1996 (7) TMI 506 - AT - VAT and Sales Tax

Tribunal rules in favor of applicant, grants 100% tax exemption under promissory estoppel doctrine

The Tribunal held that the retrospective effect of the 1990 amendments to the 1987 Incentive Schemes was not permissible. The principle of promissory ... - Issues Involved:1. Retrospective Effect of Amendments2. Doctrine of Promissory Estoppel3. Classification of Cement PlantDetailed Analysis:1. Retrospective Effect of Amendments:The Tribunal addressed whether the amendments dated January 11, 1990, and February 22, 1990, to the 1987 Incentive Schemes could be given retrospective effect. The amendments sought to restrict the tax exemption for mini cement plants to 50% of their tax liability, effective from August 6, 1988. The Tribunal noted that the power to grant exemptions under section 4(2) of the RST Act includes both prospective and retrospective effect. However, it emphasized that the granting and withdrawal of exemptions are not the same processes in reverse. The Tribunal cited the case of Kandoi Kabliwala v. Assistant Commercial Taxes Officer, Pali, where it was held that in the absence of express legislative power, a subordinate legislative body like the State Government cannot issue a notification with retrospective effect that takes away vested rights or imposes obligations. The Tribunal concluded that the amendments could not be given retrospective effect.2. Doctrine of Promissory Estoppel:The Tribunal examined whether the doctrine of promissory estoppel applied to prevent the amendments from having prospective effect on the applicant. The applicant argued that the amendments could not apply to them as they had established their cement plant based on the original promise of 100% tax exemption. The Tribunal reviewed several cases, including Pournami Oil Mills v. State of Kerala, where the Supreme Court held that exemptions granted under a scheme could not be withdrawn retrospectively if the promisee had acted upon the promise. The Tribunal also referred to the case of Civil Asbestos v. State of Gujarat, where it was held that the withdrawal of benefits under an incentive scheme could only operate prospectively. The Tribunal concluded that the principle of promissory estoppel applied in this case, as the applicant had made substantial investments based on the original promise of 100% tax exemption.3. Classification of Cement Plant:The Tribunal considered whether the applicant's cement plant was a small-scale unit or a mini cement plant. The applicant contended that their plant was in the small-scale sector and thus not subject to the 50% tax exemption limit imposed on mini cement plants. The Tribunal noted that the classification of the cement plant was a question of fact that could not be determined based on the material on record. However, it stated that the relevant considerations for classification were the type of kiln used and the production capacity. The Tribunal concluded that if the applicant's plant used a vertical shaft kiln with a capacity not exceeding 200 tonnes per day or a rotary kiln with a capacity not exceeding 300 tonnes per day, it would be considered a mini cement plant and subject to the 50% tax exemption limit.Conclusion:The Tribunal held that the amendments to the 1987 Incentive Schemes could not be given retrospective effect and that the principle of promissory estoppel prevented the amendments from applying prospectively to the applicant. Consequently, the applicant was entitled to 100% tax exemption as originally promised. The impugned assessment order dated March 24, 1995, was set aside, and it was declared that the applicant would be eligible for 100% exemption of sales tax subject to a ceiling of 100% of investment in fixed capital or for seven years, whichever was earlier. The application was allowed with no order as to costs.