1984 (3) TMI 360 - HC - VAT and Sales Tax

Court rules in favor of petitioner, grants full 10-year tax exemption based on promissory estoppel.

Usha Martin Industries Ltd. Versus Additional Superintendent of Commercial Taxes, Jamshedpur Circle, Jamshedpur

The court quashed the order granting sales tax exemption only until 31st March 1979 and held that the petitioner was entitled to a five-year exemption ... - Issues Involved:1. Entitlement to sales tax exemption for ten years.2. Validity of the order in annexure 11 granting exemption up to 31st March, 1979.3. Application of the principle of promissory estoppel.Detailed Analysis:1. Entitlement to Sales Tax Exemption for Ten Years:The petitioner, a company that set up an industrial unit at Adityapur, sought a writ commanding the respondents to grant exemption from sales tax on raw materials for ten years from the date of production, 21st March 1979. The petitioner relied on a resolution by the Government of Bihar dated 29th September 1973, which promised such exemptions for new large and medium industries. The petitioner took several steps, including obtaining an industrial license and loans, based on this resolution. The Government of Bihar issued a notification on 18th March 1977, under the Bihar Sales Tax Ordinance, providing a five-year exemption, which the respondents insisted was the applicable term.2. Validity of the Order in Annexure 11:The order in annexure 11, dated 24th November 1979, granted the petitioner exemption from sales tax only up to 31st March 1979. The learned Advocate-General conceded that this order could not be sustained in view of the precedent set by Kailash Roller Flour Mills v. Assistant Commissioner of Commercial Taxes [1981] 48 STC 297; 1980 BLJR 432. Consequently, the court quashed annexure 11, holding that the petitioner was entitled to the exemption for five years from 21st March 1979, under the statutory notifications.3. Application of the Principle of Promissory Estoppel:The petitioner argued that the respondents were estopped from denying the ten-year exemption based on the principle of promissory estoppel, as established in Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. [1979] 44 STC 42 (SC); AIR 1979 SC 621. The court noted that the petitioner had acted to its detriment based on the Government's resolution. The Advocate-General contended that the notifications under the Sales Tax Act would prevail over the resolutions and that the petitioner was entitled to only five years of exemption. The court examined various resolutions and notifications, concluding that the State Government had repeatedly resolved to grant ten-year exemptions, which were not revoked by subsequent notifications.The court also considered the argument that public interest, due to increasing overdraft and deficit budget, justified limiting the exemption to five years. However, the court found this insufficient to override the principle of promissory estoppel, especially given the consistent resolutions over several years.Finally, the court referred to a letter dated 17th March 1981 (annexure 1/G), from the Director of Industries-cum-Special Secretary, confirming the petitioner's entitlement to the ten-year exemption. This letter was issued during the pendency of the writ petition and was not countered by the respondents.Conclusion:The court allowed the application, quashed annexure 11, and held that the petitioner was entitled to the incentives under the sales tax legislation in terms of annexure 1/G dated 17th March 1981. No order as to costs was made.