Exemption notification limits and tax burden-shifting clauses cannot create fresh liability or discriminate by territory.

An exemption notification under a tax-relief provision may grant or withdraw relief as a matter of policy, and the plea of promissory estoppel failed because no enforceable promise of continuation was shown. The notification could not, however, be used to create a new charging liability or shift tax burden onto re-rolling mills for consignment or branch transfers, as that was inconsistent with the statutory scheme and the rules governing declared goods; that burden-shifting clause was struck down. Tube manufacturers were held outside the intended class of steel re-rolling mills and could not claim the concession. The territorial restriction confining the benefit to mills in Tamil Nadu was discriminatory and was directed to be deleted.

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Issues: (i) Whether the withdrawal and modification of the earlier exemption notifications was vitiated by promissory estoppel or absence of public interest; (ii) whether the impugned notification could validly fasten tax liability on re-rolling mills for consignments or branch transfers and whether the levy was uncertain or contrary to the statutory scheme; (iii) whether tube manufacturers could claim the benefit reserved for steel re-rolling mills and whether the restriction to re-rolling mills in Tamil Nadu was valid; (iv) whether the notifications, to the extent they confined the benefit to re-rolling mills in Tamil Nadu, were discriminatory and liable to be deleted.

Issue (i): Whether the withdrawal and modification of the earlier exemption notifications was vitiated by promissory estoppel or absence of public interest.

Analysis: The exemption regime had undergone several stages, beginning with relief to steel re-rolling mills and later modification of the rate structure. The earlier concessions were not shown to contain any enforceable promise that they would continue indefinitely. The power under section 17 was treated as a power to grant exemption or reduction in rate to a class of assessees, and the existence or withdrawal of such relief was held to be a matter of policy rather than a binding promise. The requirement of proving public interest, in the sense applicable to provisions that expressly invoke that concept, was held not to control section 17 in the same manner.

Conclusion: The plea of promissory estoppel failed, and the challenge on the ground of absence of public interest was rejected.

Issue (ii): Whether the impugned notification could validly fasten tax liability on re-rolling mills for consignments or branch transfers and whether the levy was uncertain or contrary to the statutory scheme.

Analysis: The impugned arrangement was found to be defective because it attempted, through a notification issued under section 17, to shift the burden of tax onto the purchaser/re-roller upon breach of the exemption condition. Section 17 was treated as enabling exemption or reduction in rate, not as a charging provision authorising creation of a fresh liability on a dealer. The mechanism also created uncertainty as to the point and incidence of levy, and was viewed as inconsistent with the restrictions governing declared goods under sections 14 and 15 of the Central Sales Tax Act, 1956. The attempt to tax the purchaser by reference to the turnover of goods sent on consignment or branch transfer was held to be legally unsustainable.

Conclusion: The condition fastening liability on re-rolling mills for consignment or branch transfers was struck down, while the remaining exemption framework was sustained.

Issue (iii): Whether tube manufacturers could claim the benefit reserved for steel re-rolling mills and whether the restriction to re-rolling mills in Tamil Nadu was valid.

Analysis: The notifications were construed as intended for steel re-rolling mills engaged in the recognised rolling process for the specified end-products, and not for tube manufacturers using a different manufacturing process. The contention that tube manufacturers could take the benefit either directly or through job-work was rejected. At the same time, the territorial restriction confining the concession to re-rolling mills in Tamil Nadu was held to be inconsistent with the constitutional guarantees of free trade and non-discrimination, and was therefore not sustainable.

Conclusion: Tube manufacturers were held not entitled to the exemption, but the words limiting the benefit to re-rolling mills in Tamil Nadu were held liable to be ignored.

Issue (iv): Whether the notifications, to the extent they confined the benefit to re-rolling mills in Tamil Nadu, were discriminatory and liable to be deleted.

Analysis: The territorial limitation was treated as offending the constitutional protection against discriminatory treatment of goods and trade across State boundaries. The exemption could not validly be confined to mills located only within Tamil Nadu when the substantive object of the concession was linked to the manufacturing process and the identity of the goods, not to the situs of the mill. Accordingly, the offending words were ordered to be deleted from the relevant notifications.

Conclusion: The territorial restriction was invalid and was directed to be deleted.

Final Conclusion: The core exemption scheme was upheld in substance, but the notification was modified by striking down the impermissible conditions and territorial restriction. Relief was granted to the extent of protecting re-rolling mills from the unlawful burden-shifting clause, while tube manufacturers were denied the concession.

Ratio Decidendi: A notification under an exemption provision may grant relief or reduce tax, but it cannot create a new charging liability or impose an uncertain tax burden contrary to the governing statute and constitutional restrictions on inter-State trade.

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