VAT exemption for SEZ sales depends on statutory support; promissory estoppel cannot override the tax law framework.

An SEZ unit could not claim VAT exemption on sales to the Domestic Tariff Area merely on the basis of the State SEZ policy or promissory estoppel, because the Kerala Value Added Tax Act, 2003 required a supporting statutory footing. The earlier exemption under the Kerala General Sales Tax Act, 1963 depended on the then-existing legal framework, while the KVAT regime materially changed the position: section 6(7)(b) exempted only specified SEZ sales and section 32(1) preserved earlier concessions only within the statutory scheme. As no notification was issued to operationalise the amended policy under KVAT, the tax demand remained valid.

---

---

Issues: Whether an SEZ unit was entitled to VAT exemption on sales from the SEZ to the Domestic Tariff Area on the strength of the State's SEZ policy and the doctrine of promissory estoppel, despite the absence of a supporting notification under the Kerala Value Added Tax Act, 2003.

Analysis: The exemption earlier granted under the Kerala General Sales Tax Act, 1963 was traceable to the then-existing statutory framework and notifications issued under Section 10. After the Kerala Value Added Tax Act, 2003 came into force, the statutory scheme changed materially. Section 6(7)(b) of the KVAT Act exempted sales to units situated in a Special Economic Zone, while Section 32(1) limited the survival of earlier exemptions and contemplated only deferment within the statutory scheme. The amended SEZ policy of 06.10.2008 contemplated further notification to operationalise the policy, but no such notification under the KVAT regime was issued. Promissory estoppel cannot be invoked to compel a benefit that is contrary to statute or beyond governmental authority, and a declaratory relief under Article 226 cannot be granted to override the legislative scheme governing VAT exemptions.

Conclusion: The SEZ unit was not entitled to VAT exemption on DTA sales under the policy or on promissory estoppel, and the demand of VAT under the KVAT Act was valid.

Final Conclusion: The declaration granted by the Single Judge could not stand because it was inconsistent with the KVAT statutory framework and with the settled limits on promissory estoppel in fiscal matters.

Ratio Decidendi: Promissory estoppel cannot be used to enforce a fiscal promise that is unsupported by the governing statute or that would override the legislative scheme for tax exemption.

---