Research › Search › Judgment

Punjab High Court · body

2010 DIGILAW 2543 (PNJ)

VARUN BEVERAGES LTD. v. STATE OF HARYANA

2010-09-06

ADARSH KUMAR GOEL, AJAY K.MITTAL

body2010
JUDGMENT ADARSH KUMAR GOEL :- This petition challenges order passed under section 56(3) of the Haryana Value Added Tax Act, 2003 (annexure P7). It also challenges section 8(1) of the Act which restricts input-tax credit on transfer of goods within the State on the ground that it was contrary to the promise made in white paper (annexure P4) issued by the Empowered Committee of State Finance Ministers. The case of the petitioner is that it is in the business of trading in soft drinks. It purchased VISI coolers for the period from January 1, 2009 to March 31, 2009 within the State of Haryana and paid 12.5 per cent tax. The goods which were purchased in the State of Haryana were transferred to the branches of the petitioner in the State of Rajasthan. The petitioner was not allowed input-tax credit under the VAT Act. As per the white paper, annexure P4, issued by the Empowered Committee of State Finance Ministers (constituted by the Ministry of Finance, Government of India on the basis of resolution adopted in the conference of the Chief Ministers on November 16, 1999) input-tax credit was to be provided if local taxes were in excess of four per cent. In spite of above policy declaration the State of Haryana did not make amendment in the VAT Act. The rate of tax was fixed at 12.5 per cent as per section 7 of the Act. Section 8 of the Act continues to provide that input tax on goods purchased was to be allowed on sale of goods to a dealer liable to pay tax in the State and not on transfer of goods to a dealer outside the State. Section 8 of the Act continues to provide that input tax on goods purchased was to be allowed on sale of goods to a dealer liable to pay tax in the State and not on transfer of goods to a dealer outside the State. The petitioner made an application (annexure P6) under section 56 of the Act seeking following clarification : "Whether the State of Haryana is denying to comply with the commitments made in the Empowered Committee of the State Finance Ministers regarding input of tax credit in excess of four per cent for stock transfers of goods out of the State by virtue of section 8 read with entry No. 5(ii) of Schedule E of the Haryana Value Added Tax Act, 2003 ?" Clarification given by impugned order is that under the provisions of the VAT Act, 2003, no input-tax credit could be allowed on goods purchased and transferred outside the State as section 8 denies input-tax credit in respect of such goods. We have heard learned counsel for the petitioner. The learned counsel for the petitioner submits that denial of input-tax credit in the VAT Act is contrary to the contents of policy declaration issued in white paper, reproduced above. Reliance is placed on the judgment of the honourable Supreme Court in State of Punjab v. Nestle India Ltd. [2004] 136 STC 35 (SC); AIR 2004 SC 4559, holding that the State was bound by the principles of promissory estoppel. We are unable to accept the submission. It is not disputed that the petitioner is not entitled to input-tax credit under the provisions of the existing framework of law. If the contention of the petitioner based on declaration in white paper is to be accepted, it will amount to giving of a direction to act against the existing law or to enact law giving effect to the declaration. Executive is bound to act according to the existing framework of law and no direction can be issued either to act against the law or to enact the law even if promise to make a law has been given in policy declaration. The judgment in Nestle India Ltd.'s case [2004] 136 STC 35 (SC); AIR 2004 SC 4559 is distinguishable. Therein a statement was made by the Chief Minister that purchase tax on milk and milk products will be abolished. The statement was incorporated in a circular. The judgment in Nestle India Ltd.'s case [2004] 136 STC 35 (SC); AIR 2004 SC 4559 is distinguishable. Therein a statement was made by the Chief Minister that purchase tax on milk and milk products will be abolished. The statement was incorporated in a circular. Accordingly, the writ petitioner did not pay the tax and sought exemption. Even though the decision was taken by the council of Ministers, demand was raised from the petitioner which was challenged. Reliance was placed on statutory provision for grant of exemption under sections 30 and 30A. The said contention was upheld. The honourable Supreme Court affirmed the view taken by this court. While discussing the law on the point in para 30 of the judgment, limitation on the concept of promissory estoppel were noticed, i.e., (a) requirement of public interest, (b) representation made being against law. Quoting from Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. [1979] 44 STC 42 (SC); [1979] 2 SCC 409, it was observed : "... Thus, if the statute does not contain a provision enabling the Government to grant exemption, it would not be possible to enforce the representation against the Government, because the Government cannot be compelled to act contrary to the statute. But if the statute confers power on the Government to grant the exemption, the Government can legitimately be held bound by its promise to exempt the promisee from payment of sales tax." After applying the said principle, it was held as under : "In the case before us, the power in the State Government to grant exemption under the Act is coupled with the word 'may' - signifying the discretionary nature of the power. We are of the view that the State Government's refusal to exercise its discretion to issue the necessary notification 'abolishing' or exempting the tax on milk was not reasonably exercised for the same reasons that we have upheld the plea of promissory estoppel raised by the respondents. We, therefore, have no hesitation in affirming the decision of the High Court and dismissing the appeals without costs." The above principles have been reiterated in subsequent judgments, inter alia, in Bannari Amman Sugars Ltd. v. Commercial Tax Officer [2005] 139 STC 86 (SC); [2005] 1 SCC 625, and Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector and E.T.I.O. AIR 2007 SC 1984 . Ltd. v. Electricity Inspector and E.T.I.O. AIR 2007 SC 1984 . No doubt, when the principle of promissory estoppel, applies even the State is not exempted from liability to carry out a representation made. However, as already mentioned, in absence of law permitting carrying out of a promise, the State cannot be compelled to act contrary to the existing law. In view of above settled legal position, we are unable to entertain this petition. Accordingly, the petition is dismissed.