2013 (6) TMI 409 - HC - VAT and Sales Tax

Exemption from VAT on milk powder and the vitaminised infant milk foods - Public interest - Doctrine of promissory estoppel. - period between 01.04.2006 to 01.08.2006. - Since the exemption notification was withdrawn, the petitioner and other co-operatives made a concentrated effort to convince the Government to reintroduce such concession. - On 02.08.2006, the Government of Gujarat issued a fresh notification in exercise of powers in Sub-section (5) of Section 8 of the Central Sales Tax Act,1956 and reintroduced concessional rate of duty at 2% on whole milk powder or skimmed milk powder. Held that - If the partial exemption enjoyed by the petitioner was withdrawn mechanically and reintroduced shortly thereafter, the question of examining the petitioner s grievance in the context of the submissions made before us would arise. In the present case, however, we notice that such withdrawal was also based on public interest. We fail to see how the petitioner can bring in the element of promissory estoppel. It is not the case of the petitioner that on the basis of the exemption granted, it altered the position to its disadvantage. It was suggested that the petitioner had not passed on burden of the differential duty for the intervening period. Even if it was so, this can hardly bind the Government into granting the exemption for such period. In any case, the petitioner s stand that the differential duty was not collected from the purchasers due to ignorance of withdrawal of exemption also appears to be one of doubtful proposition. We may recall, soon after the exemption was withdrawn, the Gujarat Co-operative Milk Market Federation Ltd., an apex body of the milk producing co-operatives had, on 10.06.2006, made a detailed representation before the Government to reintroduce the exemption. The stand of the petitioner that they were not aware about the withdrawal of the exemption, therefore, is not borne out from the record. The decision in case of M/s. Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and others (1978 (12) TMI 45 - SUPREME Court) is of course well known judgement in the field of promissory estoppel. Since we have held that this is not a case where such principle can be applied, we do not find it necessary to discuss the issue any further. - Decided against the assessee.

Issues Involved:
1. Exemption from payment of value added tax on milk powder and vitaminised infant milk foods.
2. Validity of the withdrawal of exemption notification.
3. Claim of exemption for the intervening period (01.04.2006 to 01.08.2006).
4. Application of the principle of promissory estoppel.

Issue-wise Detailed Analysis:

1. Exemption from payment of value added tax on milk powder and vitaminised infant milk foods:

The petitioner, a District Co-operative Milk Producers' Union, challenged the non-extension of exemption from value added tax on milk powder and vitaminised infant milk foods for the period between 01.04.2006 to 01.08.2006. The petitioner sought a direction for the respondent authorities to exercise power under Section 49 or Section 8(5) of the Gujarat Value Added Tax Act, 2003. The petitioner also contested a communication dated 28.10.2010, which denied their representations for granting exemption for the said period, and a demand notice dated 13.09.2010.

2. Validity of the withdrawal of exemption notification:

Previously, under a notification dated 01.04.1997, the Government of Gujarat had granted a concessional tax rate of 2% on milk powder and vitaminised infant milk foods. This exemption continued until 31.03.2006, when the Government rescinded the notification, citing the need for a uniform tax policy under the new Value Added Tax system. The petitioner argued that the withdrawal of the exemption was arbitrary and not in public interest, as the exemption was reintroduced on 02.08.2006.

3. Claim of exemption for the intervening period (01.04.2006 to 01.08.2006):

The petitioner contended that the exemption should also cover the period between 01.04.2006 and 01.08.2006. They argued that the withdrawal of the exemption was not in public interest, as public interest was cited both before and after the intervening period. The respondents countered that the withdrawal was necessary for creating a uniform tax policy and that exemptions do not confer any permanent rights upon beneficiaries.

4. Application of the principle of promissory estoppel:

The petitioner relied on the principle of promissory estoppel, arguing that they had not passed on the burden of the differential duty for the intervening period and were unaware of the withdrawal. The court, however, found no basis for applying promissory estoppel, as the petitioner did not alter their position to their disadvantage based on the exemption. The court also noted that the petitioner was aware of the withdrawal soon after it occurred, as evidenced by their representation on 10.06.2006.

Judgment:

The court dismissed the petitions, holding that the withdrawal of the exemption was in public interest and part of a broader policy to create a uniform tax regime. The court emphasized that exemptions are concessions granted by the State and can be withdrawn in public interest. The court also rejected the application of promissory estoppel, finding no evidence that the petitioner had altered their position based on the exemption. The interim relief previously granted was extended until 15.04.2013 to allow the petitioner to file an appeal.

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