Tax exemption in revival scheme cannot override statute; promissory estoppel cannot sustain an unlawful benefit.

An exemption from works contract tax granted in a revival scheme was held to be outside the scope of Section 10(1) of the Kerala General Sales Tax Act, 1963 because that provision permits exemptions only for specified goods or a genuine class of persons, not for a single industrial unit. Promissory estoppel could not be used to compel the State to continue a benefit contrary to statute, and the sanctioned revival scheme under the sick industrial companies law could not override the State tax prohibition. The later withdrawal of the exemption was therefore upheld, as continuation would have perpetuated an unlawful individual benefit.

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Issues: (i) Whether the tax exemption granted for works contract tax in the revival scheme could be treated as valid and enforceable notwithstanding Section 10 of the Kerala General Sales Tax Act, 1963. (ii) Whether the State was precluded by promissory estoppel or the binding nature of the sanctioned revival scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 from withdrawing the exemption by the later government order.

Issue (i): Whether the tax exemption granted for works contract tax in the revival scheme could be treated as valid and enforceable notwithstanding Section 10 of the Kerala General Sales Tax Act, 1963.

Analysis: The exemption had to be traced to the statutory power under Section 10 of the State sales tax law. An exemption under that provision could be granted only to specified goods or a specified class of persons. The relief in question was extended to a single industrial unit and not to a genuine class of similarly situated units. The exemption notification or order had to be read as a whole and could not be enlarged by importing a time limit or other conditions from earlier policy material. In substance, the benefit was found to be outside the permissible scope of Section 10(1).

Conclusion: The exemption was held to be ultra vires Section 10(1) of the Kerala General Sales Tax Act, 1963 and could not be sustained as a valid individual exemption.

Issue (ii): Whether the State was precluded by promissory estoppel or the binding nature of the sanctioned revival scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 from withdrawing the exemption by the later government order.

Analysis: Promissory estoppel cannot be invoked to compel the Government to act contrary to statute. A sanctioned scheme under the sick companies law binds the concerned parties, but it cannot override a prohibition contained in the State tax statute. Since the exemption itself was not legally permissible under the State Act, the scheme could not confer an enforceable right to continue it. The later withdrawal was also justified because the benefit had been extended only to one unit, without lawful basis, and continuation would perpetuate an illegality.

Conclusion: The doctrines of promissory estoppel and binding scheme could not bar withdrawal of the exemption, and the State's action was upheld.

Final Conclusion: The challenge to the withdrawal of the tax exemption failed, and the impugned judgment upholding the State's decision was sustained.

Ratio Decidendi: An exemption granted in aid of rehabilitation cannot be enforced against the State if it is contrary to the governing tax statute, and promissory estoppel cannot be used to compel continuation of a benefit that the statute does not permit.

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