2022 (4) TMI 360 - HC - VAT and Sales Tax

Recovery of Tax - Exemption from Purchase Tax - Soyabean - Sections 9 and 10 of the Adhiniyam,1994 - breach of doctrine of promissary estoppel or not - Notification No.43 dated 06.06.1995 - HELD THAT - Earlier exemption notification dated 06.06.1995 was issued giving the benefit of exemption from payment of tax payable under sections 9 and 10 of the Adhiniyam,1994 and pursuant to the aforesaid notification, the Director of Industry has issued a certificate of eligibility for availing the facility of exemption of tax under notification dated 06.06.1995, therefore, a notification from exemption was issued only for those dealers and manufacturers who are liable to pay tax under section 9 and 10 of Adhiniyam,1994. Now by way of section 10-B, a new charging section has been introduced for every dealer who in the course of his business purchases any goods as may be notified by the Government. After the insertion of Section 10-B and issuance of notification classifying Soybean as a class of goods, the respondents are treating the petitioner as out of the purview of section 10, hence withdrawing to avail the benefit of exemption from tax by virtue of notification 06.06.1995. But the respondents have not withdrawn the notification which was valid for the period mentioned in it. Due to the insertion of section 10-B, the petitioner has been brought from section 10 hence any notification issued for granting charging of tax under section 9 and 10 will apply to the petitioner from the date of issuance of notification prospectively. The petitioner has established the soybean extraction plant in the backward area of the State on the incentive in the form of exemptions from the tax for a fixed period under the Adhiniyam, 1994. The Apex court in MAHABIR VEGETABLE OILS (P) LTD. AND ANR. VERSUS STATE OF HARYANA AND ORS. 2006 (3) TMI 234 - SUPREME COURT has held firstly the doctrine of promissory estoppel operates even in the legislative field, secondly, the attempt to take away the benefit of exemption already granted for fixed period, is not only highly arbitrary, unjust and unreasonable but hits the principles of legitimate expectation and thirdly the exemption from payment of tax in favour of the person under the statute would also constitute a right or privilege. Apart from the above the petitioner has been granted exemption from payment of tax under section 17 of the Adhiniyam, 1994, if Government wanted to levy tax on soyabean then Government could have withdrawn the notification in exercise of power conferred under sub-section (2) of section 17 instead of inserting new charging section which specifically provides that any notification issued under Section 17(1) may be rescinded before the expiry of the period for which it was to have remained in force and on such rescission such notification shall cease to be in force. A notification rescinding an earlier notification shall have prospective effect. Thus, the petitioner shall be entitled to avail the notification dated 06.06.1995 for exemption from payment of tax payable under sections 9 and 10 of the Adhiniyam,1994 a certificate of eligibility for availing the facility of exemption of tax under notification dated 06.06.1995, till its validity period i.e. 31.03.2005 - Even otherwise the period of notification was upto 31.3.2005 and same has not been continued, therefore only for three months period the petitioner has been subjected to payment of entry tax under the Adhiniyam, 1994. The impugned notices dated 09.09.2005 and 13.09.2005 issued to the petitioner are hereby quashed - petition allowed.

Issues Involved:
1. Validity of the impugned notification dated 13.12.2004 and notice dated 13.09.2005.
2. Applicability of the principle of promissory estoppel.
3. Competency of the legislature to amend the statute.
4. Legitimacy of the exemption from payment of tax under Section 17 of the Adhiniyam, 1994.
5. Withdrawal of exemption notification and its impact.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Notification and Notice:
The petitioner challenged the notification dated 13.12.2004 and the subsequent notice dated 13.09.2005, which mandated the payment of tax on Soybean under Section 10-B of the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994. The petitioner argued that this notification breached the principle of promissory estoppel and was issued without withdrawing the earlier exemption notifications. The court found that the notification was issued under the legislative competence of the state and did not invalidate the earlier exemption notifications.

2. Applicability of the Principle of Promissory Estoppel:
The petitioner contended that the principle of promissory estoppel should prevent the state from imposing the tax, as they had relied on the earlier exemption to make significant investments. The court referred to precedents including Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector & ETIO, and MRF Ltd. v. CST, which established that promissory estoppel applies even in the legislative field and protects rights or privileges granted under a statute. The court agreed that the petitioner was entitled to the benefits of the exemption until its validity expired on 31.03.2005.

3. Competency of the Legislature to Amend the Statute:
The petitioner did not challenge the validity of the Madhya Pradesh Vanijyik Kar (Sanshodhan) Adhiniyam, 2004, which introduced Section 10-B. The court noted that the legislature has the inherent power to amend statutes, and the petitioner’s challenge was not against the legislative competence but the application of the new section without withdrawing the earlier exemption.

4. Legitimacy of the Exemption from Payment of Tax under Section 17 of the Adhiniyam, 1994:
The court examined the exemption granted under Section 17 of the Adhiniyam, 1994, and confirmed that the petitioner was entitled to the exemption benefits until the specified end date of 31.03.2005. The court emphasized that the exemption was valid and applicable during its designated period, and any new tax imposition should have been preceded by a formal withdrawal of the exemption notification.

5. Withdrawal of Exemption Notification and Its Impact:
The court criticized the state for not formally withdrawing the exemption notification before imposing the new tax under Section 10-B. It cited the statutory provision that allows for the rescission of an exemption notification with prospective effect. The court concluded that the state should have followed this procedure to avoid legal inconsistencies and ensure fair treatment of the petitioner.

Conclusion:
The court quashed the impugned notices dated 09.09.2005 and 13.09.2005 and any assessment proceedings initiated under the interim order. The petitioner was entitled to the exemption benefits until 31.03.2005, and the state’s attempt to impose the tax without withdrawing the exemption notification was deemed improper. The judgment extended to all connected writ petitions, with no order as to costs.

← Previous Next →