CWP No. 14323 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No. 14323 of 2010 Date of Decision: 6.9.2010 M/s Varun Beverages Ltd. ....Petitioner. Versus State of Haryana and others ...Respondents. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sunil Panwar, Advocate for the petitioner. ADARSH KUMAR GOEL, J. 1. This petition challenges order passed under Section 56(3) of the Haryana VAT Act, 2003 (Annexure P-7). 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 P-4) issued by the Empowered Committee of State Finance Ministers. 2. Case of the petitioner is that it is in the business of trading in soft drinks. It purchased VISI coolers for the period from 1.1.2009 to 31.3.2009 within the state of Haryana and paid 12.5% 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 White Paper, CWP No. 14323 of 2010 -2- Annexure P-4, 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 4%. 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% 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. The petitioner made an application (Annexure P-6) 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 4% for Stock transfers of goods out of the State by virtue of Section 8 r/w 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. 3. We have heard learned counsel for the petitioner. 4. Learned counsel for the petitioner submits that denial of input tax credit in the VAT Act is contrary to the contents of policy CWP No. 14323 of 2010 -3- declaration issued in White Paper, reproduced above. Reliance is placed on the judgment of the Hon'ble Supreme Court in State of Punjab v. M/s. Nestle India Ltd. and another, AIR 2004 Supreme Court 4559 holding that the State was bound by the principles of promissory estoppel. 5. 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. 6. The judgment in M/s Nestle India Ltd's case 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 Hon'ble 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 CWP No. 14323 of 2010 -4- being against law. Quoting from M/s Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh and others, 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 powers on the Government to grant exemption, the Government can legitimately be held bound by its promise to exempt the promisee from payment of sales tax.” 7. 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.” 8. The above principles have been reiterated in subsequent CWP No. 14323 of 2010 -5- judgments, inter alia, in Bannari Amman Sugars Ltd. v. Commercial Tax Officer and others, (2005) 1 SCC 625 and Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector and E.T.I.O. and others, AIR 2007 SC 1984. 9. 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. 10. In view of above settled legal position, we are unable to entertain this petition. 11. Accordingly, the petition is dismissed. (ADARSH KUMAR GOEL) JUDGE September 6, 2010 (AJAY KUMAR MITTAL) gbs JUDGE