1998 Supreme(P&H) 700

PUNJAB AND HARYANA HIGH COURT
G.S. Singhvi and M.L. Singhal, JJ.
M/s Nestle India Limited - Petitioners
Versus
State of Punjab - Respondents
Civil Writ Petition No. 9974 of 1997.
Decided On : 18 May, 1998

Headnote:

PURCHASE TAX - Levy on milk - Abolition - Promise/representation made by the government to the public that purchase tax will not be levied on milk - Petitioners acted upon the promise and changed their position - Respondents are stopped from going back from the promise made by them and force the petitioners to pay purchase tax on milk - Doctrine of promissory estoppel/equitable estoppel is available to the petitioners.

Fact of the Case:

The petitioners, who are engaged in the manufacture of milk products, challenged the notices issued by the respondents requiring them to pay purchase tax on milk under the Punjab General Sales Tax Act, 1948 for the period commencing from 1.4.1996. The petitioners pleaded that the policy declaration made by the Chief Minister on 26.2.1996 to abolish purchase tax on milk and the subsequent actions taken by the department to issue circulars to the competent authorities to take action in accordance with the decision of the Government amounts to a promise/representation made to the petitioners and other assessees that purchase tax will not be levied on milk and as the petitioners have acted upon the said promise and have changed their position, the respondents are stopped from going back from the promise made by them and force the petitioners to pay purchase tax on milk.

Finding of the Court:

The Court held that the doctrine of promissory estoppel/equitable estoppel is available to the petitioners and the respondents are stopped from going back from the promise made by them and force the petitioners to pay purchase tax on milk.

Issues: Whether the doctrine of promissory estoppel/equitable estoppel is available to the petitioners to question the levy of purchase tax w.e.f. 1.4.1996.

Ratio Decidendi: The Court held that the doctrine of promissory estoppel/equitable estoppel is available to the petitioners because: (a) the then Chief Minister of the State had made a public announcement on 26.2.1996 for abolition of purchase tax on milk; (b) the Finance Minister of the State had in his budget speech dated 30.3.1996 made on the floor of the Legislative Assembly declared that the purchase tax shall be abolished w.e.f. 1.4.1996; (c) the Financial Commissioner (Taxation) wrote letter dated 26.4.1996 to the Excise and Taxation Commissioner, Punjab conveying the governments decision to abolish purchase tax on milk w.e.f. 1.4.1996 and the Excise and Taxation Commissioner issued circular letter dated 8.5.1996 to all the concerned authorities conveying the governments decision about the abolition of purchase tax on milk; (d) in the meeting held on 27.6.1996 under the Chairmanship of the Chief Minister, which was attended by the Finance Minister and the Excise and Taxation Minister, apart from the various Financial Commissioners, the decision to abolish the purchase tax on milk was reiterated and it was decided to issue formal notification in a day or two; (e) the Finance Department formally approved the proposal of the Administrative Department to abolish purchase tax on milk and the Council of Ministers, in its meeting held on 21.8.1996 formalised that decision; (f) acting on the declaration made by the Chief Minister in the meeting dated 26.2.1996 and the announcement made by the Finance Minister in the budget speech dated 30.3.1996 in the Legislative Assembly and the letter circulated by the Financial Commissioner (Taxation) and the Excise and Taxation Commissioner, Punjab, the petitioners and other manufacturers of milk products as well as the milk producers diverted the funds available at their disposal. The petitioners used a substantial part of the saving for the benefit of the farmers and milk producers and did not collect the element of purchase tax. They also gave higher price for purchases made from the milk producers; (g) the Excise and Taxation Department and the assessing authorities accepted the returns filed by the petitioners without payment of purchase tax; (h) nobody objected to the filing of returns without payment of purchase tax even though no formal notification had been issued; (i) nobody in the government denied or controverted the news items appearing in the press regarding the abolition of purchase tax; (j) the present government issued advertisement (Annexure-P. 18) enclosed with C.W.P. No. 9974 of 1997 claiming credit of having abolished purchase tax on milk.

Final Decision: The Court allowed the writ petitions and quashed the impugned notices and demands issued by the respondents for levy of tax on the milk purchased by the petitioners from 1.4.1996 to 4.6.1997.