IMPORTANT POINTS
1. The Court will not interfere with any action taken by the Government in public interest and public interest must override any consideration of private loss or gain.
2. Determination of applicability of promissory estoppel against the Government hinges upon balance of equity or public interest and the plea of change of trade policy on the basis of resource crunch is sufficient for dismissing case of withdrawal of exemption from sales tax based on the doctrine of promissory estoppel.

Headnote:(i) PROMISSORY ESTOPPEL-Doctrine of-Applicability against Government-Orissa Sales Tax Act, 1947-Section 6-Tax free goods-Exemption of sales tax-Method and manner of granting-Exemptions have to be granted by a notification-Exemption granted u/s 6 can be modified or withdrawn by State Government at any point of time-There cannot be estoppel against statute-Government by an executive order cannot override requirement of the statute-Court will not interfere with any action taken by the Government in public interest-Public interest must override any consideration of private loss or gain.
       Held : If the Government after granting tax exemption to various industries finds itself in a tremendous financial crunch and seeks to raise finance by doing away with the exemptions, it cannot be argued that because the Government had promised to give tax exemption, which was revocable under the statute, the Government cannot resile from its stand however disastrous it may turn out to be for the State s economy. (Para 10)
       Exemption of sales tax can only be granted in the manner laid down by the Sales Tax Act. The Government by an executive order cannot override the requirement of the statute. The method and manner of granting exemption has been laid down in Section 6 of the Orissa Sales Tax Act. This Section specifically says that exemptions have to be granted by a notification. It further provides that exemption granted by a notification issued under Section 6 can be modified or withdrawn by the State Government at any point of time. The State Government in the instant case, initially issued the exemption notifications under Section 6. The State Government subsequently decided to withdraw the exemption notification in respect of some of the industries which had commenced production after 1.4.1977. The State Government was fully competent to do so under the provisions of Section 6 of the Act. The respondent must have been aware of this when its industry was set up. Everybody is presumed to know the law. Section 6 of the Orissa Sales Tax Act which empowers the State Government to issue a notification granting exemption from sales tax, also empowers the State Government to withdraw, amend or modify any such notification as and when it thinks necessary to do so. (Para 14)
       (ii) Orissa Sales Tax Act, 1947-Section 6-Claim of benefit of-Two notifications dated 11-11-1969 and 23-4-1976 issued granting exemption from sales tax-Abrogated by notification dated 20-5-1977-Two notifications restored by another notification dated 9-9-1977-Exemption limited only to industries which had started production prior to 1-4-1977-Writ petitioner commenced production on 19-3-1980-Claim made that State Government could not change these notifications after assessee had set up its plant-Petitioner s case that it had set up its industry pursuant to and in terms of Industrial Policy Resolution dated 18-7-1979-Prayer to declare notification dated 9-9-1977 as ultra vires Art. 19(1)(g) of the Constitution-State s plea of change of policy of trade on basis of resource crunch-Whether sufficient for dismissing respondent s case based on doctrine of promissory estoppel?-(Yes)-Public interest demanded modification of the earlier I.P.R.
       Held : In the instant case, it has been stated on behalf of the State that various notifications granting sales tax exemptions to the dealers resulted in severe resource crunch. On reconsideration of the financial position, it was decided to limit the scope of the earlier exemption notifications issued under Section 6 of the Orissa Sales Tax Act. Because of this new perception of the economic scenario of the State, the scope of the earlier notifications had to be restricted. They were first abrogated altogether on 20.5.1997. Thereafter, it was decided to grant exemption at a limited scale. (Para 21)
        In our opinion, the plea of change of policy trade on the basis of resource crunch should have been sufficient for dismissing the respondent s case based on the doctrine of promissory estoppel. Public interest demanded modification of the earlier I.P.R. Moreover, as it has been noted earlier that the I.P.R. itself had not granted any exemption but had indicated that orders will be issued by various departments for granting the exemptions. The exemption order under sales tax could only be issued under Section 6 which could be amended or withdrawn altogether. This is expressly provided by Section 6. If the respondent acted on the basis of a notification issued under Section 6 it should have known that such notification was liable to be amended or rescinded at any point of time, if the Government felt that it was necessary to do so in public interest. That is exactly what has happened in this case. (Paras 22 & 23)

JUDGMENT

Sen, J.-M/s. Shree Durga Oil Mills, respondent herein, was assessed to tax by the Sales Tax Officer for the assessment years 1979-80, 1980-81 and 1981-82 for purchase of groundnut from unregistered dealers. There is no dispute that groundnut was purchase from time to time by the respondents and utilised for manufacturing oil. The assessment orders were challenged by a writ petition on the ground that in view of the Industrial Policy Resolution (I.P.R.) dated 18.7.1979 issued by the Industries Department of the Government of Orissa, sales tax was not payable by a new industry on the purchase of raw material for the period prescribed in the I.P.R.

2. It was contended on behalf of the writ petitioner that it had applied for a license setting up an industry at Betnoti in the district of Mayurbhanj and obtained a provisional registration certificate on 28.11.1979. A permanent registration certificate as a small scale industrial unit was granted by the Director of Industries, Orissa on 10.4.1980. The industrial unit also obtained a production certificate certifying that it had started production on 19.3.1980. The certificate of registration was renewed from time to time. Clause (8) of the I.P.R. effective for the period 1979-83 provided that village cottage and tiny industries certified as such by the State Government and small scale industries shall be exempt from purchase/sales tax for five years on construction material, raw material, machinery and packaging materials. Small scale industrial units in non-backward areas would be entitled to this exemption only for four years. The case of the writ petitioner before the High Court was that it set up its industry in the district of Mayurbhanj pursuant to this I.P.R. It had obtained a huge loan from the United Bank of India. It terms of the I.P.R., it was entitled to tax exemption on purchase of groundnut, mustard seeds etc. which were used as raw material for production of oil.

3. The Sales Tax Officer took the stand that there was no notification in force under Section 6 of the Orissa Sales Tax Act, 1947 granting exemption to purchase or sale of groundnut, mustard seeds etc. during the relevant period. In the absence of such a notification, the assessee could not gain immunity from payment of tax on its purchases.

4. Section 6 of the Orissa Sales Tax Act provides that the State may by notification, subject to such conditions and exceptions, if any, exempt from tax the sale or purchase of any goods or class of goods and likewise withdraw any such exemption. A notification dated 11.11.1969 had been issued under Section 6 by the State Government by which raw materials which went into manufacture of the finished goods were exempted from sale/purchase tax when such goods were sold to a registered dealer who was a manufacturer inside the State and who had started production after 1.4.1969. This exemption had been given for a period of five years from the date on which such registered dealer had started production. A similar notification dated 23.4.1976 was issued granting exemption to raw materials purchased by a manufacturer for a further period of five years from the date on which production had commenced. Both these notifications require that in order to avail this exemption the manufacturer should furnish declarations in Form D .

5. The exemptions granted by the two earlier notifications were abrogated by notification dated 25.7.1977. The State Government again restored the earlier two notifications by another notification dated 9.9.1977. However, in that notification dated 9.9.1977, the exemption was limited only to the industries which had started production prior to 1.4.1977. Since the industry set up by the writ petitioner had commenced production on 19.3.1980, it was not eligible for the exemption given by the notification dated 9.9.1977. The case of the respondent in the writ petition was that the I.P.R. was effective for the period 1979-83. The petitioner had set up its i

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1997 Supreme(SC) 1670

Cases Referred (5)