Case: Amrit Banaspati Co. Ltd.  Vs. State Of Punjab

Facts, found by the learned single Judge, which were sufficient to direct the government to honour its commitments of refunding sales tax to the appellant on principle of promissory estoppel were announcement of policy by the Government to refund sales tax, as an incentive to those who were willing to set up large scale selective industries in the focal points, letter of the appellant seeking details of policy as he was willing to set up a Vanaspati manufacturing unit, favourable response from t he Director of Industries followed by exchange of letters and meetings between appellants representatives and Secretary of Industries extending assurance that the incentives shall be available to; the appellant acting on which it purchased land, machinery etc., laying of foundation stone by the Governor and issuance of notification declaring the land, on which unit was established, in focal point. The order was set aside in appeal and it was held that even though rule of equitable estoppel should be observed by all government and public authorities but its scope was restricted and it could not be extended, too widely so as to bind a government even where its officials in excess of their authority or against the interest of the government extended the promise. The Bench drew inference against the appellant from its letters seeking written assurance that the concession would be extended to it which came, as well, in June, 1969 but before that the policy had, already, undergone change in May, 1969.The Bench further felt mystified that even though there was a decision of Cabinet Sub-Committee as far back as 1966 not to give any refund of sales tax yet the Government officials acting contrary to it issued the brochure and corresponded with the appellant in, wholly unauthorised manner therefore their action could not create any right in favour of the appellant. It also negatived the claim of appellant, as refund of an amount paid as sales tax by the appellant, would be raising revenue by the Government not for itself or for public but for a private person which would be contrary to Articles 265 and 266 of the Constitution of IndiaLaw of Promissory Estoppel which Found its `most eloquent exposition in Union of India v. Indo Afghan Agencies, 1968 (2) SCR 366 , crystallised in Motilal Padampat Sugar Mills v. State of U.P., 1972 (2) SCR 641 as furnishing cause of action to a citizen, enforceable in a court of law, against government if it or its officials in course of their authority extended any promise which created or was capable or creating legal relationship, and it was acted upon, by the promise irrespective of any prejudice. It was reiterated in Union of India v. Godfrey Philips India Ltd., 1985 (4) SCC 370 and was taken further when it was held that no duty of excise was assessable on cigarettes manufactured by assessee by including, cost of corrugated fibreboard conta iners, when it was clearly represented by the Central Board of Excise and Customs in response to the submission made by the Cigarette Manufacturers Association-and this representation was approved and accepted by the Central Government - that the cost of corrugated fibreboard containers would not be includible in the value of the cigarettes for the purpose of assessment of excise duty. In Delhi Cloth and General Mills Ltd . v. Union of India, 1988 (1) SCR 383  it was held .

Reasoning: But refund of tax is made in consequence of excess payment of it or its realisation illegally or contrary to the provisions of law. A provision or agreement to refund tax due or realised in accordance with law cannot be comprehended. No law can be made to refund tax to a manufacturer realised under a statute. It would be invalid and ultra vires. The Punjab Sales Tax Act provided for refund of sales tax and grant of exemption in circumstances specified in Sections 12 and 30 respectively. Neither empowered the Government to refund sales tax realised by a manufacturer on sales of its finished product. Refund could be allowed if tax paid was in excess of amount due. An agreement or even a notification or order permitting refund of sales tax which was due shall be contrary to the statute. To illustrate it the appellant claimed refund of sales tax paid by it to the State Government of sale made by it of its finished products. But the tax paid is not an amount spent by the appellant but realised on sale by it. What is deposited under this head is tax which is otherwise due under provisions of the Act.Return of refund of its or its equivalent, irrespective of from is repayment or refund of sales tax. This would be contrary to Constitution. Any agreement for such refund being contrary to public policy was void under Section 23 of Contract Act. The constitutional requirements of levy of tax being for the welfare of the society and not for a specific individual the agreement or promise made by the government was in contravention of public purpose thus violative of public policy. No legal relationship could have arisen by operation of promissory estoppel as it was contrary both to the Constitution and the law. Realisation of tax through State mechanism for sake of paying it to private person directly or indirectly is impermissible under Constitutional scheme. The law does not permit it nor equity can countenance it. The scheme of refund of sales tax was thus incapable of being enforced in a court of lawFallacy of such constitutionally inhibited policy, sacrificing public interest resulting in illegal private enrichment is exposed by claim of refund for nearly Rs. 2 crores, for a period of three years, only, when tot al investment in establishing the unit was Rs. 1.5 crores, Levy of tax to raise revenue for promoting economic growth of the State reduced itself in enhancing the profit margin of the manufacturer and the sales tax stood converted into income of the appellant. Such contrivance of law even though bona fide is legally unenforceable.