Retrospective tax computation amendment upheld under compounding scheme; higher-of-two formula applies and promissory estoppel cannot block legislation.

The Kerala HC held that a retrospective amendment to section 7 of the Kerala General Sales Tax Act, 1963 was valid because it changed only the mode of quantification under the compounding scheme and did not abolish the scheme itself. Promissory estoppel and any alleged vested right could not prevent the Legislature from amending the taxing provision, and prior exercise of the compounding option did not create an immutable entitlement. The Court also read clauses (a) and (b) conjunctively, so the higher of the two computations governed tax payable. The retrospective amended compounding scheme was therefore sustained as a valid fiscal measure.

---

---

Issues: (i) Whether the amended provisions of section 7 of the Kerala General Sales Tax Act, 1963 could validly operate retrospectively from 1 July 2006 and apply to dealers who had already opted for compounded payment of turnover tax; (ii) whether the doctrine of promissory estoppel or any vested right protected the dealers from the retrospective amendment; and (iii) whether clauses (a) and (b) of the amended section 7 were to be read disjunctively or conjointly so as to permit an option between the two rates.

Issue (i): Whether the amended provisions of section 7 of the Kerala General Sales Tax Act, 1963 could validly operate retrospectively from 1 July 2006 and apply to dealers who had already opted for compounded payment of turnover tax.

Analysis: The amendment altered the mode of quantification under the compounding scheme and was enacted by the Legislature within its fiscal competence. A taxing statute may operate retrospectively, and such retrospectivity is not invalid merely because it affects arrangements already made for the assessment year. The amendment did not abolish the compounding scheme itself but changed the basis on which the tax was computed. The practical inconvenience caused to dealers was held insufficient to invalidate the retrospective operation on the grounds of unreasonableness or arbitrariness.

Conclusion: The retrospective amendment was upheld and was held applicable to the assessees.

Issue (ii): Whether the doctrine of promissory estoppel or any vested right protected the dealers from the retrospective amendment.

Analysis: Once the field is occupied by legislation, promissory estoppel cannot be used to prevent the Legislature from amending the law. The option exercised by the dealers under the earlier scheme did not create an immutable contractual or vested right against subsequent statutory alteration. The authority relied on by the assessees was distinguished on the footing that it involved executive promises and subordinate action, not a direct legislative change to the taxing provision.

Conclusion: No promissory estoppel or enforceable vested right barred the amended provision.

Issue (iii): Whether clauses (a) and (b) of the amended section 7 were to be read disjunctively or conjointly so as to permit an option between the two rates.

Analysis: Reading the provision as a whole, the amended scheme was intended to ensure that the higher of the two computations governed the tax payable. Punctuation, including the semi-colon and the word "or", could not override the clear legislative purpose to enhance revenue and prevent payment at the lower rate where clause (b) produced a higher figure. The amendment introduced by the later Finance Act reinforced that understanding of the statutory scheme.

Conclusion: Clauses (a) and (b) were to be applied conjunctively so that the higher amount determined the tax payable.

Final Conclusion: The appeals failed on all substantial issues, and the amended compounding scheme was sustained as a valid retrospective fiscal measure applying on the higher-of-two-computations basis.

Ratio Decidendi: A Legislature competent to enact a taxing law may amend the mode of tax computation retrospectively, and neither promissory estoppel nor prior acceptance under an optional compounding scheme can defeat the amended statutory mandate where the legislative intent is to levy the higher amount under the revised formula.

---