MRP-linked VAT rate reduction upheld from 1 April 2014; later higher levy for the interim period was unsustainable.

Government Orders fixing MRP inclusive of 15% VAT from 01.04.2014 were treated as valid executive action and, since they were neither withdrawn nor superseded, the reduced rate was held to operate from that date. On a harmonious reading of the relevant orders, the demand to levy 20% VAT for the intervening period up to 22.06.2014 was found unsustainable. The analysis also notes that sales were made on the basis of the notified MRP, supporting legitimate expectation and promissory estoppel, and that a later higher levy for the earlier period would be arbitrary and inconsistent with Article 14.

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Issues: Whether the State could demand 20% VAT for the period from 01.04.2014 to 22.06.2014 on Indian Made Foreign Liquor despite the earlier Government Orders fixing MRP inclusive of 15% VAT from 01.04.2014, and whether the impugned assessment and recovery orders were liable to be quashed.

Analysis: The writ was maintainable under Article 226 because the controversy concerned the legality and effective date of the tax rate fixed by Government Orders, a question not to be decided by the assessing or appellate authorities. The Court read the Government Orders dated 28.02.2014, 31.03.2014 and 01.04.2014 together and noted that they fixed MRP inclusive of 15% VAT from 01.04.2014, were issued in the name of the Governor, and had not been withdrawn or superseded. In light of Articles 154 and 166 of the Constitution of India, those orders were treated as valid executive action. The Court further held that, having made sales on the basis of the MRP fixed inclusive of 15% VAT, the petitioner had a legitimate expectation and was protected by promissory estoppel against a later attempt to levy 20% VAT for the earlier period. A harmonious construction of the notifications led to the conclusion that the reduced rate operated from 01.04.2014, and insisting on 20% for the intervening period would be arbitrary and offend Article 14.

Conclusion: The demand for 20% VAT for 01.04.2014 to 22.06.2014 was unsustainable, and the petitioner was entitled to VAT at 15% from 01.04.2014.

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