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2024 (1) TMI 509 - HC - VAT and Sales TaxInvocation of doctrine of promissory estoppel against the State for continuing to avail the tax concessions - whether tax incentives granted to the petitioner-industrial units under specific Rules and statutory Notifications framed & issued pursuant to the State Industrial Policy, 2004, could be withdrawn during the currency of the exemption period promised under the Industrial Policy/ Rules/Notifications? - HELD THAT:- It is, thus, quite apparent that petitioner units had acted upon the promise extended to them by the State for investing in backward Panchayats of the State categorized as tax free zone. The promise being exemption from payment of VAT/CST for a period of ten years from the date of commencement of production. The petitioner units changed their position and invested in the State by setting up industrial units in backward areas/tax free zone. The doctrine of promissory estoppel is definitely applicable to the facts of the instant case. Having promised the petitioners exemption from payment of VAT/CST for a specific period, the respondents-State cannot be permitted to now assert that it is entitled to withdraw the tax concessions and to direct the industrial units to pay VAT/CST merely because in the subsequent years the Panchayats where the petitioners had set up their industrial units were de-notified and no longer carried the backward status. The growth of industrial sector can be said to be one significant factor in the development of an area. Doctrine of promissory estoppel is applicable in the facts of the cases and can certainly be successfully invoked by the petitioners in such circumstances to compel the State to adhere to its side of bargain promised under the Industrial Policy, 2004 and the Rules framed thereunder. The action of the respondent in withdrawing tax concessions granted to the petitioner units is not in consonance with law. The notifications withdrawing the backward area status from the concerned Panchayats will have only prospective effect i.e. will be applicable to industries being set up/expanded after the date of withdrawal notifications. These cannot be applied retrospectively to the petitioner units which had already come into production by the time the backward areas status was withdrawn from such Panchayats. These Panchayats shall have to be construed as backward areas/ tax free zone for the purpose of grant of tax incentives to the petitioners for specific period as per the promise extended by the State. The impugned office communication dated 26.04.2013 directing realization of tax from the petitioner Industrial units established in tax free zones, the consequent notices issued to the petitioners to deposit tax are quashed and set aside. Petitioners are held entitled to tax exemptions in terms of the Industrial Policy, 2004, the Incentive Rules, 2004 and the tax exemption notifications dated 30.03.2005(GST & CST) and 19.01.2006 (VAT) till the coming into force of GST regime in the year 2017. Petition allowed.
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