Promissory estoppel and prospective tax notification changes barred purchase tax and penalty under the incentive scheme

An incentive notification could not be applied retrospectively to a unit whose eligibility had already crystallised under the earlier regime; the amended condition was treated as a substitution of a core eligibility term, not a mere further condition, so no breach of Entry No. 255 arose and purchase tax could not be sustained. The Tribunal was also entitled to rely on promissory estoppel in sales tax proceedings, because the State's assurance under the incentive scheme induced the unit to alter its position; once the foundational breach failed, the consequential penalty also could not survive.

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Issues: (i) whether the amended conditions in Entry No. 255 of the notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969 applied to the respondent so as to constitute a breach of the exemption conditions and attract purchase tax; (ii) whether the Tribunal could invoke the doctrine of promissory estoppel and whether penalty could be sustained.

Issue (i): whether the amended conditions in Entry No. 255 of the notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969 applied to the respondent so as to constitute a breach of the exemption conditions and attract purchase tax.

Analysis: The incentive scheme and Entry No. 255, as originally framed, required the eligible unit to furnish Form 26 and to satisfy the then-existing conditions, while condition (2) contemplated only further conditions laid down from time to time. The amendment made on 14 November 2000 altered condition No. 6 and the corresponding Form 26 language, but the Court held that such amendment could not be applied retrospectively to a unit whose eligibility had already crystallised under the earlier regime. The change was not treated as a mere further condition within the meaning of condition (2), but as a substitution of an existing condition, which could operate only prospectively for units set up thereafter.

Conclusion: The amended condition did not apply to the respondent, and no breach of Entry No. 255 was made out; the levy of purchase tax on that basis was not sustainable.

Issue (ii): whether the Tribunal could invoke the doctrine of promissory estoppel and whether penalty could be sustained.

Analysis: The Court held that promissory estoppel is an evidentiary and equitable doctrine capable of application in proceedings under section 50 of the Gujarat Sales Tax Act, 1969, and that the Tribunal was not barred from relying on it. On the facts, the State had held out a promise under the incentive scheme, the respondent altered its position by arranging its power sourcing accordingly, and it would be inequitable to permit a later change in the basic conditions to the respondent's detriment. Since the foundational breach itself was not established, the consequential penalty also could not survive.

Conclusion: The Tribunal was justified in applying promissory estoppel, and the penalty was not sustainable.

Final Conclusion: The appeals failed because the respondent was found to be entitled to the benefit of the incentive scheme on the original terms, the amended condition could not be applied against it, and no legally sustainable tax or penalty demand remained.

Ratio Decidendi: Where an incentive notification preserves existing eligibility conditions and permits only further conditions to be laid down prospectively, a later substitution of a core condition cannot be enforced against a unit whose rights have already crystallised under the earlier notification; promissory estoppel may also bar such detrimental change where the beneficiary altered its position on the State's assurance.

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