2011 (6) TMI 517 - HC - VAT and Sales Tax

Benefit of deferment of tax - retrospective amendment in H. P. General Sales Tax (Deferment of Tax) Scheme 2005 - petitioner-company was registered under this Scheme for the grant of benefit of deferment - petitioner challenged this order and according to the petitioner once the petitioner-company had expanded its unit and was given benefit of deferment scheme the State was estopped from withdrawing this benefit from the petitioner - State on the other hand is that there was a mistake in the original negative list attached to the notification. According to the State liquor industry is not one of those industries to which such benefit has to be given Held that - stand of the State that by mistake liquor industry was not included in the negative list appears to be correct substantial material on record to show that the State had put in the negative list industries like the tobacco industry and even soft drink manufacturers. When soft drink manufactures are put in the negative list it would indeed be surprising not to have liquor in the negative list no fault can be found with the notification issued by the State including liquor in the negative list with retrospective effect petition which is accordingly rejected

Issues Involved:
1. Withdrawal of tax deferment benefit.
2. Application of promissory estoppel.
3. Retrospective amendment and its legality.
4. Public policy and directive principles.

Issue-wise Detailed Analysis:

1. Withdrawal of Tax Deferment Benefit:
The petitioner, a company engaged in the manufacture of liquor, challenged the withdrawal of the tax deferment benefit granted under the H.P. General Sales Tax (Deferment of Tax) Scheme, 2005. The benefit was withdrawn by a letter dated June 24, 2009, citing an inconsistency in the provisions of the Scheme. The petitioner argued that the State was estopped from withdrawing the benefit once it had been granted.

2. Application of Promissory Estoppel:
The petitioner relied on the doctrine of promissory estoppel, arguing that they had expanded their unit based on the promise of tax deferment. The petitioner cited the apex court's judgment in Mahabir Vegetable Oils Pvt. Ltd. v. State of Haryana, which held that the doctrine of promissory estoppel operates even in the legislative field. The petitioner contended that the State could not retrospectively withdraw the benefit, especially after the petitioner had invested substantial amounts based on the promise.

3. Retrospective Amendment and Its Legality:
The State argued that the liquor industry was inadvertently left out of the negative list and that it was never the intention to grant tax deferment benefits to the liquor industry. The State introduced an amendment to include the liquor industry in the negative list retrospectively. The petitioner contended that retrospective operation could not be given to such subordinate legislation, especially when a party had changed its position based on the promise. The petitioner cited judgments from the apex court, including State of U.P. v. Vam Organic Chemicals Limited and State of Haryana v. Anil Pesticides Limited, to support the argument that benefits could not be withdrawn retrospectively.

4. Public Policy and Directive Principles:
The State defended its action by invoking Article 47 of the Constitution of India, which mandates the State to endeavor to introduce prohibition. The State argued that encouraging the liquor industry was against public policy and the directive principles of State policy. The court agreed with the State's contention, emphasizing that public interest and health of the citizens were paramount. The court noted that the inclusion of the liquor industry in the negative list with retrospective effect was justified, given that other harmful industries like tobacco and soft drinks were already in the negative list.

Conclusion:
The court rejected the petition, finding no merit in the arguments presented by the petitioner. It upheld the State's decision to retrospectively include the liquor industry in the negative list, emphasizing the importance of public policy and the health of citizens over private interests. The doctrine of promissory estoppel was found inapplicable as the petitioner failed to demonstrate a detrimental change in position based on the promise. The court concluded that the State's action was neither illegal nor liable to be set aside. No order as to costs was made.

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