1988 (5) TMI 34 - SC - VAT and Sales Tax

Whether the doctrine of promissory estoppel was not applicable in the present case because it was found by the Government of Karnataka that the concessions granted under the said order dated June 30, 1969, were being misused and undue advantage was being taken of the same? Whether the concessions granted by the said order dated June 30, 1969, were of no legal effect as there is no statutory provision under which such concessions could be granted and the order of June 30, 1969, was ultra vires and bad in law? Held that - In the present case, there is nothing on record to show that any such misuse was being made or undue advantage taken of the said concessions by the newly established industries. The Government had, therefore, failed to establish the requisite ground or the basis on which it might be allowed to go back on its promise. The first submission of learned counsel for the appellants must, therefore, fail. There is no substance whatever in the contention that the State Government had no authority to provide for the grant of refunds. Again, the mere fact that the order of June 30, 1969, did not specify the power under which it was issued will make no difference because such power is clearly there in section 8A and where the source of power under which it is issued is not stated in an order but can be found on the examination of the relevant Act, the exercise of the power must be attributed to that source. The second submission of learned counsel for the appellants must, also, therefore, be rejected. Thus the doctrine of promissory estoppel must be regarded as good law. Appeal dismissed.

Summary

Issues:
- Validity of concessions granted under the order dated June 30, 1969
- Applicability of the doctrine of promissory estoppel
- Legal effect of the order dated January 12, 1977
- Authority of the State Government to grant concessions
- Interpretation of the Karnataka Sales Tax Act, 1957

Analysis:

The judgment by the Supreme Court involved appeals arising from a decision of the High Court of Karnataka regarding concessions granted to new industrial units in the State. The appeals centered around the validity of the concessions provided under the order dated June 30, 1969, and the application of the doctrine of promissory estoppel. The Government of Karnataka had issued orders to encourage industrialization, including granting refunds on sales tax for new industries. The Government later issued an order on January 12, 1977, limiting the concessions due to alleged misuse. The petitioners claimed promissory estoppel against the Government for starting industries based on the earlier concessions.

The first issue addressed was the contention that the concessions were being misused, justifying the Government's decision to limit them. The Court found that without evidence of misuse, the Government could not retract the promised concessions. The Court emphasized that mere allegations of misuse were insufficient to justify revoking the concessions without concrete proof. The Government failed to establish misuse, leading to the rejection of this argument.

The next issue involved the legality of the concessions granted under the order dated June 30, 1969. The appellants argued that the concessions were invalid as there was no statutory provision for such grants. The Court disagreed, stating that the State Government had the authority to grant exemptions and reductions under the Karnataka Sales Tax Act, 1957. The Court interpreted the substance of the concessions, noting that they effectively provided exemptions or reductions in sales tax liability, thus falling within the State Government's powers.

Furthermore, the Court addressed the applicability of the doctrine of promissory estoppel, confirming its validity based on previous judgments. The Court cited the State of Bihar v. Usha Martin Industries Ltd. case to uphold the doctrine. Ultimately, the Court dismissed the appeals, finding no merit in the arguments presented by the appellants and upheld the decisions of the lower courts.