Prospective withdrawal of sales tax incentives upheld where public interest, rescission power, and rational taxation classification were established.

Promissory estoppel does not bar the State from prospectively withdrawing sales tax incentives where supervening public interest, including fiscal and revenue protection, justifies a policy change. The power to grant exemptions and deferments under the sales tax statute includes, with the aid of the general clauses law, the power to rescind those notifications even without an express rescission clause. Later Cabinet ratification can validate an earlier notification, and prior notice is not a validity when withdrawal is supported by overriding public interest. Classification between categories of industrial units in taxation matters will be upheld if it has intelligible differentia and a rational nexus to the fiscal objective.

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Issues: (i) whether the State was bound by promissory estoppel to continue sales tax exemptions and deferments granted under the industrial policy resolutions; (ii) whether the State had power to withdraw or rescind exemptions and deferments granted under section 7 of the Orissa Sales Tax Act, 1947; (iii) whether the impugned notifications were invalid for want of prior Cabinet approval or for want of notice before withdrawal; and (iv) whether the withdrawal notifications were discriminatory and violative of article 14 of the Constitution of India.

Issue (i): whether the State was bound by promissory estoppel to continue sales tax exemptions and deferments granted under the industrial policy resolutions.

Analysis: The promised incentives had been extended to industrial units for specified periods, but the State placed material showing a serious fiscal crisis, mounting revenue deficit, a review of incentives, recommendations for withdrawal, and a policy decision to restrict the burden on the exchequer. The equitable doctrine of promissory estoppel yields where overriding public interest and supervening circumstances justify a change of policy. The fact that the units had acted on the promise did not prevent the State from modifying the incentives prospectively when public interest required it.

Conclusion: The State was not bound to continue the incentives for the entire promised period, and the plea of promissory estoppel failed.

Issue (ii): whether the State had power to withdraw or rescind exemptions and deferments granted under section 7 of the Orissa Sales Tax Act, 1947.

Analysis: Section 6 expressly permits exemption and withdrawal of exemption in respect of goods, while section 7 empowers exemption of classes of dealers and deferment of tax. Read with section 22 of the Orissa General Clauses Act, 1937, the power to issue notifications includes the power to rescind them in the same manner and subject to the same conditions. The absence of an express rescission clause in section 7 did not deprive the State of the power to withdraw notifications granting deferment or exemption to dealers. The challenge based on lack of competence therefore could not succeed.

Conclusion: The State had the statutory power to rescind the notifications issued under section 7, read with section 22 of the Orissa General Clauses Act, 1937.

Issue (iii): whether the impugned notifications were invalid for want of prior Cabinet approval or for want of notice before withdrawal.

Analysis: The notifications were later ratified by the Cabinet, and ratification related back to validate the earlier act. Since the withdrawal was justified by overriding public interest, notice to the affected units was not a precondition to validity. The notifications could not be treated as still-born or void merely because they had initially been issued in anticipation of Cabinet approval.

Conclusion: The notifications were not invalid on the grounds of lack of prior Cabinet approval or absence of notice.

Issue (iv): whether the withdrawal notifications were discriminatory and violative of article 14 of the Constitution of India.

Analysis: The State differentiated between industries covered by earlier industrial policy resolutions and those under the later policy regime, and also between existing units, pipeline units, and other categories. The classification was linked to the objective of protecting the State's fiscal health and limiting an open-ended tax erosion. In taxation matters, wide latitude is available in classification, and the petitioners failed to show that the classification lacked intelligible differentia or rational nexus with the object sought to be achieved.

Conclusion: The notifications were not discriminatory and did not offend article 14 of the Constitution of India.

Final Conclusion: The withdrawal of sales tax incentives and deferments was upheld as a valid exercise of statutory and executive power taken in response to overriding public interest, and the challenge to the notifications failed.

Ratio Decidendi: A promised fiscal incentive may be withdrawn prospectively when supervening public interest so requires, and the power to issue a tax-exemption notification includes the power to rescind it where the governing statute and general clauses law so provide.

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