TaxTMI 
TaxTMI 
1988 (9) TMI 325
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....t Corporation in terms of the representation; (iii) that the petitioner is exempt from the payment of sales tax in terms of the Government order aforesaid and the orders of assessment impugned in the petition are non est being illegal and invalid in view of the exemption granted under it; (iv) that the respondents are even otherwise estopped from charging sales tax on the doctrine of promissory estoppel though the Government order amounts to grant of exemptions; and (v) that the State Government having provided every other incentive to the petitioner for setting up the unit and in case the order aforesaid is not construed as an exemption from payment of sales tax which, in fact, it is, the State cannot be allowed to resile from the promises it made to the industrialists including the petitioner granting exemption from sales tax both on raw material and finished products. All other averments being based on facts alone were given up at the Bar while arguing the petition and need not be referred to or commented upon in view of the concession. Controverting the averments, the respondents' plea is that the order containing package of incentives relied on by the petitioner is not an o....
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....by the terms of the 1971 Order and is, therefore, entitled to the exemption claimed. The argument of Mr. Altaf Ahmed, learned Advocate-General, is fourfold: (i) that the order cannot be construed as an outright exemption from payment of sales tax in the absence of a notification under section 5 of the Act and this was so understood and construed by the petitioner as would be evident from its own conduct; (ii) that the petitioner having not acted upon any representation and being not even sure of the existence of incentives offered in the Government orders, even after having set up the factory as per its own admission contained in the documents annexed with the petition, is not entitled to invoke the doctrine of promissory estoppel; (iii) that the very fact that the petitioner went on collecting sales tax from the date the factory went into production, is a proof-probendi that it never acted upon the assurances contained in the Government order relied upon by it and is, therefore, estopped from invoking the equitable doctrine of promissory estoppel by its own conduct and (iv) that no writ can even otherwise be issued to the State commanding it to issue an exemption notific....
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....nging to such industries, would be available as admissible under the Urban Immovable Property Tax Rules." This order was partially modified by Government Order No. 414-Ind. of 1971 dated 25th August, 1971, which reads: "In partial modification of Government Order No. 159-Ind. of 1971 dated 26th March, 1971, item 2 may be read as under: 1.. Grant of exemption from the sales tax both on raw materials and finished products: The State sales tax paid by large and medium scale industries on the raw materials procured by them for the initial 5 years of the production would be refunded, to such industries. Similarly such industries will be granted exemption from payment of any State sales tax on their finished products for a period of five years from the date the unit goes into production." The combined reading of the section and the order which deals with grant of exemptions under various statutes would unmistakably show that the order as such is not an exemption but only a policy decision to be followed by the party claiming exemption by establishing that it is covered by the order and entitled to exemption. In other words, to apply the Government order an industria....
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....oner knew that issuance of notification under section 5 of the Act is a condition precedent for obtaining exemption and also that it was the Finance Department alone which was competent to do so. This admittedly was its understanding even much after the unit had gone into production and in the absence of an exemption notification it was obliged to collect sales tax as well because letter (annexure B) dated 28th May, 1980 does not leave any manner of doubt that the petitioner knew that the notification under section 5 was a must and was also aware of the fact that such notification had already been issued under SRO No. 267 of 1978 dated 15th May, 1978 granting exemption to small-scale industrial units as is clear from the following letter dated 28th May, 1980 of the petitioner addressed to the Deputy Secretary, Industries Department: *Here italicised. "We may add that in the case of small-scale units necessary notification has already been issued under SRO No. 267 dated 15th May, 1978 amending the Sales Tax Act under section 5 and as per SRO No. 235 dated 27th April, 1978 under section 8 of the Central Sales Tax Act. Similar notification have to be issued by the Finance Departmen....
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....ssessed as such under the sales tax law. Accordingly, the order under reference is not by itself an order of exemption but had to be followed by a notification under section 5 of the Act and the petitioner has never understood it as an exemption as per its own admissions. This takes us to the main argument of the learned counsel for the petitioner on which great emphasis was laid that the 1971 Order if not construed as an exemption, is a clear representation promising exemption from payment of sales tax and other incentives. The petitioner, argued Mr. Diwan, having accepted the offer contained in the order acted upon the representation by setting up the factory on the land provided in terms of the order, and was therefore, entitled to exemption from sales tax as promised by the respondent-State to fulfil which it is required to be commanded to give effect to this part of the promise contained in the representation as the doctrine of promissory estoppel is clearly attracted to the facts of the case. As the entire thrust of the argument has now been focussed on the promise held out by the State to the grant of exemptions, inter alia, from sales tax, vide the 1971 Order and seco....
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....made by it, the court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it........" This judgment may apart from the exceptions noticed above, be said to have laid down the following three propositions: (1) There must be a clear and unequivocal representation or promise intended to create legal relationship; (2) The representation/promise must have been acted upon by the other party so as to bind the party making the promise to bring out a legal relationship; (3) The doctrine of promissory estoppel would be displaced in a case on the facts of which equity would not require that the Government or public authority should be held bound by the promise or representation made by it. We shall deal with these propositions ad seriatim: Proposition (1) The 1971 Order reproduced elsewhere is undoubtedly a represe....
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....as collected by it because the burden having already passed on to the consumer, the amount cannot be allowed to be retained by the petitioner for its enrichment. Dealing with the first aspect of the case regarding the setting up of the unit the petitioner has specifically pleaded that an advertisement notice issued by the Jammu and Kashmir Industries Ltd. ("JKI", for short) appeared in the Delhi edition of the TIMES OF INDIA, on 2nd June, 1974 which invited offers for establishing two rosin and turpentine factories in District Rajouri of Jammu division. Following this advertisement, Camphor and Allied Products Ltd. ("CAP", for short) despatched its representative to Srinagar to negotiate modalities of setting up of the aforesaid factories in collaboration with the JKI. It was during the negotiations that the 1971 Government Order came to the notice of its representative. After sometime, the petitioner submitted feasibility report to the JKI following which, sometime in February, 1977, the State Cabinet is reported to have approved the setting up of such a factory by the JKI in collaboration with CAP as a joint sector venture. However, soon after, the State appears to have develo....
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....r an initial period of 5 years with respect to raw material and finished products. However, I am not very sure as to whether these incentives are still continuing as I am told that these incentives were introduced in 1971, there are chances that they may have undergone some changes or the schemes may have even been withdrawn. As misstatement in the prospectus involve the criminal liability, I would very much like your giving me the clarification at your earliest convenience as to whether these schemes are existing or whether there are any amendments to the same or entirely a new scheme is introduced. I would also be very grateful to you if you let me know that apart from these schemes, whether there are any other incentives which are being given by the Government to the new industries in the State so that the same can be incorporated in the prospectus." (Emphasis* supplied) The letter was replied to on 8th June, 1979 and the petitioner-company was informed as under: "The Government, while reviewing the resources position of the State, had decided in principle to review the exemption from payment of tax both on raw material as well as on finished products and also....
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....there been any "doubt" present in the mind of the petitioner in the normal course of human conduct, it would have got it "clarified" before 11th April, 1978 when the foundation was laid and not a year later when the factory was about to start commercial production. The argument of Mr. Diwan appears to be an after-thought and goes against the terms of the letter. Moreover, had the petitioner-company only sought "confirmation" for the purpose of avoiding any civil or criminal liability for misstatement under the Companies Act, it would have sought a simple "confirmation" about the availability of exemption and would not have expressed "doubts" as to whether or not the package of incentives issued in 1971 were still in force. The letter of the petitioner-company dated 28th May, 1979 clearly shows that it did not act on the basis of so-called assurance to set up the factory. From the circumstances emerging from the letter, it appears that the petitioner was on the look out for some additional benefits, in addition to those which were available under the advertisement notice for setting up of rosin and turpentine factory in collaboration with the JKI, which subsequently it set up in ....
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....er, 1979 (annexure E-1) which as already noticed clearly enquired: "..........It is, therefore, most humbly prayed that the matter may kindly be clarified so that if exemption is available, the tax is not charged by the company on the sale being effected on local and inter-State basis. It shall be further appreciated if it is further clarified as to under what conditions these exemptions can be claimed by large and medium scale industries as there is lot of confusion." This letter, in fact, destroys the very foundation of the petitioner's attempt for setting up a case to attract the doctrine of promissory estoppel because (i) the petitioner admittedly was not sure whether the exemption from sales tax could be claimed by large and medium scale industries in 1978-79 and (ii) it wanted clarification about the availability of exemption so that the sales tax was not charged on the sales effected on local and inter-State basis. Thus, the argument of Mr. Diwan that after having received confirmation from the Industries Department about the availability of incentives vide letter dated 8th June, 1979, there was no doubt left in the mind of the petitioner that it was exempt from pay....
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....nclude the sales tax paid on the raw material. The assessment orders, impugned in the writ petition, contain the findings of fact recorded by the assessing authority that the evidence before it established that the petitioner-company had charged sales tax from the consumers while fixing the price of its products. Therefore, on facts, the petitionercompany has not laid down any acceptable foundation for invoking the doctrine of promissory estoppel. The petitioner has, thus, failed to satisfy the second proposition as laid down in Godfrey Philip's case AIR 1986 SC 806. Proposition (3) Lastly, as held in Godfrey Philip's case AIR 1986 SC 806, on the admitted facts of this case, it would be inequitable to hold the respondents to the promise made by it in the 1971 Order when there is no equity in favour of the petitioner firstly, because it was not sure if exemption was available to its unit as admitted by it in the letter dated 21st December, 1979; secondly, because to avail of exemption it is its own case that a notification under section 5 of the Act had to be issued which was never issued; thirdly, because in the absence of notification the sales tax had to be collected and this pos....
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....ed by him and accounted for includes excise and sales tax. The return furnished under the State Sales Tax Act wherein interState sales have been disclosed as taxable and the facts that the tax thereon has been deposited in spite of the Government Order No. 414 of 1971 established that the assessee did not act on the alleged promise of exemption from the State sales tax. Therefore the claim that he is not liable to Central sales tax is a motivated claim to evade the huge amount of tax which is payable." Similarly assessment order for the year 1982-83 records: "Now I come to the next contention of the assessee that he has not collected the tax and therefore is not liable to pay tax. The contention that no tax was collected is not supported by any evidence. On the other hand, there is evidence to the contrary. In this connection reliance is placed on the sale vouchers which specify the sale price inclusive of excise and taxes. It is discretion of the dealer to charge tax separately or show the sale price inclusive of sales tax. In similar circumstances the assessee has himself disclosed interstate sales in the return filed under the Jammu and Kashmir General Sales Tax Act as ....
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.... the burden to the consumer, both by adding the sales tax paid on the raw material and including the sales tax on the finished products in the price structure, there is no justification for the petitionercompany to retain that sales tax. The petitioner-company, in the instant case, does not run the risk of incurring any loss as per the material on the record. The recovery of the sales tax from the petitioner-company, in the facts and circumstances of the case, will, therefore, not result in any injustice much less manifest injustice nor would it perpetuate any fraud so far as the petitioner-company is concerned. Ours is not a State with unlimited financial resources and the courts of law cannot shut their eyes to this aspect of the case. Public revenue, it cannot be denied, is collected for use of the public good. In the present set up of the State, when finances are required for starting and completing various projects in the interest of the public at large, it is immoral for a party to evade payment of sales tax, particularly after having collected it, as is evident from the findings of fact recorded by the assessing authority in the instant case, by taking shelter under the i....