2008 (3) TMI 779 - HC - VAT and Sales Tax

Issues Involved:
1. Effect of the amendment in Section 2(17) of the West Bengal Sales Tax Act, 1994 on the vested right to claim tax exemption.
2. Whether blending of tea amounts to manufacture under the amended Act.
3. Constitutionality of the amendment under Article 14 and Article 19 of the Constitution of India.
4. Application of the doctrine of promissory estoppel.

Detailed Analysis:

1. Effect of the Amendment in Section 2(17) on Vested Right to Claim Tax Exemption:
The core issue revolves around whether the amendment to Section 2(17) of the West Bengal Sales Tax Act, 1994, which omitted the phrase "and includes blending of tea," affected the vested right of the petitioner company to claim tax exemption under Section 39. The petitioner company argued that their right to tax exemption crystallized when they set up their industrial unit and made the first sale in 1999, based on the then-existing definition of "manufacture." The amendment, effective from August 1, 2001, was contended to be prospective and should not affect the already accrued rights. The court, however, held that the amendment was prospective and did not retrospectively take away any benefits already enjoyed by the petitioners. The court emphasized that the legislative power to amend statutes includes the power to withdraw concessions, and such amendments do not amount to an irrevocable vested right.

2. Whether Blending of Tea Amounts to Manufacture:
Initially, blending of tea was included in the definition of "manufacture" under Section 2(17) of the Act, qualifying the petitioner for tax exemptions. Post-amendment, blending of tea ceased to be considered a manufacturing process from August 1, 2001. The petitioner argued that the amendment should not affect their right to exemption for the prescribed period of seven years. The court concluded that the amendment was prospective and operational from the date of the amendment, thus altering the status of blending tea as a manufacturing process for future cases.

3. Constitutionality of the Amendment under Article 14 and Article 19:
The petitioner contended that if the amendment deprived them of the exemption, it would be violative of Articles 14 and 19 of the Constitution of India. The court, however, found no merit in this argument, stating that the amendment was a legislative action within the competence of the legislature. The court reiterated that legislative amendments could alter existing rights unless explicitly stated otherwise. The principle of legislative supremacy allows the legislature to amend laws, which may affect existing rights, provided it does not infringe upon constitutional rights.

4. Application of the Doctrine of Promissory Estoppel:
The petitioner did not base their claim on promissory estoppel but argued that their right to exemption was already crystallized. The court noted that promissory estoppel does not apply against legislative actions. The court cited several precedents, including the Supreme Court's rulings in "Kasinka Trading vs. Union of India" and "MRF Ltd. vs. Assistant Commissioner (Assessment) Sales Tax," which held that exemptions granted under statutory provisions could be withdrawn if public interest so demanded. The court concluded that the petitioner's right to exemption was not absolute and could be altered by subsequent legislative amendments.

Conclusion:
The court upheld the decision of the Learned Taxation Tribunal, stating that the amendment to Section 2(17) was prospective and did not retrospectively affect the petitioner's right to exemption. The court affirmed that legislative amendments could alter existing rights and that the principle of promissory estoppel does not apply against legislative actions. Consequently, the petitioner's application was dismissed, and similar writ petitions were disposed of in light of this judgment.

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