1992 (2) TMI 360 - HC - VAT and Sales Tax

Summary

Issues involved:
The issues involved in this case include the cancellation of exemption certificate granted to the petitioner by the sales tax authorities based on a subsequent notification, the invocation of the doctrine of promissory estoppel by the petitioner, and the legality of the actions taken by the authorities in light of the sales tax incentive scheme.

Cancellation of Exemption Certificate:
The petitioner, having set up a new industry in a backward area and fulfilling the requirements for sales tax incentive benefits, had its exemption certificate cancelled by the authorities due to a subsequent notification excluding certain industries, including the petitioner's, from the exemption scheme. The petitioner challenged this cancellation, invoking the doctrine of promissory estoppel to argue that the withdrawal of the exemption was unjustified given the circumstances of its establishment and reliance on government promises.

Doctrine of Promissory Estoppel:
The court acknowledged that the petitioner could validly invoke the doctrine of promissory estoppel in this case. It was noted that the initial notification granting the exemption was issued to fulfill the obligations under the sales tax incentive scheme, and the subsequent withdrawal of the exemption could not be applied retroactively to industries set up in reliance on the government's promises. The court held that the withdrawal of the exemption, in this case, was illegal and that the petitioner was entitled to the benefits under the scheme as per the eligibility and exemption certificates granted.

Legal Precedent and Decision:
Referring to a previous Supreme Court case, the court emphasized that while concessions like tax exemptions could be withdrawn by legislation, such power was subject to the limitation of not violating the rule of promissory estoppel. In this instance, the court found that the withdrawal of the exemption was in violation of the doctrine of promissory estoppel and ruled in favor of the petitioner. The court allowed the petition, set aside the order cancelling the exemption certificate, and directed the authorities to grant the sales tax exemption benefits to the petitioner as stipulated in the eligibility and exemption certificates.

Conclusion:
The court allowed the petition, set aside the order cancelling the exemption certificate, and directed the authorities to grant the sales tax exemption benefits to the petitioner. The court held that the withdrawal of the exemption was illegal in this case, given the petitioner's reliance on government promises and fulfillment of the scheme's conditions.