Promissory estoppel and tax incentives: prospective amendment upheld, but retrospective withdrawal of exemption struck down.

A sales tax incentive scheme that expressly characterised benefits as a concession and reserved power to review or amend did not create an immutable entitlement enforceable through promissory estoppel. The State could therefore amend the scheme prospectively and reduce the exemption structure. However, a retrospective curtailment of an already extended tax concession from 5 March 1987 was beyond the permissible scope of the statutory and notification-making power and was held invalid as arbitrary. The challenge succeeded only to the extent of striking down retrospective operation, while prospective amendment of the scheme remained valid.

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Issues: Whether the petitioner could invoke promissory estoppel to prevent the State from amending the sales tax incentive scheme and reducing the exemption limit; and whether the amendment making the restriction effective retrospectively from 5 March 1987 could be sustained.

Issue (i): Whether the petitioner could invoke promissory estoppel to prevent the State from amending the sales tax incentive scheme and reducing the exemption limit.

Analysis: The incentive scheme expressly stated that it was in the nature of a concession and did not confer any enforceable right to claim benefits. It also reserved to the State Government the power to review or amend the scheme whenever needed. On the facts, the petitioner's eligibility was initially founded on the category of a new industrial unit covered by the 1985 dispensation, and the same application could not, by itself, be treated as a separate claim for expansion or diversification benefits. Even so, the scheme itself contemplated possible amendment, and the State was not shown to be barred from modifying the incentive structure in principle.

Conclusion: The petitioner was not entitled to insist on the original exemption structure as an immutable entitlement on the basis of promissory estoppel.

Issue (ii): Whether the amendment making the restriction effective retrospectively from 5 March 1987 could be sustained.

Analysis: The scheme had offered tax incentives to induce industrial action, and once those benefits had been held out and acted upon, a detrimental alteration could not be imposed retrospectively. The statutory powers under the sales tax enactments permitted grant of exemption or concession by notification, but did not authorise retrospective withdrawal of an already extended concession. A retrospective curtailment of the exemption was therefore inconsistent with the legal limits on such power and offended the constitutional guarantee against arbitrariness.

Conclusion: Clause 6 of the notification, insofar as it gave retrospective effect from 5 March 1987, was invalid and was struck down.

Final Conclusion: The challenge succeeded only to the extent that retrospective operation of the amending notification was removed, while the State's power to amend the scheme prospectively remained intact.

Ratio Decidendi: A taxing authority may amend a concessional incentive scheme prospectively where the scheme reserves such power, but it cannot withdraw or curtail an existing tax concession with retrospective effect unless the governing statute clearly authorises such retrospective operation.

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