1986 (11) TMI 45 - SC - VAT and Sales Tax

Whether the appellants had acquired a vested right of exemption from payment of sales tax under the Gujarat Sales Tax Act, 1969 for a period of 5 years from the date of commissioning of their oil mill in respect of purchases and sales relating to the business of their oil mill? Whether in any event the appellants are entitled to claim tax exemption for a period of 5 years under cover of the doctrine of Promissory Estoppel? Held that - The facts in the present case do not go to establish that the appellants had put up the new industry in question subsequent to and in pursuance of the promise held out by Notification dated 29-4-1970 granting exemption. The concession offered by the Government under the first Notification dated 29-4-1970 did not prescribe any period or time limit, and hence the appellants cannot claim anything more than the benefit of the Notification for such period the exemption was in force. Once the Government decided, in exercise of the powers vested in it, to revoke the original Notification, the benefit of exemption from sales tax enjoyed by the appellants came to an automatic end. The period of five years mentioned in the second Notification will have no reference to the appellants oil mill commissioned much earlier because the Notification had only prospective effect. We have, therefore, to affirm the view of the High Court that the appellants will be entitled to the benefit of tax exemption only for the limited period during which the concession was offered by the Government. Appeal dismissed.

Summary

Issues Involved:
1. Vested Right of Exemption from Sales Tax
2. Doctrine of Promissory Estoppel

Detailed Analysis:

1. Vested Right of Exemption from Sales Tax:

The primary issue was whether the appellants had acquired a vested right of exemption from payment of sales tax under the Gujarat Sales Tax Act, 1969, for a period of 5 years from the date of commissioning their oil mill. The appellants argued that the Notifications dated 29-4-1970 and 11-11-1970 granted them a vested right to a tax holiday for 5 years, which could not be nullified by the subsequent Notification dated 17-7-1971. The court examined the dates and contents of the Notifications, noting that the first Notification did not specify a period for the exemption, implying it was valid only until withdrawn by a subsequent Notification. The second Notification, which specified a 5-year exemption, was deemed prospective and thus applicable only to industries commissioned after its issuance. Since the appellants' oil mill was commissioned before the second Notification, they could not claim the 5-year exemption. The court concluded that the exemption granted was a concession, not an obligation, and could be withdrawn at any time, thus rejecting the appellants' claim of a vested right.

2. Doctrine of Promissory Estoppel:

The second issue was whether the appellants were entitled to tax exemption for 5 years under the doctrine of Promissory Estoppel. The court noted that the principle of Promissory Estoppel would apply if the appellants had established the industry based on a specific representation by the Government promising exemption for a particular period. However, the court found no evidence that the appellants had set up their oil mill in response to the Notification dated 29-4-1970. The appellants' mill was commissioned on 17-5-1970, shortly after the first Notification, indicating that the construction had likely commenced before the Notification. Therefore, the court ruled that the appellants could not claim the benefit of Promissory Estoppel as they did not establish the industry based on the Government's representation. The court emphasized that the exemption was a concession, and its withdrawal did not violate the rule of Promissory Estoppel, as the appellants had not proven that their entire venture was attributable to the Government's inducement.

Conclusion:

The court affirmed the High Court's view that the appellants were entitled to tax exemption only for the period during which the concession was in force. The appeal was dismissed, and no costs were awarded.