9911796707
TMI Blog2011 (6) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... f India in so far as it purported to withdraw and/or frustrate and/or nullify the remission of sales tax allowed to applicant No. 1, Damodhar Cement and Slag Ltd., under the West Bengal Incentive Scheme, 1993 and also under section 41 read with section 44 of the West Bengal Sales Tax Act, 1994 and also for a direction upon the Government of West Bengal to honour its promise contained in the aforesaid scheme particularly clause 14 thereof and the remission of tax allowed to the said Damodhar Cement and Slag Ltd. by letter dated February 6, 1997 as modified by the letter dated April 27, 1997 read with the Scheme sanctioned by BIFR in Case No. 502 of 1994 and/or on the basis of the eligibility certificate and for direction upon the Assistant Commissioner of Commercial Tax, Corporate Division, West Bengal, to cancel and/or rescind and/or withdraw the decision contained in the memo No. 80 dated September 23, 2003 and the memo. No. 83(CD) dated October 15, 2003 and the view taken by the Joint Secretary to the Government of West Bengal contained in his letter dated September 29, 2003 and/or direction by which the said Damodhar Cement and Slag Ltd., had been directed to pay turnover tax un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BIFR issued on August 16, 1996. At the time when Damodhar Cement was declared a sick industrial unit by the BIFR, 58 per cent shares were held by Cement Corporation of India, a Government of India undertaking and 42 per cent shares were held by WBIDC, a State Government undertaking. Efforts were made by the BIFR to revive Damodhar Cement for which several discussions took place between the representatives of the writ petitioner-company, viz., ACC Ltd. and Damodhar Cement along with the representatives of the Government of West Bengal and the Central Government, Industrial Reconstruction Department, Government of West Bengal, Kolkata, West Bengal Industrial Development Corporation Limited and various financial institutions who gave various loans and advances to Damodhar Cement apart from other interested persons. The details facts are set out in para 5 of the writ petition. In the meantime, the West Bengal Incentive Scheme, 1993, was issued by the Government of West Bengal. The said scheme was approved by the Government of West Bengal for large and medium scale industries. Under the said Scheme of 1993, para 14.1.1 lays down that a new unit for its approved project shall be eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax both local and CST and purchase tax payable for a period of 9 years from the date of taking over without any ceiling on the amount thereof. It was further stipulated that in case the above were substituted by the Central/State Government by any other levies, Damodhar Cement would be exempted from the same. The writ petitioner claims that the Government of West Bengal being one of the parties to the said scheme has agreed to the terms of the said scheme. The scheme was declared to come into force immediately and will be implemented by all concerned including the Government of West Bengal. The implementation schedule also provides that the Government of West Bengal has agreed to exempt Damodhar Cement from payment of sales tax (both local and CST) and purchase tax payable for a period of 9 years from the date of takeover by the petitioner without any ceiling or CAP on the amount thereof (see page 58, clause E and page 53, clause D). The writ petitioner has referred to the letter written by the Deputy Secretary, Government of West Bengal, dated 6th February, 1997 to the Directors of Industries, West Bengal, Managing Director, West Bengal Industrial Development Corporation and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of commencement of commercial production without any CAP (see page 65 of the writ petition). As indicated earlier, the Tribunal below has dismissed the application. In dismissing the said application, the Tribunal was of the view that the turnover tax was/is no substitute for sales tax and purchase tax and the same was a separate tax in addition to the sales tax and purchase tax and that the Government never made any promise to exempt the sick company from the payment of turnover tax which was introduced subsequently nor was there any promise that all kind of future taxes that might be imposed under the Sales Tax Act would be exempted excepting the provisions in the revival scheme that no tax substituting sales tax and purchase tax would be realised during the period of exemption. Being dissatisfied, the writ petitioner, the present owner of the Damodhar Cement, has come up with the present writ application. Dr. Pal, the learned senior advocate appearing on behalf of the petitioner, has severely criticized the order passed by the Tribunal and has contended that both on the ground of promissory estoppel and in view of the scheme framed by the BIFR, his client is entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government undertaking and also the shares of WBIDC, a State Government undertaking as in spite of the management of Damodhar Cement taken over earlier by the said two companies was running at a huge losses. According to Dr. Pal, the petitioner-company would not have taken the said decision and the risk involved in taking over ownership/management of such a loss-making-unit unless such representation was made by the West Bengal Government in terms of Incentive Scheme of 1993 and also the sanction of the Governor made in exercise of his power under para 18.1 of the said Incentive Scheme. Dr. Pal further submits that the petitioner-company on the basis of the said representation and/or promise and/or assurance had invested a further sum of Rs. 23 crore for the expansion of its unit and in these circumstances, the doctrine of promissory estoppel obliges the Government of West Bengal to honour its promise and/or assurance and/or representation. In answer to the reason assigned by the Tribunal that what was allowed in the form of exemption and/or remission was the sales tax due for payment and not the turnover tax which was introduced under section 16B of the West Bengal Sales Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bengal Finance (Sales Tax) Act, 1941 every dealer whose aggregate of the gross turnover under this Act and the gross turnover under the West Bengal Sales Tax Act, 1954 exceeds Rs. 25 lakh shall in addition to the tax payable by him under the Act be liable to pay a turnover tax at the rate specified in sub-section (3) of such part of his turnover as specified in subsection (2) and therefore, both the sales tax payable under the Bengal Finance (Sales Tax) Act, 1941 and turnover tax payable under section 6B of the Act was on the basis of and in respect of the turnover of sales. Dr. Pal points out that the turnover of sales in relation to any period under section 2(40) means the aggregate of the sale prices or parts of sale prices receivable by a dealer or if a dealer so elects, actually received by the dealer, during such period after deducting therefrom the amounts, if any, refunded by the dealer in respect of any goods returned by the purchaser within such period. Therefore, according to Dr. Pal, both sales tax and turnover tax or additional sales tax are levied on the turnover of sales subject to such a deduction which may be allowed under the Act and thus, the nature, qual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, contends that under the Bengal Act of 1941 turnover tax under section 6B was levied on the turnover of sales and the liability would arise if the turnover of sales exceeded the sum of Rs. 25 lakh in a year and under the Act of 1994, the liability to sales tax under section 9 is on the basis of the turnover of sales. Similar also is the position of the turnover tax under section 16B where the liability to pay turnover tax is on the turnover of sales but the turnover tax is levied in respect of goods or articles which are referred to in Schedule VIIIB of the Act and Schedule VIIIB refers to mostly the luxury goods and also cement. Therefore, the turnover tax is not levied upon all types of goods which are liable to sales tax under section 9 or 10 of the 1994 Act but the turnover tax is levied only in respect of turnover of sales on certain specified goods referred to in Schedule VIIIB of the 1994 Act. In support of his contention that the turnover tax is also in essence a sales tax, Dr. Pal relied upon the following decisions:- (1) Century Spinning Mfg. Co. v. State of West Bengal reported in [1989] 73 STC 277 (Cal); (2) Province of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. v. State of Uttar Pradesh reported in [1979] 44 STC 42 (SC) ; [1979] 118 ITR 326 (SC), at pages 361, 368 and 369. The Supreme Court at page 361 observed that the law may, therefore, now be taken to be settled that where the Government makes a promise knowing or intending that it would be acted on by the promisee and in fact, the promisee acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee. The Supreme Court at page 362 observed that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise equity in favour of the promisee and enforce the promise against the Government. But the court made it clear at page 363 that it would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that the public int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no manner of doubt that tax levied upon sales of goods is the sales tax whereas the tax levied upon on the turnover of sales tax is turnover tax. Mrs. Roy submits that turnover tax is an additional sales tax and such turnover tax is a fresh tax and separate from the tax that was exempted and which is a separate tax imposed by Legislature in addition of sales tax and purchase tax. Mrs. Roy points out that the Legislature itself has referred to two forms of impost under the Act and section 16B is self-contained provision, the turnover tax is, according to Mrs. Roy, after all, in the nature of additional sales tax and the Legislature thought it fit to levy tax under the same entry being entry No. 54 in different ways and under different provisions and under different nomenclature and yardsticks and section 16B is a completely separate self-contained provision for an additional tax in the name of turnover tax. Reliance, in this connection, was placed on following judgments:- (1) State of West Bengal v. Deekay Cocoanut Oil Industries reported in [1998] 110 STC 136 (Cal); (2) Sun Oil Company (P) Ltd. v. State of West Bengal reported in [1998] 111 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver tax as contemplated under section 16B of the West Bengal Sales Tax Act, 1994 by virtue of the remission granted under the Scheme of 1993 and also with the aid of the order passed by the BIFR notwithstanding the specific bar created by sub-section (2) of section 16B of the Act. The fact that the appellant is entitled to the benefit of exemption of payment of sales tax is not in dispute. The only dispute is whether within the scope of the Scheme of 1993 and in view of the fact that the State of West Bengal was a party to the proceedings before the BIFR and by the order of the BIFR, the appellant is entitled to the benefit of exemption of payment of sales tax, such benefit includes exemption from the payment of turnover tax introduced by the State by way of subsequent piece of legislation in section 16B of the West Bengal Sales Tax Act, 1994 in the year 2003 which was not in existence in the year 1997 when the appellant was brought under the Scheme of 1993 as amended. In order to appreciate the question, at the very outset, we propose to consider the various relevant provisions of the Scheme of 1993 and its subsequent amendments. Para 3(xxi) of the Scheme provides that Sales Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Finance (Sales Tax) Act, 1941, the saving clause of the 1994 Act, i.e., section 106(2) provided that notwithstanding the repeal of the Bengal Finance (Sales Tax) Act, 1941, such repeal should not affect any right, privilege, obligation or liability acquired, accrued or incurred under the Bengal Finance (Sales Tax) Act so repealed. It is needless to mention that subsequently, when the West Bengal Sales Tax Act, 1994 came into force from March 23, 1995, the Bengal Finance (Sales Tax) Act, 1941, was operative and the turnover tax introduced under section 6B of the said Act was also in force. At this stage, it would be apposite to refer to the provisions contained in section 2(35) of the West Bengal Sales Tax Act, 1994, where the word "tax" has been defined to mean tax payable under this Act, i.e., under the West Bengal Sales Tax Act, 1994 and includes surcharge payable under section 16, additional surcharge payable under section 16A, turnover tax payable under section 16B and the additional sales tax payable under section 18A. Therefore, it is apparent that both under the Bengal Finance (Sales Tax) Act, 1941 and under the West Bengal Sales Tax Act, 1994, "tax" means sales tax paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant year. The liability to pay turnover tax is cast upon every dealer who had incurred liability to pay sales tax under section 9 or 10 and shall be liable to pay turnover tax at the rates specified in column 3 of Schedule VIIIB of the Act against goods specified in column 2 of the said Schedule on the turnover of sales of such goods in West Bengal except such part of the turnover as represents sales in the course of inter-State trade or commerce within the meaning of section 3 of the CST Act or in the course of import of goods into and export out of the territory of India within the meaning of section 5 of that Act. There is no dispute that taxable turnover is payable in addition to the general sales tax which is levied under section 9 or 10 of the West Bengal Sales Tax Act, 1994 and the taxable event under sections 9, 10 and 16B of the West Bengal Sales Tax Act, 1994 is the quantum of sales aggregate of which constitute the turnover. It will, therefore, appear that under the Act of 1994, both sales tax payable under sections 9 and 10 and turnover tax payable under section 16B are in respect of turnover of a dealer. If we look at the definition of "turnover of sales" in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re pure and simple sales tax and nothing else. It would be a misnomer to call it a tax on income. . . .... Once it is held that 'turnover tax' is a tax on sales imposed in addition to the tax on sales envisaged by the main taxing provision of section 5 then the argument questioning the legislative competence of the State Legislature on the ground that the subject-matter does not fall within entry No. 54 of List II, would be of no avail." In making such observations, the said Division Bench of this court relied upon the decision of the Federal Court in the case of Province of Madras v. Boddu Paidanna and Sons reported in [1950] 1 STC 104 (FC) and decision of the Supreme Court in the case of S. Kodar v. State of Kerala reported in [1974] 34 STC 73 (SC) ; AIR 1974 SC 2272. In the case of Deputy Commissioner of Sales Tax v. Aysha Hosiery Factory (P.) Ltd. reported in [1992] 85 STC 106 (SC) ; AIR 1992 SC 874, the Supreme Court was considering the provisions of the Kerala Additional Sales Tax Act which provided that "the tax payable under the Kerala General Sales Tax Act, 1963 (15 of 1963) for every financial year commencing from the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing observations (page 534 in 89 STC):- "It is obvious that the additional tax is leviable at the rate of ten paise in the rupee on the sales tax or purchase tax or both, payable by such dealer. The additional tax is computed with reference to the tax payable by the dealer. When once the assessing authority determines the sales tax or purchase tax under the Act the additional tax is levied automatically and becomes part and parcel of the assessment order. The expression 'tax' has been defined to mean a tax leviable under the provisions of the Act and as such includes the additional tax levied under section 6B of the Act. When section 20(3) talks of 'payment of the tax and penalty not disputed in the appeal' it obviously includes the additional tax. On the plain language of section 20(3) of the Act it is not possible to make any distinction between the tax and the additional tax and the only conclusion which can be drawn is that the undisputed 'tax' which includes additional tax has to be deposited before the appeal is entertained." (emphasis supplied by us). In the case before us, the expression "tax" has been defined to include the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including the definition of sales tax in the amendment Act of 1994 and in view of the notification issued by the Governor of West Bengal allowing exemption in terms of para 18 of the Incentive Scheme for a period of 9 years from the date of commencement of the commercial production, there is a clear promise and/or assurance and/or representation on the faith of which the petitioner has altered its position to its disadvantage by investing huge sums of money, the principle of promissory estoppel is clearly applicable and the Government is bound to honour its obligation made by the aforesaid promise and/or representation and/or assurance. We, therefore, find no substance in the first contention of Mrs. Roy that in view of the prayer of the writ petitioner to exempt it from payment of turnover tax as reflected in the letters dated September 19, 2003 and August 22, 2003 to the Principal Secretary, Commerce and Industries Department, where there was no whisper that the said company had got remission from payment of sales tax as well as from payment of turnover tax, it should be presumed that the petitioner-company admitted that the turnover tax is a fresh one and not exempted. If acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration for the promise and the promise is not recorded in the form of a formal contract as required by article 299 of the Constitution. It is elementary that in a Republic governed by the rule of law, no one, howsoever high or low, is above the law. Everyone is subject to the law as fully and completely as any other and, the Government is no exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned : the former is equally bound as the latter. It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel. Can the Government say that it is under no obligation to act in a manner that is fair and just or that it is not bound by considerations of 'honesty and good faith'? Why should the Government not be held to a high 'standard of rectangular rectitude while dealing with its citizens'? There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his point." Applying the aforesaid principles to the facts of the present case, we find that in the present case, the Incentive Scheme of 1993 was issued by the Government as it was of the opinion that it was necessary and expedient in the public interest to extend incentives for promotion of industries in the case of large and medium scale industries. Therefore, the incentive scheme was introduced in the public interest. When the turnover tax was reintroduced in the year 2003 by inserting section 16B of the West Bengal Sales Tax Act, 1994, there is no reason disclosed as to whether there is any larger public interest on which earlier promise and/or assurance given in the Incentive Scheme of 1993 required to be amended and/or altered. Even in the affidavit filed by the respondent-Government it has not been disclosed for what larger public interest the Incentive Scheme granted in 1993 is now sought to be withdrawn regarding the payment of turnover tax. Therefore, the promise and/or assurance given in the Incentive Scheme of 1993 as amended also in 1994 is sought to be withdrawn on undisclosed and indefinite policy and no material is given before the court so that the court can judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he doctrine of promissory estoppel even though the legislative provision need not be challenged. The Supreme Court in the case of Mahabir Vegetable Oils Pvt. Ltd. v. State of Haryana reported in [2006] 145 STC 350 (SC) ; [2006] 3 SCC 620 has taken note of almost all the decisions on the question and reiterated that the doctrine of promissory estoppel operates even in the legislative field (paragraph 25). In the case before us, the promise was conveyed through a Scheme framed by the Government and thus, by mere incorporation of subsection (2) of section 16B of the Act, the State cannot take away the right of the petitioner who altered its position by investment of huge amount of money in a sick industry on the basis of the promise of the Government of remission of sales tax. Consequently, the said provision which is a device to recover really sales tax in the guise of turnover tax will not be applicable to the appellant so long the promised period of exemption is not over. We how propose to deal with the decisions cited by Mrs. Roy. In the case of Sun Oil Company (P) Ltd. v. State of West Bengal reported in [1998] 111 STC 420 (SC) ; AIR 1998 SC 3232, the appellant-company was ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons as well as other sections of the Act. The Supreme Court thereafter referred to section 4AA which opened with a non obstante clause and provided that despite the provisions of charging section 4, if the State Government was satisfied that it was in the public interest so to do, it might issue notification in the official gazette directing that no tax should be payable by the dealer. Here it may be noticed that the empowerment under this section to notify that no tax should be payable relates to tax, levied under section 4. The Supreme Court further observed at paragraph 7 that from a perusal of the notification it was evident that the expression used there was that the Governor was pleased to direct that no tax should be payable by a dealer under the said. Act which obviously referred to the tax under section 4 but not to turnover tax imposed under section 4AAA. In that view of the matter, the Supreme Court held that a small-scale industrial unit was not entitled to exemption from payment of turnover tax under section 4AAA. It will, therefore, appear that the entire judgment of the Supreme Court proceeded on the basis that the exemption under section 4AA was allowed only to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and their allotment as per Rules. As the Rules did not provide for re-conveyance, the Supreme Court pointed out that the rule of promissory estoppel could not be availed of to permit or condone a breach of law. In the case before us, the promise was made in terms of the sanctioned Scheme by appropriate authority which specifically exempted payment of sales tax payable by the relevant statute which included turnover tax and thus, it was not a promise to do illegal act at the relevant time and notwithstanding the subsequently legislation taking away the benefit of exemption from payment of turnover tax granted under the scheme, the Government would be bound by the doctrine of promissory estoppel, as the doctrine of promissory estoppel operates even in the legislative field. (Mahabir Vegetable Oils Pvt. Ltd. v. State of Haryana reported in [2006] 145 STC 350 (SC) ; [2006] 6 RC 417 ; [2006] 3 SCC 620 vide paragraph 25 of the judgment). At this stage, it will be appropriate to refer to the decision of the Supreme Court in the case of Pournami Oil Mills v. State of Kerala [1987] 65 STC 1 (SC) ; [1987] 165 ITR 57 (SC) ; AIR 1987 SC 590, where two notifications/orders issued by the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable notwithstanding anything contained in any other law to the contrary excepting the Foreign Exchange Regulation Act and Urban Land Ceiling Act. Therefore, under section 32 of the SICA, the exemption that has been allowed in respect of sales tax will override any other provisions of the local Sales Tax Act which may contain any provision to the contrary. It is relevant to note that BIFR refers to exemption of sales tax without referring to any statute and it does not refer to sales tax under the Bengal Finance (Sales Tax) Act, 1941 or West Bengal Sales Tax Act, 1994. Sales tax, as already indicated, includes turnover tax and if the said proposition is not accepted, as mentioned earlier, the State Legislature then will have no power to impose any tax in the name of turnover tax as the same would not fall under entry 54 of List II of the Seventh Schedule. We, consequently, find that the second, third, fourth and fifth contentions of Mrs. Roy are not tenable in the eye of law. We/therefore/find that the learned Tribunal below erred in law in holding that there was no promise to exempt from the payment of turnover tax and consequently, refused to exercise jurisdiction vested in it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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