Promissory estoppel and prospective amendment rule protected an already granted sales tax exemption from retrospective curtailment.

A tax incentive scheme that had already conferred eligibility for full sales tax exemption could not be amended so as to deprive the applicant of benefits already accrued under the earlier terms. The later restrictions were held to operate only prospectively, because withdrawal or curtailment of an exemption stood on a different footing from grant of exemption where retrospective operation was expressly permitted. Promissory estoppel also applied: the entrepreneur had altered position by establishing the unit and obtaining eligibility on the basis of the State's representation, so the State could not defeat the promised exemption through retrospective amendment. The assessment order was quashed and entitlement to the original exemption was preserved while certificate conditions were satisfied.

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Issues: (i) Whether the amendments dated January 11, 1990 and February 22, 1990 to the incentive schemes could be given retrospective effect; (ii) Whether promissory estoppel applied so as to prevent the amended restrictions from operating against the applicant.

Issue (i): Whether the amendments dated January 11, 1990 and February 22, 1990 to the incentive schemes could be given retrospective effect.

Analysis: The exemption under the State sales tax law could be granted retrospectively where the statute so permitted, but withdrawal or curtailment of an already granted exemption stood on a different footing. The schemes in question had already conferred eligibility on the applicant for full exemption when the eligibility certificate was issued. The later amendments could not be treated as automatically operating backwards to deprive the applicant of benefits already accrued under the earlier scheme.

Conclusion: The amendments could not be applied retrospectively to take away the applicant's existing exemption.

Issue (ii): Whether promissory estoppel applied so as to prevent the amended restrictions from operating against the applicant.

Analysis: The incentive scheme was framed to induce industrial investment and the applicant acted upon the representation by establishing the unit and obtaining eligibility under the then existing terms. The State was free to revise the scheme, but a change detrimental to an entrepreneur who had already altered position on the faith of the promise could operate only prospectively. Since the applicant had acted on the assurance embodied in the scheme, the State was bound by promissory estoppel in relation to the benefits already promised and accepted.

Conclusion: Promissory estoppel applied in favour of the applicant, and the amended restrictions could not defeat the earlier promised exemption.

Final Conclusion: The assessment order was quashed and the applicant retained entitlement to the full sales tax exemption under the original eligibility terms for so long as the certificate conditions were fulfilled.

Ratio Decidendi: A tax incentive that has been granted and acted upon cannot be curtailed retrospectively by a later amendment, and where an entrepreneur has altered position on the faith of the State's representation, promissory estoppel prevents the State from withdrawing the promised benefit except prospectively.

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