Promissory estoppel cannot block prospective withdrawal of a sales tax incentive where public interest justifies the change.

A sales tax incentive scheme may be withdrawn prospectively where the scheme itself reserves power to amend it and public interest justifies the change, so promissory estoppel does not bar withdrawal unless the claimant has irreversibly altered position before the change. The Rajasthan withdrawal was therefore valid. On the Central Sales Tax notification, the assessees were entitled to the benefit from commencement of commercial production because the scheme was operative when production began. They could retain benefits already enjoyed under the State scheme only up to 4 April 1994, in line with the earlier interim protection.

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Issues: (i) Whether the notification withdrawing the sales tax incentive under the Rajasthan Sales Tax Act was valid and could be defeated by promissory estoppel. (ii) Whether the assessees were entitled to exemption under the Central Sales Tax scheme and to retain benefits already enjoyed up to 4 April 1994.

Issue (i): Whether the notification withdrawing the sales tax incentive under the Rajasthan Sales Tax Act was valid and could be defeated by promissory estoppel.

Analysis: The incentive scheme itself reserved power to review or amend the concession during its currency. The withdrawal was justified by public interest, namely the adverse effect of the scheme on existing industrial units and the failure of the policy to achieve its intended object. The assessees had not completed such effective steps for setting up the unit before withdrawal as would make the promise irrevocable against the State. In these circumstances, the equitable doctrine of promissory estoppel could not prevent prospective withdrawal of the benefit.

Conclusion: The withdrawal under the Rajasthan sales tax scheme was valid and the challenge to it fails.

Issue (ii): Whether the assessees were entitled to exemption under the Central Sales Tax scheme and to retain benefits already enjoyed up to 4 April 1994.

Analysis: The Central Sales Tax notification had already been quashed in the earlier decision governing the same scheme, and the assessees had commenced production during the period when that scheme was still operative. They were therefore entitled to the Central sales tax benefit from the date of commencement of commercial production. As regards benefits already availed of under the State scheme, parity with the earlier decision warranted protection only up to the date on which interim protection was first granted in the earlier matter, namely 4 April 1994, and not beyond it.

Conclusion: The assessees succeed on the Central Sales Tax issue and may retain benefits under the Rajasthan scheme only up to 4 April 1994.

Final Conclusion: The State's challenge succeeds in part because the Rajasthan sales tax withdrawal is upheld, but the assessees retain the Central sales tax relief and limited protection for past benefits up to 4 April 1994.

Ratio Decidendi: An incentive scheme may be withdrawn prospectively in public interest, and promissory estoppel cannot be invoked against such withdrawal unless the claimant has altered position by effective steps taken before the withdrawal and no supervening public interest justifies the change.

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