1998 (5) TMI 391 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Liability to pay purchase tax on milk u/s 4-B of the Punjab General Sales Tax Act, 1948.
2. Applicability of the doctrine of promissory estoppel/equitable estoppel.
3. Impact of the Chief Minister and Finance Minister's public announcements on tax liability.
4. Validity of the Government's decision to abolish purchase tax without formal notification.
5. Effect of subsequent Government's reversal of the decision to abolish purchase tax.

Summary:

1. Liability to pay purchase tax on milk u/s 4-B of the Punjab General Sales Tax Act, 1948:
The petitioners, engaged in manufacturing milk products, challenged the notices requiring them to pay purchase tax on milk u/s 4-B of the 1948 Act for the period from April 1, 1996. They argued that they had acted on the Government's promise to abolish the tax.

2. Applicability of the doctrine of promissory estoppel/equitable estoppel:
The petitioners invoked the doctrine of promissory estoppel, arguing that the Government's announcements and subsequent actions amounted to a promise that purchase tax would not be levied, and they had acted upon this promise. The court agreed, stating that the Government's actions created a legitimate expectation that the tax would be abolished.

3. Impact of the Chief Minister and Finance Minister's public announcements on tax liability:
The Chief Minister and Finance Minister publicly announced the abolition of purchase tax on milk, which was widely publicized. The petitioners relied on these announcements and adjusted their financial and operational strategies accordingly.

4. Validity of the Government's decision to abolish purchase tax without formal notification:
The court noted that although no formal notification was issued, the Government's consistent actions and communications indicated a clear intention to abolish the tax. The absence of a formal notification was deemed a ministerial act that did not negate the promise made to the petitioners.

5. Effect of subsequent Government's reversal of the decision to abolish purchase tax:
The court held that the subsequent Government could not retroactively enforce the tax from April 1, 1996, as it would be inequitable. The decision to reverse the abolition could only be applied prospectively from the date of the new decision, i.e., June 4, 1997.

Conclusion:
The court allowed the writ petitions, quashing the impugned notices and demands for purchase tax on milk from April 1, 1996, to June 4, 1997, based on the doctrine of promissory estoppel. The Government was held to its promise not to levy the tax during this period.