel
The petitioners argued that they set up their industry based on the State's promise of tax holidays, invoking the doctrine of promissory estoppel. The appellate court noted that the doctrine has several facets, including that there is no estoppel against a statute and that a unilateral decision to withdraw a promise is not ultra vires if it is in public interest. The court cited several cases, including Shabi Construction Company v. City & Industrial Development Corporation and Mahalaxmi Rice Mills v. State of West Bengal, to support this view. The court concluded that the doctrine of promissory estoppel could not be applied in this case as the necessary ingredients were not proven.

3. Validity of Retrospective Legislation
The petitioners contended that the retrospective application of the 1987 Amendment Act was unconstitutional. The appellate court, however, held that the Legislature has the power to amend laws with retrospective effect, as supported by various Supreme Court decisions, including Arvind Industries v. State of Gujarat and Shantilal & Brothers v. State of Karnataka. The court emphasized that a statute clarificatory in nature may be given retrospective effect and that turnover tax is a separate tax for which no promise of exemption was made by the State.

4. Scope and Interpretation of Tax Exemption Provisions
The petitioners argued that the tax holidays should apply to both sales tax and turnover tax. The appellate court examined the relevant provisions and rules, including Section 6B(2)(e) and Rule 3 of the Bengal Sales Tax Rules, 1941. The court concluded that Rule 3 did not encompass turnover tax, as it referred specifically to sections 4 and 8(3) of the Act, not Section 6B. The court also noted that turnover tax is levied only on dealers whose turnover exceeds Rs. 25 lakhs, further distinguishing it from other taxes. The court held that the State is entitled to grant exemptions selectively and that the deletion of Section 6B(2)(e) was within the Legislature's jurisdiction.

Conclusion:
The appellate court overruled the judgment of the learned trial Judge, holding that the 1987 Amendment Act was not unconstitutional, the doctrine of promissory estoppel did not apply, the retrospective legislation was valid, and the tax exemption provisions did not cover turnover tax. The appeal was allowed, and the writ petition was dismissed without any order as to costs.

Appeal allowed.