2007 (1) TMI 507 - HC - VAT and Sales Tax

Issues Involved:
1. Legality and validity of Notification Nos. S.O. 201 and S.O. 202 dated March 30, 2006.
2. Application of the doctrine of promissory estoppel.
3. Impact of the Jharkhand Value Added Tax Act, 2005, specifically sections 95(3)(ii) and 96(3).
4. Supervening public interest and the State's financial burden.
5. Discrimination and violation of Article 14 of the Constitution of India.
6. Enforceability of judicial decisions and the principle of promissory estoppel against legislative actions.

Detailed Analysis:

1. Legality and Validity of Notification Nos. S.O. 201 and S.O. 202 Dated March 30, 2006:
The court examined the validity of the notifications withdrawing earlier exemptions granted under the Bihar Finance Act, 1981. It was found that the impugned notifications did not disclose any reasons for withdrawing the earlier exemptions. The court emphasized that any state action must satisfy the rule of non-arbitrariness, and reasons must be recorded in writing, especially when such actions result in civil consequences. The court held that the notifications were invalid for non-disclosure of reasons and lack of supervening public interest.

2. Application of the Doctrine of Promissory Estoppel:
The court analyzed the applicability of the doctrine of promissory estoppel, which prevents the State from resiling from its promise if the promisee has acted upon it and altered their position. The court found that the petitioners had established their industrial units based on the promise of tax exemptions under the Industrial Policy of 1995 and subsequent statutory notifications. The court concluded that the State was bound by the principle of promissory estoppel to continue the exemptions for the promised period.

3. Impact of the Jharkhand Value Added Tax Act, 2005:
The court examined sections 95(3)(ii) and 96(3) of the VAT Act, which converted tax exemptions into deferment and repealed all exemption notifications. The court held that the doctrine of promissory estoppel applies even against legislative actions, particularly when such actions are in the nature of subordinate legislation. The court found that the impugned notifications and the provisions of the VAT Act were intended to deny the petitioners the benefit of deferment, which was inequitable.

4. Supervening Public Interest and the State's Financial Burden:
The State argued that the withdrawal of exemptions was justified by supervening public interest due to financial burdens. The court found that the plea of budget deficit was not bona fide, as the State had continued to extend similar benefits under the 1993 Industrial Policy. The court held that there was no supervening public interest that justified resiling from the promise made to the petitioners.

5. Discrimination and Violation of Article 14:
The court noted that the State had issued S.O. 213 dated March 31, 2006, allowing exemptions to industries established under the 1993 Industrial Policy while withdrawing exemptions under the 1995 Policy. The court found this discriminatory and violative of Article 14 of the Constitution, as no plausible reason was provided for such differential treatment.

6. Enforceability of Judicial Decisions and Promissory Estoppel Against Legislative Actions:
The court emphasized that a binding judicial pronouncement cannot be nullified by legislative or executive actions. The court referred to the Supreme Court's decision in Tata Iron & Steel Co. Ltd. v. State of Jharkhand, which upheld the petitioner's right to exemptions. The court held that the State's action of issuing the impugned notifications was a motivated device to deny the petitioners the benefit of deferment under the VAT Act.

Conclusion:
The court quashed the impugned notifications S.O. 201 and S.O. 202 dated March 30, 2006, and the order dated May 5, 2006, rejecting the petitioners' claim for deferment of tax. The court directed the State to allow the benefit of deferment of tax to the petitioners for the remaining period under the 1995 Industrial Policy and the relevant notifications, in accordance with section 95(3) of the VAT Act. The writ petitions were allowed, and no costs were awarded.

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