Promissory estoppel limits later tax restrictions where industries relied on an earlier incentive scheme and began production.

G.O. Ms. No. 500 was read as granting new industries in specified backward taluks a full five-year sales tax waiver, while limiting existing industries to deferment or waiver only on sales tax attributable to expansion or diversification capacity. G.O. Ms. No. 92 was treated as a later restriction operating prospectively, so it could not curtail benefits already accrued to units set up and commissioned before its publication. Promissory estoppel was applied against the State because industries had altered their position in reliance on the earlier incentive scheme, and the later notification could not defeat that reliance.

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Issues: (i) Whether G.O. Ms. No. 500 dated 14 May 1990 granted to new industries in the specified most backward taluks a full waiver of sales tax for five years, and to existing industries only a deferment or waiver confined to sales tax on products manufactured by the expansion or diversification capacity; (ii) whether G.O. Ms. No. 92 dated 22 February 1991, issued under section 17-A of the Tamil Nadu General Sales Tax Act, restricted the benefit of G.O. Ms. No. 500 only prospectively and could not affect industries set up and commissioned before the later notification; (iii) whether the State was estopped from applying the later restriction to industries that altered their position by acting on the earlier governmental promise.

Issue (i): Whether G.O. Ms. No. 500 dated 14 May 1990 granted to new industries in the specified most backward taluks a full waiver of sales tax for five years, and to existing industries only a deferment or waiver confined to sales tax on products manufactured by the expansion or diversification capacity.

Analysis: The text of G.O. Ms. No. 500 distinguished between new industries and existing industries. Paragraph 3 granted new industries in the 30 most backward taluks a full waiver of sales tax dues for five years up to the ceiling of fixed investment. Paragraph 4 dealt with further concessions for industries in the 75 backward taluks and with expansion or diversification of existing units. Paragraph 5, by its language, confined the sales tax deferral or waiver of expansion or diversification to sales tax payable on products manufactured by the additional capacity created by expansion or diversification. The order was not treated as vague, and its wording was read as controlling over extraneous materials.

Conclusion: G.O. Ms. No. 500 conferred a full five-year waiver on qualifying new industries, while for existing industries it limited the concession to deferment or waiver on sales tax relatable to the capacity created by expansion or diversification.

Issue (ii): Whether G.O. Ms. No. 92 dated 22 February 1991, issued under section 17-A of the Tamil Nadu General Sales Tax Act, restricted the benefit of G.O. Ms. No. 500 only prospectively and could not affect industries set up and commissioned before the later notification.

Analysis: The later notifications under section 17-A were understood as confining the concession to tax on sale of finished products and as modifying the earlier scheme. However, the Court held that the modification could not operate to defeat benefits already acted upon by units established and commissioned before the gazette publication of the later order. Units commencing commercial production before 24 April 1991 were entitled to the benefit promised under the earlier order for the full period stated therein. Units set up thereafter could claim only the benefit as restricted by the later order.

Conclusion: The later notification operated only prospectively against units established after its publication and did not curtail the earlier promised benefit of units already set up and commissioned.

Issue (iii): Whether the State was estopped from applying the later restriction to industries that altered their position by acting on the earlier governmental promise.

Analysis: The incentive scheme was held to be a lawful exercise of executive power under article 162 of the Constitution. The industrial units had acted on the governmental representation and altered their position by establishing new industries or undertaking expansion and diversification. In such circumstances, the State could not resile from the promise by applying the later restriction to those who had already relied on the earlier scheme. The principle of promissory estoppel was applied against the State.

Conclusion: The State was estopped from applying G.O. Ms. No. 92 to industries that had acted upon G.O. Ms. No. 500 and commenced production before 24 April 1991.

Final Conclusion: The earlier incentive scheme was upheld according to its plain terms, the later restrictive notification was given only prospective operation, and relief was granted to the industries that had already come within the earlier scheme and altered their position on that basis.

Ratio Decidendi: A governmental incentive issued under executive power can create an enforceable promise, and a later restrictive notification cannot be applied to defeat the accrued benefit of persons who acted upon the earlier promise before the later change took effect.

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