2015 (10) TMI 214 - HC - VAT and Sales Tax

Promissory Estoppel Upheld for Tax Exemption: Government Obligated to Honor Promises

The court held that M/s. VM Extrusions Private Limited was entitled to exemption from entry tax based on the principle of promissory estoppel. The court ... Benefit of exemption from entry tax - Whether or not M/s. VM Extrusions Private Limited (the respondent) is entitled to exemption of entry tax on the principle of promissory estoppel - Held that:- The State also issued a notification dated April 26, 2002 under the 2001- 06 Policy explaining the new industries that are included in the thrust sector. So far as 'cement and downstream industries' under the 'mineral based industries' are concerned, manufacture of HDPE woven bags is included under this notification - industrial unit set up by the respondent is included in the thrust sector in the 'mineral based industry' as envisaged under the 2001-06 Policy. The fact that the respondent is a medium scale industry is admitted - The respondent commenced its commercial production on June 16, 2004. Had it commenced production after November 1, 2004, then it would have got exemption irrespective of the fact whether it was set up in pursuance of the 2001-06 Policy or the 2004-09 Policy. - it is not relevant under which policy the notification was issued. The relevant thing is whether the respondent could claim exemption of entry tax on the principle of 'promissory estoppel or not'. The respondent has set up its own industrial unit in pursuance of the promise given by the State Government under the 2001-06 Policy. It had already got exemption from payment of electricity duty as envisaged under the 2001-06 Policy. The Government has come out with the notification granting exemption in entry tax but not within the time stipulated under the 2001-06 Policy. The Government was negligent and there was slackness on its part - Once the Government had given a promise to give exemption of the entry tax in order to give thrust to industrial growth and in fact such benefit from exemption of entry tax for seven years is being given to all similarly situate industries, then there is no justification to limit it only for industrial unit starting production after November 1, 2004 especially when such notification ought to have been issued within 60 days of issuance of the 2001-06 Policy namely in 2002 itself. - Decided against Revenue. Issues involved:- Whether M/s. VM Extrusions Private Limited is entitled to exemption of entry tax on the principle of promissory estoppelRs.Detailed Analysis:Facts:- The State of Chhattisgarh introduced a policy in 2002 to promote industrial growth, providing benefits to industries setting up in the state.- M/s. VM Extrusions Private Limited set up its factory in Raipur and began commercial production in 2004, claiming benefits under the policy except for exemption in entry tax.- The respondent sought exemption from entry tax through a representation to the State Government.- A notification was issued in 2005, limiting the exemption to new industrial units starting production after November 1, 2004, which did not include M/s. VM Extrusions Private Limited.- The respondent filed a writ petition, which was allowed by the single judge based on promissory estoppel, leading to the State Government's appeal.Decision:- The 2001-06 Policy was binding and provided incentives, including exemption from entry tax, to industries in thrust sectors.- The notification limiting entry tax exemption to units starting production after November 1, 2004, was issued under a different policy.- The respondent's production commenced before the specified date, but the principle of promissory estoppel was invoked due to the State's promise of exemption.- The doctrine of promissory estoppel requires the government to fulfill promises made, even if not in a formal contract.- Exceptions to promissory estoppel were considered, but none applied in this case.- The respondent's reliance on the State's promise and the State's delay in issuing the notification supported the application of promissory estoppel.- The court held that the respondent was entitled to exemption from entry tax from the date of starting commercial production in 2004.- The judgment of the single judge was upheld, and the writ appeal by the State Government was dismissed.This detailed analysis of the judgment highlights the key legal principles of promissory estoppel and the application of the doctrine in the context of industrial incentives and tax exemptions provided by the State Government's policies.