STATE OF PUNJAB versus M/S. NESTLE INDIA LTD. AND ANR.

Citation: [2004] SUPP. 2 S.C.R. 135 · Decided: 05-05-2004 · Supreme Court of India · Bench: RUMA PAL · Disposal: Dismissed

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Judgment (excerpt)

STATE OF PUNJAB 
A 
v. 
MIS. NESTLE INDIA LTD. AND ANR. 
MAY 5, 2004 
[RUMA PAL AND P. VENKATARAMA REDD!, JJ.] 
B 
Punjab General Sales Tax Act, 1948-Ss. 2(jJ), 4(B), 6, JO, II, 
13(A), 31-Punjab General Sales Tax Rules, 1949-Rules 20 to 25 & 69: 
Levy of purchase tax on milk abolished by the State Government for 
certain period-Subsequently raising of demands for the same period by C 
the State-Challenged by the assessee-Demand quashed by High Court 
holding that the State Government estopped from raising the demand 
because of its promise exempting tax on milk-On appeal, Held : State 
Government could have been es topped for the promise made by it provided 
necessary ingredients of promissory estoppel established-State possesses D 
discretionary power to exempt tax on milk-Discretionary power not 
properly exercised by it as necessary notification not issued-However, it 
failed to establish any overriding public interest which would make it 
inequitable to enforce the estoppel against it-Hence, estoppel could be 
. invoked against the State-High Court rightly quashed the demands of tax 
for the stated period. 
E 
Estoppel-Enforceability against the State Government-Scope of-
Discussed. 
Words and Phrases : 
'dealers '-Meaning of in the context of Punjab General Sales Tax 
Act. 
F 
Respondents-Producers of milk products were registered as dealers 
under the Punjab Sales Tax Act and they have been paying vurchase 
tax on milk in terms of the provisions of the Act except for the period G 
1.4.1996 to 4.6.1997. The traders did not pay the tax on the ground that 
the State Government had abolished the tax on milk for the said 
period. However, the State had raised demands for the same period. 
The respondents filed writ petitions and the High Court quashed the 
demands. Hence the present appeals, 
H 
135 
136 
SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R. 
A 
Appellant-State contended that the State Government's decision 
B 
of not abolishing purchase tax on milk was taken in public interest; 
that there could be no estoppel against the State; and that since the 
requisite exemption Notification was not issued, the respondents could 
not refuse to pay the tax on the ground of promissory estoppel. 
Dismissing the appeals, the Court 
HELD: 1.1. The incidence of taxation has been provided for under 
Section 4 of the Punjab General Sales Tax Act under which every dealer 
dealing in goods not declared tax fee under Section 6 and whose gross 
C turnover exceeds the taxable <1uantum is liable to pay tax on the sales 
effected or the purchases mad1~. Certain goods have been made tax free 
under Section 6(1) read with Schedule' B' to the Act. Section 6(2) at the 
material time provided that the State Government "after giving by 
Notification not less than twenty days notice of its intention so to may 
D by like Notification add to or delete from Schedule B and thereupon 
Schedule B shall be deemed to be amended accordingly." The State 
Government had the power to exempt or abolish milk as a taxable 
commodity. There was nothing in law which prohibited it from doing so. 
The representation to exempt milk was made by persons who had the 
E power to implement the representation. Of course, the Government 
cannot rely on a representation made without complying with the 
procedure prescribed by the relevant statute, but a citizen may and can 
compel the Government to do so if the factors necessary for founding 
a plea of promissory estoppel are established. Such a proposition would 
F 
not fall foul of the constitutional scheme and public interest. The 
appellants have been unable to establish any overriding public interest 
which would make it inequitable to enforce the estoppel against the State 
Government. The representation was made by the highest authorities 
including the Finance Minister in his Budget Speech after considering 
the financial implications of the grant ol examination to milk. It was 
G found that the overall benefit to the State's economy and the public 
would be greater if the exemption was allowed. The respondents have 
passed on the benefit of that exemption by providing various facilities 
and concessions for the upliftment of the milk producers. It would, in 
the circumstances, be inequitable to allow the State Government to resile 
H from its decision to exempt milk and demand the purchase tax with 
STATE v. NESTLE INDIA LTD. 
137 
/ 
retrospective effect from 1st April, 1996 so that the respondents cannot A

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