2013 (9) TMI 186 - HC - VAT and Sales Tax

Doctrine of promissory estoppel - Demand of Entertainment Tax - Grant of Concession upto 33% when paid in lump sum - whether budget proposal would invoke the principle of promissory estoppel - The writ petitioners were the firms engaged in the business of cinema and had been granted licence under the provisions of Punjab Cinemas (Regulation) Act 1952 - Held that - The petitioners were not entitled to raise the plea of promissory estoppel - One of the essential ingredients so as to invoke doctrine of promissory estoppel was altering of position by a person - the averments do not show that the petitioners had altered their position on the basis of representation of the functionaries of the State. The petitioners were running cinemas and continued to run cinema even after the speech of the Chief Minister / Finance Minister - If the petitioners have provided better facilities and infrastructure though in the absence of any material such fact cannot be taken into consideration still such better facilities do not lead to alteration of positions by the petitioners on the strength of promise made - It was the convenience of the visitors which was taken care of by the cinema owners when they provided better facilities and infrastructures or when they screen big budget films which will obviously gave better revenue to the petitioners as well - Therefore it cannot be said that the petitioners have altered their position to their detriment on the basis of speech of the Finance Minister proposing the reduction of the entertainment tax. Mere payment of entertainment tax in lump sum by the petitioners will not create any equity in favour of the petitioners nor can the respondents be said to be bound by the principle of promissory estoppel on the basis of such representation - Such proposal cannot acquired the status of law so as to be treated as a deemed abolition of entertainment tax imposed under the Punjab Entertainment Tax (Cinematograph Shows) Rules 1954 - The proposal in the Budget Speech had not travelled to the stage of law nor the representation was categorical that entertainment tax if paid in lump sum would be at reduced rate - The representation was only of proposal and not the decision. State of Punjab Vs. Nestle India Ltd. & another 2004 (5) TMI 65 - SUPREME Court - The doctrine of promissory estoppel was an equitable remedy and had to be moulded depending on the facts of each case and not straitjacketed into pigeonholes - there cannot be any hard-and-fast rule for applying the doctrine of promissory estoppel but the doctrine had to evolve and expand itself so as to do justice between the parties and ensure equity between the parties. Whether entertainment tax can be permitted to be paid in lump sum or not - Neither the budget proposal nor the earlier statement of Chief Minister was to the effect that it had been decided to permit the payment of entertainment tax in lump sum - The representation was only that the State Government had proposed the payment of entertainment tax in lump sum so as to grant concession upto 33% - No promissory estoppel can be raised against the State on the basis of such promise when the levy of entertainment tax was statutory.

Summary

Issues Involved:
1. Quashing of demand for entertainment tax.
2. Application of the doctrine of promissory estoppel.
3. Validity of government representations and proposals.
4. Judicial review of policy decisions in fiscal matters.

Detailed Analysis:

1. Quashing of Demand for Entertainment Tax:
The petitioners, cinema firms licensed under the Punjab Cinemas (Regulation) Act, 1952, sought a writ of certiorari to quash the demand for entertainment tax under the Punjab Entertainment Tax (Cinematograph Shows) Rules, 1954. They argued that the cinema industry was suffering due to the high rate of entertainment tax and that the government had decided to give a 33% concession in the tax if paid in lump sum, as announced in the 2003-04 budget proposal. The petitioners claimed to have deposited the lump sum tax based on this budget proposal.

2. Application of the Doctrine of Promissory Estoppel:
The petitioners contended that the state was bound by the principle of promissory estoppel, as they had altered their position based on the government's representation. They cited the Supreme Court judgments in M/s Motilal Padampat Sugar Mills Co. Ltd. vs. The State of Uttar Pradesh & others and State of Punjab vs. Nestle India Ltd. & another, arguing that the state must honor its promise of tax concession.

3. Validity of Government Representations and Proposals:
The state argued that the budget proposal was merely a proposal and not a binding decision, as no notification or bill was introduced to formalize the tax concession. The court found that the budget speech only indicated a proposal to reduce the entertainment tax, which did not materialize into law. Therefore, the representation was not unequivocal or legally binding.

4. Judicial Review of Policy Decisions in Fiscal Matters:
The court emphasized that policy decisions, especially in fiscal matters, are primarily within the government's domain and should not be interfered with unless they are arbitrary, capricious, or mala fide. The court cited the Supreme Court's judgment in Brij Mohan Lal vs. Union of India & others, which stated that the government has the authority to frame and change policies, including fiscal policies, as long as they are not arbitrary or unreasonable.

Conclusion:
The court dismissed the writ petitions, holding that the petitioners could not invoke the doctrine of promissory estoppel as there was no clear and unequivocal promise by the state regarding the reduction of entertainment tax. The court found that the budget proposal was merely a proposal and did not constitute a binding decision. Additionally, the court ruled that policy decisions in fiscal matters are within the government's purview and should not be interfered with unless they are arbitrary or unreasonable. The petitioners failed to demonstrate that they had altered their position to their detriment based on the government's representation.