Retrospective tax exemption restriction barred, but land-ownership condition in poultry exemption notification survived constitutional challenge.

A sales tax exemption notification that imposed a new land-ownership condition for poultry farmers and hatcheries could not be treated as a mere clarification or applied retrospectively to withdraw an existing exemption, because Section 10 of the Kerala General Sales Tax Act did not authorise retrospective cancellation or variation. The challenge on constitutional and statutory grounds failed: the differential treatment based on ownership of land was held to have a rational basis, and the notification was within the State's exemption power under the Act. The plea of estoppel and promissory estoppel also failed, since there is no estoppel against law and the earlier clarification could not override the later valid notification.

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Issues: (i) whether the impugned sales tax exemption notification could operate retrospectively so as to withdraw an exemption already available under the earlier notification, (ii) whether the notification was ultra vires the Constitution of India and the Kerala General Sales Tax Act, 1963, and (iii) whether the State was barred by estoppel or promissory estoppel from enforcing the amended restriction.

Issue (i): whether the impugned sales tax exemption notification could operate retrospectively so as to withdraw an exemption already available under the earlier notification.

Analysis: Section 10 of the Kerala General Sales Tax Act, 1963 empowers the Government to grant exemption or reduction in rate of tax and to cancel or vary notifications, but the power under sub-section (3) does not authorise retrospective cancellation or variation of a notification already issued. The earlier notification, on its plain language, exempted poultry farmers and hatcheries in the State in respect of turnover from sale of chicks, chickens and poultry reared in their own farms. The later notification introduced a new restriction by limiting the benefit to farms run on land owned by the dealer and excluding leased, mortgaged, licensed or similarly held land. That was not a mere clarification of an already implicit meaning, but a substantive amendment creating a new condition. In a taxing statute, where two interpretations are reasonably possible, the interpretation favourable to the assessee must prevail.

Conclusion: The impugned notification could not operate retrospectively and was effective only prospectively.

Issue (ii): whether the notification was ultra vires the Constitution of India and the Kerala General Sales Tax Act, 1963.

Analysis: The challenge under Articles 14, 19(1)(g) and 304 of the Constitution of India was rejected. The policy of granting or limiting tax concession lies within the State's domain, and differential treatment based on ownership of land for the purpose of the exemption was held to rest on rational and justifiable grounds. The notification was also within the power conferred by Section 10 of the Kerala General Sales Tax Act, 1963. The Court followed the binding view that such exemption policy, even if limited to a class within the State, does not by itself offend the constitutional guarantees invoked.

Conclusion: The notification was held to be intra vires Articles 14, 19(1)(g) and 304 of the Constitution of India and Section 10 of the Kerala General Sales Tax Act, 1963.

Issue (iii): whether the State was barred by estoppel or promissory estoppel from enforcing the amended restriction.

Analysis: There is no estoppel against law. The earlier clarification issued by the Commissioner under Section 59A(1) of the Kerala General Sales Tax Act, 1963 was made in the context of the pre-amended notification and could not override the subsequent government notification issued under Section 10. Once the Government validly declared a new policy through the later notification, the earlier clarification did not continue to govern the field. As the earlier concession and clarification were not time-bound, no enforceable promissory estoppel arose against the State.

Conclusion: The plea of estoppel and promissory estoppel was rejected.

Final Conclusion: The petitions succeeded only to the limited extent of excluding retrospective operation of the impugned notification, while the constitutional and estoppel challenges failed.

Ratio Decidendi: A taxing notification that introduces a new substantive restriction cannot be treated as a mere clarification or given retrospective effect unless such retrospectivity is expressly authorised by the statute; in construing fiscal provisions, any reasonable ambiguity must be resolved in favour of the assessee.

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