2003 (3) TMI 693 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Denial of exemption from sales tax under G.O. Ms. No. 108, dated May 20, 1996.
2. Eligibility of LPG bottling units for sales tax exemption.
3. Interpretation of "manufacture" and "commercial production" under the policy.
4. Validity of temporary eligibility certificates issued by the District Industries Centre.
5. Applicability of the doctrine of promissory estoppel.
6. Liability of the petitioner for sales tax despite not collecting it from consumers.

Detailed Analysis:

1. Denial of Exemption from Sales Tax:
The petitioners challenged the denial of sales tax exemption under G.O. Ms. No. 108, dated May 20, 1996, arguing that their LPG bottling units should qualify for the exemption as per the industrial policy. The State argued that the petitioners' activities did not involve "manufacture" or "commercial production" as required by the policy.

2. Eligibility of LPG Bottling Units:
The petitioners claimed that their bottling units produced a product with a distinct commercial identity, i.e., bottled LPG, which complied with legal requirements and thus qualified for the exemption. The State contended that merely bottling LPG did not constitute manufacturing a new product.

3. Interpretation of "Manufacture" and "Commercial Production":
The court examined whether the process of bottling LPG constituted manufacturing. It referred to various judicial precedents to conclude that "manufacture" implies a transformation resulting in a new product with a distinct name, character, or use. The court determined that bottling LPG did not meet this criterion as the basic characteristics of LPG remained unchanged.

4. Validity of Temporary Eligibility Certificates:
The petitioners argued that the temporary eligibility certificates issued by the District Industries Centre should entitle them to the exemption. The court held that these certificates were provisional and subject to the final decision of the State Level Committee, which had not granted final eligibility. The cancellation of these certificates was upheld as the petitioners did not challenge the cancellation.

5. Applicability of the Doctrine of Promissory Estoppel:
The petitioners invoked the doctrine of promissory estoppel, arguing that they relied on the provisional eligibility certificates and did not collect sales tax from consumers. The court found no specific promise by the State guaranteeing exemption regardless of whether the petitioners' activities constituted manufacturing. The doctrine of promissory estoppel was deemed inapplicable.

6. Liability of the Petitioner for Sales Tax:
The petitioners contended that it would be unjust to impose sales tax liability as they did not collect it from consumers based on the provisional certificates. The court held that the statutory liability to pay sales tax is on the dealer, regardless of whether it was collected from consumers. The court cited precedents affirming that non-collection of tax does not absolve the dealer from liability.

Conclusion:
The court dismissed the writ petitions, holding that the petitioners were not engaged in manufacturing and thus not entitled to the sales tax exemption under G.O. Ms. No. 108, dated May 20, 1996. The provisional eligibility certificates did not confer any rights, and the doctrine of promissory estoppel was not applicable. The petitioners were liable to pay the sales tax despite not collecting it from consumers. The interim orders were vacated, and the petitions were dismissed with costs.