TaxTMI 
TaxTMI 
2016 (7) TMI 584
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....ribunal has erred in holding that the Appellant's case is barred by the principle of promissory estoppel? (2) Whether the Hon'ble Tribunal has erred in holding that the Respondent has not violated the conditions prescribed in Entry No. 255 of the notification issued u/s. 49(2) of the Gujarat Sales Tax Act, 1969? (3) Whether the Hon'ble Tribunal has erred in holding that the levy of penalty pursuant to the breach of conditions prescribed in Entry No. 255 is required to be deleted? 3. The respondent is a public limited company registered and incorporated under the Companies Act, 1956 and is engaged inter alia in the business of manufacture and sale of sponge iron, that is, Hot Briquetted Iron (HBI) and Hot Rolled Coil (HRC) at its two units situated at Hazira in Surat. The respondent holds registration certificate under the Gujarat Sales Tax Act, 1969 (hereinafter referred to as the "Act") and also under the Central Sales Tax Act, 1956. The respondent made eligible investment in Unit No.1 pursuant to resolution dated 7th May, 1986 issued by the Industries, Mines and Energy Department of the Government of Gujarat. Accordingly, the respondent was certified as entit....
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....urchased by the respondent against declarations in Form 26 were converted into electricity through Essar Power Limited and utilized as input for the purpose of manufacturing HRC in the industrial unit of the respondent. This was done after satisfying all necessary statutory formalities and to the knowledge of the respondent authorities with effect from 1994-95. 3.3 The officers of the Sales Tax Department conducted a surprise visit at the premises of the respondent on 24th July, 2001. Pursuant to the visit, a notice was issued on 25th July, 2001 by the Sales Tax Officer calling for certain information including details of branch transfers, deemed exports, transfer of finished goods, etc. which were supplied by the respondent on 25th July, 2001, 26th July, 2001 and 6th August, 2001. Thereafter, the appellant raised a dispute inter alia regarding breach of declarations given in Form 26 while purchasing naphtha/natural gas having been committed by the respondent on the ground that the goods so purchased were transferred to Essar Power Limited for generation of electricity which was then used in Unit No.2 in the manufacture of HRC. In response thereto, the respondent made detailed r....
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.... years 1998-99 and 1999-2000. It was accepted in the first appeal that till the amendment took place in Entry 255 on 14th November, 2000, even if the purchased goods were used for manufacture at any place in the State of Gujarat, there was no breach of the conditions stipulated in Form 26 and thus, the purchase tax together with interest and penalty imposed had been set aside. The Joint Commissioner, accordingly, partly confirmed the orders levying purchase tax under section 50 of the Act in respect of the purchase of goods till 14th November, 2000 and confirmed the remaining part of the assessment order. 3.7 Being aggrieved, the respondent went in appeal before the Tribunal and to the extent the Commissioner had granted substantial relief in respect of the penalty levied under section 45(6), the State Government filed cross-objections before the Tribunal. By the impugned order, the appeals filed by the respondent came to be allowed and the cross-objections filed by the Department were dismissed. The Tribunal, accordingly, held that the respondent was not liable to pay any tax, interest or penalty on the disputed transactions. 4. Mr. P.K. Jani, learned Additional Advocate Gen....
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....on 5th March, 1992, it was pointed out that the same clearly indicates that the eligible unit has to actually use the goods within the State of Gujarat. Condition No.17 provides that if the eligible unit contravenes any of the conditions mentioned, the exemption shall cease to operate and the entire amount of tax payable on sales or purchases would be liable to be paid. It was submitted that Unit No.2 of Essar Steel Limited had committed breach of conditions, inasmuch as, it had not brought to the notice of the State of Gujarat that there was an agreement dated 29th June, 1996 existing between Essar Steel Limited and Essar Power Limited and Fuel Management Agreement dated 18th October, 1996 between Essar Steel Limited and Essar Power Limited. It was submitted that under the incentive scheme, it was only Unit No.2 of Essar Steel Limited which was eligible for exemption and it was the said unit which was required to have a captive power plant to derive the benefit of tax exemption. Whereas in the present case, Unit No.2 of Essar Steel Limited has purchased naphtha and natural gas in succeeding assessment years running into crores of rupees on payment of 0.25 paise by way of tax and i....
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.... would debar or disqualify the industrial unit from getting the benefit of exemption. It was submitted that in the present case, there are gross contraventions of the conditions of exemption in the notification and hence, the entire amount of benefit availed of by the respondent is liable to be recovered. 4.3 Referring to the impugned order, it was pointed out that the Tribunal while holding in favour of the respondent has invoked the principle of promissory estoppel. It was argued that the Tribunal in exercise of appellate jurisdiction cannot exercise powers of a writ court to entertain a contention that the notification would work to the prejudice of the appellant and, therefore, it would be hit by the doctrine of promissory estoppel. Referring to the provisions of section 50 of the Act, which bears the heading "Liability to pay tax in the event of breach of condition of exemption", and more particularly subsection (2) thereof, which provides that if the Commissioner has reason to believe that the seller or purchaser as the case may be, has incurred liability under sub-section (1), he shall serve notice upon him calling upon him to produce all evidence on which he relies in co....
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....he court, accordingly, held that the principle of promissory estoppel would have no application to the case of the appellants therein so as to entitle the appellants any right to the continuation of the concessional tariff earlier granted. It was contended that thus it is open for the State Government to vary the conditions under which the benefit of the scheme would be available to the respondent and that the doctrine of promissory estoppel would have no applicability to the facts of the present case. It was submitted that the findings recorded by the Tribunal are at variance with the findings recorded by the Assessing Officer and the first appellate authority, without recording any cogent finding as to how the findings recorded by the authorities below are erroneous. It was, accordingly, urged that the Tribunal having exercised powers not vested in it, the impugned order passed by the Tribunal suffers from lack of jurisdiction and, therefore, deserves to be quashed and set aside. 5. Opposing the appeals, Mr. Mihir Joshi, Senior Advocate, learned counsel for the respondent, submitted that though the questions proposed raise a controversy as regards the jurisdiction of the Tribu....
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....der and further conditions as may be laid down from time to time. It was submitted that thus, what the policy envisages is specifying further conditions; however, the same does not contemplate amendment of the existing conditions. So while further conditions could be laid down, the existing conditions could not be amended. Reference was made to the impugned order to submit that the Tribunal has, after considering the material on record and incentive policy, held that the amended conditions would not apply and has accordingly, held that there is no breach of the amended conditions. It was pointed out that no error on facts had been pointed out in the impugned order of the Tribunal and that the only case of the appellant is that there was no promise at all. 5.1 Reference was made to paragraph 42 of the impugned order to point out that it was contended on behalf of the respondent before the Tribunal that the Commissioner of Sales Tax had by his order dated 16.8.2002 accepted that the respondent had not committed any breach of the declarations given for the purchase of good viz. naphtha and therefore, the Deputy Commissioner of Sales Tax, being a subordinate officer did not have the....
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....o. v. STO, AIR 1987 SC 142. In Bakul Cashew Co. case this Court found that there was no clear material to show any definite or certain promise which had been made by the Minister to the persons concerned and there was no clear material also in support of the stand that the parties had altered their position by acting upon the representations and suffered any prejudice. On facts, therefore, no case for raising the plea of estoppel was held to have been made out. This Court proceeded on the footing that the notification granting exemption retrospectively was not in accordance with Section 10 of the State Sales Tax Act as it then stood, as there was no power to grant exemption retrospectively. By an amendment that power has been subsequently conferred. In these appeals there is no question of retrospective exemption. We also find that no reference was made by the High Court to the decision in M.P. Sugar Mills case. In our view, to the facts of the present case, the ratio of M.P. Sugar Mills case directly applies and the plea of estoppel is unanswerable. ... Such exemption would continue for the full period of five years from the date they started production. New industries se....
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....eligible unit and that condition of entry 255 does not require the use directly in manufacturing process and hence, the respondent stands on a stronger footing as ultimately in the form of electricity, gas and naphtha were used in the eligible unit. It was submitted that this factual finding is not disputed that in converted form, the naphtha and gas has come back to the respondent. 5.4 In conclusion, it was submitted that the appellants have not pointed out any error of law in the impugned order passed by the Tribunal, nor have the findings of fact recorded by the Tribunal been dislodged, as being perverse. Moreover, proposed question No.1 does not arise out of the impugned order. Under the circumstances, the impugned order does not give rise to any question of law, warranting interference and that the appeals deserve to be dismissed. 6. This court has heard the learned counsel for the respective parties and has perused the orders passed by the authorities below as well as the record of the case as placed before it as well as the orders passed by the authorities below. 7. In the backdrop of the facts and contentions noted hereinabove, the question that arises for consider....
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....e of the amendment brought about by the notification dated 14th November, 2000, the eligible unit was required to use the raw materials, processing material or consumable stores, in its industrial unit for which it has obtained the eligibility certificate. Since, the naphtha and gas purchased by the respondent at a concessional rate has not been directly used in its industrial unit, it is alleged that there is a breach of the above condition. 8.3 In this regard, a plain reading of sub-entry (2) of Entry 255 as inserted with effect from 5th March, 1992 shows that under condition (1) of column 4 thereof, the eligible unit was required to furnish to the selling dealer a certificate in Form 26 appended to the said notification declaring, inter alia, that the goods are required for use by him within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat or as packing materials in the packing of goods so manufactured. Under condition (2) of column 4, the eligible unit was required to fulfill the conditions specified thereunder and further conditions as may be laid....
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....Condition No.6 of the General Conditions, which came to be substituted with effect from 14th November, 2000, reads thus: "6. The eligible unit shall actually use the goods purchased within the State of Gujarat as raw materials, processing materials or consumable stores, in its industrial unit for which it has obtained the eligibility certificate in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat or as packing materials in the packing of the goods so manufactured." 9.2 Correspondingly, in Form No.26, for the words "within the State of Gujarat", the words "in the industrial unit for which the eligibility certificate has been obtained", came to be substituted. 9.3 In view of the amendment in Condition No.6 of the General Conditions prescribed under Entry No.255, it has been alleged that there is a breach of such condition on the part of the respondent as naphtha and gas obtained at a concessional rate against the prescribed Form No.26 have been diverted to M/s Essar Power Ltd. for generation of electricity, which in turn has been used by the respondent for its manufacturing activities. It is, accordingly, the case of the app....
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....cking materials in the packing of the goods so manufactured. According to the appellant, in view of the fact that the naphtha and gas purchased by the respondent at concessional rates has not been actually used by the respondent in its industrial unit for which it had obtained the eligibility certificate in the manufacture of goods, the respondent has committed breach of the amended Condition No.6 and therefore, all exemption benefits which came to be earned by the respondent were withdrawn and tax liability came to be imposed in accordance with law, which the Tribunal has wrongfully set aside. 9.6 Examining the allegations of breach of Condition No.6 of the General Conditions under Entry No.255 on merits, as noted hereinabove, condition (2) in column-4 against the said entry (2) of Entry No.255 provides that the eligible unit was required to fulfill the conditions specified thereunder and further conditions as may be laid down from time to time. On a plain reading of the said condition, it is clear that it provides that the eligible unit shall have to fulfill the conditions specified thereunder, which the unit admittedly fulfilled. The said condition also provides for laying do....
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.... by no stretch of imagination would be in a position to immediately put up a captive power plant for generating electricity for use by its unit and would amount to denying the benefit under the scheme to the respondent without actually withdrawing the same. Evidently, therefore, the basic conditions stipulated at the time of permitting the respondent to avail of the benefit of the scheme cannot be changed to the detriment of the respondent. 9.7 As noticed hereinabove, it is an admitted position that insofar as the period prior to 14th November, 2000 is concerned, it is not the case of the appellant that there is any breach of Condition No.6 on the part of the respondent despite the fact that naphtha and natural gas provided at concessional rate have been supplied to M/s Essar Power Ltd. and the electricity generated thereby has been used by the respondent unit. It is only in view of the amended Condition No.6, that the appellant has alleged that the respondent has committed breach of the conditions prescribed in Entry No.255 and seeks to take action against the respondent for breach thereof. As discussed hereinabove, the amended Condition No.6 would not be applicable to the resp....
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.... conclusions drawn by the Cooperative Tribunal. In addition to the above principle, the High Court invoked the principles of equity and fairness. Insofar as the latter principles are concerned, we shall delve upon them after examining the contentions of the rival parties, as equity and fairness would depend upon the entirety and totality of the facts. The above aspect can therefore only be determined after dealing with the intricacies of the factual circumstances involved. We shall, however, endeavour to deal with the principle of estoppel, so as to figure whether, the rule contained in Section 115 of the Indian Evidence Act could have been invoked, in the facts and circumstances of the present case. 35. Section 115 of the Indian Evidence Act is being extracted hereinabove:- "115. Estoppel.- When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing. Illustration A intentionally and false....
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....s plant qualified as a small-scale industry or as a mini cement plant within the meaning of the amended scheme. This was the respondent's only case before it. If the particulars in this behalf were not, as it stated, before the Tribunal, the Tribunal should have called for the same or sought a finding on this aspect from the tax authorities. 7. In these circumstances, it is appropriate that the appeal should be allowed in so far as it relates to the period subsequent to February 22, 1990 and that the order of the Tribunal should, to that extent, be set aside. The application made by the respondent to the Tribunal under Section 8 of the Rajasthan Taxation Tribunal Act, 1995 (Sales Tax Revision No. 94 of 1996) shall now stand restored to the file of the Tribunal to be heard and decided afresh to the aforestated extent in the light of what has been stated in this judgment." 10.3 In the opinion of this court, the doctrine of promissory estoppel being a rule of evidence, can be invoked in any proceeding, and that the Tribunal while exercising powers in the context of section 50 of the Act, is not barred from invoking the said rule. Moreover, from the above decisions, it ....
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....nce, inasmuch as, if for the period prior to 14th November, 2000, diversion of naphtha and gas to M/s Essar Power Ltd. does not defeat the intent of the Government of not including power generation within the industries which are entitled to incentives under the scheme, one fails to understand as to how for the period subsequent to 14th November, 2000, the same would defeat the intent of the Government. 11.1 As noted hereinabove, in the light of the assurance given by the Government by virtue of sub-entry (2) of Entry No.255 read with Condition 6 of the notification issued under section 49(2) of the Act on 5th March, 1992, the appellant held out a promise to the respondent whereby, the respondent was permitted to utilize the electricity generated from Essar Power Limited by supplying naphtha and natural gas obtained by it at concessional rates to Essar Power Limited and utilizing the electricity generated thereby. Accordingly, based on such promise, the respondent instead of setting up a captive power plant as originally intended, (in view of the approval given by the State Government to commission a power plant, which in turn was permitted to supply power to the respondent) ava....
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....unal and is of the opinion that the Tribunal was wholly justified in invoking the doctrine of principle of promissory estoppel and holding that the appellant was bound by the assurances given to the respondent and cannot change the conditions to the detriment of the respondent. Insofar as the decision of the Supreme Court in the case of M/s Kothari Industrial Corporation Ltd. v. Tamil Nadu Electricity Board (supra) on which reliance has been placed by the learned counsel for the appellant is concerned, the said decision was rendered in respect of a case where the benefit of exemption was withdrawn and would have no applicability to the facts of the present case which relates to change in the conditions for availment of the benefit of exemption. Moreover, the contention regarding lack of jurisdiction on the part of the Tribunal to invoke the principle of promissory estoppel was never raised before the Tribunal, and hence such question does not arise out of the impugned order. 12. Having regard to the fact that there is no breach of any condition of Entry 255, the question of imposition of any penalty does not arise. 13. A perusal of the impugned order further shows that the Tr....