2010 (9) TMI 1243 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Adjustment/set-off of tax quantified u/s 8(1) of the Central Sales Tax Act, 1956.
2. Applicability of amendments to Section 8(5) of the Central Sales Tax Act by the Finance Act No. 20 of 2002.
3. Principle of promissory estoppel in the context of tax exemptions.
4. Set-off of higher rate of tax from the maximum monetary limit under the eligibility certificate u/s 4A of the U.P. Trade Tax Act, 1948.

Summary:

Issue 1: Adjustment/set-off of tax quantified u/s 8(1) of the Central Sales Tax Act, 1956

The Petitioners challenged the assessment orders of trade tax under the U.P. Trade Tax Act, 1948, arguing that the assessing authorities did not allow adjustment/set-off of tax quantified u/s 8(1) of the Central Sales Tax Act, 1956, from the monetary limit of the exemption mentioned in the eligibility certificate granted u/s 4A of the U.P. Trade Tax Act, 1948. Interim orders were passed by the Court to continue the benefit of tax exemption as per the notifications, despite their withdrawal by the State Government.

Issue 2: Applicability of amendments to Section 8(5) of the Central Sales Tax Act by the Finance Act No. 20 of 2002

The Central Sales Tax Act was amended by the Finance Act No. 20 of 2002, restricting the State Government's power to grant tax exemptions only if sales were made against form C or D. The Department argued that this amendment would apply automatically, negating the principle of promissory estoppel. The Court held that the State Government could not grant exemptions contrary to the amended Central Act.

Issue 3: Principle of promissory estoppel in the context of tax exemptions

The Court ruled that the principle of promissory estoppel did not apply as the eligibility certificate and exemptions were not withdrawn, nor was the rate of tax increased. The benefit of exemption was not denied to the Petitioner, and the tax liability was confined to Central sales covered by forms C/D.

Issue 4: Set-off of higher rate of tax from the maximum monetary limit under the eligibility certificate u/s 4A of the U.P. Trade Tax Act, 1948

The Supreme Court allowed the Petitioner to argue that the higher rate of tax payable for non-compliance with the amended provisions of Section 8(5) should be set off from the maximum monetary limit under the eligibility certificate. The Court held that the rate of tax has nothing to do with the amount of tax benefit under the eligibility certificate. The higher rate of tax for non-production of form C/D cannot be a ground to deny the set-off from the limits prescribed in the eligibility certificate, subject to other conditions.

Conclusion:

All writ petitions were partly allowed. The assessing authorities were directed to modify the assessment orders to allow set-off to the Petitioners, which was earlier denied due to the rate of tax without the benefit of reduced rate of tax on inter-State transactions for which forms C/D were not produced. The required modifications are to be carried out within two months from the date of production of this judgment.