Promissory estoppel barred withdrawal of sales tax exemption after industries relied on the State's assurance and invested.

The amended Section 8(5) of the Central Sales Tax Act, 1956 was held to operate prospectively from 11 May 2002, so the earlier exemption notification issued under the Industrial Policy, 1997 and the Meghalaya Industries (Sales Tax Exemption) Scheme, 2001 was not invalid when made. Because the petitioners had established industries and made substantial investments on the faith of the State's assurance of sales tax exemption, and no overriding public interest or want of authority was shown, the State was bound by promissory estoppel. The notification dated 5 September 2005 withdrawing the exemption was therefore illegal and unenforceable.

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Issues: Whether the notification dated 5 September 2005 withdrawing the sales tax exemption granted under the earlier notification could be sustained in view of the amended Section 8(5) of the Central Sales Tax Act, 1956, and whether the State was bound by promissory estoppel in respect of the exemption already promised and acted upon.

Analysis: The exemption under the Industrial Policy, 1997 and the Meghalaya Industries (Sales Tax Exemption) Scheme, 2001 was implemented by the notification dated 12 April 2001 under Section 8(5) as it then stood. The amendment to Section 8(5) by the Finance Act, 2002 took effect only from 11 May 2002 and was held to be prospective, not retrospective. Accordingly, the earlier exemption notification was not contrary to law when issued. The petitioners had altered their position by establishing their industries and making substantial investments on the faith of the State's assurance of exemption. No public interest justification or lack of authority was shown to defeat the promise. On these facts, the State could not resile from the representation by issuing the impugned notification.

Conclusion: The impugned notification withdrawing the exemption was illegal and unenforceable, and the State was bound by promissory estoppel to honour the exemption already held out and acted upon.

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