2002 (12) TMI 580 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of Industrial Policy of Assam, 1991 and subsequent notifications regarding tax incentives for industrial undertakings, Doctrine of promissory estoppel, Validity of subsequent notification excluding tea as raw material for tax benefits, Application of promissory estoppel principle in granting tax concessions, Compliance of sales tax authorities with industrial policy provisions.

Analysis:
The petitioner, a partnership firm, established an industrial unit in Dibrugarh following the Industrial Policy of Assam, 1991, which provided incentives to new and existing industrial undertakings. The petitioner used tea as a raw material, included in the eligibility certificate. However, a subsequent notification excluded tea as a raw material for tax benefits. The petitioner invoked the doctrine of promissory estoppel, arguing that the government is bound by its promises under the policy. The respondent-State did not oppose the case, and it was found that the petitioner had established the industrial unit and commenced production as per the scheme.

The petitioner relied on the Gujarat High Court judgment in Shri Guru Ashish Wire Industries case, emphasizing that the power to withdraw tax exemptions is subject to the rule of promissory estoppel. The court noted that the subsequent notification should not adversely affect industries set up based on the initial promises. Referring to the case law of Shri Bakul Oil Industries and State of Bihar v. Suprabhat Steel Ltd., the court highlighted the importance of upholding promises made under incentive policies.

In a previous case, the court had emphasized the principles of promissory estoppel and legitimate expectation in government dealings with the public. The court agreed that the State cannot retract promises made through industrial policies once industrial units are set up based on those promises. Therefore, the Assam Industries (Sales Tax Concessions) Scheme, 1995 should not curtail benefits promised under the Industrial Policy of 1991 until the concession period expires.

The court concluded that the respondent-State is bound by promissory estoppel, and the petitioner is entitled to tax concessions for black tea as a raw material under the Assam Industries (Sales Tax Concessions) Scheme, 1995 until the expiry of the eligibility certificate. The sales tax authority was directed to comply with these findings, and the writ petition was allowed.