2001 (3) TMI 992 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the Assam Industries (Sales Tax Concessions) Scheme, 1995.
2. Comparison between the 1991 Industrial Policy and the 1995 Scheme.
3. Application of the principle of promissory estoppel.
4. Determination of eligibility and extent of sales tax exemption for industrial units.

Detailed Analysis:

1. Validity of the Assam Industries (Sales Tax Concessions) Scheme, 1995:

The appellants challenged the validity of the 1995 Scheme, arguing that it curtailed the benefits promised under the 1991 Industrial Policy. The 1995 Scheme limited sales tax exemption to the increase in production resulting from expansion, modernization, and diversification, contrary to the 1991 Policy, which promised full exemption for seven years.

2. Comparison between the 1991 Industrial Policy and the 1995 Scheme:

The 1991 Industrial Policy provided full sales tax exemption for seven years to both new industrial units and existing units undertaking expansion, modernization, and diversification. Clause 5 of the 1991 Policy stated that existing units would also be eligible for all incentives if they increased their capital investment by at least 25%. The 1995 Scheme, however, limited the exemption to the increase in production post-expansion, which was perceived as a departure from the promises made in the 1991 Policy.

3. Application of the Principle of Promissory Estoppel:

The appellants argued that the principle of promissory estoppel should apply, preventing the state from reneging on the promises made in the 1991 Policy. The Supreme Court's decisions in cases like *State of Bihar v. Suprabhat Steel Ltd.* and *Shri Bakul Oil Industries v. State of Gujarat* were cited, which upheld that the government could not withdraw promised benefits if industries had acted on those promises.

4. Determination of Eligibility and Extent of Sales Tax Exemption:

The eligibility criteria under the 1991 Policy required that industrial units increase their capital investment by at least 25% and employment by 10% to qualify for incentives. The 1995 Scheme introduced a new method for determining the increase in production, which the appellants claimed was arbitrary and deprived them of the promised benefits.

Judgment Analysis:

Validity of the 1995 Scheme:
The court found that the 1995 Scheme was a continuation of the 1991 Policy and that the benefits promised under the 1991 Policy could not be curtailed by the 1995 Scheme. The court held that the appellants were entitled to the benefits of the 1995 Scheme as it was intended to give effect to the 1991 Policy.

Comparison between Policies:
The court noted that the 1991 Policy provided full exemption for seven years, and the 1995 Scheme's limitation to increased production was a significant departure. The court emphasized that the 1991 Policy's intention was clear in extending full benefits to both new and expanding units.

Promissory Estoppel:
The court upheld the principle of promissory estoppel, stating that the government could not withdraw the benefits promised in the 1991 Policy, as the appellants had acted on those promises. The court referenced the Supreme Court's rulings, affirming that the principle applied to prevent the government from reneging on its commitments.

Eligibility and Extent of Exemption:
The court concluded that the appellants had met the criteria under the 1991 Policy and were entitled to full sales tax exemption for seven years. The eligibility certificates issued to the appellants created enforceable rights, and the 1995 Scheme could not retroactively alter these rights.

Separate Judgments:
The leading judgment by Smt. Meera Sharma, J., supported the appellants' claims, emphasizing the continuity of the 1991 Policy and the enforceability of the eligibility certificates. Shri D. Biswas, J., agreed on the principle of promissory estoppel but differed on the interpretation, stating that the 1995 Scheme did not materially depart from the 1991 Policy. Ultimately, the third judge, N.C. Jain, C.J., agreed with Smt. Meera Sharma, J., leading to the conclusion that the appeals should be allowed.

Conclusion:
The court allowed the appeals, holding that the appellants were entitled to the benefits promised under the 1991 Industrial Policy and that the 1995 Scheme could not curtail these benefits. The court issued a writ of mandamus directing the government to implement the policy decisions in favor of the appellants.