Promissory estoppel can bind tax exemption promises in industrial policy when businesses rely on them and alter their position.

A governmental promise of tax exemption in an industrial policy may bind the State where an industrial unit is established and production begins in reliance on that representation. The note explains that promissory estoppel can apply against Government when a clear promise is intended to be acted on and is in fact acted on, and the absence of a separate notification under the sales tax statute does not necessarily defeat the promise on these facts. The assessment rejecting the exemption was therefore inconsistent with the policy representation, and tax liability had to be worked out on the basis of the promised benefit.

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Issues: Whether the petitioners were entitled to exemption from purchase or sales tax under the Industrial Policy Resolution for 1979-83 on the basis of promissory estoppel, and whether the assessment order rejecting that claim was liable to be quashed.

Analysis: The petitioners established that they set up and commenced production of a small-scale oil mill in reliance on the Industrial Policy Resolution, and altered their position on the strength of the State's representation of tax exemption. The doctrine of promissory estoppel was held applicable against the Government where a clear promise is intended to be acted upon and is in fact acted upon. The absence of a separate notification under section 6 of the Orissa Sales Tax Act did not defeat the enforceability of the State's promise in the policy resolution on these facts, and the subsequent refusal to grant the promised exemption was found inconsistent with that representation.

Conclusion: The petitioners were held entitled to the benefit of the Industrial Policy Resolution and the tax liability was required to be computed on that basis; the assessment order was quashed.

Ratio Decidendi: A governmental promise of tax exemption contained in an industrial policy, when acted upon and resulting in alteration of position by the promisee, is enforceable against the State by promissory estoppel and cannot be withdrawn inconsistently on the ground of executive freedom where no overriding statutory bar is shown.

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