1999 (9) TMI 925 - HC - VAT and Sales Tax

Validity of Act 18 of 1996 Upheld, Sales Tax Holiday Denied to Cotton Seed Oil Industries

The court upheld the validity of Act 18 of 1996 and its retrospective effect, denying the sales tax holiday to cotton seed oil industries listed in G.O. ... - Issues Involved:1. Withdrawal or non-sanction of incentives declared by the State Government.2. Validity and interpretation of Andhra Pradesh Act No. 18 of 1996.3. Applicability of the principle of promissory estoppel.4. Legislative competence and retrospective effect of laws.5. Validity of temporary sales tax eligibility certificates.Issue-wise Detailed Analysis:1. Withdrawal or Non-Sanction of Incentives:The petitioners, small-scale industrialists in Adilabad district, challenged the withdrawal or non-sanction of incentives like the sales tax holiday declared by the State Government. They argued that the incentives were promised under G.O. Ms. No. 498, dated October 16, 1989, which included a sales tax holiday for five years and investment subsidies. The eligibility for these incentives was subject to the condition that the industries commence production before March 31, 1995. However, subsequent government orders and legislative measures, including G.O. Ms. No. 146, dated April 25, 1991, revised the list of ineligible industries, affecting their right to claim these incentives.2. Validity and Interpretation of Andhra Pradesh Act No. 18 of 1996:Act 18 of 1996 amended section 2 of Act 14 of 1995, restricting the sales tax holiday to 100% of the fixed capital investment or Rs. 35 lakhs, whichever is less. The amendment aimed to exclude certain industries, including cotton seed oil industries, from the benefits. The court interpreted the word 'Annexure' in section 2 to mean the annexure as amended by G.O. Ms. No. 146. This interpretation aligned with the legislative intention to deny benefits to industries listed in G.O. Ms. No. 146. The court held that the industries engaged in the manufacture of cotton seed oil were ineligible for the sales tax holiday under the amended provisions.3. Applicability of the Principle of Promissory Estoppel:The petitioners argued that the principle of promissory estoppel should apply, as they had acted on the government's promise of incentives. The court noted that promissory estoppel requires an unequivocal representation, reliance on the representation, and resultant detriment. However, the court found that the principle could not be invoked in cases where the representation was contrary to law or public interest demanded its withdrawal. The court also distinguished between industries that took steps before and after April 25, 1991, the date G.O. Ms. No. 146 came into force. For those who took steps before this date, the principle of promissory estoppel could apply, but not for those who acted after the date.4. Legislative Competence and Retrospective Effect of Laws:The petitioners contended that Act 18 of 1996 could not override the court's judgment in W.P. No. 2031 of 1994, which had declared that cotton seed oil industries were entitled to incentives. The court held that the Legislature has the power to amend laws retrospectively to remedy situations arising from court judgments. The amendment in Act 18 of 1996 fundamentally altered the legal position, making the earlier judgment inapplicable. The court cited the Supreme Court's decision in State of Tamil Nadu v. Arooran Sugars Ltd. to support the view that the Legislature can retrospectively amend laws to remove the basis of a court's decision.5. Validity of Temporary Sales Tax Eligibility Certificates:In seven cases, temporary sales tax eligibility certificates were granted, allowing the petitioners to avail of sales tax exemption up to 20% of the fixed capital investment. The court held that these certificates, issued based on the guidelines in the Manual of Guidelines, were valid until the commencement of Act 18 of 1996. The court directed that no sales tax should be demanded for the period before the Act's commencement based on these certificates. However, if the petitioners were found eligible for the final eligibility certificate, they would be entitled to full exemption from sales tax.Conclusion:The court upheld the validity of Act 18 of 1996 and its retrospective effect, denying the sales tax holiday to cotton seed oil industries listed in G.O. Ms. No. 146. The principle of promissory estoppel was not applicable to industries that took steps after April 25, 1991. The court directed reconsideration of claims for industries that took steps before this date based on the State Level Committee's decision. Temporary sales tax eligibility certificates were upheld for the period before the Act's commencement, providing limited relief to the petitioners. The rest of the writ petitions were dismissed.