2016 (7) TMI 584 - HC - VAT and Sales Tax

Principle of promissory estoppel - Levy of penalty - Scheme for Special Incentives to Prestigious Units 1990-95 - The respondent, in accordance with the eligibility certificate and exemption granted as aforesaid, availed of exemption from payment of purchase tax and sales tax. - Condition No.6 came to be amended with effect from 14th November, 2000 whereby it was provided that the goods were to be actually used by the eligible units as raw materials, processing materials, consumable stores in its industrial unit for which it had eligibility certificate. - Violation of condition of exemption. Held that - Tribunal was wholly justified in invoking the doctrine of principle of promissory estoppel and holding that the appellant was bound by the assurances given to the respondent and cannot change the conditions to the detriment of the respondent. Insofar as the decision of the Supreme Court in the case of M/s Kothari Industrial Corporation Ltd. v. Tamil Nadu Electricity Board (supra) on which reliance has been placed by the learned counsel for the appellant is concerned, the said decision was rendered in respect of a case where the benefit of exemption was withdrawn and would have no applicability to the facts of the present case which relates to change in the conditions for availment of the benefit of exemption. Moreover, the contention regarding lack of jurisdiction on the part of the Tribunal to invoke the principle of promissory estoppel was never raised before the Tribunal, and hence such question does not arise out of the impugned order. Having regard to the fact that there is no breach of any condition of Entry 255, the question of imposition of any penalty does not arise.

Summary

Issues Involved:
1. Whether the Tribunal erred in holding that the appellant's case is barred by the principle of promissory estoppel.
2. Whether the Tribunal erred in holding that the respondent has not violated the conditions prescribed in Entry No. 255 of the notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969.
3. Whether the Tribunal erred in holding that the levy of penalty pursuant to the breach of conditions prescribed in Entry No. 255 is required to be deleted.

Detailed Analysis:

Issue 1: Promissory Estoppel
The Tribunal invoked the principle of promissory estoppel, holding that the respondent had relied on the State's promise and altered its position by entering into agreements and making substantial investments. The Tribunal found that the State Government's assurance allowed the respondent to utilize electricity generated by Essar Power Limited using naphtha and natural gas purchased at concessional rates. The Tribunal concluded that it would be inequitable to expect the respondent to set up a captive power plant after such a considerable period, as the respondent had irretrievably changed its position based on the State's promise.

Issue 2: Violation of Conditions in Entry No. 255
The Tribunal examined whether the respondent had violated the conditions prescribed in Entry No. 255 of the notification issued under section 49(2) of the Gujarat Sales Tax Act. The original Condition No. 6 required the eligible unit to use goods within the State of Gujarat as raw materials, processing materials, or consumable stores in the manufacture of goods for sale. The condition was amended on 14th November 2000, to require the use of goods in the industrial unit for which the eligibility certificate was obtained. The Tribunal held that the respondent complied with the original conditions and that the amended conditions could not be applied retrospectively. Therefore, there was no breach of the conditions prescribed in Entry No. 255.

Issue 3: Levy of Penalty
Since the Tribunal found no breach of the conditions prescribed in Entry No. 255, it concluded that the imposition of any penalty was unwarranted. The Tribunal noted that the benefit of concessional tax rates was retained by the respondent and not diverted to Essar Power Limited. The Tribunal observed that the respondent had paid purchase tax along with returns whenever there was any diversion of electricity generated by Essar Power Limited to the Gujarat Electricity Board (GEB).

Conclusion:
The Tribunal's judgment was upheld, concluding that the respondent did not violate the conditions of Entry No. 255 and that the principle of promissory estoppel barred the appellant's case. Consequently, the levy of penalty was also deemed unnecessary. The appeals were dismissed as they did not raise any substantial question of law.