Retrospective curtailment of industrial tax exemption barred where vested rights, promissory estoppel, and legitimate expectation applied.

An industrial exemption granted for a fixed term could not be retrospectively curtailed by an amending notification where the benefit had already crystallised after expansion, eligibility certification, and issuance of the exemption order. The power to cancel or vary notifications did not authorise retrospective withdrawal of vested or accrued rights. The State was also prevented from denying the promised exemption because the unit had altered its position on the faith of the representation, and no overriding public interest justified departure. Promissory estoppel and legitimate expectation, reinforced by Article 14, made the attempted withdrawal arbitrary and impermissible; the assessee retained the exemption for the full original period.

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Issues: (i) Whether the amending notification could retrospectively curtail the exemption already granted for a fixed period and thereby take away accrued rights; (ii) whether the State could deny the exemption in the teeth of promissory estoppel, legitimate expectation, and Article 14 of the Constitution of India.

Issue (i): Whether the amending notification could retrospectively curtail the exemption already granted for a fixed period and thereby take away accrued rights.

Analysis: The exemption under the original notification had been granted after the industrial unit had completed expansion, obtained the eligibility certificate, and secured the exemption order for a fixed seven-year period. The later amendment was expressly prospective and could not be read as withdrawing the benefit already crystallised for units that had commenced production and been sanctioned exemption before the amendment. Section 10 of the Kerala General Sales Tax Act, 1963 empowered the Government to grant exemption and to cancel or vary notifications, but the power to cancel or vary was not held to authorise retrospective withdrawal so as to impair vested or accrued rights. The Court also accepted that the later notification preserving the benefit for units already sanctioned exemption reinforced this conclusion.

Conclusion: The retrospective curtailment of the already sanctioned exemption was impermissible and the accrued exemption right of the assessee remained protected.

Issue (ii): Whether the State could deny the exemption in the teeth of promissory estoppel, legitimate expectation, and Article 14 of the Constitution of India.

Analysis: The industrial unit had altered its position by making substantial investment on the faith of the State's representation and the incentive notification. The doctrine of promissory estoppel was held applicable to statutory notifications where a clear promise had induced alteration of position and no overriding public interest justified departure. The principle of legitimate expectation, grounded in fairness and non-arbitrariness under Article 14 of the Constitution of India, also supported continuation of the promised exemption. The Court found no overriding public interest to justify depriving the assessee of the remaining exemption period, and characterised the State's action as arbitrary and unreasonable.

Conclusion: The State was estopped from denying the promised exemption and its attempt to withdraw the benefit was violative of Article 14.

Final Conclusion: The assessee was entitled to retain the sales tax exemption for the full period originally granted, and the contrary action of the authorities could not be sustained.

Ratio Decidendi: Where an industrial exemption is granted for a fixed term and the beneficiary has altered its position on the faith of that representation, the exemption cannot be retrospectively withdrawn or curtailed in the absence of clear statutory authority, and such withdrawal is invalid if it defeats promissory estoppel and legitimate expectation without overriding public interest.

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