Summary
The steel manufacturer bought fuel under a purchase-tax exemption but sold it to a separate, ineligible power producer, buying back the electricity generated. This breached the requirement that the eligible unit itself use the purchased goods and its Form 26 declaration. Later amendments did not remove an existing entitlement; the original conditions already excluded this arrangement. Earlier exemptions did not justify continuing an erroneous benefit. The Court restored the assessing officer’s purchase-tax demand and penalty.
Issues
- Whether selling exempted fuel to a separate power producer satisfied the eligible unit’s actual-use condition.
- Whether later notifications or promissory estoppel protected the claimed exemption.
- Whether the purchase-tax demand and penalty should be restored.
Provisions considered
- Entry 255(2), notifications dated 5 March 1992, 14 November 2000 and 16 January 2002; Form 26, Gujarat Sales Tax Act, 1969 — exemption notificationsThe original actual-use condition and declaration were breached; subsequent amendments clarified or expanded eligibility without validating the separate-company arrangement. (¶ 7-18)
- Section 45(5) and (6), Gujarat Sales Tax Act, 1969The tax difference exceeded 25 per cent and the deliberate transfer to an ineligible industry warranted restoration of the assessing officer’s penalty. (¶ 23-24)
Held
- The eligible unit had to use the purchased raw materials itself. Selling fuel to another entity for electricity generation did not comply merely because the resulting electricity was bought back for steel manufacture. The power producer was independently ineligible for the incentive. (¶¶ 10-14, 17-18)
- The November 2000 notification clarified the actual-use requirement; the January 2002 amendment expanded eligibility without removing that requirement. Neither took away a right to the arrangement claimed here, which failed even under the original entry. (¶ 15-18)
- Promissory estoppel could not override the exemption’s conditions. No promise authorised transfer to the ineligible entity, the declarations were breached, and benefits erroneously granted in earlier assessment periods did not establish entitlement for later periods. (¶ 19-22)
- The difference between tax paid and tax assessed exceeded the statutory threshold. The deliberate arrangement and breach of the declaration justified the penalty. Orders setting aside the tax demand and penalty were quashed and the assessing officer’s order restored. (¶ 23-25)
Result
State appeals allowed; assessing officer’s purchase-tax demand and penalty restored; no order as to costs.