2017 (3) TMI 1648 - HC - VAT and Sales Tax

Benefit of deferment of tax - H.P. VAT Act 2005 - whether the principle of promissory estoppel is applicable to the facts of the instant case? Held that - Admittedly the notification dated 23.7.1999 remained in force fully for a period of 5 years whereby the deferred payment of sales tax was available to the units relating to Mini Steel Plants induction / Arc / Submerged furnaces and / or rolling mills only available up till 23.07.2004. After 23.7.2004 the notification ceased to exist and it is only vide notification dated 30.3.2005 that the scheme for making deferred payment of tax was extended to the A & B category areas but as the unit of the petitioner was manufacturing SS/MS Ingot billets and TOR SARIA which admittedly fall in the negative list the petitioner obviously was not entitled to the deferred payment of tax. It has come on record that even the commercial production was commenced by the petitioner almost 16 months after issuance of the notification dated 30.3.2005. Thus it is evidently clear that the petitioner was not even born during the currency of the notification dated 23.7.1999 which as observed earlier was valid only for five years up till 23.7.2004. The petitioner had taken no steps whatsoever for setting up its industrial unit during the currency of the notification dated 23.7.1999 which remained operative up till 5 years i.e. 23.7.2004 and whatever steps were taken to set-up the industry including the registration with the Industry Department was taken after 23.07.2004 i.e. after the scheme has come to an end. All the other effective steps for setting up the industrial unit were taken by the petitioner when the notification dated 30.3.2005 had been issued. However since the goods manufactured by the petitioner fell within the negative list it was not entitled to the benefit of the Scheme. The doctrine of promissory estoppel is clearly not attracted as the unit of the petitioner admittedly falls within the negative list and it is therefore not entitled to the benefit of deferred payment of tax that too under the notification dated 23.7.1999. Petition dismissed - decided against petitioner.

Summary

Issues:
Challenge to Notification Retrospectivity and Applicability; Quashing of Orders and Demand Notice; Mandamus for Tax Deferment Benefits; Rescheduling of Deferred Tax Period; Refund of Recovered Amount; Principle of Promissory Estoppel Applicability.

Challenge to Notification Retrospectivity and Applicability:
The petitioner sought to challenge Notification No. EXN-F(1) 2/2004 dated 30.03.2005 as illegal and invalid due to its retrospectivity and applicability to industrial units. The petitioner claimed that the notification affected units in the pipeline that had started commercial production subsequently. The State Government issued a notification on 23.7.1999 regarding deferred tax payment for industrial units, which was valid for five years. The subsequent notification on 30.03.2005 extended the deferred tax benefit but excluded units manufacturing goods in the negative list, which included the petitioner's unit. The petitioner argued for deferment based on promissory estoppel, citing investments made before inclusion in the negative list. The respondents contended that the petitioner's unit did not qualify for deferment under the notifications due to being in the negative list and starting production after the validity of the 1999 notification.

Principle of Promissory Estoppel Applicability:
The petitioner invoked the principle of promissory estoppel to claim the benefit of deferred tax payment, citing investments made in reliance on the initial notification. The respondents argued against the application of promissory estoppel, pointing out that the petitioner's unit was included in the negative list and commenced production after the expiry of the 1999 notification. Both parties relied on relevant legal precedents to support their arguments, highlighting the applicability of promissory estoppel in governmental decisions.

Judicial Analysis:
The court analyzed the facts and legal arguments presented by both parties. It noted that the petitioner's unit fell within the negative list and commenced production after the expiry of the 1999 notification. The court emphasized that the petitioner failed to take significant steps for setting up the unit during the validity of the 1999 notification. Consequently, the court held that the principle of promissory estoppel did not apply in this case. The court upheld the decisions of the authorities under the Act, which rejected the petitioner's claim based on the timing of unit establishment and production in relation to the notifications. Ultimately, the court dismissed the petition, stating that the petitioner was not entitled to deferred tax benefits under the relevant notifications.

Conclusion:
The court dismissed the petition challenging the notification retrospectivity and applicability, as well as the claim for deferment benefits based on promissory estoppel. The court upheld the decisions of the authorities, emphasizing the petitioner's unit's inclusion in the negative list and the timing of production in relation to the notifications. The judgment clarified the inapplicability of promissory estoppel in this context and affirmed that the petitioner was not entitled to deferred tax benefits under the notifications.