Promissory estoppel protected industrial tax incentives, preventing curtailment from defeating units set up in reliance on the government promise.

Government orders granting sales tax concessions to new small-scale industrial units were treated as issued under the statutory power to grant exemption or reduction in tax by notification, because the source of authority was clear from their content and purpose even without express reference to the provision. The promised five-year incentive was held capable of enforcement under promissory estoppel where units had altered their position by establishing industries in reliance on it, so later curtailment could not defeat the benefit for units set up before the withdrawal took effect. Units established after the curtailment were outside the earlier promise.

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Issues: (i) whether the two Government orders granting sales tax concessions to new small-scale industrial units were issued in exercise of the power under section 10 of the Kerala General Sales Tax Act; (ii) whether units established in reliance on the first order were entitled to the promised exemption for the full five-year period, notwithstanding the later curtailment.

Issue (i): Whether the two Government orders granting sales tax concessions to new small-scale industrial units were issued in exercise of the power under section 10 of the Kerala General Sales Tax Act.

Analysis: Section 10 empowered the Government to grant exemption or reduction in tax by notification in the public interest. Even though the earlier order did not expressly mention the provision, an order made within the statutory power is treated as one made under that enabling provision when the source of authority is otherwise clear from the content and purpose of the order. Both orders were thus referable to section 10.

Conclusion: The two orders were held to have been issued under section 10 of the Act.

Issue (ii): Whether units established in reliance on the first order were entitled to the promised exemption for the full five-year period, notwithstanding the later curtailment.

Analysis: The first order offered a concession of sales tax and purchase tax exemption for five years from commencement of production to induce new small-scale industries to set up in the State. Promoters who altered their position by acting on that representation could invoke promissory estoppel against the State. The later order curtailing the concession could not defeat the entitlement of units that had been set up before the curtailment took effect; only units established after the later order came into force were outside the promised benefit.

Conclusion: The assessees who set up units before 21-10-1980 were entitled to the exemption promised under the first order for five years from commencement of production.

Final Conclusion: The appeals were allowed and the earlier concessionary regime was held binding on the State for qualifying units that had acted upon it before the curtailment.

Ratio Decidendi: When a government notification issued under statutory power induces parties to alter their position by establishing industrial units, the State is bound by promissory estoppel and cannot withdraw the promised fiscal incentive to the prejudice of those who acted on it before the withdrawal took effect.

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