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Judgment
Prafulla C. Pant, J.—By means of this writ petition, moved under Article 226 of the Constitution of India, the petitioner has sought declaration to the effect that Notification No. 698/XXVII (8) Commercial Tax (VAT)/2007, dated November 14, 2007, is illegal, ultra vires and void. Also writ in the nature of certiorari has been sought quashing the provisional assessment orders dated March 20, 2008, for the months of April 2007 and January 2008, issued by the Deputy Commissioner (Tax Assessment) IV, Commercial Tax, Dehradun, and the penalty order dated April 9, 2008 passed thereafter. A mandamus has also been sought directing respondents not to act in pursuance of aforesaid notification and to grant full period exemption in Central sales tax at the concessional rate of tax at one per cent against form DD under the Notification No. 23/XXVII(8)/Commercial Tax/2005, dated January 9, 2006.
Heard learned Counsel for the parties, and perused the affidavit, counter-affidavit and rejoinder affidavit, on record.
Brief facts of the case, as narrated in the writ petition are that the petitioner-M/s. HCL Infosystem Limited, is a duly incorporated company under Indian Companies Act, 1956. The petitioner had obtained allotment -cum-lease of plot Nos. 1, 2, 27 and 28 in Sector 5, HE, Pant Nagar, District Udham Singh Nagar, in the year 2005, and the possession of said land was given to the petitioner on May 7, 2005, for establishing its unit. The petitioner-company is engaged in manufacture and sale of Information Technology (for short, I.T.) products, viz., computers and parts thereof, in the aforesaid plots. Earlier to establishment the factory at Pant Nagar, petitioner was engaged in only trading activity pertaining to electronics goods, viz., photo copiers, fax, etc., in Uttarakhand. The petitioner is duly registered under the Uttaranchal Value Added Tax Act, 2005, as well as the Central Sales Tax Act, 1956. The State Government of Uttarakhand exercising its power under Sub-section (5) of Section 8 of the Central Sales Tax Act, 1956, issued a Notification No. 23/XXVII (8)/Commercial Tax/2005, dated January 9, 2006, whereby it is provided that in the public interest, with effect from date of publication of said notification, tax payable under Sub-section (2) of Section 8 of the Act by a manufacturer having its place of business in Uttaranchal (now Uttarakhand), in respect of the sales by him in the course of inter-State trade or commerce of information technology goods as specified, shall be calculated at the rate of one per cent for a period of five years, on furnishing declaration in form DD. (A copy of the said notification is annexed as annexure 3 to the writ petition). According to the petitioner, the aforesaid notification crystalises and creates vested and accrued rights, as per the representation or terms made by the Government. The petitioner has invested more than 20 crores in establishing its unit in the aforesaid plots allotted to it, and started its commercial production on June 27, 2006, availing of the tax concession. However, the State Government vide Notification No. 698/XXVII (8) Commercial Tax (VAT)/2007, dated November 14, 2007 (copy of which is annexure 6 to the writ petition) abruptly rescinded the earlier notification dated January 9, 2006. Aggrieved by the said subsequent notification, the petitioner made a representation to respondent No. 1, but to no avail. Instead, the petitioner was served with the impugned notices of assessment and the penalty by the respondent authorities.
The petitioner''s case is that the withdrawal of concession in the Central sales tax by the State Government, is violative of doctrine of promissory estoppel and also against the principle of legitimate expectation. Referring to the various cases, particularly Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, , U.P. Power Corporation Ltd. and Another Vs. Sant Steels and Alloys (P) Ltd. and Others, , Southern Petrochemical Industries Co. Ltd. Vs. Electricity Inspector and E.T.I.O. and Others, and S.L. Srinivasa Jute Twine Mills P. Ltd. Vs. Union of India (UOI) and Another, the petitioner has assailed the impugned Notification dated November 14, 2007, as illegal and ultra vires. The petitioners have further stated that the amendment made in Section 8 of the Central Sales Tax Act, 1956, vide Taxation Laws (Amendment) Act, 2007, with effect from April 1, 2007, does not require the State Government to withdraw the concession granted under Sub-section (5) of Section 8 of the Act. It is further pleaded that there is no "public interest" involved in withdrawing the concession granted vide notification dated January 9, 2006.
A counter-affidavit has been filed on behalf of respondent Nos. 1 and 2, contesting the writ petition, in which it has been stated that in the year 2003, the Central Government came up with excise duty exemption package for the State of Uttarakhand to encourage the industries to start their manufacturing activities in the State. The petitioner-M/s HCL also started construction work to establish its unit under said scheme in the year 2005. No doubt, on January 9, 2006, the State of Uttarakhand did issue a notification under Sub-section (5) of Section 8 of the Central Sales Tax Act, 1956, giving rebate in the rate of tax on IT goods on certain terms and conditions. One of the main condition of the notification dated January 9, 2006, which was issued u/s 8 of the Act, was that the requirement of Sub-section (4) must be fulfilled. In other words, if the goods are sold to a registered dealer or to Government then as a proof of such sale, the prescribed form must be furnished by the selling dealer to his assessing authority in form C or form D, as the case may be. But, with effect from April 1, 2007, the provision contained in Sub-section (5) of Section 8 of the Central Sales Tax Act, 1956, was amended deleting the words "or the Government" used in both Clause (a) and Clause (b). Thus as a result of this amendment, the sales made to the Government became fully taxable with effect from April 1, 2007. Notification No. 23, dated January 9, 2006, by which the concession in tax was earlier given in respect of sales made to the Government and its agencies on furnishing form D, no longer remained in force. As such, there is no illegality in issuing the impugned notification dated November 14, 2007, rescinding the earlier notification dated January 9, 2006. As to the plea of promissory estoppel and doctrine of legitimate expectation, raised by the petitioner, it is stated in the counter-affidavit that the petitioner had already established its factory before the notification dated January 9, 2006, granting tax exemption, was issued. It is also stated in the counter-affidavit that plea of promissory estoppel is not available against the changes brought about by the statute. It is also stated in the counter-affidavit that the State Government has statutory power to reduce or enhance the rate of tax on any class of goods. It is further stated that the respondents have made no promise to the petitioner. In para 27 of the counter-affidavit, it has been stated that the petitioner had already purchased the land where the factory is established eight months before the issuance of the notification granting the concession.
In the rejoinder affidavit, filed on behalf of the petitioner, the averments made in the writ petition are reiterated enclosing the copy of Industrial Policy, 2003 of the Government of Uttarakhand, Dehradun, as annexure 2 to the rejoinder affidavit.
Before further discussion, this Court thinks it just and proper to mention here the relevant provision of law, as it existed at the time when notification dated January 9, 2006 granting exemption was issued, and the law as it existed (after amendment) with effect from April 1, 2007, when the impugned notification was issued rescinding the concession granted vide notification dated January 9, 2006. The same is shown in the following chart:
-------------------------------------------------------------------------------- Pre-amendment 2007 Post-amendment 2007 -------------------------------------------------------------------------------- Section 8. Rates of tax on sales Section 8. Rates of tax on sales in the course of inter-State trade in the course of inter-State trade or commerce- or commerce-
(1) Every dealer, who in the (1) Every dealer, who in the course of inter-State trade or course of inter-State trade or commerce,- commerce, sells to a registered dealer goods of the description (a) sells to the Government any referred to in Sub-section (3), goods ; or shall be liable to pay tax under this Act, which shall be three per (b) sells to a registered dealer cent of his turnover or at the other than the Government, goods rate applicable to the sale or of the description referred to in purchase of such goods inside the Sub-section (3). appropriate State under the sale tax law of that State, whichever Shall be liable to pay tax under is lower : this Act, with effect from such date as may be notified, by the Provided that the Central Central Government in the Official Government may, by notification in Gazette for the purpose, which the official gazette, reduce the shall be two per cent of his rate of tax under this sub-section. turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, or, as the case may be, under any enactment of that State imposing value added tax, whichever is lower :
Provided that the rate of tax payable under this sub-section by a dealer shall continue to be four per cent, of this turnover, until the rate of two per cent, takes effect under this sub-section.
(2) The tax payable by any dealer (2) The tax payable by any dealer on his turnover in so far as the on his turnover in so far as the turnover or any part thereof turnover or any part thereof relates to the sale of goods in relates to the sale of goods in the course of inter-State trade or the course of inter-State trade or commerce not falling within commerce not falling within Sub-section (1),- Sub-section (1), shall be at the rate applicable to the sale or (a) in the case of declared goods, purchase of such goods inside the shall be calculated at twice the appropriate State under the sales rate applicable to the sale or tax law of that State. purchase of such goods inside the appropriate State ; and Explanation.-For the purposes of this sub-section, a dealer shall (b) in the case of goods other be deemed to be a dealer liable to than declared goods, shall be pay tax under the sales tax law of calculated at the rate of ten per the appropriate State, cent or at the rate applicable to notwithstanding that he, in fact, the sale or purchase of goods may not be so liable under that inside the appropriate State, law. whichever is higher, and
(c) in the case of goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally shall be nil.
And for the purpose of making any such calculation under Clause (a) or Clause (b), any such dealer shall be deemed, to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.
Explanation.-For the purposes of this sub-section, a sale of purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods.
(3) The goods referred to in (3) The goods referred to in Clause (b) of Sub-section (1)- Sub-section (1)-
(a) Omitted. (a) Omitted
(b) Are goods of the class or (b) Are goods of the class or classes specified in the classes specified in the certificate of registration of the certificate of registration of the registered dealer purchasing the registered dealer purchasing the goods as being intended for resale goods as being intended for resale by him or subject to any rules by him or subject to any rules made by the Central Government in made by the Central Government in this behalf, for use by him in the this behalf, for use by him in the manufacture or processing of goods manufacture or processing of goods for sale or in the for sale or in the telecommunications network or in telecommunications network or in mining or in the generation or mining or in the generation or distribution of electricity or any distribution of electricity or other form of power ; any'' other form of power ;
(c) Are containers or other (c) Are containers or other materials specified in the materials specified in the certificate of registration of the certificate of registration of the registered dealer purchasing the registered dealer purchasing the goods, being containers or goods, being containers or materials intended for being used materials intended for being used for the packing of goods for sale; for the packing of goods for sale;
(d) Are containers or other (d) Are containers or other materials used for the packing of materials used for the packing of any goods or classes of goods any goods or classes of goods specified in the certificate of specified in the certificate of registration referred to in Clause registration referred to in Clause (b) or for the packing of any (b) or for the packing of any containers or other materials, containers or other materials, specified in the certificate of specified in the certificate of registration referred to in Clause registration referred to in Clause (c). (c).
(4) The provisions of Sub-section (4) The provisions of Sub-section (1) shall not apply to any sale in (1) shall not apply to any sale in the course of inter-State trade or the course of inter-State trade or commerce unless the dealer selling commerce unless the dealer selling the goods furnishes to the the goods furnishes to the prescribed authority in the prescribed authority in the prescribed manner- prescribed manner a declaration duly filled and signed by the (a) A declaration duly filled and registered dealer to whom the signed by the registered dealer to goods are sold containing the whom the goods are sold containing prescribed particulars in a the prescribed particulars in a prescribed form obtained from the prescribed from obtained from the prescribed authority : prescribed authority ; or Provided that the declaration is (b) If the goods are sold to the furnished within the prescribed Government, not being a registered time or within such further time dealer, a certificate in the as that authority may, for prescribed form duly filled and sufficient cause, permit. signed by a duly authorized officer of the Government :
Provided that the declaration referred to in Clause (a) is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit.
(5) Notwithstanding anything (5) Notwithstanding anything contained in this section, the contained in this section, the State Government may on the State Government may on the fulfilment of the requirements fulfilment of the requirements laid down in Sub-section (4) by laid down in Sub-section (4) by the dealer, if it is satisfied the dealer, if it is satisfied that it is necessary so to do in that it is necessary so to do in the public interest, by the public interest, by notification in the official notification in the official gazette and subject to such gazette, and subject to such conditions as may be specified conditions as may be specified therein direct, therein direct,-
(a) that no tax under this Act (a) that no tax under this Act shall be payable by any dealer shall be payable by any dealer having his place of business in having his place of business in the State in respect of the sales the State in respect of the sales by him, in the course of by him, in the course of inter-State trade or commerce, to inter-State trade or commerce, to a registered dealer or the a registered dealer from any such Government from any such place of place of business of any such business of any such goods or goods or classes of goods as classes of goods as may be may be specified in the specified in the notification or notification, or that the tax on that the tax on such sales shall such sales shall be calculated at be calculated at such lower rates such lower rates than those than those specified in specified in Sub-section (1) as Sub-section (1) or Sub-section (2) may be mentioned in the as may be mentioned in the notification : notification ;
(b) that in respect of all sales (b) that in respect of all sales of goods or sales of such classes of goods or sales of such classes of goods as may be specified in of goods as may be specified in the notification which are made, the notification, which are made, in the course of inter-State trade in the course of inter-State trade or commerce to a registered dealer or commerce, to a registered or the Government, by any dealer dealer by any dealer having his having his place of business in place of business in the State or the State or by any class of such by any class of such dealers as dealers as may be specified in the may be specified in the notification to any person or to notification, to any person or to such class of persons as may be such class of persons as may be specified in the notification, no specified in the notification, no tax under this Act shall be tax under this Act shall be payable or the tax on such sales payable or the tax on such sales shall be calculated at such lower shall be calculated at such lower rates than those specified in rates than those specified in Sub-section (1) or Sub-section (2) Sub-section (1) as may be as may be mentioned in the mentioned in the notification. notification.
(6) Notwithstanding anything (6) Notwithstanding anything contained in this section, no tax contained in this section, no tax under this Act shall be payable by under this Act shall be payable by any dealer in respect of sale of any dealer in respect of sale of any goods made by such dealer, in any goods made by such dealer, in the course of inter-State trade or the course of inter-State trade or commerce, to a registered dealer commerce, to a registered dealer for the purpose of setting up, for the purpose of setting up, operation, maintenance, operation, maintenance, manufacture, trading, production, manufacture, trading, production, processing, assembling, repairing, processing, assembling, repairing, reconditioning, re-engineering, reconditioning, re-engineering, packaging or for use as packing packaging or for use as packing material or packing accessories in material or packing accessories in a unit located in any special a unit located in any special economic zone or for development, economic zone, or for development, operation and maintenance of operation and maintenance of special economic zone by the special economic zone by the developer of the special economic developer of the special economic zone, if such registered dealer zone, if such registered dealer has been authorized to establish has been authorised to establish such unit or to develop, operate such unit or to develop, operate and maintain such special economic and maintain such special economic zone by the authority specified by zone by the authority specified by the Central Government in this the Central Government in this behalf. behalf.
(7) The goods referred to in (7) The goods referred to in Sub-section (6) shall be the goods Sub-section (6) shall be the goods of such class or classes of goods of such class or classes of goods as specified in the certificate of as specified in the certificate of registration of the registered registration of the registered dealer referred to in that dealer referred to in that sub-section. sub-section.
(8) The provisions of Sub-sections (8) The provisions of Sub-section (6) and (7) shall not apply to any (6) and (7) shall not apply to any sale of goods made in the course sale of goods made in the course of inter-State trade or commerce of inter-State trade or commerce unless the dealer selling such unless the dealer selling such goods furnishes to the prescribed goods furnishes to the prescribed authority referred to in authority referred to in Sub-section (4) a declaration in Sub-section (4) a declaration in the prescribed manner on the the prescribed manner on the prescribed form obtained from the prescribed form obtained from the authority specified by the Central authority specified by the Central Government under Sub-section (6), Government under Sub-section (6) duly filled in and signed by the duly filled in and signed by the registered dealer to whom such registered dealer to whom such goods are sold. goods are sold.
Explanation.-For the purposes of Explanation.-For the purposes of Sub-section (6), the expression Sub-section (6), the expression "special economic zone" has the "special economic zone" has the meaning assigned to it in Clause meaning assigned to it in Clause (iii) to Explanation 2 to the (iii) to Explanation 2 to the proviso to Section 3 of the proviso to Section 3 of the Central Excise Act, 1944(1 of Central Excise Act, 1944(1 of 1944). 1944). --------------------------------------------------------------------------------
On behalf of the petitioners, it is argued that the abovementioned changes made vide Taxation Laws (Amendment) Act, 2007, with effect from April 1, 2007, do not require the Government to withdraw the concession already granted in the rate of tax to a registered dealer. It is further submitted that under Sub-section (5) of Section 8, the State Government, in the public interest, on fulfilment of requirements laid down in Sub-section (4), still could issue a notification exempting a registered dealer from paying the tax.
Having considered the submissions of learned Counsel for the petitioner and the comparative position of law, as it existed prior to April 1, 2007, and the one subsequent to the said date, this Court is of the view that it is evident that in Sub-section (1) of Section 8, Clause (a), which contained the expression "sells to the Government any goods or", is deleted. As such the sales made to the Government by a dealer are not to be placed at a reduced rate of tax under Sub-section (1). Similarly deletion of expression "or Government" from Clause (a) in Sub-section (5) of Section 8 further clarifies that the power given in Sub-section (5) is not to be exercised by the State Government in respect of the sales made by a dealer in inter-State trade or commerce to the Government. Looking at annexure 3, which is copy of Notification No. 23/XXVII (8)/Commercial Tax/2005, Dehradun, dated January 9, 2006, it is clear that the list of authorized institutions contained in annexure B to the notification includes State and Central Government agencies and bodies (as mentioned at serial No. 8 of annexure B of said notification). Now in view of the amendment made in the Central Sales Tax Act, 1956, the sale to the State Government cannot be granted exemption under Sub-section (5) of Section 8. As such, this Court does not find any illegality in the impugned notification, rescinding the notification dated January 9, 2006.
As far as the argument advanced on behalf of the petitioner, relating to the plea of doctrine of legitimate expectation and the one relating to promissory estoppel, is concerned, in support of which various case laws including the cases, as mentioned in the writ petition (reference already made earlier), it is sufficient to mention here that in the facts and circumstances of this case, the same are of no help to the petitioner. Had it been a case of establishing his factory by the petitioner on allurement made by the respondents by promising the concessional rate of commercial tax, it could have been said that once the said concession was promised for five years, it should not have been withdrawn before the expiry of the period, as the concerned dealer had acted upon such promise. But from the affidavit, counter-affidavit and rejoinder affidavit, filed on behalf of the parties, it is very clear that the industrial policy was issued in the year 2003 in which there is no mention of providing concession in the Central Sales Tax Act. What mainly promised in the industrial policy by the Government of India, is that the new industrial units were to get exemption in Central excise and Income Tax. The present case does not relate to any issue relating to Central excise or Income Tax. Apart from this, what is most important in this case is that in pursuance of the industrial policy of 2003, the petitioner had already complied and got allotted the plots in industrial area of State in the year 2005 to set up its factory, while notification dated January 9, 2006, relating to exemption in Central sales tax, was issued in the year 2006. After the factory has been established, the petitioner cannot say that he was allured in setting up the industry only for the reason that the Government had promised reduced rate of Central sales tax, notification in respect of which was in fact issued subsequent to the establishment of the factory. On behalf of the petitioner, reliance is placed in para 24 of Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, para 26 of MRF Ltd., Kottayam Vs. Assistant Commissioner (Assessment) Sales Tax and Others, , paras 118 and 133 of Southern Petrochemical Industries Co. Ltd. Vs. Electricity Inspector and E.T.I.O. and Others, paras 27 and 30 of U.P. Power Corporation Ltd. and Another Vs. Sant Steels and Alloys (P) Ltd. and Others, , para 6 of S.L. Srinivasa Jute Twine Mills P. Ltd. Vs. Union of India (UOI) and Another, and paras 9, 16, 20, 22, 28 and 29 of Shree Digvijay Cement Co. Ltd. and Others Vs. State of Rajasthan and Others, (for brevity I do not think it necessary to reproduce the said paras in the judgment). The cases referred to on behalf of the petitioners do not relate to industries, which were set up before the promise was given relating to the exemption in the tax. Therefore, in the opinion of this Court, on the facts and circumstances of the case there is no question of violation of doctrine of legitimate expectation, nor is the Government in the present case bound by principle of promissory estoppel, as the impugned notification was issued only consequent to the amendment in Section 8 of the Central Sales Tax Act, 1956, vide Tax Laws (Amendment) Act, 2007.
For the reasons, as discussed, this Court finds no force in this writ petition, which is liable to be dismissed. The same is dismissed. Interim order dated June 23, 2008 stands automatically vacated.