Madras High Court
Mahaveer Metal Industries vs State Of Tamil Nadu And Others on 18 October, 1994
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT Jayasimha Babu, J.
1. The grievance of the petitioners in these writ petitions being the same these petitions are disposed of by this common order.
2. The petitioners are the steel rolling mills who purchased raw materials which fall under item 4 of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959 and the manufactured end-products which also fall under the same entry. It is not in dispute that the State can tax raw materials as well as the end-products under that entry. The Supreme Court in the case of State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 held that the raw materials and the end-products are commercially different commodities and accordingly both are taxable. That judgment of the Supreme Court reversed the decision of this Court taking a contrary view reported in the case of Pyarelal Malhotra v. Joint Commercial Tax Officer [1970] 26 STC 416.
3. It is not in dispute that the State though it had power to tax both the raw material and the end-products, had by Notification No. 49/82 dated March 24, 1982 exempted the end-products manufactured by the rolling mills provided tax had been paid on the raw materials purchased by the said rolling mills. The exemption so granted continued in force till March 17, 1986, on which date G.O.P. No. 253 dated March 17, 1986, was issued whereby the exemption was granted in respect of the tax payable on the purchase of raw materials and the earlier exemption granted to the sale of the end-products was withdrawn. The result of this notification is that while under the earlier notification, the end-product was not taxable, on and after March 17, 1986, such end-products has become taxable. The end-product was not taxed earlier; not on account of lack of power on the part of the State to levy tax, but by reason of the decision to exempt such end-products from levy of tax subject to the condition specified in the notification issued on March 24, 1982.
4. The grievance of the petitioners is only in regard to the stocks of raw materials held by them as on the date of the notification dated March 17, 1986 from out of which, they manufactured the end-products. The petitioners contend that by the reason of the earlier notification, the exemption of sales tax on the end-products should be made available to the petitioners even after March 17, 1986, in so far as such end-products were manufactured by them out of the raw materials purchased prior to March 17, 1986. The notification dated March 17, 1986, does not support the case of the petitioners in any way. There is no provision therein exempting the end-products from tax even after that date if such products had been manufactured out of the raw materials purchased prior to the date of the notification.
5. Reliance is placed by the petitioners on the doctrine of promissory estoppel to contend that the State is estopped from levying tax on the end-products which had been manufactured out of the raw materials on which tax had been paid already. The contention is that placing reliance on the notification dated March 24, 1982, the petitioners had purchased the raw materials on the basis that the end-products made out of such raw materials would be exempted from tax and therefore, the State has no power to demand tax on the end-products by withdrawing the exemption granted earlier in respect of the sale of the end-product and giving benefit of such exemption to the raw materials purchased by the rolling mills as has been done under the notification dated March 17, 1986.
6. The petitioners rely upon the decisions of the Supreme Court and this Court wherein the doctrine of promissory estoppel was explained and applied. Learned counsel for the petitioners referred to the decision of the Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 44 STC 42 and also to the decision of the Supreme Court in the case of Union of India v. Godfrey Philips India Ltd. [1986] 158 ITR 574; [1985] 22 ELT 306. Reliance was also placed on the decision of this Court in the case of Union of India v. Chakra Tyres Limited [1990] 45 ELT 3 (Mad.) and the decision of the learned single Judge in the case of Rexin Sea (India) v. Union of India [1991] 53 ELT 218 (Mad.).
7. The nature and scope of the doctrine of promissory estoppel has been elucidated in the decisions referred to by the learned counsel for the petitioners. However, there is no scope for the application of the doctrine of promissory estoppel on the facts of these cases and those decisions are not of any assistance to the petitioners.
8. The State Government under entry 4 of the Second Schedule to the Act, has ample power to tax not only the raw materials but also the end-products manufactured by the petitioners. The State had chosen to grant exemption in respect of the sale of the end-products subject to the conditions specified in the notification dated March 24, 1982. The latter notification dated March 17, 1986, withdrew the exemption granted under the earlier notification dated March 24, 1982. In respect of the tax payable on the sale of the end-products and made such end-products subject to tax on and after the date of the notification on March 17, 1986 but however while making the end-products taxable, the State exempted the raw materials purchased by the rolling mills.
9. No promise had been held out to the petitioners by the notification dated March 24, 1982 that the exemption of tax on the end-products would continue for ever. Exemption was till such time as the State chose to withdraw it. The State having decided to make such end-product taxable from March 17, 1986, sale of end-products falling within the item 4 of the Second Schedule of the Act will become taxable. The fact that such end-products had been manufactured out of the raw materials on which the tax had already been paid does not render the notification in any way invalid. The State Government by issuing the notification did not acquire the power to levy tax on the end-products for the first time but it merely discontinued the exemption which had already been granted earlier although at all times, the State had the legal authority to collect that tax on the sale of the end-products.
10. The notification dated March 24, 1982, nowhere sets out that until such time as the stocks of raw materials purchased by the rolling mills are converted into end-products and are sold, the exemption would be available to the rolling mills. There is therefore no scope for applying the doctrine of promissory estoppel in order to restrain the State from collecting sales tax from the petitioners on their sale of end-products falling within item 4 of the Second Schedule of the Act on or after March 17, 1986.
11. The validity of the notification dated March 17, 1986, has not been called into question here and the notification being valid, it must be given effect to in accordance with its terms. That notification clearly confines exemption to the raw materials purchased by the rerollers for the purpose of manufacturing end-products subject to the conditions specified therein. The end-products sold by the rollers are taxable on or after the date of notification and there is no scope for any enquiry as to whether the end-products sold on or after that date of notification were manufactured out of the raw materials on which tax had been paid or as to whether the rolling mills had availed the benefit of exemption of sales tax on the purchase of the raw materials.
12. Learned counsel for the respondent/State also pointed out that the assessment for the period in question had been made by the authorities on the petitioners several years back and that unless such assessment orders are set aside in a properly instituted proceedings, the petitioners are liable to pay the tax so assessed. The fact that assessments have already been made, is not in dispute.
13. I do not see any merit in these writ petitions and the same are dismissed. In the circumstances of the case, the parties shall bear their respective costs.
14. Writ petitions dismissed.