2009 (9) TMI 886 - HC - VAT and Sales Tax

Exemption from payment of purchase tax on purchase of raw materials - Held that - The notification of the Sales Tax Department cannot act in contravention of the Industrial Policy. Once the policy defines the purpose, aims, objects, and the sweep, the notification of the Sales Tax Department must in a subservient manner ensure effective implementation of the policy. We are in no doubt that in case of any apparent or real conflict between the dominant policy decision and the notification of the Sales Tax Department, the latter shall yield to the former, and will have to be read down in case of doubt or difficulty. The latter can be read only in the manner it advances the aims and objects of the Industrial Policy, and any attempt to reduce its efficacy has to be discouraged, and, if necessary, shall be declared to be repugnant to the policy. In the result, the writ petition is allowed. The impugned order dated March 7, 2000 (annexure 5), passed by the learned Commercial Tax Tribunal, is set aside. It is held that the petitioner is entitled to the benefit of exemption from payment of purchase tax on purchase of raw materials for manufacture of its products in Bihar, and sold in Bihar or outside Bihar. The petitioner shall be entitled to refund of the amount, if any, deposited by it along with interest at 15 per cent from the date of deposit(s) till the date of payment

Issues Involved:
1. Entitlement to exemption from payment of purchase tax on raw materials used for manufacturing products sold outside the State of Bihar by stock transfer under the Industrial Incentive Policy, 1993.
2. Validity of the notification S.O. No. 95, dated April 4, 1994, issued by the State Government.
3. Applicability of the principle of estoppel.
4. Maintainability of the writ petition in light of previous litigation.

Issue-wise Detailed Analysis:

1. Entitlement to Exemption from Payment of Purchase Tax:
The petitioner, a private limited company, sought exemption from purchase tax on raw materials used for manufacturing products sold outside Bihar by stock transfer, under the Industrial Incentive Policy, 1993. The assessment officer and revisional authorities denied this benefit, limiting the exemption to sales within Bihar. The court analyzed the Industrial Policy and the relevant statutory provisions, concluding that the policy intended a liberal approach to promote industrial growth. The court found no restriction in the policy or the notification that limited the exemption to sales within Bihar, emphasizing that the primary condition was the manufacture of products in Bihar for sale, irrespective of the sale location.

2. Validity of Notification S.O. No. 95, Dated April 4, 1994:
The petitioner argued that the notification did not impose additional eligibility conditions and should not contravene the Industrial Policy. The court agreed, stating that the notification must align with the policy's objectives and cannot introduce conditions that restrict the policy's benefits. The court held that the notification did not imply that the finished products must be sold within Bihar to qualify for the exemption. The court referenced the Supreme Court's ruling in Suprabhat Steel Ltd. v. State of Bihar, affirming that notifications under section 7 of the Bihar Finance Act should not contradict the Industrial Policy.

3. Applicability of the Principle of Estoppel:
The petitioner claimed protection under the principle of estoppel, arguing that they had made significant investments based on the promised exemptions in the Industrial Policy. The court supported this view, citing the Supreme Court's judgment in State of Punjab v. Nestle India Ltd., which upheld the principle of promissory estoppel. The court emphasized that the petitioner had relied on the policy's promises, and the State could not retract these assurances.

4. Maintainability of the Writ Petition:
The State contended that the writ petition was barred by Order 2, Rule 2 of the CPC due to prior litigation. The court rejected this argument, clarifying that the issues in the current petition arose from assessment proceedings and were not addressed in the previous writ petition. The court concluded that the petition was maintainable, and the previous litigation did not preclude the petitioner from challenging the assessment order.

Conclusion:
The court allowed the writ petition, setting aside the impugned order of the Commercial Tax Tribunal. It held that the petitioner was entitled to the exemption from payment of purchase tax on raw materials used for manufacturing products sold both within and outside Bihar. The court directed the refund of any deposited amounts with interest and emphasized that the notification must align with the Industrial Policy's liberal approach to promote industrial growth in Bihar.

← Previous Next →