1991 (11) TMI 244 - HC - VAT and Sales Tax

Court upholds tax demands under A.P. Act 20 of 1987, limits interest-free loan; rejects estoppel claim

The court dismissed the writ petitions, upholding the validity of the demands raised by the Commercial Tax Officer and affirming that A.P. Act 20 of 1987 ... - Issues Involved:1. Entitlement to Rs. 100 lakhs interest-free sales tax loan.2. Constitutional validity of the Andhra Pradesh Interest-free Sales Tax Loans for Industries (Imposition of Ceiling) Act, 1987 (A.P. Act 20 of 1987).3. Application of promissory estoppel.4. Implementation of G.O. Ms. No. 483, dated September 9, 1986.Issue-wise Detailed Analysis:1. Entitlement to Rs. 100 lakhs interest-free sales tax loan:The petitioner-company, located in a backward area, claimed entitlement to an interest-free sales tax loan of Rs. 100 lakhs based on G.O. Ms. No. 483, dated September 9, 1986. The company had commenced production on September 1, 1981, and relied on various government orders, including G.O. Ms. No. 224, dated March 9, 1976, which offered incentives like investment subsidy and interest-free sales tax loans to new industries and those undergoing substantial expansion. The petitioner argued that the State Government had promised these benefits, leading shareholders and promoters to invest in the company. However, the State Level Committee had only sanctioned Rs. 10 lakhs, prompting the petitioner to make repeated representations, culminating in G.O. Ms. No. 483, which sanctioned Rs. 100 lakhs.2. Constitutional validity of the A.P. Act 20 of 1987:The Andhra Pradesh Interest-free Sales Tax Loans for Industries (Imposition of Ceiling) Act, 1987, capped the interest-free sales tax loan at Rs. 10 lakhs and was given retrospective effect from January 1, 1976. The petitioner challenged this Act, but the court referenced a Division Bench judgment that upheld the Act's validity, stating it was conceived in public interest to address financial constraints. The court reiterated that 'there can be no promissory estoppel against the exercise of legislative power,' citing the Supreme Court's observations in State of Kerala v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. and Vasantkumar Radhakisan Vora v. Board of Trustees of the Port of Bombay.3. Application of promissory estoppel:The petitioner argued that the principle of promissory estoppel should apply, as the government had made a promise through G.O. Ms. No. 483. However, the court held that promissory estoppel could not be used to compel the government to carry out a representation or promise prohibited by law or beyond the authority of the officer making it. The court cited Union of India v. Godfrey Philips India Ltd., which stated that 'there can be no promissory estoppel against the Legislature in the exercise of its legislative functions.'4. Implementation of G.O. Ms. No. 483, dated September 9, 1986:The petitioner contended that G.O. Ms. No. 483, issued after the expiry of G.O. Ms. No. 224, was a separate negotiated settlement. However, the court found that G.O. Ms. No. 483 was not independent of G.O. Ms. No. 224 but rather quantified the benefit allowable under the earlier G.O. The court emphasized that the claims under G.O. Ms. No. 224 continued to be valid even after its expiry and that G.O. Ms. No. 483 was a negotiated settlement within the framework of G.O. Ms. No. 224. Therefore, the retrospective application of A.P. Act 20 of 1987, which capped the loan at Rs. 10 lakhs, applied to the petitioner's case, rendering the implementation of G.O. Ms. No. 483 contrary to legislative provision.Conclusion:The court dismissed the writ petitions, upholding the validity of the demands raised by the Commercial Tax Officer and affirming that A.P. Act 20 of 1987 applied retrospectively, limiting the interest-free sales tax loan to Rs. 10 lakhs. The court rejected the application of promissory estoppel and the petitioner's claim for Rs. 100 lakhs based on G.O. Ms. No. 483.