1998 (1) TMI 507 - AT - VAT and Sales Tax

Issues Involved:
1. Eligibility of the dealer under clause 2(c) of the Scheme.
2. Jurisdiction of the DLSC to cancel the EC.
3. Retrospective cancellation of the EC by the Board.
4. Application of the doctrine of promissory estoppel.

Issue-wise Detailed Analysis:

1. Eligibility of the Dealer under Clause 2(c) of the Scheme:
The dealer, a small-scale industry engaged in the manufacture of HDPE/PP woven fabrics and bags, applied for an eligibility certificate (EC) under the Rajasthan Sales Tax Incentive Scheme for Industries, 1987, in the category of "expansion." The dealer's unit commenced commercial production on May 20, 1980, and thus did not qualify as a new industrial unit under the "1985 Dispensation." The dealer's application was processed as one for expansion, and the DLSC granted the EC based on the dealer's investment post-April 1, 1985. The Tribunal found that the dealer was not eligible for benefits under the Scheme as a new industrial unit covered by the 1985 Dispensation since the unit commenced production before the cutoff date.

2. Jurisdiction of the DLSC to Cancel the EC:
The DLSC initially granted the EC to the dealer based on expansion. However, upon later review, it was found that the dealer's expansion occurred before the Scheme's effective date, making the dealer ineligible for the benefits. The DLSC, exercising its powers under clause 9(c) of the Scheme, cancelled the EC. The Tribunal noted that the DLSC had the authority to amend, suspend, restore, or cancel the EC but emphasized that the DLSC's decision to grant the EC initially was a conscious and considered decision, albeit erroneous.

3. Retrospective Cancellation of the EC by the Board:
The Board set aside the DLSC's decision, holding that an exemption granted and availed of, though illegal, could not be cancelled or withdrawn with retrospective effect. The Board highlighted that the dealer had fully availed the benefits by March 31, 1992, and the proceedings for cancellation were initiated much later. The Tribunal agreed with the Board, stating that cancelling the EC retrospectively would unfairly penalize the dealer, who had not collected sales tax during the EC's effective period.

4. Application of the Doctrine of Promissory Estoppel:
The Board applied the doctrine of promissory estoppel, stating that the Government's promise to grant tax exemption induced the dealer to make investments. The Tribunal, however, clarified that this case did not fit the typical scenario for promissory estoppel, as it involved a mistake by the DLSC rather than a subsequent curtailment of admissible benefits. Nevertheless, the Tribunal found that the dealer should not suffer due to the DLSC's error, given the significant lapse of time and the dealer's full utilization of the benefits.

Conclusion:
The Tribunal concluded that the DLSC's decision to cancel the EC after many years was unsustainable, as it would unjustly burden the dealer. The Tribunal dismissed the revision application, affirming that the Board was justified in holding that the EC could not be cancelled retrospectively and that the dealer was not at fault. The application of promissory estoppel was deemed inappropriate for this case, but the dealer's reliance on the DLSC's initial decision was protected. The revision petition was dismissed with no order as to costs.

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