By C. B. Thakar Advocate G. G. Goyal
Janak Vaghani Chartered Accountants
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Sales Tax – Scheme of Rehabilitation – Directing State to Grant Exemption From Payment of Tax- State not Granting It – Dealer Relying on Scheme and Not Collecting Tax – State Directed to Consider the Matter for Exemption, The Sick Industrial Companies (Special Provisions) Act, 1985.
FACTS
The appellant company, a Medium Scale Industries fell sick due to initial problems, could not avail one third of the sales tax exemption limit. BIFR declared the company sick and approved the rehabilitation scheme which provided for specific relief to the company in the form of sales tax exemption and concessional rate of CST.
This was circulated to all concerned. Accordingly the company had claimed exemption from payment of tax and not collected any tax. At the same time, CST was paid at concessional rate of 2%. The company approached the Government to extend the exemption of KGST and concessional rate of CST till March, 31, 2005 as contemplated in the Sanctioned Scheme. However, the tax department issued pre-assessment notices and demanded tax without extending the benefits of exemption under SRO as also the concessional rate of CST at the rate of two per cent. The company filed writ petition before the Kerala High Court to quash the order passed by the Government, as well as, notices and also soughtfor the benefit of exemption and concessions as per sactioned scheme by the BIFR.
HELD
In the present case, the respondent State participated in the proceedings before the BIFR. Taking note of the reluctance by the sales tax authorities to extend the relief envisaged by the sanctioned scheme, BIFR, issued revised directions u/s. 22A of the Act. The State did not prefer any appeal u/s. 25 of the Act. If order and notices allowed to stand, the same would put things out of gear and the entire efforts taken so far by the BIFR for reviving the appellant company from sickness would terribly be watered down, The burden is heavily on the Government to establish that it would be inequitable to hold the Government bound by the promise on account of public interest. The State was unable to establish overriding public interest which made it inequitable to enforce the estopple against them.
The High Court upheld the plea of promissory estoppels raised by the appellant company. The High Court allowed the appeal and order as well as notices were quashed and directed the respondent State to reconsider the matter and guided by the directions in Sanctioned Scheme by BIFR.
