2003 (1) TMI 661 - HC - VAT and Sales Tax

Issues Involved:
1. Applicability of Notification S.O. No. 85 dated July 17, 2002.
2. Interpretation of the Industrial Policy Resolution, 1993.
3. Effect of Notification S.O. No. 96 dated April 4, 1994.
4. Validity and scope of multi-point tax levy under section 11(3) of the Bihar Finance Act, 1981.
5. Application of the principle of promissory estoppel.
6. Jurisdiction and authority of the Commissioner of Commercial Taxes.

Detailed Analysis:

1. Applicability of Notification S.O. No. 85 dated July 17, 2002:
The petitioners challenged the applicability of Notification S.O. No. 85, which specified the levy of multi-point tax on certain goods, including television sets produced by the petitioner. The petitioners argued that this notification should not override the sales tax exemption granted under the Industrial Policy and Notification S.O. No. 96.

2. Interpretation of the Industrial Policy Resolution, 1993:
The Industrial Policy of 1993 aimed to accelerate industrialization by providing incentives, including sales tax exemptions. Clause 10.2 of the policy provided for sales tax exemption for new industrial units commencing production between April 1, 1993, and March 31, 1998. The petitioners' unit fell within this category and was entitled to an 8-year sales tax exemption.

3. Effect of Notification S.O. No. 96 dated April 4, 1994:
Notification S.O. No. 96 was issued to implement the Industrial Policy, detailing the procedure and conditions for grant of sales tax exemption. The petitioners argued that the exemption applied to the products of the industrial unit and not just to the first sale. They contended that subsequent sales should also be exempt from sales tax.

4. Validity and Scope of Multi-Point Tax Levy under Section 11(3) of the Bihar Finance Act, 1981:
Section 11(3) of the Act allowed the State Government to levy sales tax at multiple points. The State argued that this provision authorized the levy of tax on subsequent sales of the exempted products. However, the court held that section 11 only determined the point of levy and did not override the exemptions granted under section 7(3)(b) of the Act. The court clarified that the first sale price, if exempted, should not be taxed at subsequent stages.

5. Application of the Principle of Promissory Estoppel:
The court emphasized the principle of promissory estoppel, stating that the State could not withdraw benefits promised under the Industrial Policy after the petitioners had acted upon those promises. The court referred to previous judgments, including State of Bihar v. Suprabhat Steel Ltd., which held that the State could not negate incentives granted under a policy by issuing conflicting notifications.

6. Jurisdiction and Authority of the Commissioner of Commercial Taxes:
The petitioners challenged the Commissioner's direction to impose tax on subsequent sales of exempted products. The court held that the Commissioner's interpretation was incorrect and that the exemption should apply to all sales of the exempted products until they reached the final consumer.

Conclusion:
The court allowed the petition to the extent that the finished products sold by the industrial unit with sales tax exemption should not be subjected to sales tax until they reached the unregistered dealer/consumer. The court declared the Commissioner's circular, which contradicted this interpretation, as illegal. The judgment reinforced the principle that the State must honor its policy promises and cannot retroactively impose taxes that nullify granted exemptions.

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