2002 (1) TMI 1276 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the Finance Department notification dated July 30, 1999, withdrawing sales tax exemption.
2. Applicability of promissory estoppel against the withdrawal of the exemption.
3. Justification of the withdrawal in public interest.

Detailed Analysis:

1. Validity of the Finance Department Notification:
The petitioner challenged the validity of the Finance Department notification dated July 30, 1999 (annexure 9), which withdrew the sales tax exemption previously granted by the notification dated January 25, 1999 (annexure 8). The petitioner, a public limited company, argued that the sales tax exemption was crucial for its viability due to high competition and low profit margins. The company had made significant investments based on the granted exemption. The State Government justified the withdrawal by citing fiscal imbalances and the need to improve revenue receipts, stating that the exemption was withdrawn under section 6 of the Orissa Sales Tax Act, 1947, which allows the State to grant and withdraw exemptions.

2. Applicability of Promissory Estoppel:
The petitioner argued that the withdrawal of the exemption was arbitrary, unreasonable, and violated the principle of promissory estoppel. The State countered that there can be no estoppel against a statute, emphasizing that the exemption granted under section 6 of the Act could be withdrawn in public interest. The court noted that the power to exempt includes the power to withdraw, referencing section 22 of the Orissa General Clauses Act, 1937, which corresponds to section 21 of the Central Act.

3. Justification of the Withdrawal in Public Interest:
The court examined whether the withdrawal was justified in public interest. The State Government's affidavit highlighted severe fiscal pressure, rising revenue deficits, and the need for fiscal reform measures. The Government of India had conditioned financial assistance on the State implementing specific fiscal reforms, including the reduction of tax concessions. The court found that the State's fiscal situation necessitated the withdrawal of sales tax incentives to stabilize finances and ensure the implementation of development and welfare programs. The court concluded that the withdrawal was justified in supervening public interest, and public interest must override private loss or gain.

Conclusion:
The court held that the State Government was justified in withdrawing the sales tax exemption in public interest, and there was no valid reason to contend that the notification was arbitrary or discriminatory. The writ petition was dismissed.