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M/S Moser Baer India Ltd. Thru' Authorised Signatory v. State Of U.P. & Others - WRIT TAX No. 1204 of 2006 [2006] RD-AH 12783 (2 August 2006)


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Court No.37

Civil Misc. Writ Petition No.1204 of 2006

M/s Moser Baer India Ltd. v. State of U.P. and others

Hon'ble R.K.Agrawal, J.

Hon'ble Vikram Nath, J.

(Delivered by R.K.Agrawal, J.)

The learned Standing Counsel may file a counter affidavit within one month.

List thereafter.

By virtue of Notification issued on 31.3.95 by the U.P. Government under section 8(5) of the Central Sales Tax Act, 1956 ( in short referred to as the Act) as it then stood certain exemptions were granted to new unit established in certain areas of the State of U.P.  The petitioner relying upon this Notification established a unit after the said Notification within the territory of Gautam Budh Nagar as it stood in 1995.  The benefits conferred by that Notification were available for different periods for different set of districts subject to fulfillment of the conditions mentioned therein.  For the petitioner's district the benefit was available for 10 years.  The petitioner fulfilled the condition of eligibility and accordingly was taking the benefit.

However, the Central Sales Tax Act was amended by Act No.XX of 2002, with effect from 11.5.2002.  According to the learned counsel for the petitioner, the date should be 13.5.2002 and 11.5.2002 is a misprint in the book. Whichever be the case, the fact is that the amendment took place with effect from May, 2002.

The benefits contemplated by unamended Section 8(5) of the Act were available irrespective of the fact whether the inter State sale was in favour of the registered dealer, or in favour of the Government department or in favour of the unregistered dealer or consumer.  The Notification of 1995 also extended the benefit irrespective of the fact whether the sale was made to a registered dealer, or the Government department, or the unregistered dealer or consumer.

By the Amendment Act of 2002, a restriction has been placed upon the power of the State Government and now the State Government is only authorized to issue the Notification to give exemption where the inter State sale is in favour of either a Government department or a registered dealer only.  The State Government thereafter ceased to have the power to issue the Notification granting exemption to inter State sale in favour of unregistered dealer.  

We have examined the words of the amended provision of Section 8(4) as well as Section 8(5) of the Central Sales Tax Act, 1956.  The provisions do not provide for cancellation of the notifications of exemption issued prior to the amendment, either expressly or by necessary implication. It is well settled that where two interpretations are possible, the interpretation in favour of the tax payer has to be preferred.  We, therefore, hold prima facie that the Amendment of 2002 in the Central Sales Tax Act only deals with the power of the State of U.P. in respect of the notification proposed to be issued after the amendment and it does not deal with the notifications of exemption already issued.

According to the principle of promissory estoppel, once the petitioner is covered by the exemption granted by the Notification dated 31.3.1995 establishing a new Unit in the territory covered by that notification, the State Government is estopped from withdrawing the exemption during the period promised by the notification, of course, subject to fulfillment of the conditions mentioned in the notification of 1995.  Therefore, the withdrawal of exemption with effect from 15.10.2002 by the State Government and the consequent refusal on the part of the Assessing Authority, by the impugned order dated 6.5.2006, to refuse the benefit of 1995 notification after 15.10.2002 is covered by the principle of promissory estoppel and cannot be sustained.

It is, therefore, directed that as an interim measure the benefit of tax exemption granted by the Notification of 19.7.1996 referred to above will continue to be available to the petitioner for the duration contemplated by that notification subject to the terms and conditions mentioned in that notification notwithstanding the withdrawal of those benefits with effect from 15.10.2002 by the State Government.

Accordingly, in the meantime, the amount of Rs.33,87,308/- will not be recovered from the petitioner.




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