Strict construction of tax exemption bars extension beyond the statute, with earlier notifications and executive orders unable to enlarge eligibility.

A tax exemption must be strictly confined to the statutory conditions in the applicable enactment and notification. The earlier exemption under the Karnataka Sales Tax Act did not continue automatically under the Karnataka Value Added Tax Act, and the respondents had to satisfy section 5(2) as new industrial units; they did not, so the exemption claim failed. There can be no estoppel against a statute, so the State could oppose the claim notwithstanding the earlier regime. An executive order describing tourism as an industry could not enlarge the statutory class of beneficiaries, so it did not confer exemption on hotel units.

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Issues: (i) Whether the respondents were entitled to continue to claim tax exemption despite the change from the Karnataka Sales Tax Act, 1957 to the Karnataka Value Added Tax Act, 2003 and the absence of express or implied repeal of the earlier exemption notification; (ii) whether the State was estopped from contending that the respondents were not new industrial units entitled to exemption under section 5(2) of the Karnataka Value Added Tax Act, 2003; (iii) whether the Government order declaring tourism as an industry could be relied upon to treat hotel units as industrial units for the purpose of tax exemption.

Issue (i): Whether the respondents were entitled to continue to claim tax exemption despite the change from the Karnataka Sales Tax Act, 1957 to the Karnataka Value Added Tax Act, 2003 and the absence of express or implied repeal of the earlier exemption notification.

Analysis: The earlier exemption under the Karnataka Sales Tax Act, 1957 could not automatically be carried forward under the Karnataka Value Added Tax Act, 2003. The later enactment operated as an independent taxing statute, and the exemption under section 5(2) was confined to the class of new industrial units contemplated by that provision and the notification issued under it. Continuance of a benefit under the former regime did not dispense with satisfaction of the statutory conditions under the later regime.

Conclusion: The respondents were not entitled to exemption merely on the basis of the earlier notification.

Issue (ii): Whether the State was estopped from contending that the respondents were not new industrial units entitled to exemption under section 5(2) of the Karnataka Value Added Tax Act, 2003.

Analysis: There can be no estoppel against a statute. A claim to exemption must satisfy the statutory requirements of the taxing enactment and the relevant notification. Since the respondents did not answer the description of new industrial units under the Karnataka Value Added Tax Act, 2003, the State was entitled to resist the claim notwithstanding the earlier exemption regime.

Conclusion: The plea of estoppel was rejected and the State's objection was upheld.

Issue (iii): Whether the Government order declaring tourism as an industry could be relied upon to treat hotel units as industrial units for the purpose of tax exemption.

Analysis: An executive order issued for a different purpose, namely financial assistance to tourism-related units, could not enlarge or alter the statutory class of beneficiaries under section 5(2) of the Karnataka Value Added Tax Act, 2003. The determining factor remained whether the units were industrial units within the meaning of the taxing statute and notification, not whether tourism was described as an industry in an administrative order.

Conclusion: The Government order could not be applied to confer tax exemption on the respondents.

Final Conclusion: The exemption claims failed because the respondents did not satisfy the statutory description of new industrial units under the later sales tax regime, and the earlier notification, estoppel, and executive classification of tourism could not override the taxing statute.

Ratio Decidendi: A tax exemption must be strictly construed and can be claimed only by a person who squarely satisfies the statutory conditions of the applicable enactment and notification; an executive order and the doctrine of estoppel cannot be used to extend a tax exemption beyond the statute.

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