2006 (8) TMI 543 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the notification dated November 5, 1999, amending the Assam Industries (Sales Tax Concessions) Scheme, 1995.
2. Competence and authority of the State Government to amend the Scheme in a manner incompatible with the Industrial Policy of Assam, 1991.
3. Application of the doctrine of promissory estoppel against the State Government.
4. Compatibility of the amended Scheme with the Industrial Policy of Assam, 1991.

Issue-Wise Detailed Analysis:

1. Validity of the Notification Dated November 5, 1999:
The petitioners challenged the validity of the notification dated November 5, 1999, which amended the Assam Industries (Sales Tax Concessions) Scheme, 1995, by including coal washing industries in the list of ineligible industries. The amended Scheme was given effect from November 17, 1999. The petitioners argued that the amendment was incompatible with the Industrial Policy of Assam, 1991, and therefore, illegal and non est in law.

2. Competence and Authority of the State Government:
The petitioners contended that the State Government lacked the competence and authority to effect any amendment to the Scheme that was incompatible with the Industrial Policy of Assam, 1991. The Industrial Policy, being a product of a Cabinet decision, could not be altered by any department of the State. The Finance Department, being only an implementing authority, lacked jurisdiction to decide on eligibility issues, making the amended Scheme 1999 invalid.

3. Doctrine of Promissory Estoppel:
The petitioners argued that they had established their industrial unit based on the promises made in the Industrial Policy and had been granted an eligibility certificate assuring full sales tax exemption for seven years. The State-respondent was estopped from rolling back the benefits under the amended Scheme. The plea of promissory estoppel was supported by the decision in Union of India v. Shri Ganapati Rolling Mills Pvt. Ltd. and Sunrise Biscuits Co. Ltd. v. State of Assam.

4. Compatibility with the Industrial Policy of Assam, 1991:
The court noted that the Industrial Policy of 1991 aimed at fostering industrial growth and self-employment using locally available raw materials. The policy offered sales tax exemptions to new and expanding industrial units. The amended Scheme 1999, by including coal washing industries in the ineligible list, conflicted with the Industrial Policy. The court held that a government cannot adopt policies inconsistent with each other, as it would reveal arbitrary governance and jeopardize the rule of law.

Judgment:
The court declared the Amended Scheme 1999, to the extent it was irreconcilable with the Industrial Policy of 1991, unconstitutional and non est in law. The respondents were restrained from realizing sales tax from the petitioner-company for the period it was entitled to the exemption under the Industrial Policy of 1991 and the Scheme of 1995. The plea of promissory estoppel was upheld, and the court emphasized the binding nature of Cabinet decisions on all governmental departments. The parties were to bear their own costs.