2005 (8) TMI 656 - SC - VAT and Sales Tax

Challenging the withdrawal of the exemption that the State was bound by the principle of promissory estoppel by the Government Order in 1995 Held that - Granting exemption from general sales tax uptil 2000 As noticed there was nothing either in the notification or in the Policy which provided that the negative list would not be amended or altered. On the contrary clause (vii) of paragraph 7 to G.O. 10 of 1995 expressly reserved the Government s right to amend the negative list. The right if any of the appellants was a precarious one and could not found a claim for promissory estoppel. As observed the edible oil industries were entitled to the benefit of S.R.O. 93 since edible oil was not an industry mentioned in the negative list. The State Government in view of the decision of this court in Shree Mahavir Oil Mills 1996 (11) TMI 358 - SUPREME COURT OF INDIA had no other option but to place edible oils in the negative list.

Summary

Issues:
1. Exemption of small-scale industrial units manufacturing edible oils from sales tax.
2. Withdrawal of exemption by Government Order.
3. Challenge of withdrawal based on promissory estoppel and legal interpretation.

Exemption of Small-Scale Industrial Units:
The judgment involves a batch of appeals by small-scale industrial units manufacturing edible oils in Jammu and Kashmir. These units were granted exemption from sales tax under Notification S.R.O. No. 93 dated 7th March, 1991. The exemption was subject to the condition that the goods manufactured were not listed in the negative list. The exemption percentages were specified in the notification, with 100% exemption granted until March 31, 1995, and subsequent reductions until March 31, 2000. Edible oils were not included in the negative list, entitling the appellants to the exemption.

Withdrawal of Exemption by Government Order:
A Government Order (G.O. No. 10 of 1995) issued a new policy regarding incentives for industrial units, including small-scale units manufacturing edible oils. This policy granted 100% exemption from sales tax until March 31, 2000. However, the benefit was withdrawn on March 31, 1997, through Notification S.R.O. 122, which added edible oils to the negative list. The reason cited for this withdrawal was a previous court decision. The appellants challenged this withdrawal in the High Court, invoking the principle of promissory estoppel based on the 1995 Government Order and disputing the legal interpretation behind the withdrawal.

Challenge of Withdrawal Based on Promissory Estoppel and Legal Interpretation:
The High Court challenge focused on two main grounds. Firstly, the appellants argued that the State was bound by promissory estoppel due to the 1995 Government Order promising exemption until 2000. Secondly, they contended that the legal basis for the withdrawal, referencing a previous court decision, was incorrect. The Supreme Court, however, ruled against the appellants on both counts. The Court held that the Government's policy did not create a binding promise, as it explicitly required a notification for implementation. Additionally, the Court upheld the withdrawal based on the previous court decision which deemed the initial exemption unconstitutional. The judgment emphasized that the State Government was obligated to comply with the court decision, leading to the dismissal of the appeals without costs.

This summary provides a detailed analysis of the issues involved in the legal judgment, covering the exemption of small-scale industrial units, the withdrawal of exemption through a Government Order, and the challenge to the withdrawal based on promissory estoppel and legal interpretation.