Promissory estoppel bars State from withdrawing BIFR-sanctioned tax reliefs after the assessee acted on the scheme.

A State that participated in BIFR rehabilitation proceedings and accepted a sanctioned scheme with tax reliefs could not later withdraw those concessions without showing overriding public interest. Where the assessee acted on the promised reliefs and BIFR issued further directions that were not challenged in appeal, the Government's refusal to implement sales tax exemption and concessional central sales tax was treated as an unreasonable exercise of discretion. Promissory estoppel was upheld, and the adverse communications and demand-related notices were set aside for reconsideration in accordance with the BIFR scheme and directions.

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Issues: Whether the State Government could decline to extend sales tax exemption and concessional central sales tax in terms of the BIFR-sanctioned rehabilitation scheme and subsequent directions, and whether the resulting demand notices were liable to be quashed.

Analysis: The company was referred to BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985, and a rehabilitation scheme was sanctioned with tax reliefs. When the State authorities showed reluctance to implement the reliefs, BIFR issued further directions under the Act and the State did not challenge them in appeal. The Court held that the State had participated in the BIFR proceedings, the company had acted on the sanctioned reliefs, and no overriding public interest was shown to justify the State resiling from the promised concessions. The refusal to extend the benefit was found to be an unreasonable exercise of the discretion left to the Government under the scheme and the BIFR orders.

Conclusion: The State could not act contrary to the BIFR scheme and orders, and the plea of promissory estoppel was upheld in favour of the assessee.

Final Conclusion: The appeal succeeded to the extent that the adverse judgment and the impugned demand-related communications were set aside, while the matter was sent back for reconsideration in accordance with the BIFR scheme and directions.

Ratio Decidendi: A State that has participated in BIFR rehabilitation proceedings and has not shown overriding public interest cannot resile from tax reliefs promised in a sanctioned scheme and enforced by BIFR directions, especially where the assessee has acted upon those assurances.

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