2003 (5) TMI 491 - HC - VAT and Sales Tax

Summary

Issues:
1. Recovery of cess under the Punjab Dairy Development Board Ordinance, 2000 and the Punjab Dairy Development Board Act, 2000.
2. Claim of exemption from payment of tax under the Package of Incentives, 1992.
3. Invocation of the doctrine of promissory estoppel.
4. Legal infirmity in the recovery proceedings initiated by respondent No. 2.
5. Impact of the judgment in Health-Aid Food Specialist Pvt. Ltd. v. State of Punjab (2001) 3 PLR 821 on the present case.

Issue 1: Recovery of Cess
The petitioner sought to quash notices and a certificate issued by the Director, Dairy Development, Punjab for the recovery of cess under the Punjab Dairy Development Board Ordinance, 2000, and the Punjab Dairy Development Board Act, 2000. The petitioner argued that the recovery of cess was improper due to the exemption granted under the Package of Incentives, 1992.

Issue 2: Claim of Tax Exemption
The petitioner, having set up a milk processing plant to avail incentives under the Package of Incentives, 1992, was granted exemption from tax for seven years. However, during this period, the State of Punjab introduced the Ordinance for the levy of cess, leading to a dispute regarding the petitioner's liability to pay the cess.

Issue 3: Promissory Estoppel
The petitioner invoked the doctrine of promissory estoppel, contending that the State Government, having induced the establishment of the industry with tax exemption benefits, should not be allowed to indirectly recover taxes through cess. The petitioner argued that the recovery of cess was akin to a purchase tax and should be nullified due to lack of notice and hearing.

Issue 4: Legal Infirmity in Recovery Proceedings
After considering the arguments, the Court opined that the recovery proceedings initiated by respondent No. 2 for the cess did not suffer from any legal infirmity. The Court held that the exemption from tax under the Package of Incentives did not automatically extend to exemption from cess under the 2000 Act. The Court found no evidence of withdrawal of the tax exemption granted to the petitioner.

Issue 5: Impact of Previous Judgment
The Court addressed the impact of a previous judgment that held the State Legislature was not competent to enact the 2000 Act. Despite this judgment, the Supreme Court had stayed its operation, allowing respondent No. 2 to enforce the recovery of the cess under the Act. The Court rejected the petitioner's plea to quash the recovery notices based on the previous judgment.

In conclusion, the Court dismissed the writ petition, emphasizing that the petitioner's exemption from tax did not extend to exemption from cess and that the recovery proceedings were legally valid despite the invocation of promissory estoppel and the previous judgment's stay by the Supreme Court.