2003 (3) TMI 761 - HC - Indian Laws

Summary

Issues Involved:
1. Denial of sales tax exemption under G.O. Ms. No. 108, dated 20-5-1996.
2. Whether the bottling of LPG constitutes "manufacture" for tax exemption purposes.
3. Validity and impact of temporary and final eligibility certificates.
4. Application of the principle of promissory estoppel.
5. Liability of sales tax in the absence of tax collection from consumers.

Detailed Analysis:

1. Denial of Sales Tax Exemption:
The petitioners challenged the denial of sales tax exemption provided under G.O. Ms. No. 108, dated 20-5-1996. They argued that their industrial units, engaged in bottling LPG, should qualify for the exemption. The State contended that bottling LPG does not constitute "manufacture" or "commercial production," thus not qualifying for the exemption.

2. Whether Bottling of LPG Constitutes "Manufacture":
The petitioners claimed that bottling LPG involves a manufacturing process, resulting in a product with a distinct commercial identity. They cited various legal precedents to support their claim. However, the court referred to the Gujarat High Court's decision in State of Gujarat v. Kosan Gas Company, which held that filling LPG into cylinders does not change its essential characteristics and thus does not constitute "manufacture." The court concluded that the petitioners' activities did not involve manufacturing a new product and thus did not qualify for the exemption.

3. Validity and Impact of Temporary and Final Eligibility Certificates:
The petitioners argued that temporary eligibility certificates issued by the District Industries Centre should entitle them to the exemption. However, the court noted that these certificates were subject to final approval by the State Level Committee, which had not been granted. The court emphasized that temporary certificates do not confer any binding right to claim exemptions.

4. Application of the Principle of Promissory Estoppel:
The petitioners invoked the principle of promissory estoppel, arguing that the State should be estopped from denying the exemption after initially issuing temporary eligibility certificates. The court rejected this argument, stating that there was no clear promise or assurance from the State guaranteeing the exemption. The court further noted that the principle of promissory estoppel does not apply where there is no specific promise or where the policy itself does not support the claim.

5. Liability of Sales Tax in the Absence of Tax Collection from Consumers:
The petitioners contended that they should not be liable for sales tax as they did not collect it from consumers, relying on the provisional eligibility certificates. The court held that the statutory liability to pay sales tax is on the dealer, irrespective of whether the tax was collected from consumers. The court cited precedents affirming that non-collection of tax does not absolve the dealer from liability.

Conclusion:
The court dismissed the writ petitions, holding that the petitioners were not entitled to the sales tax exemption under G.O. Ms. No. 108, dated 20-5-1996, as their activities did not constitute "manufacture." The court also ruled that temporary eligibility certificates do not confer any binding right, and the principle of promissory estoppel was not applicable. The petitioners were held liable for sales tax regardless of whether they collected it from consumers. The court emphasized that exemptions must be clearly established by the claimant and interpreted strictly.