2009 (12) TMI 870 - HC - VAT and Sales Tax

Grant of benefit of sales tax exemption under sub-rule (4)(a) of rule 28A - Held that - As LLSC was obliged to consider the application of the petitioner for grant of exemption from sales tax with effect from the date of issuance of entitlement/exemption certificate when the bar of placing the petitioner s industry on the negative list has been removed. Accordingly it is held that the order passed by the LLSC dated October 28, 1994 (P10) and the order passed by the HLSC August 5, 1995 (P12) are unsustainable in the eyes of law and are liable to be set aside. As a consequence of the aforesaid discussion the order passed by the LLSC dated October 28, 1994 (P10) and the order passed by the HLSC dated August 5, 1995 (P12) are hereby quashed. The matter is sent back to the LLSC to reconsider the claim of the petitioner by treating its application for grant of benefit of sales tax exemption under sub-rule (4)(a) of rule 28A by not treating the claim from the date of commercial production. The LLSC shall be at liberty to consider the claim of the petitioner from the date of application. The needful shall be done within a period of four months from the date of receipt of copy of this order.

Issues Involved:

1. Rejection of the petitioner's claim for sales tax exemption by the Lower Level Screening Committee (LLSC) and Higher Level Screening Committee (HLSC).
2. Applicability of the negative list of industries and the relevant dates of its amendments.
3. Interpretation of Rule 28A of the Haryana General Sales Tax Rules, 1975 regarding the eligibility for tax exemption.
4. Application of the principle of promissory estoppel.

Issue-wise Detailed Analysis:

1. Rejection of the Petitioner's Claim for Sales Tax Exemption by LLSC and HLSC:
The petitioner challenged the orders dated October 28, 1994, by the LLSC and August 5, 1998, by the HLSC, which rejected their claim for sales tax exemption on the grounds that the petitioner's unit went into production prior to February 11, 1994, and was in the negative list of industries.

2. Applicability of the Negative List of Industries and Relevant Dates of Its Amendments:
The petitioner's unit, engaged in manufacturing "HDPE/PP woven sacks and polythene bags and sheets," was initially on the negative list as per the notification dated March 9, 1992. However, it was removed from the negative list by the Industries Department on May 25, 1993. The Excise and Taxation Department issued a draft notification on October 13, 1993, proposing to exclude such industries from the negative list retrospectively from May 25, 1993. Eventually, a notification dated February 11, 1994, amended the Third Schedule prospectively, excluding the petitioner's industry from the negative list.

3. Interpretation of Rule 28A of the Haryana General Sales Tax Rules, 1975:
Rule 28A(2) defines various terms, including "eligible industrial unit" and "negative list." Rule 28A(4) provides that tax exemption or deferment benefits are available to eligible units holding exemption or entitlement certificates. Sub-rule (5) outlines the procedure for availing these benefits, requiring applications within 90 days of commercial production. The petitioner argued that their unit, which commenced production on December 20, 1993, applied within the stipulated period and should be eligible for exemption from the date of the application or the issuance of the certificate.

4. Application of the Principle of Promissory Estoppel:
The petitioner contended that they relied on the incentives announced under the New Industrial Policy of 1992, including exemption from electricity duty and capital subsidy. They argued that the principle of promissory estoppel should apply, citing precedents from the Supreme Court in State of Bihar v. Suprabhat Steel Ltd. and State of Punjab v. Nestle India Ltd., which upheld the principle in similar circumstances.

Judgment Summary:
The court held that the petitioner's entitlement to tax exemption should be considered under sub-rules (3), (4), and (5) of Rule 28A. The petitioner's unit, being a new industrial unit, applied within the prescribed period and was eligible for exemption from the date of the application or the issuance of the entitlement certificate, not necessarily from the date of commercial production.

The court emphasized that Rule 28A(4)(a) allows for the benefit of tax exemption either from the date of commercial production or from the date of issuance of the certificate. The language of the rule is not mandatory, allowing flexibility. The court found the orders by LLSC and HLSC unsustainable and set them aside, directing LLSC to reconsider the petitioner's claim from the date of the application.

The principle of promissory estoppel was acknowledged, given that the petitioner had been granted various incentives based on the policy and notifications in place. The court directed LLSC to re-evaluate the claim within four months, considering the petitioner's eligibility from the date of the application.

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