2017 (3) TMI 1651 - HC - VAT and Sales Tax

Exemption from payment of Sales Tax / Commercial Tax as also Central Sales Tax - effect of subsequent notification - petitioner s contention is that the State of Madhya Pradesh with an aim and object to encourage the generation and consumption of electricity generated through non-conventional power generation system, issued a notification dated 28/02/1995 and granted exemption from payment of Sales Tax / Commercial Tax as also Central Sales Tax subject to fulfillment of certain terms and conditions as mentioned in the notification - The petitioner s contention is that subsequent notification cannot be made applicable with retrospective effect and amount which has been accrued upon power generation system and purchasers like the Company, cannot be extinguished on account of subsequent notification issued by the State Government. Held that - the State / respondents vide notification dated 28/02/1995 granted exemption to the dealers who will set up non-conventional power set up from the non-conventional sources, meaning thereby, the State respondents with the intention to promote the use of nonconventional sources has issued the notification. Further State respondents has included the dealers who will consume such power will be given exemption in commercial tax for those years from the date of commencement of the consumption - It is pertinent to mention that the notification dated 28/02/1995 do not provide for any cutoff date for the dealers / investors to set up plant. The State respondent respectfully submit that the MPGST, 1958 stood repealed by the enactment of the M.P. Commercial Tax Act, 1994 and Section 17 of the Act of 1994. In the considered opinion of this Court, no retrospective withdrawal of exemption is permissible - In the case of State of M. P. Vs. G. S. Dall & Flour Mills 1990 (9) TMI 70 - SUPREME Court , the apex Court has held that while a notification can be prospective or retrospective, only a prospective operation can be given to a notification rescinding an exemption granted earlier. The subsequent notification cannot be construed to have a retrospective operation. A right which has already accrued in favour of the petitioner cannot be extinguished by a subsequent notification, specially when the petitioner has acted upon on the basis of first notification dated 28/02/1995 - the impugned notification to the extent it is made applicable with retrospective effect is hereby quashed. The matter is remanded back to the State Level Committee to pass a fresh order by taking into account the first notification issued by the State Government dated 28/02/1995 - petition disposed off.

Summary

Issues Involved:
1. Validity of the notification dated 05/09/1998 introducing a cutoff date.
2. Applicability of the doctrine of promissory estoppel against the State.
3. Retrospective withdrawal of tax exemption benefits.

Issue-wise Detailed Analysis:

1. Validity of the Notification Dated 05/09/1998 Introducing a Cutoff Date:

The petitioner, M/s. Malwa Vanaspati & Chemicals Co. Ltd., challenged the validity of the notification dated 05/09/1998, which amended the earlier notification dated 28/02/1995 by introducing a cutoff date of 30/06/1998. The original notification granted tax exemptions to dealers setting up non-conventional power generation systems. The petitioner argued that the subsequent notification's cutoff date retroactively withdrew the exemption benefits for units that commenced power generation between 01/07/1998 and 04/09/1998. The court found that the original notification did not specify any cutoff date and that the retrospective application of the new cutoff date adversely affected the petitioner's accrued rights under the original notification.

2. Applicability of the Doctrine of Promissory Estoppel Against the State:

The respondent State contended that the doctrine of promissory estoppel should be tested against public interest, especially when public money is involved. The State argued that the exemption was initially granted to promote the use of non-conventional energy sources, but the lack of a cutoff date in the original notification led to ambiguities and potential misuse of public funds. The court noted that while the State has the authority to issue notifications retrospectively under Sections 12 and 17 of the MPGST and MPCT Acts, the doctrine of promissory estoppel cannot be ignored if the petitioner had acted upon the original notification in good faith.

3. Retrospective Withdrawal of Tax Exemption Benefits:

The court emphasized that retrospective withdrawal of tax exemption benefits is not permissible under the law. The court referred to several judgments, including State of M.P. Vs. G.S. Dall & Flour Mills and State of U.P. & Others Vs. Deepak Fertilizers and Petrochemical Corporation Ltd., which held that while a notification can be prospective or retrospective, only prospective operation can be given to a notification rescinding an earlier exemption. The court concluded that the petitioner's right to exemption, which had already accrued under the original notification dated 28/02/1995, could not be extinguished by the subsequent notification dated 05/09/1998.

Conclusion:

The court quashed the impugned notification to the extent it was made applicable with retrospective effect. The matter was remanded back to the State Level Committee to pass a fresh order considering the original notification dated 28/02/1995. The committee was directed to conclude this exercise within 90 days. The writ petition was disposed of accordingly.