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2011 (6) TMI 722 - HC - VAT and Sales Tax


Issues Involved:
1. Legality of Section 16B of the West Bengal Sales Tax Act, 1994.
2. Applicability of the West Bengal Incentive Scheme, 1993.
3. Doctrine of Promissory Estoppel.
4. Jurisdiction and authority of the BIFR.
5. Applicability of Turnover Tax under Section 16B.

Issue-wise Detailed Analysis:

1. Legality of Section 16B of the West Bengal Sales Tax Act, 1994:
The writ petitioner challenged the legality of Section 16B, arguing it was ultra vires the Constitution. However, this specific prayer was not agitated in the current application. The Tribunal dismissed the application, stating that turnover tax is a separate tax and not a substitute for sales tax or purchase tax. The court analyzed that both the Bengal Finance (Sales Tax) Act, 1941, and the West Bengal Sales Tax Act, 1994, define "tax" to include surcharge, additional surcharge, turnover tax, and additional sales tax. The turnover tax is essentially another form of sales tax, and its imposition is within the legislative competence of the State Legislature under Entry 54 of List II of the Seventh Schedule to the Constitution.

2. Applicability of the West Bengal Incentive Scheme, 1993:
The petitioner argued that the Incentive Scheme of 1993 promised exemption from sales tax, including turnover tax, for nine years. The court noted that the Scheme's definition of "sales tax due for payment" included turnover tax. The Scheme was intended to promote industrial development by providing tax incentives, and the petitioner had invested significantly based on this promise. The court held that the exemption from sales tax under the Scheme also covered turnover tax, as both are forms of sales tax.

3. Doctrine of Promissory Estoppel:
The petitioner invoked the doctrine of promissory estoppel, asserting that the State Government should honor its promise of tax exemption. The court referred to several Supreme Court decisions, including Union of India v. Godfrey Philips India Ltd., which established that the government is bound by its promises if the promisee has acted upon them to their detriment. The court found that the petitioner had altered its position by investing in the sick unit based on the government's promise of tax exemption. Therefore, the government was estopped from reneging on its promise, and the exemption must include turnover tax.

4. Jurisdiction and Authority of the BIFR:
The BIFR had declared Damodhar Cement a sick industrial unit and approved a rehabilitation scheme that included tax exemptions. The court held that the BIFR's order, being a Central Act, overrides any inconsistent State laws. The exemption granted by the BIFR included sales tax, which encompasses turnover tax. Therefore, the petitioner's claim for exemption from turnover tax was enforceable under Section 32 of the SICA, which overrides conflicting provisions of the West Bengal Sales Tax Act, 1994.

5. Applicability of Turnover Tax under Section 16B:
The Tribunal had held that turnover tax was a separate tax and not covered by the exemption. However, the court disagreed, stating that turnover tax is essentially a form of sales tax. The court cited several judicial decisions affirming that turnover tax is a tax on sales and falls within the legislative competence of the State Legislature under Entry 54 of List II. The court concluded that the exemption from sales tax under the Incentive Scheme of 1993 included turnover tax, and the government was bound by the doctrine of promissory estoppel to honor this exemption.

Conclusion:
The court set aside the Tribunal's order, directing the State not to realize turnover tax from the petitioner for the sale of cement during the exemption period. If turnover tax had already been collected, it was to be refunded with interest. The writ application was allowed, and the court emphasized that the government must honor its promises under the Incentive Scheme of 1993, including the exemption from turnover tax.

 

 

 

 

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