JUDGMENT Satish Chandra, C.J.
1. The petitioners import and sell exercise books. They also manufacture them for sale. They challenge the levy of sales tax on the turnover of exercise books.
2. Previously sale of exercise books was exempt though sales tax was leviable on sale of paper used for manufacturing exercise books. This position was effected by the State Government of Uttar Pradesh by issuance of several notifications under the provisions of Section 4 of the U. P. Sales Tax Act, 1948. In 1973, the State Government changed its policy. It confined the exemption from sales tax to exercise books manufactured from paper purchased within the State of Uttar Pradesh. Other kinds of exercise books were made liable to sales tax at the rate of 5 per cent. This included exercise books imported from outside Uttar Pradesh. The levy of sales tax on exercise books was challenged in a group of writ petitions. Laxmi Paper Mart, Agra v. State of Uttar Pradesh 1974 U.P.T.C. 474 held that, the levy of sales tax on exercise books imported from outside Uttar Pradesh violated Article 301 of the Constitution and since similar goods manufactured or produced in the State were not similarly taxed, the imposition was not saved by Article 304(a). In consequence the term "importer" occurring in the relevant notification dated 1st December, 1973, was quashed. The decision was rendered by this Court on 21st August, 1974.
3. On 20th May, 1976, the State Legislature enacted the U. P. Sales Tax (Amendment and Validation) Act (23 of, 1976). Section 16 of this amending Act is material for our purposes. By it the exemption of exercise books, if made from paper purchased within Uttar Pradesh, was repealed. All exercise books were liable to sales tax at the rate of 5 per cent. The amendment in the relevant notifications effected by Section 16 was made retrospective with effect from 1st December, 1973, and the imposition of the tax was made valid notwithstanding any judgment, decree or order of any court to the contrary as if the notifications as amended by this section had been in force at all material times.
4. The result was that exercise books of all kinds became taxable at 5 per cent. Simultaneously another notification was issued by the State Government exempting paper, which was a raw material used for manufacture of exercise books, from levy of sales tax. In order to avoid hardship to dealers, the State Government issued an administrative instruction to the Commissioner of Sales Tax that the tax levied on paper which was raw material for the manufacture of exercise books between 1st December, 1973, and 20th May, 1976, shall be adjusted against liability to pay sales tax on exercise books made from locally purchased paper. Thus the hardship likely to be caused to the dealers in this respect was considerably wiped out.
5. The present petitioners have come to this Court to challenge the validity of this amending Act of 1976. Its validity has been challenged on the following grounds:
(i) the doctrine of promissory estoppel invalidates this Act;
(ii) the Act violates Article 19(1)(f) and (g) of the Constitution;
(iii) the amending Act was confiscatory in nature and so violates Article 31 of the Constitution.
6. In our opinion the doctrine of promissory estoppel has no application. In 1973 the State Government issued notifications under the relevant provisions of the Sales Tax Act exempting exercise books made from locally purchased paper. Other kinds of exercise books were liable to sales tax at 5 per cent. These notifications were, in their true nature and character, subordinate legislations. In 1976 the State Legislature intervened and amended the relevant notifications in relation to exercise books so as to make the turnover of exercise books taxable at 5 per cent.
7. The doctrine of promissory estoppel is an equitable principle. According to the Supreme Court decision in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh A.I.R. 1979 S.C. 621, the true principle of promissory estoppel is that where one party has by his words or conduct made to the other a clear and unequivocal promise intended to create or effect a legal relationship to arise in future, knowing or intending that it would be acted upon by the other party to whom the promise is made, and it is, in fact, so acted upon by the other party, then the promise would be binding on the party making it and he would not be permitted to go back upon it, if it would be inequitable to allow him to do so, having regard to the precedent and attendant circumstances. The doctrine applies against the Government.
(1) It cannot be invoked for preventing the Government from acting in discharge of its duty under the law, i.e., it cannot be applied in teeth of an obligation or liability imposed by law ;
(2) it cannot be invoked to compel the Government or even a private party to do an act prohibited by law ; and (3) there can be no promissory estoppel against the exercise of legislative power. The legislature can never be precluded from exercising its legislative function by resort to the doctrine of promissory estoppel.
8. In the present case, the levy of sales tax has bee a brought about by legislative enactment. The amending Act of 1976 bodily changes the relevant entries in the notifications issued by the State Government. It, by these changes, levied sales tax with retrospective effect from 1st December, 1973, onwards.
9. The learned counsel for the petitioners submitted that the levy of sales tax continues to be by virtue of the notifications issued by the State Government and so the principle that the doctrine of promissory estoppel cannot be invoked against the legislative exercise has no application. The submission is misconceived.
10. The State Government had issued two notifications on 1st December, 1973. By the first (No. 6623) exercise book manufactured from paper purchased within Uttar Pradesh was exempted. The amending Act of 1976 has repealed this entry from the notification. The exemption has completely gone and with retrospective effect. It can no longer be said that the notification issued by the Government ever exempted such exercise books manufactured from locally purchased paper. The second notification (No. 6624) dated 1st December, 1973, substituted the existing entry against serial number 4 retrospectively by the following entry :
12. It is noticeable that the amending Act did not amend entry No. 4 in Notification No. 6624. It did not merely delete the phrase "other than those referred to in Notification No. ST-II-6623/X-1012-1972 dated 1st December, 1973". It deleted the entire entry and substituted it by a fresh entry retrospectively. Thus the levy of sales tax on exercise books at 5 per cent has been made solely because of the legislative exercise made by Amending Act No. 23 of 1976. The retrospective levy is also because of this legislative enactment. Though the notification issued by the State Government remains, it cannot be said that the State Government is responsible for the levy of sales tax on exercise books at 5 per cent. It is the State Legislature which is solely and exclusively responsible for it. Hence the doctrine of promissory estoppel cannot be invoked. The Supreme Court has ruled that there can be no promissory estoppel against the exercise of legislative power. The legislative power can be exercised by the legislature. It can, on being delegated within constitutionally permissible limits, be also exercised by the executive, namely, the Government. In the exercise of such delegated functions the Government frames rules which are legislative in character. Such notifications are not tantamount to making any promises to any individual on the basis of which a dealer can invoke the doctrine of promissory estoppel. For this reason also, it cannot be said that when the State Government issued the notifications on 1st December, 1973, exempting exercise books made from locally purchased paper, it held out any promise on which the doctrine of promissory estoppel could validly rest. This point has no substance.
13. It was then submitted that the amending Act of 1976 violates Article 19 as well as Article 31 because its provisions are in their true nature confiscatory and constitute unreasonable restriction on the fundamental right to carry on business. We see no substance in this submission.
14. Previously, sale of paper which was used as raw material in manufacturing exercise books was liable to sales tax at 5 per cent. At that time the sale of exercise books made from locally purchased paper was exempt. When the levy of sales tax on other kinds of exercise books was quashed by this Court because of violation of Article 301 of the Constitution, the State Government changed its policy. It took a policy decision to levy sales tax on exercise books and exempt sale of raw materials for manufacture of exercise books, i.e., paper. Thenceforward raw materials were exempt. The finished products, namely, the exercise books, alone were liable to sales tax. In order to effectuate this scheme it issued a notification exempting paper from sales tax. It also issued administrative instructions directing the sales tax authorities to adjust the tax paid on sale of paper between 1st December, 1973, to 20th May, 1976, against tax leviable for that period on sale of exercise books. This considerably ameliorated the hardship likely to be felt by the dealers in exercise books. Of course, it did not put the dealers completely on a par, because the sale price of paper is less than the sale price of exercise books. It was conceded by the learned counsel that the relief would extend to somewhere between two-third to three-fourth of the tax liability on exercise books. We fail to see how can then this levy be called "confiscatory". Retrospective levy of tax with a view to validate past levy and collection of tax has never been per se held confiscatory or amounting to unreasonable restriction within the meaning of Article 19 of the Constitution.
15. Our attention was invited to a decision of the Calcutta High Court in Bengal Paper Mill Co. Ltd. v. Commercial Tax Officer, Calcutta [1976] 38 S.T.C. 163. In that case, the retrospectivity was about 27 years. It was held by the Calcutta High Court that such retrospective imposition of fresh tax which could not be recovered by the dealer from his buyers would make an appreciable impact on his finances and imposed unreasonable resections on the fundamental rights guaranteed by Article 19(1)(f) and (g) of the Constitution. The case is clearly distinguishable. Here the retrospectivity is less than 3 years, i.e., between 1st December, 1973, and 20th May, 1976. In the next place, it is a validating enactment. The levy was there previously also but it was struck down by the High Court. The amending Act validates the levy to safeguard, inter alia, taxes already collected. Section 64A of the Sale of Goods Act which was introduced with effect from 22nd September, 1963, enables the seller to recover from the buyer any fresh tax which might be imposed on the seller after the contract of sale is concluded. Under this provision, a selling dealer can always recover such tax from the buyer. Further, it is settled law that inability to pass on the tax to a buyer will not render the enactment violative of Article 19(1)(f) and (g).
16. In Hira Lal Rattan Lal v. Sales Tax Officer, Section III, Kanpur A.I.R. 1973 S.C. 1034, the Supreme Court observed:
A feeble attempt was made to show that the retrospective levy made under the Act is violative of Article 19(1)(f) and (g). But we see no substance in that contention.... Further the retrospective amendment became necessary as otherwise the State would have to refund large sums of money. The contention that the retrospective levy did not afford any opportunity to the dealers to pass on the tax payable to the consumers, has not much validity. The tax is levied on the dealer; the fact that he is allowed to pass on the tax to the consumers or he is generally in a position to pass on the same to the consumer has no relevance when we consider the legislative competence.
17. In Assistant Commissioner of Urban Land Tax, Madras v. Buckingham and Carnatic Co. Ltd. A.I.R. 1970 S.C. 169, the Supreme Court observed that as a general rule it may be said that so long as a tax retains its character as a tax and is not confiscatory or extortionate, the reasonableness of the tax cannot be questioned. It is not possible to put the test of reasonableness into the straight jacket of a narrow formula. The objects to be taxed, the quantum of tax to be levied, the conditions subject to which it is levied and the social and economic policies which a tax is designed to subserve are all matters of political character and these matters have been entrusted to the legislature and not to the courts. In applying the test of reasonableness it is also essential to notice that the power of taxation is generally regarded as an essential attribute of sovereignty and constitutional provisions relating to the power of taxation are regarded not as grant of power but as limitation upon the power which would otherwise be practically without limit.
18. We have already seen that the amending Act is neither confiscatory nor extortionate. Ex hypothesi its reasonableness cannot be questioned. Even if it is justiciable it has been shown to be reasonable.
19. Towards the end, the learned counsel faintly submitted that the amending Act violates Article 20 of the Constitution because the provisions of the Sales Tax Act relating to prosecution of dealers can be invoked against the petitioner. We are not told here whether the provisions of the Sales Tax Act relating to prosecution would become applicable because of the retrospective levy and the technical failure of the dealers to comply with it prior to the enforcement of the amending Act. Moreover, the petitioners do not complain of prosecution. So, on fact, the situation does not arise. We are hence not called upon to consider whether the impugned amending Act violates Article 20 of the Constitution.
20. In the result, the various submissions raised in support of the writ petitions having failed, the same are dismissed with costs.