2011 (2) TMI 7 - SC - VAT and Sales Tax

Principal of promissory estopple withdrawal of exemption - . An exemption is nothing but a freedom from an obligation which an assessee is otherwise liable to discharge. In a fiscal statute, an exemption has been held to be a concession granted by the state so that the beneficiaries of such concession are not required to pay the tax or the duty they are otherwise liable to pay under such statute. The beneficiary of a concession has no legally enforceable right against the government to grant a concession except to enjoy the benefits of the concession during the period of its grant. The right to exemption or concession is a right that can be taken away under the very power in exercise of which the exemption was granted. . It cannot be denied that an investment was made by the Respondent in the said area of the State of Haryana, probably on the belief that it would be entitled to the exemption. However, the said factor alone, in the absence of any specific confirmation cannot stop the State to amend the policy and withdraw the exemption if the same is deemed necessary and expedient in the Public Interest. The High Court has gone on the premise that once the Appellant have themselves extended the benefit to the Respondent they cannot further classify the benefit of investment up to the date of amendment, putting the unit in the negative list. It appears that the High Court while arriving at the said finding has failed to appreciate the fact that the case of the Respondent was considered for exemption in the light of the judgment passed by this Court in the Mahabir Vegetable case (supra) reported at (2006 -TMI - 66491 - Supreme Court) wherein it was held that the Respondent is entitled to exemption. However, the issue of quantum was kept open. The High Court while giving the said finding has altogether closed itself in considering the said issue and on the contrary has held that only because the Respondent has been considered for grant of exemption, there is no issue of quantum and the Respondent is entitled to entire exemption. In our opinion the said finding is not in line with the observations made by this Court in the Mahabir Vegetable case (2006 -TMI - 66491 - Supreme Court). The quantification made by the LLSC is in accord with the ratio laid by this Court.

Issues Involved:
1. Entitlement to Sales Tax exemption on entire investment or only up to the date of amendment.
2. Application of the Doctrine of Promissory Estoppel.
3. Validity of amendments and their retrospective effect.
4. Quantum of exemption to be granted.

Detailed Analysis:

1. Entitlement to Sales Tax Exemption:
The primary issue was whether the Respondent is entitled to the benefit of Sales Tax exemption on the entire investment made in setting up the industrial unit (Solvent Extraction Plant) or only on the investments made up till 16.12.1996, the date on which the exemption under Rule 28A of the Haryana Sales Tax Rules (HSTR) was withdrawn by the State by putting the Solvent Extraction Plant in the negative list.

The Respondent had applied for exemption from payment of sales tax as on 16-12-1996, which was rejected because the solvent extraction plants were included in the negative list from 16-12-1996. The High Court had dismissed the writ petition filed by the Respondent, holding that the power to grant exemption is a delegated legislative function, and the benefit of exemption can be withdrawn in public interest. The Respondent approached the Supreme Court, which held that the promises/representations made by way of a statute continued to operate in the field. However, the issue of the quantum of exemption was kept open and remanded to the Director of Industries for fresh adjudication.

2. Doctrine of Promissory Estoppel:
The Respondent argued that the State cannot deny the benefit of exemption once the Respondent, based on the State's representation, initiated steps to establish the unit and made substantial investments. The Supreme Court, however, disagreed with this argument, stating that the doctrine of Promissory Estoppel is an equitable remedy and must yield when equity so requires. It was noted that the decision to put the Solvent Extraction Plant in the negative list was taken in public interest since the industry is a polluting one. There was no allegation of fraud or lack of bona fides in the decision to include the Solvent Extraction Plant in the negative list.

3. Validity of Amendments and Retrospective Effect:
The Supreme Court's judgment dated 10-3-2006 in Civil Appeal 1635 of 2006 had held that the amendment to Rule 28A could not have any retrospective effect in the sense that it could not affect an assessee's pre-existing rights. The Court noted that the amendments carried out in 1996 and subsequent amendments made prior to 2001 could not have taken away the rights of the Respondent with retrospective effect.

4. Quantum of Exemption:
The Lower Level Screening Committee (LLSC) recommended granting an eligibility certificate to the extent of Rs.94,48,911/- for a period of nine years, calculated with reference to the investment made by the Respondent up to 16.12.1996. The Appellate Authority affirmed this view. The High Court, however, allowed the writ petition filed by the Respondent, holding that there was no valid reason to classify the benefit of investment up to the date of amendment.

The Supreme Court, in the present appeal, held that the quantification made by the LLSC was in accord with the ratio laid by the Court in the Mahabir Vegetable case. The Court noted that the Respondent's case was considered for exemption in light of the judgment passed in the Mahabir Vegetable case, which held that the Respondent is entitled to exemption, but the issue of quantum was kept open. The High Court had failed to appreciate this and erroneously concluded that the Respondent was entitled to the entire exemption.

Conclusion:
The Supreme Court allowed the appeal, set aside the impugned judgment passed by the High Court, and upheld the quantification made by the LLSC, granting exemption only up to the date of the amendment (16.12.1996). The parties were left to bear their own costs.

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