Madras High Court
M/S.Sundaram Industries Limited vs The State Of Tamil Nadu on 21 March, 2012
1
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
RESERVED ON : 23.01.2019
DELIVERED ON : 05.03.2019
CORAM:
THE HONOURABLE MR.JUSTICE S.S.SUNDAR
AND
THE HONOURABLE MR.JUSTICE C.SARAVANAN
W.A.(MD)Nos.206, 338 and 339 of 2012
and
M.P(MD)No.1 of 2012
W.A.(MD)No.206 of 2012
M/s.Sundaram Industries Limited,
Represented by its President and Secretary K.S.Viswanathan,
211, South Veli Street,
Madurai – 1. : Appellant/Petitioner
Vs.
1.The State of Tamil Nadu,
Represented by the Secretary to Government,
Department of Commercial Taxes & Religious Endowments,
Fort St. George,
Chennai – 600 009. : 1st Respondent / 1st Respondent
2.The Commercial Tax Officer,
Kamarajar Salai Assessment Circle,
Madurai. : 2nd Respondent/2nd Respondent
3.The Special Commissioner & Commissioner of Commercial Taxes,
Ezhilagam, Chepauk,
Chennai – 600 005. : 3rd Respondent/3rd Respondent
PRAYER: Appeal filed under Clause 15 of the Letters Patent, against
the order passed in W.P(MD)No.22668 of 2005, dated 21.03.2012.
http://www.judis.nic.in
2
W.A.(MD)No.338 of 2012
M/s.Sundaram Industries Limited,
Represented by its President and Secretary K.S.Viswanathan,
211, South Veli Street,
Madurai – 1. : Appellant/Petitioner
Vs.
The Commercial Tax Officer,
Kamarajar Salai Assessment Circle,
Madurai. : Respondent/Respondent
PRAYER: Appeal filed under Clause 15 of the Letters Patent, against
the order passed in W.P(MD)No.2880 of 2005, dated 21.03.2012.
W.A.(MD)No.339 of 2012
M/s.Sundaram Industries Limited,
Represented by its President and Secretary K.S.Viswanathan,
211, South Veli Street,
Madurai – 1. : Appellant/Petitioner
Vs.
1.The State of Tamil Nadu,
Represented by the Secretary to Government,
Department of Commercial Taxes & Religious Endowments,
Fort St. George,
Chennai – 600 009. : 1st Respondent / 1st Respondent
2.The Commercial Tax Officer,
Kamarajar Salai Assessment Circle,
Madurai. : 2nd Respondent/2nd Respondent
3.The Special Commissioner & Commissioner of Commercial Taxes,
Ezhilagam, Chepauk,
Chennai – 600 005.
http://www.judis.nic.in : 3rd Respondent/3rd Respondent
3
PRAYER: Appeal filed under Clause 15 of the Letters Patent, against
the order passed in W.P(MD)No.22669 of 2005, dated 21.03.2012.
For Appellant : Mr.K.Natarajan
Senior Counsel
for Mr.N.Inbarajan
For Respondents : Mr.K.Chellapandian
Additional Advocate General
Assisted by Mr.R.Sethuraman,
Special Government Pleader
******
COMMON JUDGMENT
S.S.SUNDAR,J.
All these Writ Appeals are disposed of by this common judgment as they are inter-connected and arising out of the common order passed in three Writ Petitions namely W.P.(MD)Nos. 2880, 22668 and 22669 of 2005.
2.W.A.(MD)No.206 of 2012 is directed against the order dismissing the Writ Petition in W.P.(MD)No.22668 of 2005, W.A. (MD)No.338 of 2012 is directed against the order dismissing the Writ Petition in W.P.(MD)No.2280 of 2005 and W.A.(MD)No.339 of 2012 is directed against the order dismissing the Writ Petition in W.P.(MD)No.22669 of 2005.
http://www.judis.nic.in 3.The appellant is the petitioner in all the Writ Petitions. 4
The facts that are necessary for the disposal of these three Writ Appeals are as follows:
3.1.The appellant is a company incorporated under the Companies Act, 1913 having their registered office at Madurai. The appellant is engaged in the construction of bus bodies in their workplaces situated at Madurai, Pudukottai and Viralimalai. The appellant is a registered dealer under Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as 'TNGST Act') and the Central Sales Tax Act, 1956 (hereinafter referred to as 'CST Act'). The appellant, who are engaged in the manufacture of bus bodies which are mounted on the chassis manufactured by automobile manufacturers like Ashok Layland Ltd., TELCO, etc., to fulfil the export orders of those automobile manufacturers. The body is mounted on supply of chassis to the appellant. The body is mounted on the chassis as per specification of export orders as between vehicle manufacturer and foreign buyers. It is stated that chassis is sent to the factory of appellant and body built bus or vehicle is cleared under bond to the harbor directly for export.
3.2.The appellant sent a representation on 14.10.1971 to the Government to recommend the case of body builders to the http://www.judis.nic.in 5 Revenue Department of the State for exemption from the levy of Tamil Nadu Sales Tax on the exported bodies constructed by body builders in Tamil Nadu against foreign orders for supply of busses and other types of vehicles from India. It is to be seen that in the said representation the appellant has referred to similar exemption granted by the State of Maharastra. It is also stated as under:
“10.In the circumstances, in the interest of body-builders in Tamil Nadu State as well as in the interest of trade in general, it is eminently desirable that such an anomalous position be rectified immediately; as otherwise not only will it render motor vehicles exporters in Tamil Nadu less competitive in export markets but it will also deprive the body- builders located in Tamil Nadu State of the export business apart from the flight of capital and business to other states even in respect of local markets. Continued levy of Sales tax without refund on automobile bodies mount for export will seriously impair the export effort of the Madras region.
11.Taking into account all these aspects, there will be positive gain if sales tax exemption is given and the State will be richer by the indirect benefits. This will more than outweigh any other considerations flowing from a negative approach of estimated or notional loss of revenue if exemption is given, which actually will not be the case at all. ” 3.3.On 17.01.1972, the Government of Tamil Nadu issued G.O.Ms.No.115, Revenue Department, dated 17.01.1972 granting exemption for the sale of bus bodies manufactured by the appellant.
The said Government Order reads as follows:
“The Government have examined the request of M/s.Sundaram Industries Private Limited, Madras for grant of exemption from the levy of 15% Sales Tax on the bodies built and supplied to the chassis manufacturers in India for onward export to foreign countries. The Government have decided to grant the exemption by way of refund of tax. They direct that the tax paid under the Tamil Nadu General Sales Tax Act, 1959 on bus bodies built and supplied to chassis manufacturers in India for onward export to foreign countries be refunded subject to production of proof of export. The proof of export may be furnished before or at the time of final check of the accounts of the assessees for the year concerned. Any one of the following documents will be treated http://www.judis.nic.in as proof of export.6
(i) Certificate of Exports out of India duly attested by the Customs Department as prescribed in Public Notice No.122/62, dated 15.09.62 the Customs Department as may be amended from time to time.
(ii) the shipping Bill duly attested by the Customs by way of proof that bus bodies have been exported;
(iii)Invoices attested by the Customs mentioning G.R.1 number of Reserve Bank of India.” 3.4.It is admitted that thereafter the Government also issued an order in G.O.(Ms) No.8, Commercial Taxes and Religious Endowment Department, dated 02.01.1991, G.O.Ms.No.1048, Commercial Taxes and Religious Endowments Department, on 21.09.1981 granting refund of additional sales tax and surcharge.
3.5.The benefit of G.O.No.115, dated 17.01.1972 was denied to appellant in an assessment on the ground that the bus body sold by the appellant was commercially different from bus exported out of India. However, the appeal preferred by the appellant in MTA No. 477 of 1990 before the Appellate Tribunal was allowed and it was held that the appellant is entitled to the benefit of Section 5(3) of the CST Act read with Article 286 (1b) of the Constitution of India as well as G.O.Ms.No.115, dated 17.01.1972. Similarly, it is also brought to the notice of this Court that Tamil Nadu Taxation Special Appellate Tribunal, Chennai, by its order dated 06.06.2000, dismissed the appeal filed by the State against the orders of the Tribunal and the Special Tribunal held that there is no need to http://www.judis.nic.in 7 order payment of tax and then claim refund inasmuch as the assessment relates to the year 1987-88 and that the relief granted by the Appellate Tribunal in the same line was approved. During 1976 Sub Clause 3 was inserted in Section 5 of the CST Act. Relying upon this provision, read with Article 286 (1b) of the Constitution, it was stated that the appellant is exempted from levy of sales tax in respect of sale of bus bodies for export. It is a matter on record that the appellant claimed exemption both under G.O.Ms.No.115, dated 17.01.1972 and under Section 5(3) of CST Act before authorities and all the assessments were completed by granting benefit of exemption as per Government Order and tax collected was refunded.
3.6.Though in relation to a particular assessment, the sales tax Appellate Tribunal set aside the assessment dated 20.11.1989 on 10.01.1991 in MTA No.477 of 1990 by holding that the appellant is entitled to claim exemption both under Section 5(3) of the CST Act and as per G.O.Ms.No.115, dated 17.01.1972, the Commercial Tax Department filed a revision under Section 38 of the TNGST Act before the High Court. The same was later transferred to Tamil Nadu Taxation Special Tribunal, Chennai, on its constitution and the said revision in TC(R) No.2169 of 1997 was taken up along with http://www.judis.nic.in 8 other cases by other persons and disposed of by a common order. The Tamil Nadu Taxation Special Tribunal dismissed the revision filed by the department by common order dated 06.06.2000 holding that the assessee is entitled to refund in view of the G.O.Ms.No.115, dated 17.01.1972. It was also held by the Tamil Nadu Taxation Special Tribunal that the benefit under Section 5(3) of the CST Act is not available to the appellant since the bus bodies built and sold to exporters does not qualify for exemption as in the case of appellant, the goods that were meant for export are busses and not bus bodies built on the chassis. This order was passed by the Tamil Nadu Taxation Special Tribunal on 06.06.2000. Similar order was passed by the Special Tribunal subsequently in few other cases disagreeing with the views taken by the Karnataka High Court in the case of Azad Coach Builders Private Limited v. State of Karnataka reported in 123 STC 473. It is to be noted that the Karnataka High Court then in the said case specifically held that the body builders are entitled to get exemption under Section 5(3) of the CST Act. It is also admitted that the Constitution Bench of the Hon'ble Supreme Court in a judgment dated 14.09.2010 in the State of Karnataka v. Azad Coach Builders Private Limited (2010 VII 12 SC) upheld the judgment of the Karnataka High Court holding that the transaction between assessee and the http://www.judis.nic.in 9 exporter and the transaction between the exporter and foreign buyer is inextricably connected with each other and that such transaction of assessee would get the benefit of Section 5(3) of the CST Act.
3.7.When the appellant claim refund of sales tax, additional sales tax and surcharge as per G.O.Ms.No.115, dated 17.01.1972, after the completion of assessment for the year 1999-2000, the Commercial Tax Officer refused to grant the benefit of refund and the appellant was constrained to move this Court by filing a Writ Petition in W.P.(MD)No.3980 of 2004 seeking a direction to refund the tax as per G.O.Ms.No.115, and other Government Orders. This Court by order dated 03.12.2004 in W.P.(MD)No.3980 of 2004 directed the Commercial Tax Officer, Kamarajar Salai Assessment Circle, Madurai, to refund the tax to the appellant as per G.O.Ms.No.115, dated 17.01.1972 within six weeks. A review application filed by the department was also dismissed on 25.02.2005. It is in these background, the Government issued the impugned Government Order vide G.O.Ms.No.78, Commercial Tax (B2) Department, dated 05.07.2005 withdrawing G.O.Ms.No.115, dated 17.01.1972 and other Government Orders granting refund of additional sales tax and surcharge to the appellant retrospectively. http://www.judis.nic.in 10 3.8.The Government of Tamil Nadu passed G.O.Ms.No.78, dated 05.07.2005, cancelling the exemption granted vide G.O.Ms.No.115, Revenue Department, dated 17.01.1972, on the ground that the exemption by refund of tax to an assessee was wholly illegal and unconstitutional by referring to the principles laid down by the Hon'ble Supreme Court in the judgment dated 05.03.1992 (85 STC 493) in the case of Amrit Banaspati Co. Limited v. State of Panjab. The Government Order proceed as if the Government had no authority to pass G.O.Ms.No.115, dated 17.01.1972 providing for refund of tax to an assessee. From a reading of the G.O.Ms.No.78, dated 05.07.2005, it is seen that the said Government Order is solely relying upon the judgment of the Hon'ble Supreme Court in the case referred to supra.
3.9.The Government before issuing G.O.Ms.78, dated 05.07.2005, issued a show cause notice informing the appellant the proposed action withdrawing totally the exemption by refund of sales tax, additional sales tax and surcharge granted to the appellant and to recover the tax refunded in full. Thereafter, the appellant submitted a detailed explanation dated 03.02.2004 and there were also exchange of correspondence before G.O.Ms.No.78, http://www.judis.nic.in 11 dated 05.07.2005 was issued. The issues raised by the appellant on facts were also narrated and the Government decided to reject all the objections raised by the appellant by the impugned Government Order dated 05.07.2005 and G.O.Ms.No.115, Revenue Department, dated 17.01.1972 granting sales tax exemption by way of refund was totally withdrawn retrospectively from the date of the earlier Government Order i.e., 17.01.1972. Further, by the said Government Order the Commissioner of Commercial Tax, requested to take action to recover from the appellant the sales tax, additional sales tax and surcharge so far refunded or not collected and to send a report to the Government. Pursuant to the Government Order, dated 05.07.2005, the Commercial Tax Officer issued notice of demand to the appellant requesting the appellant to remit the amount refunded to the appellant from 1972-73 to 2004-05 by individual demand notices. It is thereafter the appellant filed the three Writ Petitions as detailed below.
4.Writ Petition in W.P.(MD)No.2880 of 2005 is filed for issuing a Writ of Mandamus to direct the respondent to refund the tax of Rs.63,39,000/- and additional sales tax of Rs.7,29,375/- towards the tax on the bus body export turnover relating to the assessment year 2000-2001 as contemplated in G.O.Ms.No.115, Revenue http://www.judis.nic.in 12 Department, dated 17.01.1972. Writ Petition in W.P.(MD) No.22668 of 2005 was filed for issuing a Writ of Declaration declaring G.O.Ms.No.78, Commercial Taxes (B2) Department, dated 05.07.2005 of the first respondent State as illegal, ultra vires of Article 14 and 19(1)(g) of the Constitution of India and in any view be inconsistent with and of no effect as against quasi judicial order passed under the TNGST Act or the Mandamus issued by this Court in W.P.(MD)No.3980 of 2004, dated 03.12.2004. Writ Petition in W.P. (MD)No.22669 of 2005 is filed for issuing a Writ of Declaration declaring that G.O.Ms.No.115, Revenue Department, dated 17.01.1972 of the first respondent herein is a clear representation held out to the appellant that their export transaction will not be subject to sales tax and the petitioner having accordingly altered their position in conducting their business, the first respondent is estopped from going back on its representation and cannot impose a new levy for the period from 17.01.1972 to 04.07.2005 and that accordingly G.O.Ms.No.78, Commercial Taxes (B2) Department, dated 05.07.2005 is not enforceable giving retrospective effect.
5.The appellant was assessed for the year 2000-2001 and the appellant paid sales tax as well as additional sales tax and surcharge. After payment of tax and surcharge, the appellant http://www.judis.nic.in 13 claimed refund of the amount as per G.O.Ms.No.115, dated 17.01.1972 and other Government Orders and the amount paid by the appellant was not refunded by citing G.O.Ms.No.78, dated 05.07.2005. Hence, the appellant was constrained to file a Writ Petition in W.P.(MD)No.2880 of 2005 for issuing a Writ of Mandamus directing the Commercial Tax Officer, Kamarajar Salai Assessment Circle, Madurai, to refund sales tax, additional sales tax and surcharge relating to the assessment year 2000-2001 based on G.O.Ms.No.115, dated 17.01.1972 and the common order dated 06.06.2000 passed by the Tamil Nadu Taxation Special Tribunal in T.C.No.2161 of 1997 batch. As stated earlier, the first respondent proceeded to issue notices of demand, to recover the refund of tax availed by the appellant from 1972 to 2005 and hence, the appellant filed the other two Writ Petitions in W.P.(MD)Nos.22668 and 22669 of 2005 questioning the constitutional vires of G.O.Ms.No.78, dated 05.07.2005 and for other relief as indicated above.
6.One important factor which needs to be recorded is that the appellant is consistent in their stand that the sales tax exemption granted in Government Order vide G.O.Ms.No.115, dated 17.01.1972 cannot be withdrawn retrospectively as the appellant has not collected any tax from the consumer or the manufacturer of http://www.judis.nic.in 14 automobile vehicle. Incidentally, it is also necessary to point out that the fact asserted by the appellant that they have not collected tax from the consumer was not disputed while passing the impugned order vide G.O.Ms.No.78, dated 05.07.2005 withdrawing G.O.Ms.No.115, Revenue Department, dated 17.01.1972 retrospectively with effect from the date 17.01.1972. This is recorded in the impugned Government Order by stating that the contention of the appellant that they had not collected tax from their buyers will not exonerate them from tax liability, since sales tax being an indirect tax, the burden of payment is always on the dealer irrespective of whether they pass on the burden to the buyer or not.
7.The learned Single Judge of this Court heard elaborately the three Writ Petitions and dismissed all the Writ Petitions. The learned Single Judge framed the following issues after hearing both sides:
“(1) Whether the power of the Government for issuance of G.O.Ms.No.115, Revenue Department, dated 17.01.1972, could be traceable to Section 17 of the TNGST Act?
(2) Whether G.O.Ms.No.78, Commercial Taxes Department, dated 05.07.2005, is hit by the doctrine of http://www.judis.nic.in promissory estoppel? 15
(3) Whether G.O.Ms.No.115 could be cancelled retrospectively, by G.O.Ms.No.78?
(4) Whether there could be a bar for the Department under Section 16 of the TNGST Act to levy or recover tax, based on G.O.Ms.No.78?
(5) Whether the authorities are bound to consider the applicability of the judgment of the Hon'ble Supreme Court in State of Karnataka v. Azad Coach Builders Pvt. Limited [2010-VIL-12-SC-CB] before proceeding to assess and recover the sales tax, if G.O.Ms.No.78 is held to be valid and legal?”
8.The learned Single Judge found that Section 17 empowers Government to grant exemption from payment of tax. However, the learned Single Judge further held that in case of exemption the assessee is not bound to pay sales tax and claim refund and that therefore, the earlier Government Order vide G.O.Ms.No.115, dated 17.01.1972 is not under Section 17 of TNGST Act, 1959. Though the learned Single Judge accepted the judgment of the Hon'ble Supreme Court in Pournami Oil Mills v. State of Kerala reported in [65 STC 1 SC] for the proposition that where the authority making an order has power conferred upon it by statute to make an order made by it and an order made without indicating the provision under which it is made, the order would be deemed to have been made under the provision enabling the making of it. In http://www.judis.nic.in 16 other words, the Hon'ble Supreme Court held that even if there is no reference to the provisions of the statute, if there exists power on the validity, the order could be said to have been issued under the relevant provision of the statute and that non-mentioning of a statutory provision is not relevant. However, the learned Judge construed Government Order in G.O.Ms.No.115, dated 17.01.1972 as one requiring the assessee to pay tax on the bus bodies built and supplied for onward export to foreign countries and to claim refund thereafter. It was further observed that in a case of exemption, there is no necessity for payment of tax. Finding that the assessee pursuant to G.O.Ms.No.115, cannot straight away claim the benefit of exemption and that he is bound to pay sales tax, the learned Single Judge accepted the stand of Additional Advocate General that the power of Government for issuance of G.O.Ms.No.115, dated 17.01.1972, is not traceable to Section 17 of TNGST Act as Section 17 of TNGST deals with only exemption and not refund. Interestingly, when some of the decisions of the Hon'ble Supreme Court was cited before the learned Single Judge for the proposition that the Government has power to grant exemption, by way of refund under Section 17 of the TNGST Act, the learned Judge distinguished those judgments on the premise that there was no occasion for the Hon'ble Supreme Court to consider in the said http://www.judis.nic.in 17 cases relied upon by the appellant as to whether there is any statutory provision relating to refund of tax. Further, the learned Judge relying upon Section 4A of the TNGST Act, found that the State has power to refund tax only under Section 4A and that refund of tax dehors Section 4A of the TNGST Act is impermissible in law. Thereafter, the learned Judge followed the judgment of the Hon'ble Supreme Court in Amrit Banaspati case relied upon by the learned Additional Advocate General and held that there is nothing illegal in retrospectively withdrawing or cancelling G.O.Ms.No.115, dated 17.01.1972, by the impugned Government Order vide G.O.Ms.No.78, dated 05.07.2005. Thus, the learned Judge upheld the impugned Government Order vide G.O.Ms.No.78, dated 05.07.2005 withdrawing and cancelling G.O.Ms.No.115, dated 17.01.1972. The learned Single Judge also relied upon paragraphs 10, 11, 12 and 13 of the judgment in Amrit Banaspati case (cited supra) and held that promissory estoppel could not be invoked if the promise is statutorily prohibited or it is against public policy. Sum and substance, the judgment in Amrit Banaspati case was relied upon by the learned Single Judge as a whole to hold that G.O.Ms.No.115, providing for refund of tax is bad in law and void under Section 23 of the Contract Act as such promise is statutorily prohibited and against public policy. The doctrine of promissory http://www.judis.nic.in 18 estoppel was therefore held inapplicable in this case by the learned Single Judge.
9.Regarding fourth issue, the learned Single Judge held that the appellant was assessed to sale tax under TNGST Act and had paid the tax. Since no assessment order was put to challenge, there is no scope for levy or recovery and therefore, it was held that the submission of the appellant counsel that assessment orders issued under Section 12 of the TNGST Act attained finality and those orders could not be reopened under Section 16 of the TNGST Act belatedly in view of the bar of limitation has no substance.
10.On the fifth issue, the learned Single Judge found that no assessment order was put to challenge in the Writ Petitions and that none of the Writ Petition is concerned with the applicability of Section 5(3) of the CST Act. Since W.P.(MD)Nos.22668 and 22669 of 2005 are questioning the validity of G.O.Ms.No.78, dated 05.07.2005 and no issue was raised in the pleading, it was held by the learned Single Judge that the plea of appellant relying upon Section 5(3) of CST Act is without any factual foundation and that no relief can be granted to the appellant on the basis of Section 5(3) of the CST Act in any of the Writ Petition.
http://www.judis.nic.in 19
11.In the Writ Petitions and before this Court, the appellant raised the following grounds which are almost common in all the Writ Petitions and Writ Appeals filed by the appellant.
(i) The appellant was granted exemption in exercise of power under Section 17 of the TNGST Act by way of refund of sales tax by the Government Order vide G.O.Ms.No.115, dated 17.01.1972. The refund of additional sales tax and surcharge was also granted by way of subsequent Government Orders consequent to G.O.Ms.No. 115, dated 17.01.1972.
(ii) The power of Government to grant exemption by way of refund is traceable to Section 17 of the TNGST Act. If the Government seeks to cancel the benefit of exemption, the same could be done only prospectively under Section 17(3) of TNGST Act and the Government has no power to cancel the benefit of exemption retrospectively.
(iii) The appellant had not collected tax from the buyers pursuant to the Government Order vide G.O.Ms.No.115, dated 17.01.1972. The said fact is not seriously in dispute after, the http://www.judis.nic.in 20 appellant filed rejoinder in response to the additional counter affidavit filed by the respondent in December, 2010. Therefore, the appellant has altered its position based on Government Order in G.O.Ms.No.115, dated 17.01.1972. Since the appellant had effected sales without charging sales tax, the impugned Government Order retrospectively withdrawing G.O.Ms.No.115, dated 17.01.1972, is hit by Doctrine of Promissory estoppel.
(iv) The tax paid by the appellant was refunded after completion of assessment orders under Section 12 of the TNGST Act and the assessment orders is valid payment of tax and refund of tax had reached finality and the same cannot be reopened by the impugned Government Order in view of the statutory bar of limitation under Section 16 of the TNGST Act.
(v) There were several orders passed by the quasi-judicial authority namely Tamil Nadu Taxation Special Tribunal holding that the appellant is entitled to refund of sales tax as per G.O.Ms.No.115, dated 17.01.1972 and several orders of Tribunal and Special Tribunal had attained finality and they are binding between parties. A decision which has become final and binding inter-parties in a quasi judicial proceeding cannot be set at naught by an Executive http://www.judis.nic.in 21 Order namely G.O.Ms.No.78, dated 05.07.2005.
(vi) The appellant has constitutional protection under Article 286 (1)(b) of the Constitution read with Section 5(3) of the CST Act. In view of the Constitution Bench judgment of the Hon'ble Supreme Court in Azad Coach Builders case, there could not have been any resultant tax due to be paid by the appellant if an adjudication is undertaken. The Government Order in G.O.Ms.No.115, dated 17.01.1972, therefore cannot be construed as illegal or unconstitutional or fraud on power at least with effect from 1976 by introduction of Section 5 (3) of the CST Act.
12.The respondents filed counter affidavit inter alia pointing out that due to the refund of sales tax, additional sales tax and surcharge to the appellant, the Government suffered heavy loss and that in the interest of public and to avoid heavy loss to the public / exchequer the Government has taken a decision to withdraw G.O.Ms.No.115, dated 17.01.1972 by issuing the impugned Government Order vide G.O.Ms.No.78, dated 05.07.2005. It was the specific case of the respondent that no exemption was granted to the appellant vide G.O.Ms.No.115, dated 17.01.1972. Since the power was not exercised under Section 17 of the TNGST Act, the http://www.judis.nic.in 22 Government Order vide G.O.Ms.No.115, dated 17.01.1972 is wholly illegal and unconstitutional. In view of the position that the Government has no power to refund sales tax collected, the impugned Government Order cancelling the benefit of refund of sales tax with retrospective effect is perfectly valid. It was also submitted by the respondent that the benefit of refund of sales tax was given only to the appellant and such a discriminatory action to favour the appellant is opposed to public policy as it has been held by the Hon'ble Supreme Court in Amrit Banaspati case. Strangely the respondent also pleaded that refund of sales tax by G.O.Ms.No. 115, dated 17.01.1972 should be treated as fraud committed on the constitution as held by the Hon'ble Supreme Court.
13.The learned Senior Counsel appearing for the appellant submitted that the Government has no authority or power to withdraw or cancel the exemption granted in exercise of power under Section 17 of the TNGST Act, 1959, retrospectively as it is done by the impugned Government Order vide G.O.Ms.No.78, dated 05.07.2005. The Government has power to grant exemption by way of refund of tax. It is submitted that the learned Judge is therefore wrong in holding that the power to exempt by refund tax by issuing G.O.Ms.No.115, dated 17.01.1972 is not traceable to Section 17 of http://www.judis.nic.in 23 the TNGST Act, 1959. It was also submitted that the Doctrine of Promissory Estoppel would certainly come into play in this case as the specific and consistent stand taken by the appellant that they had never collected tax from the manufacturer of automobile vehicle was not disputed till the impugned Government Order is passed. The rights accrued and enjoyed by the appellant by virtue of the benefit conferred on the appellant vide G.O.Ms.No.115, dated 17.01.1972, which are also incidentally covered under completed assessment over a period of 33 years cannot be destroyed by retrospectively withdrawing or cancelling the Government Order in G.O.Ms.No.115, dated 17.01.1972. The learned Senior Counsel made further submissions reiterating the stand taken by the appellant before the learned Single Judge on all other aspects. Since the judgment of learned Single Judge was mainly by relying upon the judgment of Hon'ble Supreme Court in Amrit Banaspati Company Limited vs. State of Punjab [(1992) 85 STC 496 (SC)], the distinguishing factors are strenuously focussed by the learned Senior Counsel appearing for the appellant.
14.The learned Additional Advocate General appearing for the respondent mainly relied upon the judgment of the Hon'ble Supreme Court in Amrit Banaspati case and submitted that all the http://www.judis.nic.in 24 submissions of the learned Senior Counsel appearing for the appellant cannot be countenanced in view of the illegality attached to the earlier Government Order vide G.O.Ms.No.115, dated 17.01.1972. As against the specific case of appellant that they had never collected tax from the buyers from 1972, though there was denial in the counter to the effect that they had collected on few occasions, there was no discussion by the learned Single Judge regarding the collection of tax by the appellant from their customers before paying the tax to the respondents from 1972. However, the learned Additional Advocate General submitted that the burden lies on the appellant to prove that they had not collected tax from their consumers from 1972 to 2005 and that it cannot be presumed that the appellant had not collected tax in the absence of any evidence produced by them before this Court, the judgment of the Hon'ble Supreme Court in Amrith Banaspati is applicable in all force. The learned Additional Advocate General further submitted that the Government Order in G.O.Ms.No.115, dated 12.01.1972 is discriminatory, unfair and unreasonable, as it was intended to benefit only the appellant to the disadvantage of other body builders in the State, who were not given benefits of the said Government Order.
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15.Having regard to the points argued at length by Counsels on both sides this Court also frame the same points framed by the learned Single Judge for determination for convenience apart from three other issues framed in the following lines.
Issue No.6.Whether the appellant's contention that they had not collected tax from their customers from 1972 to 2005 is relevant and can be accepted?
Issue No.7.Whether G.O.Ms.No.115, Revenue Department, dated 17.01.1972 was intended to benefit only the appellant and hence, it is discriminatory and unconstitutional.
Issue No.8.Whether the judgment of the Hon'ble Supreme Court in Amrit Banaspati case can be applied in the present case. Issue No.1 and Issue No.7. Whether G.O.Ms.No.115, dated 17.01.1972 was passed in exercise of power under Section 17 of TNGST Act? Whether G.O.Ms.No.115, was intended to benefit only the appellant?
16.As it is agreed by the learned Single Judge, it is well settled that an order in exercise of a statutory power, though made without indicating the provisions, under which it was made, it could be http://www.judis.nic.in 26 presumed that the order was passed only by exercising the statutory power. The learned Single Judge himself has referred to the two judgments of the Honourable Supreme Court. In Pournami Oil Mills vs State of Kerala case, reported in [1987] 65 STC 1 (SC), it has been held as follows:
"It is a well settled principle of law that where the authority making an order has power conferred upon it by statute to make an order made by it and an order is made without indicating the provision under which it is made, the order would be deemed to have been made under the provision enabling the making of it. We accordingly hold that both the orders are under S. 10 of the Act."
17.Again the Honourable Supreme Court in Fine Chemicals vs Assessing Authority and others, it has been held that even if the provision of statute is not specifically referred to, the Act or order shall be deemed to have been done and made under the enabling provisions. Therefore, merely because, Section 17 of the Tamil Nadu General Sales Tax Act, 1959, is not referred to in G.O.Ms.No.115, it cannot be stated that the order was not under Section 17 of TNGST Act.
18.The next question that arise is whether G.O.Ms.No.115, Revenue Department, dated 17.01.1972, was in exercise of power under Section 17 of TNGST Act and whether it can be inferred that G.O.Ms.No.115, is discriminatory as it was intended to benefit only the appellant by way of refund of tax and hence, it is http://www.judis.nic.in 27 unconstitutional. G.O.Ms.No.115 was on the representation of the appellant, dated 14.10.1971. A careful analysis of the representation would show that the appellant wanted a statutory exemption to the benefit of all the body builders in the State by citing the fact that the body builders in the State of Maharastra had such benefit. The representation of the appellant was to the effect that there will be substantial indirect benefits to the State by promoting foreign exchange and employment potential. The request was to rectify the anomalous position so that the body builders in the State of Tamil Nadu and motor vehicles exporters will be able to compete in export market. As a matter of fact, it was also referred to in the representation that the continued levy of sale tax without concession on automobiles bodies meant for export would seriously affect the export in Madras region. The relevant portion of G.O.Ms.No.115, dated 17.01.1972 read as follows:
"The Government have examined the request of M/s.Sundaram Industries Private Limited, Madras, for grant of exemption from the levy of 50% of sales tax on the bodies built and supplied to the chassis manufacturers in India for onward export to foreign countries. The Government have decided to grant the exemption by way of refund of tax. They direct that the tax paid under the Tamil Nadu General Sales Tax Act, 1959, on bus bodies built and supplied to chassis manufacturers in India, for onward export to foreign countries, be refunded subject to production of proof of export.”
19.The appellant and the other body builders, who are benefited by Government Order were not new entrepreneurs and http://www.judis.nic.in the exemption was not given as concession for the sustenance of 28 body builders. It is to be seen that the appellant is a body builder having his work shops in three places within the State. The exemption was in favour of all body builders on vehicles, which are meant for export to foreign countries. Neither from the representation nor from the language employed in the 1972 Government Order, it can be said that the Government Order was intended to benefit only the appellant. The representation of the appellant in 1971 was to get exemption from payment of sales tax for bodies manufactured by body builders on motor vehicles meant for export, throughout State and this exemption was requested to compete with body builders in other State. It is pointed out by the learned Additional Advocate General that the benefit of G.O.Ms.No. 115 was denied to other body builders in the State. Merely by the stand taken by the respondent in the case of others, it cannot be decided that the benefit was intended only to favour the appellant. From the representation and language employed in G.O.Ms.No.115, this Court cannot come to the conclusion that Government Order was intended to apply only for appellant and that therefore, it is discriminatory and illegal. When it is found that G.O.Ms.No.115, dated 17.01.1972 was intended to benefit all the body builders in the State and the power is available to the State to grant exemption, it can be presumed that the power of exemption was exercised http://www.judis.nic.in 29 under Section 17 of TNGST Act. Exemption by way of refund of tax would only refer to the mode of availing the exemption.
20.The learned Senior Counsel appearing for the appellant submitted that exemption by way of refund of tax is permissible and well recognised in law. Learned Counsel relied upon the judgment of Hon'ble Supreme Court in Assistant Commissioner of Commercial Taxes (Asst.), Dharwar and others v. Dharmendra Trading Company reported in [(1988) 70 STC 59 (SC)]. The Hon'ble Supreme Court held as follows:
“Section 8A expressly empowers the State Government to grant exemptions and reductions. Under the said order dated 30th June, 1969 it has been inter alia provided that a cash refund will be allowed on all sales tax paid by a new industry on raw materials purchased by it for the first five years from the date the industry goes into production as set out in said the Order. The only submission made on behalf of the appellants is that since the benefit given is called a refund, it cannot be said to be an exemption or reduction as permitted by Section 8A. In our view, there is no substance in this submission at all. In order to test the validity of the order dated 30th June, 1969, one has to see the substance of the concession granted under the order and not merely certain words used out of context. Although the benefit regarding sales tax granted to the new industries is by way of refunds of sales tax paid to the extent provided in the Order, it is clear that, in effect, the benefit granted is in the nature of an exemption from the payment of the sales tax or reduction in the sales tax liability to the extent stated in the order. In view of this, there is no substance whatever in the contention that the State Government had no authority to provide for the grant of refunds. Again, the mere fact that the order of 30th June, 1969 did not specify the power under which it was issued will make no difference because such a power is clearly there in Section 8A and where the source of power under which it is issued is not stated in an order but can be found on the examination of the relevant Act, the exercise of the power must be attributed to that source. The second submission of the learned counsel for the appellants must, also, therefore, be rejected. Although at one stage a faint doubt was raised by learned counsel for the appellants as to whether the Doctrine of Promissory Estoppel could be regarded as good law now, he conceded that doctrine must be http://www.judis.nic.in regarded as good law in view of the recent decision of this Court in 30 State of Bihar and Anr. v. Usha Martin Industries Ltd., [1987] 65 STC, 430 where a Division Bench comprising three learned Judges of this Court upheld and applied that doctrine.” Hence, one cannot say that exemption by way of refund of tax is not an exemption and that it should be considered as refund. Either from the language employed in G.O.Ms.No.115, dated 17.01.1972 or from the circumstances under which the order was issued we have no hesitation to hold that G.O.Ms.No.115, dated 17.01.1972 was an order of exemption granted by Government in exercise of power under Section 17 of TNGST Act.
21.Issue No.6: Whether the appellant's contention that they had not collected tax from their customers from 1972 is relevant and can be accepted.
22.As it was pointed out earlier, the representation of the appellant in 1971 was to get exemption from payment of sale tax in respect of bodies built in the chassis manufacturer by automobile manufacturers and sold to foreign countries. Neither G.O.Ms.No. 115, dated 17.01.1972, nor any subsequent communication authorise the appellant to collect tax. There was no permission or authorisation permitting or suggesting that the appellant could collect tax from their customers. It is the consistent case of the http://www.judis.nic.in 31 appellant that they never collected tax. Even when a show cause notice was issued before withdrawing G.O.Ms.No.115, dated 17.01.1972, by the impugned order, the appellant sent a detailed reply. From the exchange of communications, it can be seen that a specific point was reiterated by the appellant objecting the withdrawal of exemption under G.O.Ms.No.115, retrospectively. Even in the impugned order, the specific case of the appellant that the judgment of the Honourable Supreme Court in Amrith Banaspati Company Limited vs State of Punjab, case has no application as the appellant had not collected tax has been recorded. The objection of the appellant is specifically referred to in paragraph 15(g) of the impugned order, vide G.O.Ms.No.78, dated 05.07.2005. It is relevant to point out that the respondents have dealt with the objections in the impugned Government Order in Paragraph 6 in the following lines:
"The contention that the dealer had not collected tax from their buyers, will not exonerate them from the tax liabilities, since the sale tax being an indirect tax, the burden of payment is always on the dealer irrespective of whether the they pass on the burden to the buyers or not.
23.Therefore, prima facie, this Court has no doubt or any reservation to accept the appellant's contention that they had not collected tax from the buyer pursuant to G.O.Ms.No.115, dated 17.01.1972. In the affidavit filed in support of the writ petition, the appellant has categorically stated that they never collected sales tax http://www.judis.nic.in 32 after the exemption that was granted vide G.O.Ms.No.115, dated 17.01.1972. It was also contended by the appellant that they were dealing with big automobile companies and that therefore no tax could be collected by the appellant from their customers after G.O.Ms.No.115, dated 17.01.1972. The appellant has also produced before this Court some of the original orders placed by companies, like, Ashok Leyland Limited, which would show that the appellant's customers placed orders by specifically referring to the non-
applicability of sales tax.
24.Even in the counter affidavit filed by the respondent in the writ petition, specific contention of the appellant regarding non-
collection of tax from buyers was not seriously disputed. However, the learned Additional Advocate General relied upon additional counter affidavit filed by the second respondent, wherein, the second respondent has specifically referred to the tax collected by the appellant and paid to the department. From the tables found in the paragraph 7 of the additional counter affidavit filed in the Writ Petition in W.P.(MD)No.22668 and 22669 of 2005, the respondent has indicated that at some instances the appellant had collected tax and paid to the department pursuant to G.O.Ms.No.115. It is suggested that a sum of Rs.6,13,60,030/-, was neither collected nor http://www.judis.nic.in 33 paid. It was shown in a table that the appellant had collected a sum of Rs.4,47,54,040/- and paid to the respondents.
25.To the statement that was made by the respondents in the additional counter, the appellant filed a rejoinder to the additional counter filed by the respondent in December, 2010. In paragraph 5, the appellant has clarified the position in detail. It appears that from 1979-80 to 1986-87, the assessing authority granted exemption and the assessments were computed without payment of sales tax by applying Section 5(3) of CST Act. Thus the two tables found in Para 7 of additional counter is clarified by the appellant.
The learned Additional Advocate General conceded that the respondents have no other independent material to prove or show that the appellant was collecting tax from the buyers or manufacturers of chassis after G.O.Ms.No.115, dated 17.01.1972. It is admitted that till 2000, when the Tamil Nadu Taxation Special Tribunal held that the appellant cannot seek exemption under Section 5(3) of CST Act, several assessments were completed without payment of tax. The figures given in the counter, in the absence of material would fit in with the further explanation in the rejoinder and the facts admitted.
http://www.judis.nic.in 34
26.As pointed out earlier, in support of their stand in the rejoinder, the appellant has also filed few invoices and purchase order, dated 05.10.1997 showing that for the price for the body, no sales tax had been charged by the appellant and that orders had been placed specifically referring to the inapplicability of sales tax.
The appellant further asserted that the respondent has no material to prove that the appellant had collected tax as detailed in the table in paragraph 7 of the additional counter. Even before this Court, the learned Additional Advocate General could not explain or clarify that under what basis the figures in para 7 of the additional counter were given. The learned Additional Advocate General submitted that the burden lies on the appellant to prove that they had not collected tax from the buyers/exporters or manufacturer of chassis.
Though the learned Additional Advocate General did not rely upon any precedent, we considered the rationale behind his submissions by considering few of the judgments of the Honourable Supreme Court, particularly, the leading cases including Mafatlal case wherein it is held that the burden lies always on the Assessee to prove his contention that he had neither collected tax nor passed on the liability on to the buyer. First of all, the facts in the present case are different. In this case, we have already considered the pleadings of respective parties and the position that the respondent http://www.judis.nic.in 35 even at the time of passing impugned Government Order in 2005 proceeded on the basis that the appellant had not collected tax.
The respondent State had no reason to reject the contention of appellant till the impugned Government Order was passed in 2005.
Considering the over all facts admitted and materials produced, this Court is inclined to accept the appellant's case that they have not collected tax from their customers pursuant to G.O.Ms.No.115, dated 17.01.1972 and that they have altered their position on the promise by G.O.Ms.No.115, dated 17.01.1972.
27.Issue Nos.2, 3 and 8 are interlinked and hence, they are clubbed. The following are the issues:
(2) Whether G.O.Ms.No.78, dated 05.07.2005 is hit by doctrine of promissory estoppel?
(3) Whether G.O.Ms.No.115, dated 17.01.1972 can be cancelled retrospectively by G.O.Ms.No.78, dated 05.07.2005?
(8) Whether the judgment of Supreme Court in Amrit Banaspati case can be applied in the present case?
28.We have already seen that the appellant has referred to the fact that the buyers/exporters had placed orders by specifically stating that the sales tax is not applicable as the body built was http://www.judis.nic.in 36 meant for foreign export and it was exempted. We have also held that the appellant's case that they have not collected tax from their customers pursuant to G.O.Ms.No.115, dated 17.01.1972. We have also held that the Government Order in G.O.Ms.No.115, dated 17.01.1972 was issued in exercise of power under Section 17 of TNGST Act. We have also held in this judgment that G.O.Ms.No. 115, dated 17.01.1972 was intended for the benefit of all the body builders in the State of Tamil Nadu and it is not discriminatory. If we read the judgment in Amrit Banaspati's case, in the factual background of this case, the said case has no application to the present case.
29.In the case of Amrit Banaspati Company Limited vs. State of Punjab [(1992) 85 STC 496 (SC)], the question posed before the Hon'ble Supreme Court was whether the Government of State could agree expressly or impliedly to refund sales tax realised by a manufacturer. The Hon'ble Supreme Court concurred with the view of the High Court that the officials have acted against the decision of the Cabinet Sub Committee to give refund of sales tax to the assessee, that such refund was wholly unauthorized and that the benefit of refund which was unauthorisedly extended could not create any right in favour of the assessee. That was also a case http://www.judis.nic.in 37 where the benefit was extended to the individual assessee which was discriminatory and detrimental to other people who are doing the same business. Further, before the Hon'ble Supreme Court, it was admitted that the assessee had collected tax at the first instance and also claimed refund later. It was, therefore, held that realiasation of tax to State mechanism for the sake of paying it to private person directly or indirectly is impermissible under the Constitutional scheme. It was further held that the individual private enrichment was exposed in that case by the claim of refund of Rs.2 Crore for the period of three years where the total investment of the unit was only Rs.1.5 Crore. It was only in the background of the facts indicated above, the Hon'ble Supreme Court has held as follows:
“But Promissory Estoppel being on extension of principle of equity, the basic purpose of which is to promote justice founded on fairness and relieve a promisee of any injustice perpetrated due to promisor's going back on its promise, is incapable of being enforced in a court of law if the promise which furnishes the cause of action or the agreement, express of implied, giving rise to binding contract is statutorily prohibited or is against public policy. What then was the nature of refund which was promised by the govt.? Was such promise contrary to law and against public policy? Could it be enforced in a court of law? Taxation is a sovereign power exercised by the State to realise revenue to enable it to discharge its obligations. Power to do so is derived from entries in Lists I, II and III of the Seventh Schedule of the Constitution. Sales tax or purchase tax is levied in exercise of power derived from an Act passed by a State under Entry 54 of List II of VIIth Schedule. It is an indirect tax as even though it is collected by a dealer the normally permits it to be passed on and the ultimate burden is borne by the consumer. But 'the fact that the burden of a tax may have been passed on the consumer does not alter the legal nature of the tax' (Halsbury's Laws of England, Vol. 52, paragraph 20.04). Therefore even a legislature, much less government, cannot enact a law or issue an order or agree to refund the tax realised by it from http://www.judis.nic.in people in exercise of its sovereign powers, except when the levy or 38 realisation is contrary to a law validly enacted. A promise or agreement to refund tax which is due under the Act and realised in accordance with law would be a fraud on the Constitution and branch of faith of the people. Taxes like sales tax are paid even by a poor man irrespective of his savings with a sense of participation in growth of national economy and development of the State. Its utilization by way of refund not to the payer but to a private person, a manufacturer, as an inducement to set up its unit in the State would be breach of trust of the people amounting to deception under law.”
30.As a matter of fact, the judgment of the Hon'ble Supreme Court in Amrit Banaspati Company Limited vs. State of Punjab [(1992) 85 STC 496 (SC)], was distinguished by the Hon'ble Supreme Court in Commissioner of Sales Tax, Orissa v. Crown Re-Roller (P) Ltd., reported in [2007] 6 VST 331 (SC). Before the Hon'ble Supreme Court an argument was advanced that no law can be made to refund tax to a manufacturer to be realised under a statute and that it would be invalid and ultra vires. Though the judgment in Amrit Banaspati case was relied upon to support the case of the appellants before the Hon'ble Supreme Court, the Hon'ble Supreme Court distinguished the judgment in Amrit Banaspati case and held as follows:
"18. In that case, the issue was as to whether the manufacturer of Banaspati had set up an industry in the State of Punjab, on the assurance that the sales tax amount actually collected by it from the ultimate purchasers, would be refunded to it by way of incentive, can be enforced by a court of law. Such a prayer was declined on the ground that refund of tax is made in consequence of excess payment of it. This case, however, deals with completely different situation as despite the exemption notification issued in terms of a statute, the respondent was compelled to pay tax through its purchase price when it purchased the scrap material from subsequent sellers. The State cannot resile itself from the statutory provisions of exemption made by it. In our opinion, in equity, the State in a situation of this nature, http://www.judis.nic.in must act in letters and spirit of the Act."39
31.Again the Hon'ble Supreme Court had an occasion to consider Amrit Banaspati case in a similar situation in Deputy Commissioner of Commercial Taxes v. Hindustan Lever Ltd., reported in (2016) 13 SCC 28. The relevant portion of the judgment is extracted below:
“18. First, we shall deal with the applicability of the principle stated in Amrit Banaspati (supra). The issue raised in the case of Amrit Banaspati (supra) was quite distinct and separate. The question raised was whether the principle of promissory estoppel would apply, for the learned single Judge of the High Court on facts had found that there was sufficient material to direct the State to honour its commitment to refund the sales- tax. The issue involved in the said case relates to refund of tax paid to the State. In this context, this Court observed that refund of tax was made in consequence of excess payment or when it was realized illegally or contrary to law. The refund of tax due and realised in accordance with law cannot be comprehended and no law can be made for refund of tax to a manufacturer realized under the statute for the same would be invalid and ultra vires. A promise or an agreement to refund tax which was due under the law and realised in accordance with the law would be a fraud on the Constitution and breach of faith of the people. It is in this context, the aforesaid observations were made in paragraph 11 in the case of Amrit Banaspati (supra).
19. In fact, a careful elucidation of the said reasoning would support the stand of the respondent. The assessee, on the basis of exemption notification had set up a new undertaking incurring expenditure. This was done on the foundation that the new unit would be exempt from tax. The exemption granted under the law by a legally valid notification was to encourage investment in the backward districts and enabled the newly established industry to overcome initial financial problems, recoup and ensue reasonable return on the capital expenditure and associated risks. Exemptions are allowed to industrial units to overcome the teething problems. Observations in paragraph 11 in Amrit Banaspati (supra), nowhere stipulate that the sale price as fixed must expressly exclude the tax component. It is obvious when a manufacturer is granted an exemption, the unit would fix the sale price taking the said exemption into account. In this manner both the manufacturer and the consumer gain. As sales-tax is an indirect tax, the purchaser has to pay the same and when the tax is not levied, the purchaser does not pay the same.
20. The respondent having set up a new industry which was exempted, should not have, in terms of clause (e) of the Explanation III of the notification, collected any tax and to the extent the tax was collected the turnover was not exempted. Sales-tax, as noticed above, http://www.judis.nic.in is an indirect tax, which is charged from the consumer or the purchaser. But the liability to pay is that of the dealer. It may be 40 charged by the dealer from the purchaser. Sometimes this indirect tax is inbuilt and included in the retail price. This may be mandated by law to protect consumer interest. One frequently comes across products where the maximum sale price is specified and stated on the packaging as in the present case. Rule 2 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977, framed under the erstwhile Standards of Weights and Measures Act, 1976, stipulated that the maximum sale price should be inclusive of all taxes. This was the statutory requirement binding on the respondent, who was selling packaged product. The statement on the packaged product inclusive of all taxes, means all taxes which were leviable, were already included in the price mentioned. It should not be constructed as an admission that the respondent had charged sales tax. The respondent could not have deviated or ignored the statutory requirement by making a declaration contrary to the statutory rules. The consequences of not obeying and violating the statutory rules would have been severe.
21. Observations made in M/s C. Venkatagiriah and Brothers (supra) have to be again understood in the context in which they were made. In the said case the dealer was exigible to Central Sales-tax only if he had collected the tax and not otherwise. In the said context, this Court referred to amendment made under the Central Sales-tax Act, putting the burden of proof on the dealer to show that he had not collected the tax. For this reason, it was observed that when an endorsement was made in the Bill that price charged was inclusive of tax, it was prima facie proof against the dealer’s contention and in such circumstances where burden was on the dealer, he should produce material to displace the presumption. The finding of the tribunal that the Central Sales-tax had not been charged independently in the Bills, it was observed, would not be a conclusive proof or good finding in law. Importantly, this Court observed that the question whether the dealer had discharged the burden placed upon him by the statute is the question of fact and has to be decided in each case with respect to facts and material of the case. Significantly, in the present case no such burden has been placed on the assessee. Further the tribunal and the High Court have recorded as a finding of the fact that the assessee respondent had not collected the tax on sales made from the exempted unit. The assessee has relied upon invoices issued by them to the purchaser which have the following declaration:-
“Goods sold under this invoice are fully exempted from levy of KST/CST under exemption certificate No. IDF/E3/50-St/92-93 dt. 1-12-1992 by the Director of Industries and Commerce Department, Govt. of Karnataka, Bangalore as applicable to our newly set up tea factory at Dharwad. We are on rolls of Asst. Commissioner, ST Bangalore. Our principal place of business is at No.2 4th Cross, MM Compound, Mysore Road, Bangalore.
OR “Goods sold under this invoice are fully exempted from levy of KST/CST in terms of Govt. of Karnataka’s order No. C/1/138/SPC/90 (GO dt. 27.9.1990 and Finance Department Notification No. FD/239/CSI/90 dt. 19.6.1991 and Industries and Commerce Department Certificate No. IDF/FS/91-24/93-94 dt. 5.6.1993 http://www.judis.nic.in applicable to our newly set up factory at Dharwad (Ka). Our principal 41 place of business is at Booke Fields, Marathahalli”. ....
“26. In the case at hand, when the respondent was not liable to pay tax and had not passed on the tax liability, we do not think, sale consideration received should be bifurcated and divided on the basis of any assumption that the sale price received must have included the tax. This fiction has no application in the present case. There is neither such principle nor any precept in law. In any case the finding of fact is to the contrary.”
32.The learned Single Judge has not appreciated the distinguishing factors and the principles of law that is more appropriate in the present case. Let us also consider the power of Government to retrospectively withdraw the exemption. Section 17 of the TNGST Act read as follows:
“Section 17. Power of Government to notify exemptions and reductions of tax. – (1) The Government may, by notification, [issued whether prospectively or retrospectively,] make an exemption, or reduction in rate, in respect of any tax payable under this Act –
(i) on the sale or purchase of any specified goods or class of goods, at all points or at a specified point or points in the series of sales by successive dealers; or
(ii) by any specified class of persons, in regard to the whole or any part of their turnover; [or]
(iii) on the sale or purchase of any specified classes of goods by specified classes of dealers in regard to the whole or part of their turnover.
Section 17(2) Any exemption from tax, or reduction in the rate of tax, notified under sub-section (1) –
(a) may extend to the whole State or to any specified area or areas therein;
(b) may be subject to such restrictions and conditions as may be specified in the notification.
Section 17(3) The Government may, by notification, cancel or vary any notification issued under sub-section (1).
33.As it is evident from the language, the Government though has power to grant exemption retrospectively under Section 17(1) of TNGST Act, the Government has not been authorised to cancel, http://www.judis.nic.in vary any notification issued under Section 17.1 of the Act with 42 retrospective effect. In Honest Corporation v. State of Tamil Nadu reported in [1999] 113 STC 26 (Mad), a Division Bench of this Court has accepted the position that the Government is not empowered to cancel or vary any notification giving retrospective effect in the following lines:
"12. If we carefully peruse, the language in which sub-section (1) of section 17 is couched, it will be crystal clear that as and when the Government may, by notification, make an exemption or reduction in rate in respect of any tax payable under the Act, the same may be done whether prospectively or retrospectively. But, if we take into account the language in which sub-section (3) of section 17 is couched, the phraseology whether prospectively or retrospectively is not there and what is stated therein is the Government is empowered by way of a notification to cancel or vary any notification issued under sub-section (1). That means that notification issued under the said sub-section can be only prospectively and not retrospectively."
34. In State of Tamil Nadu v. Kannapiran Steel Re-rolling Mills reported in [1999] 112 STC 161 (Mad) the position was reiterated by a Division Bench of this Court and held that a notification to cancel or vary any notification issued under Section 17.1 of the TNGST Act can be issued only prospectively and not retrospectively.
35.The Hon'ble Supreme Court had an occasion to consider Section 10 of the Kerala General Sales Tax Act, 1963 which is similar to the provisions under Tamil Nadu General Sales Tax Act. In MRF Ltd., Kottayam v. Assistant Commissioner (Assessment), Sales Tax and others reported in (2006) 8 SCC http://www.judis.nic.in 43 702 the Hon'ble Supreme Court has held as under:
“40.Section 10 of the Act provides the power to the Government to grant exemption and reduction in rate of tax. Section 10 reads:
"10. Power of Government to grant exemption and reduction in rate of tax.--(1) The Government may, if they consider it necessary in the public interest, by notification in the Gazette, make an exemption or reduction in rate, either prospectively or retrospectively in respect of any tax payable under this Act,
(i) on the sale or purchase of any specified goods or class of goods, at all points or at a specified point or points in the series of sales or purchases by successive dealers, or
(ii) by any specified class of persons in regard to the whole or any part of their turnover.
(2) Any exemption from tax, or reduction in the rate of tax, notified under Sub-section (1),--
(a) may extend to the whole State or to any specified area or areas therein,
(b) may be subject to such restrictions and conditions as may be specified in the notification.
(3) The Government may by notification in the Gazette, cancel or vary any notification issued under Sub-section (1).
41.Under Section 10(1) of the Act the State Government has the power to make an exemption or reduction in rate either prospectively or retrospectively in respect of any tax payable under this Act. However, the power of Government under Section 10(3) by notification in the Gazette to cancel or vary any notification issued under Section 10(3) cannot be exercised retrospectively. This is the view taken by the Kerala High Court in M.M. Nagalingam Nadar Sons Vs. State of Kerala, 1993 (91) STC 61, where the learned Single Judge of the High Court has stated as under:
"Power is thus given under sub-section (1) to make an exemption or reduction in rate either prospectively or retrospectively in respect of any tax payable under the Act. Sub-section (3) enables the Government to cancel or vary any such notification issued under sub-section (1). Significantly, sub-section (3) is silent about retorpsectivity for any notification issued under it. Thus while sub- section (1) authorizes the grant of an exemption or reduction in rate with retrospective effect in respect of any tax payable under the Act, sub-section (3) does not provide for any cancellation or variation retrospectively. In issuing notifications under Section 10, the Government is exercising only delegated powers. While the legislature has plenary powers to Legislate prospectively and retrospectively, a delegated authority like the Government acting under the powers conferred on it by the enactment concerned, can exercise only those powers which are specifically conferred. Therefore, if it is intended to confer on the Government a power to cancel/withdraw/vary an http://www.judis.nic.in exemption or reduction in rate of tax, with retrospective effect, such a 44 power has to be specifically conferred, and in the absence of any such specific conferment of power in subsection (3) of Section 10, the Government cannot issue notifications there under affecting a vested right or imposing an obligation to act retrospectively. I have already mentioned that this provision is significantly silent on such a power. Equally, the Government has also no power to levy a tax with retrospective effect. The retrospective cancellation/ withdrawal of an exemption or a reduction in rate tantamounts to levy of a tax, or tax at a higher rate from a date in the past, for which the Government has no power under sub-section (3)." [Emphasis supplied]
42.This judgment of the learned Single Judge was approved by a Division Bench of the Kerala High Court in Dy. Commissioner (Law), Board of Revenue (Taxes) Vs. MRF Ltd., 1998 (109) STC 306, by observing thus: "We are in full agreement with the view taken by the learned Single Judge in M.M. Nagalingam Nadar Sons vs. State of Kerala, 1993 (91) STC 61 (Ker) that Government has no power under Section 10(3) of the Act to issue a notification with retrospective effect."
43.Before this Court the State of Kerala did not dispute the above finding (See 2000(9) SCC 286) where the State's appeal was dismissed. That Section 10(3) of the Keral General Sales Tax Act did not confer the power to withdraw an exemption with retrospective effect was not challenged by the State Government and accordingly the finding regarding the meaning and effect of Section 10(3) of the Act has become final. In any event, the appeal preferred by the State of Kerala was dismissed and the judgment of the High Court has therefore become final. Accordingly, it was held that Section 10(3) does not confer the power to withdraw an exemption with retrospective effect. Effect of this is that the amendment notification SRO 38/98 has to be read so as not to take away or disturb any manufacturer's pre-existing accrued right of exemption for a period of 7 years. If SRO 38/98 is construed as now contended by the respondent, then the inevitable consequence would be that SRO 38/98 would itself be rendered ultra vires Section 10(3) of the Act, and therefore, illegal, bad in law and null and void."
36.The validity of retrospective operation of fiscal law has been tested by the Hon'ble Supreme Court in Jeyam and Company v. Assistant Commissioner and another reported in (2016) 96 VST (SC). The operative portion of the judgment is extracted for convenience:
"35. We would also like to reproduce hereunder the following observations made by this Court in Govind Das v. ITO [(1976) 1 SCC 906, while holding Section 171(6) of the Income Tax Act to be http://www.judis.nic.in prospective and inapplicable for any assessment year prior to 45 1-4-1962, the date on which the Income Tax Act came into force: (SCC p. 914, para 11) "11. Now it is a well-settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that `all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.'" (emphasis supplied) When we keep in mind the aforesaid parameters laid down by this Court in testing validity of retrospective operation of fiscal laws, we find that the amendment in-question fails to meet these tests. The High Court has primarily gone by the fact that there was no unforseen or unforeseeable financial burden imposed for the past period. That is not correct. Moreover, as can be seen, sub-section (20) of Section 19 is altogether new provision introduced for determining the input tax in specified situation, i.e., where goods are sold at a lesser price than the purchase price of goods. The manner of calculation of the ITC was entirely different before this amendment. In the example, which has been given by us in the earlier part of the judgment, 'dealer' was entitled to ITC of Rs. 10/- on re-sale, which was paid by the dealer as VAT while purchasing the goods from the vendors. However, in view of Section 19(20) inserted by way of amendment, he would now be entitled to ITC of Rs. 9.50. This is clearly a provision which is made for the first time to the detriment of the dealers. Such a provision, therefore, cannot have retrospective effect, more so, when vested right had accrued in favour of these dealers in respect of purchases and sales made between January 01, 2007 to August 19, 2010. Thus, while upholding the vires of sub-section (20) of Section 19, we set aside and strike down Amendment Act 22 of 2010 whereby this amendment was given retrospective effect from January 01, 2007."
37.From the facts and circumstances elaborated in this judgment, on the admitted facts, this Court has no hesitation to hold that the Government has no power to withdraw exemption http://www.judis.nic.in 46 retrospectively and the impugned notification by G.O.Ms.No.78, dated 05.07.2005 is invalid, unconstitutional insofar as the same seeks to withdraw exemption with retrospective effect.
38.When we consider the next issue on the applicability of Doctrine of Promissory estoppel and to what extent the principle is helpful to the appellant in the present case, it is necessary to consider the principle and its application or invocation of the Doctrine in a case of this nature. The principle of promissory estoppel has been explained in several judgments of Hon'ble Supreme Court. In Union of India v. Godfrey Philips India Ltd., reported in AIR 1986 SC 806, the Hon'ble Supreme Court has acknowledged the doctrine of promissory estoppel as a well established principle in the administrative law of India. It was held that the doctrine of promissory estoppel is a principle evolved by equity. To avoid injustice, the Courts have accepted equity as the basis of the doctrine of promissory estoppel. It has been stated in the above judgment of the Hon'ble Supreme Court that the true principle of promissory estoppel is that where one party has by his word or conduct made to the other on a clear and unequivocal promise or representation it is intended to create legal relations or effect a legal relationship to arise in the near future, knowing or http://www.judis.nic.in 47 intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the promise or representation would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which has taken place between the parties. The doctrine of promissory estoppel is applied to cases where a promise is made by a Government or instrumentality of State knowing that it would be acted upon by the other party to whom the promise or representation is made. The Government or the instrumentality of State is not entitled to go back as it would be inequitable to allow the Government to do so having regard to the dealings which had taken place. The exception to the doctrine is that this principle cannot be pressed into to compel the Government or the public authority to carry out a representation or promise which is contrary to law. In short, there cannot be an estoppel against the statute. It has also been held by the Hon'ble Supreme Court in many cases that while considering the applicability of the doctrine, the Courts have to keep it in mind the public interest and grant relief when equity so requires. In the present case, we could see that the appellant had acted upon the promise and the representation by G.O.Ms.No.115, dated 17.01.1972. The power of withdrawing http://www.judis.nic.in 48 exemption prospectively cannot be taken away by applying the doctrine of promissory estoppel. Doctrine of promissory estoppel is acknowledged as a principle on equity in several binding precedents of Hon'ble Supreme Court particularly in the case of State Madya Pradesh v. G.S.Dall and Floor Mills reported in 1992 Supp. (1) SCC 150. In Pawan Alloys and Casting (P) Ltd., v. U.P. SEB, reported in (1997) 7 SCC 251 the Hon'ble Supreme Court has considered the principle by referring to various precedents. That was a case where the respondent board while revising the rate schedule announced certain incentives to new industries. It was admitted that some of the industries were set up because of the incentives/concessions announced by the State Electricity Board of U.P. The incentives were subsequently withdrawn. Since the new industries were lured into establishing their factories in the specific regions because of the assurance that they would get the three year guaranteed incentives of development rebate of 10% of their total bills of electricity charges and had acted on the promise it was held by the Hon'ble Supreme Court that the withdrawal of incentives is against the principle of promissory estoppel. In the present case, this Court is able to see that all the ingredients to apply the doctrine of promissory estoppel are present here in this case and without any hesitation this Court hold that the http://www.judis.nic.in 49 State Government cannot retrospectively withdraw the exemption granted to the appellant vide G.O.Ms.No.115, dated 17.01.1972. Since the exemption is only a concession, it can be withdrawn any time prospectively.
39.In view of the conclusions of this Court reached above on the specific issues, we need not decide whether there is any statutory bar from the department under Section 16 of the TNGST Act to levy or recover tax based on the impugned Government Order. The subject matter of the three Writ Petitions are regarding the validity of G.O.Ms.No.78, dated 05.07.2005 and the assessments which are made prior to G.O.Ms.No.78, dated 05.07.2005. This Court is also convinced that by virtue of the decision of Hon'ble Supreme Court in State of Karnataka v. Azad Coach Builders Private Limited (2010) 9 SCC 524 that the appellant is entitled to the benefit of Section 5(3) of C.S.T. Act. The relevant portion in the above judgment is extracted as under:
“26. When we analyze all these decisions in the light of the Statement of Objects and Reasons of the Amending Act 103 of 1976 and on the interpretation placed on Section 5(3) of the CST Act, the following principles emerge:
- To constitute a sale in the course of export there must be an intention on the part of both the buyer and the seller to export;
- There must be obligation to export, and there must be an actual export.
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- The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or 50 even from the nature of the transaction which links the sale to export.
- To occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it, without which a transaction sale cannot be called a sale in the course of export of goods out of the territory of India.
27. The phrase 'sale in the course of export' comprises in itself three essentials: (i) that there must be a sale: (ii) that goods must actually be exported and (iii) that the sale must be a part and parcel of the export. The word `occasion' is used as a verb and means 'to cause' or 'to be the immediate cause of'. Therefore, the words `occasioning the export' mean the factors, which were immediate course of export. The words `to comply with the agreement or order' mean all transactions which are inextricably linked with the agreement or order occasioning that export. The expression `in relation to' are words of comprehensiveness, which might both have a direct significance as well as an indirect significance, depending on the context in which it is used and they are not words of restrictive content and ought not be so construed. Therefore, the test to be applied is, whether there is an in- severable link between the local sale or purchase on export and if it is clear that the local sale or purchase between the parties is inextricably linked with the export of the goods, then a claim under Section 5(3) for exemption from State Sales Tax is justified, in which case, the same goods theory has no application.
28. The facts of this case clearly reveal that the transaction between the assessee and the exporter is inextricably connected with the export of the goods to Sri Lanka. The communication between the foreign buyer and the exporter reveals that the foreign buyer wanted the bus bodies to be manufactured by the assessee under the specifications stipulated by the foreign buyer. The bus bodies constructed and manufactured by the assessee could not be of any use in the local market, but were specifically manufactured to suit the specifications and requirements of the foreign buyer. In the Purchase Order placed on the assessee by the exporter, it is specifically indicated that the bus bodies have to be manufactured in accordance with the specifications provided by the foreign buyer, failure to do so might result in cancellation of the export order. The assessee in this case has succeeded in showing that the sale of bus bodies have occasioned the export of goods. When the transaction between the assessee and the exporter and the transaction between the exporter and foreign buyer are inextricably connected with each other, in our view, the `same goods' theory has no application.”
40.The judgment of Hon'ble Supreme Court is applicable to the appellant in this case. It is also admitted before this Court that the Hon'ble Supreme Court has confirmed the judgment of the http://www.judis.nic.in 51 Karnata High Court in the above judgment and that the judgment of Karnata High Court was not followed by the quasi-judicial authorities when individual assessments are challenged by the appellants. Since our judgment in these appeals are independent of appellant's right to seek exemption under Section 5(3) of CST Act, we are not inclined to elaborate further. This Court has already held that G.O.Ms.No.78, dated 05.07.2005 withdrawing the benefits granted in G.O.Ms.No.115, dated 17.01.1972 with retrospective effect is invalid and that the impugned G.O.Ms.No.78, dated 05.07.2005 is unconstitutional insofar as the same gives effect to the impugned Government Order with effect from the date namely 17.01.1972. However, this Court also has held that the impugned Government Order is valid if it is made applicable prospectively. Having regard to the conclusions we have reached above, this Court is unable to sustain the order of the learned Single Judge dismissing all the Writ Petitions filed by the appellant. These Writ Appeals are allowed and the judgment passed by the learned Single Judge in W.P.(MD)Nos.2880, 22668 and 22669 of 2005 is set aside. All the Writ Petitions are allowed. Since the withdrawal of G.O.Ms.No.115, 17.01.1972 is permissible and valid if it is done prospectively, the exemption granted by the earlier Government Order dated 17.01.1972 is deemed to be valid with effect from 05.07.2005 and http://www.judis.nic.in 52 the consequences shall follow. It is also open to the appellant to claim exemption under Section 5(3) of CST Act if fresh assessment is made for the subsequent period with effect from 05.07.2005. No costs. Consequently, the connected miscellaneous petition is closed.
Index : Yes/No (S.S.S.R.,J) (C.S.N.,J.)
Internet :Yes/No 05.03.2019
SRM
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53
To
1.The Secretary to Government,
Department of Commercial Taxes & Religious Endowments, Fort St. George, Chennai – 600 009.
2.The Commercial Tax Officer, Kamarajar Salai Assessment Circle, Madurai.
3.The Special Commissioner & Commissioner of Commercial Taxes, Ezhilagam, Chepauk, Chennai – 600 005.
http://www.judis.nic.in 54 S.S.SUNDAR,J.
AND C.SARAVANAN,J.
SRM PRE-DELIVERY JUDGMENT MADE IN W.A.(MD)Nos.206, 338 and 339 of 2012 and M.P(MD)No.1 of 2012 05.03.2019 http://www.judis.nic.in