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2007 Supreme(Guj) 274
Gujarat High Court
Judgename :J.M.Panchal, Abhilasha Kumari
AMI PIGMENTS PVT.LTD., R.R.PATEL - Appellant
Versus
STATE OF GUJARAT - Respondent
Special Civil Application 8158 Of 2007
Decided On : 04/30/2007
Headnote:
The Gujarat High Court held that the circular issued by the Sales Tax Commissioner, withdrawing the benefit of concessional sales tax rate on the purchase of fuel for manufacturing activities, could not be applied retrospectively. The Court found that the circular had the effect of nullifying the rights and interests that had already accrued to the assessees based on an earlier circular that clarified that the judgment of the Supreme Court in Coastal Chemicals Ltd. v. Commercial Tax Officer, A. P. (1999) 5 SCC 693, was not applicable to the provisions of the Gujarat Sales Tax Act, 1969. The Court also held that the assessees could not be placed in a disadvantageous position by the retrospective application of the circular, as they had acted in reliance on the earlier circular and had arranged their affairs accordingly. The Court further held that the Commissioner of Sales Tax did not have the power to issue a circular that would have the effect of withdrawing a benefit conferred upon an assessee or imposing a liability upon an assessee with retrospective effect.
Fact of the Case:
The petitioners were industries engaged in the manufacture of various products. They had been purchasing fuel at a concessional rate of sales tax based on a circular issued by the Sales Tax Commissioner in 2001, which clarified that the judgment of the Supreme Court in Coastal Chemicals Ltd. v. Commercial Tax Officer, A. P. (1999) 5 SCC 693, was not applicable to the provisions of the Gujarat Sales Tax Act, 1969. In 2005, the Sales Tax Commissioner issued another circular withdrawing the benefit of concessional sales tax rate on the purchase of fuel for manufacturing activities. The petitioners challenged the 2005 circular, arguing that it could not be applied retrospectively and that it violated the principle of promissory estoppel.
Finding of the Court:
The Court held that the 2005 circular could not be applied retrospectively as it had the effect of nullifying the rights and interests that had already accrued to the assessees based on the 2001 circular. The Court also held that the assessees could not be placed in a disadvantageous position by the retrospective application of the circular, as they had acted in reliance on the 2001 circular and had arranged their affairs accordingly. The Court further held that the Commissioner of Sales Tax did not have the power to issue a circular that would have the effect of withdrawing a benefit conferred upon an assessee or imposing a liability upon an assessee with retrospective effect.
Issues: 1. Whether the 2005 circular could be applied retrospectively to withdraw the benefit of concessional sales tax rate on the purchase of fuel for manufacturing activities. 2. Whether the assessees could be placed in a disadvantageous position by the retrospective application of the circular. 3. Whether the Commissioner of Sales Tax had the power to issue a circular that would have the effect of withdrawing a benefit conferred upon an assessee or imposing a liability upon an assessee with retrospective effect.
Ratio Decidendi: The Court held that the 2005 circular could not be applied retrospectively as it had the effect of nullifying the rights and interests that had already accrued to the assessees based on the 2001 circular. The Court also held that the assessees could not be placed in a disadvantageous position by the retrospective application of the circular, as they had acted in reliance on the 2001 circular and had arranged their affairs accordingly. The Court further held that the Commissioner of Sales Tax did not have the power to issue a circular that would have the effect of withdrawing a benefit conferred upon an assessee or imposing a liability upon an assessee with retrospective effect.
Final Decision: The Court held that the 2005 circular was invalid to the extent that it sought to apply retrospectively. The Court also held that the assessees could not be placed in a disadvantageous position by the retrospective application of the circular. The Court further held that the Commissioner of Sales Tax did not have the power to issue a circular that would have the effect of withdrawing a benefit conferred upon an assessee or imposing a liability upon an assessee with retrospective effect.
( 1 ) ALL the above numbered petitions, which are instituted under Article 226 of the Constitution, are directed against Public Circular dated September 2, 2005 issued by the Sales Tax Commissioner, State of Gujarat, whereby it is declared that the view expressed in Public Circular dated February 19, 2001 that the judgment of the Supreme Court rendered in Coastal Chemicals Limited v. Commercial Tax Officer, A. P. and Ors. holding that the natural gas used as fuel cannot be treated as consumable goods, is based on the language of Section 5-B of the Andhra Pradesh General Sales Tax Act, 1957, which is quite different from the language of the Gujarat Sales Tax Act, 1969 and the Rules framed thereunder and, therefore, the principle laid down by the Supreme Court in Coastal Chemicals Limited (supra) is not applicable to the cases arising under the Gujarat Sales Tax Act, 1969, is no longer valid in view of the decision of the Gujarat Sales Tax Tribunal, Ahmedabad, rendered in Second Appeal No. 683 of 2003 filed by Pandesara Industries Private Limited against State of Gujarat decided on September 28, 2004 and, therefore, Circular dated February 19, 2001 is cancelled with effect from the date of issuance of the said circular,. e. February 19, 2001. Another common alternative relief claimed in all these petitions is to issue a writ of mandamus or a writ of certiorari or any other appropriate writ or order declaring that the circular dated September 2, 2005 revoking and/or cancelling the circular dated February 19, 2001 does not have any retrospective effect. In addition to above mentioned reliefs, the petitioners in Special Civil Application No. 12104 of 2006 have prayed to issue a writ of mandamus or any other appropriate writ or order to set aside judgment dated September 28, 2004 rendered by the Gujarat Sales Tax Tribunal in Second Appeal No. 682 of 2003, which was filed by Pandesara Industries Private Limited against State of Gujarat.
( 2 ) AS common questions of facts and law arise for determination of the Court in these petitions and joint request is made by the learned Counsels for the parties that the petitions be disposed of by a common judgment, this Court proposes to dispose them of by this common judgment.
( 3 ) ALL the above numbered petitions can broadly be categorized into two groups,. e. Group No. I and Group No.. Special Civil Application Nos. 9169 of 2006 to 9190 of 2006 can be placed in Group No. I wherein it is not the case of the petitioners that they had established their respective units on the basis of any incentive scheme sponsored by the State Government nor they are claiming benefits of any exemption notification issued under Section 49 (2) of the Act, but they are relying upon the language of the Gujarat Sales Tax Act, 1969 ("the Act" for short) and the Gujarat Sales Tax Rules, 1970 ("the Rules" for short) to contend that the circular dated September 2, 2005 is bad in law for the reasons stated in the memorandum of petitions. As far as rest of the petitions are concerned, they can be treated as falling within Group No. II wherein the petitioners also claim that they had established their units on the basis of some incentive scheme sponsored by the State Government followed by the exemption notification issued under Section 49 (2) of the Act read with the schedule to the notification and, therefore, the circular dated September 2, 2005 should be treated as bad in law and should be set aside.
( 4 ) AS far as Group No. I is concerned, this Court proposes to refer to the facts mentioned in Special Civil Application No. 9169 of 2006 for the sake of convenience.
4. 1 The said petition is jointly filed by 22 industries. The petitioners therein are the industries having their units at Vatva Industrial Estate, Ahmedabad. They are engaged in the manufacture of dyes, dye-intermediates and pigments. They use Liquid Diesel Oil (LDO) to generate steam and the steam is supplied to the boiler through pipes
