2005 (1) TMI 667 - AT - VAT and Sales Tax

Issues Involved:
1. Doctrine of Promissory Estoppel
2. Vested Right of Petitioners
3. Supervening Public Interest
4. Violation of Article 14 of the Constitution
5. Rule 101A Ultra Vires Section 39
6. Violation of Articles 301 and 304 of the Constitution

Issue-Wise Detailed Analysis:

1. Doctrine of Promissory Estoppel:
The petitioners argued that the amendment to Section 39(4) of the West Bengal Sales Tax Act, 1994, is hit by the doctrine of promissory estoppel. The doctrine prevents a party from going back on a promise that has induced another party to act to their detriment. However, the court noted that in taxation matters, the rule of estoppel does not ordinarily apply against the government. The government can revoke, modify, or withdraw tax exemptions in public interest, as held in several Supreme Court cases including Kasinka Trading v. Union of India and Union of India v. Godhawani Brothers. The court concluded that the doctrine of promissory estoppel does not preclude the government from withdrawing tax exemptions if public interest demands it.

2. Vested Right of Petitioners:
The petitioners claimed that the tax exemption granted to them had become a vested right, which could not be withdrawn. The court explained that a vested right is one that has become the property of a person and cannot be taken away without their consent. However, the exemption from tax is a privilege and not an enforceable right. The court cited cases like Shri Bakul Oil Industries v. State of Gujarat to assert that the government can withdraw such exemptions unless precluded by promissory estoppel, which itself is subject to public interest considerations. Therefore, the petitioners did not have a vested right to the tax exemption.

3. Supervening Public Interest:
The petitioners argued that the government had not established a supervening public interest to justify the withdrawal of the tax exemption. The court noted that the government had disclosed a severe financial crisis and the need to increase revenue for development and welfare activities. The court held that the necessity to increase state revenue to undertake development work constitutes a valid supervening public interest, justifying the amendment to Section 39(4).

4. Violation of Article 14 of the Constitution:
The petitioners contended that the amendment created different classes of EC holders, thus violating Article 14 of the Constitution. The court observed that the amendment did not fix different rates of tax benefit for different EC holders. The rate of benefit remained 200% of the gross value of fixed assets for all. The court concluded that there was no unreasonable classification and no violation of Article 14.

5. Rule 101A Ultra Vires Section 39:
The petitioners argued that Rule 101A of the West Bengal Sales Tax Rules, 1995, was ultra vires Section 39 of the Act, as it prescribed a time-limit for furnishing information which the section itself did not authorize. The court noted that Section 104 of the Act empowered the State Government to make rules for carrying out the purposes of the Act, including prescribing time-limits. The court held that Rule 101A was not ultra vires Section 39.

6. Violation of Articles 301 and 304 of the Constitution:
The petitioners claimed that the withdrawal of the tax exemption restricted their trade and business, violating Articles 301 and 304 of the Constitution. The court referred to the principle that only direct and immediate restrictions on trade violate Article 301. The court held that the withdrawal of the tax exemption did not directly restrict trade but was a measure to increase state revenue. The court cited the Supreme Court's decision in Jayaram (B.A.) v. Union of India, which held that withdrawal of tax exemption was not violative of Article 301. Therefore, the court concluded that there was no violation of Articles 301 and 304.

Conclusion:
The court found no merit in the applications and dismissed them, holding that the amendment to Section 39(4) was justified by public interest, did not violate the principles of promissory estoppel, did not infringe on any vested rights, and was consistent with constitutional provisions.

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