1997 (12) TMI 114 - SC - VAT and Sales Tax

Whether in view of the Industrial Policy Resolution (I.P.R.) dated 18-7-1979 issued by the Industries Department of the Government of Orissa, sales tax was not payable by a new industry on the purchase of raw material for the period prescribed in the I.P.R.? Held that - In the instant case, it has been stated on behalf of the State that various notifications granting sales tax exemptions to the dealers resulted in severe resource crunch. On reconsideration of the financial position, it was decided to limit the scope of the earlier exemption notifications issued under Section 6 of the Orissa Sales Tax Act. Because of this new perception of the economic scenario of the State, the scope of the earlier notifications had to be restricted. They were first abrogated altogether on 20-5-1977. Thereafter, it was decided to grant exemption at a limited scale. Thus the plea of change of policy trade on the basis of resource crunch should have been sufficient for dismissing the respondent s case based on the doctrine of promissory estoppel. Public interest demanded modification of the earlier I.P.R. Appeal allowed

Issues Involved:
1. Applicability of the Industrial Policy Resolution (I.P.R.) for tax exemption.
2. Validity of the Sales Tax Officer's assessment orders.
3. Promissory estoppel against the State Government.
4. Authority of the State Government to amend or withdraw tax exemptions.
5. Public interest and its impact on policy changes.

Detailed Analysis:

1. Applicability of the Industrial Policy Resolution (I.P.R.) for Tax Exemption:
The respondent, M/s. Shree Durga Oil Mills, argued that according to the I.P.R. dated 18-7-1979, they were entitled to an exemption from sales tax for five years on the purchase of raw materials. The I.P.R. was effective for the period 1979-83 and promised tax exemptions to new industries. The respondent had set up its industry based on this policy and obtained necessary certificates, including a provisional registration certificate on 28-11-1979 and a permanent one on 10-4-1980. The High Court supported this view, stating that a clear and unequivocal promise had been made in the I.P.R., creating a legal relationship between the State and the industry.

2. Validity of the Sales Tax Officer's Assessment Orders:
The Sales Tax Officer argued that there was no notification under Section 6 of the Orissa Sales Tax Act, 1947, granting exemption during the relevant period. Previous notifications (dated 11-11-1969 and 23-4-1976) were abrogated by a notification dated 20-5-1977 and later restored with limitations by another notification dated 9-9-1977. Since the respondent's industry commenced production on 19-3-1980, it was not eligible for the exemption. The High Court quashed the assessment orders, but the Supreme Court found that the I.P.R. itself did not grant any exemption and that such exemptions must be issued as per statutory requirements under Section 6.

3. Promissory Estoppel Against the State Government:
The respondent claimed that the State could not back out from the promise of tax exemption after industries were set up based on the I.P.R. The Supreme Court, however, emphasized that no particulars were provided about when the decision to set up the industry was made or when the loan was obtained. Furthermore, the I.P.R. stated that orders would be issued by concerned departments, and exemptions could only be granted through statutory notifications under Section 6, which could be amended or withdrawn.

4. Authority of the State Government to Amend or Withdraw Tax Exemptions:
Section 6 of the Orissa Sales Tax Act allows the State Government to exempt goods from tax via notification and to withdraw such exemptions. The Supreme Court noted that the respondent should have been aware that exemptions granted under Section 6 could be rescinded at any time. The Court held that there could be no estoppel against a statute, and the State Government was within its rights to withdraw the exemption notifications.

5. Public Interest and Its Impact on Policy Changes:
The State Government argued that severe resource crunch necessitated the limitation of tax exemptions. The Supreme Court supported this view, stating that public interest must override private loss or gain. The Court referred to previous judgments, such as Kasinka Trading and Shrijee Sales Corporation, which upheld the government's right to withdraw exemptions in public interest.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's judgment. It held that the I.P.R. did not grant any exemption by itself and that exemptions must be issued as per statutory requirements, which could be amended or withdrawn by the government. The plea of promissory estoppel was dismissed, and the need for public interest to prevail over individual benefits was emphasized. The assessment orders by the Sales Tax Officer were thus upheld.

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