2005 (10) TMI 508 - HC - VAT and Sales Tax

Issues Involved:
1. Applicability of promissory estoppel against the government.
2. Legal enforceability of government promises without statutory notification.
3. Government's ability to resile from promises based on public interest.
4. Inter-departmental coherence within government policy implementation.
5. Legal implications of tax collection by the petitioner.

Detailed Analysis:

1. Applicability of Promissory Estoppel Against the Government:
The court examined whether the doctrine of promissory estoppel applies when the government makes a promise to exempt an industry from sales tax, even if no statutory notification has been issued. The doctrine of promissory estoppel binds the government to its promises if a party, acting on such promises, alters its position. The court emphasized that the government cannot resile from its promises unless it can demonstrate overriding public interest. The decision in *Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh* was cited, establishing that the government is bound by its promises if the promisee has acted upon them to their detriment.

2. Legal Enforceability of Government Promises Without Statutory Notification:
The court considered whether the absence of a statutory notification under the Assam General Sales Tax Act, 1993, invalidates the government's promise of sales tax exemption. It concluded that if the government has the statutory power to grant exemptions, it is bound by its promises even if the formal notification has not been issued. The court relied on *Pournami Oil Mills v. State of Kerala* and *Pine Chemicals Ltd. v. Assessing Authority*, which held that government orders promising exemptions can be deemed issued under the relevant statutory provisions, even if not explicitly stated.

3. Government's Ability to Resile from Promises Based on Public Interest:
The court analyzed the conditions under which the government can withdraw its promises. It held that the government must provide concrete evidence of overriding public interest to justify resiling from its promises. Mere claims of public interest are insufficient; the government must present adequate material to satisfy the court. The court referenced *Shrijee Sales Corporation v. Union of India* and *Kasinka Trading v. Union of India*, which affirmed that the doctrine of promissory estoppel applies unless overriding public interest necessitates otherwise.

4. Inter-Departmental Coherence Within Government Policy Implementation:
The court stressed the necessity for coherence and collective responsibility among different government departments. It held that the Finance Department cannot act contrary to the industrial policy announced by the Department of Industries. The government must function as a cohesive entity, and conflicting policies between departments undermine the rule of law. The court cited *State of Bihar v. Suprabhat Steel Ltd.*, which invalidated notifications that contradicted the industrial policy.

5. Legal Implications of Tax Collection by the Petitioner:
The court addressed the issue of whether the petitioner's collection of sales tax affects its eligibility for exemption. It referred to *Pine Chemicals Ltd.*, which held that the determination of tax collection should be handled separately under the relevant statutory provisions. The court concluded that the collection of sales tax by the petitioner does not preclude the issuance of an eligibility certificate. The proviso to clause 8(b) of the Scheme of 1995 stipulates that collected tax must be deposited into the government treasury but does not bar the issuance of an eligibility certificate.

Conclusion:
The court quashed the impugned notification and letter declining the issuance of the eligibility certificate, directing the respondents not to force the petitioner to pay sales tax for the specified period under the Industrial Policy of 1991. The court affirmed that the government is bound by its promises unless it can prove overriding public interest or statutory prohibition. The doctrine of promissory estoppel applies, ensuring that the government cannot arbitrarily withdraw from its commitments.

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