Retrospective tax settlement amendment struck down for hostile discrimination and denial of refund to taxpayers who had already paid tax

A settlement application under the West Bengal Sales Tax (Settlement of Dispute) Act, 1999 was treated as maintainable where it was filed within time and the assessee's appeal was pending, satisfying the statutory prerequisites for relief. The retrospective amendment to section 7 was found to create hostile discrimination by denying refund to taxpayers who had already paid the disputed tax while continuing to extend settlement benefits to similarly placed taxpayers who had paid nothing, and it was therefore held unconstitutional under Article 14. Promissory estoppel was also rejected because the claim arose from a statutory scheme and no independent governmental representation was shown.

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Issues: (i) Whether the petitioner satisfied the statutory conditions for settlement of dispute under the West Bengal Sales Tax (Settlement of Dispute) Act, 1999; (ii) whether the retrospective amendment to section 7 of the Act, 1999 was unconstitutional and ultra vires; (iii) whether promissory estoppel applied against the State.

Issue (i): Whether the petitioner satisfied the statutory conditions for settlement of dispute under the West Bengal Sales Tax (Settlement of Dispute) Act, 1999.

Analysis: The petitioner had filed the settlement application within time and his appeal against the assessment was pending when the Act came into force. The scheme of sections 4, 5, 6 and 7 entitled an eligible applicant to settlement by payment of the prescribed percentage of disputed tax and interest, with credit for amounts already paid before the application. On the facts, the petitioner fulfilled the statutory prerequisites for invoking the settlement mechanism.

Conclusion: The petitioner was eligible to claim relief under the Act, 1999.

Issue (ii): Whether the retrospective amendment to section 7 of the Act, 1999 was unconstitutional and ultra vires.

Analysis: The retrospective amendment altered the settlement benefit so that an assessee who had already paid the full disputed tax before applying was denied refund of the excess amount, while an assessee who had paid nothing could still obtain settlement on payment of the prescribed percentage. The Court found no reasonable basis for this differential treatment within the same class of taxpayers. The retrospective operation therefore created hostile discrimination and operated in a confiscatory manner, offending Article 14 of the Constitution of India.

Conclusion: The retrospective operation of the amended provision was unconstitutional and liable to be struck down.

Issue (iii): Whether promissory estoppel applied against the State.

Analysis: The relief claimed arose from a statutory scheme, not from any representation by the Government inducing alteration of position independent of the statute. The governing principle is that there can be no estoppel against the State in the exercise of legislative, sovereign or executive power.

Conclusion: Promissory estoppel did not apply.

Final Conclusion: The application succeeded, the retrospective amendment was invalidated for discrimination, and the impugned order refusing refund was set aside; the connected matters were also disposed of on the same basis.

Ratio Decidendi: A retrospective tax settlement amendment that arbitrarily denies refund to taxpayers who have already paid the disputed amount, while extending settlement benefits to similarly placed taxpayers who have paid nothing, constitutes unconstitutional hostile discrimination under Article 14.

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