TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 1296
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....e government officers to oversee the aforesaid scheme. 2. Vide a letter dated 25th March, 1987, the Government of India approved the hotel project of the appellants, being a 55 double room 3 star hotel project to be set up in the city of Calicut. 3. Pursuant to the aforesaid G.O. dated 11th July, 1986 and the aforesaid approval, the appellants began constructing the hotel building, which was completed in the year 1991. Notice for filing returns under the Kerala Buildings Tax Act was issued to the appellants on 5th September, 1988. The appellants replied that they relied upon the G.O. dated 11th July, 1986 and stated that they were under no obligation to furnish any return under the said Act as they were exempt from payment of building tax. 4. In pursuance of the said G.O. dated 11th July, 1986, the Kerala Buildings Tax Amendment Act of 1990 was passed with effect from 6th November, 1990. The Objects and Reasons for said amendment act read as follows: "STATEMENT OF OBJECTS AND REASONS The Government has declared tourism as an industry with a view to develop tourism in the State and announce various concessions to tourism related activities as per GO (P) 224/86/GAD dated 11.0....
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....; (viii) Ayurvedic centres with tourism potential; (ix) Exclusive handicrafts with emporia (approved by the State/Central Department of Tourism) (2) The area so notified shall be approved Tourist Centres and such other locations certified by a Committee consisting of Secretary to Government, Tourism Department, Secretary to Government Taxes Department and Director, Department of Tourism. (3) The period of exemption shall be 10 years or such shorter period in respect of specific areas as may be notified in the Gazette based on the recommendation of the Committee." 6. By a Writ Petition filed in 1989, the appellants challenged the notice dated 5th September, 1988. This resulted in a judgment of the Kerala High Court dated 30th August, 1995 by which the appellants were relegated to the Committee set up under the 1986 G.O. to pursue their claim. Till final orders were passed by the Committee, the judgment stated that the respondents would not take any coercive steps to recover any building tax assessed on the building constructed by the appellants. 7. By a letter dated 6th February, 1997, the exemption promised by the G.O. of 1986 was denied to the appellants stating tha....
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....at would only be a ministerial act which would be regarded as having been performed if Government was to be held to its promise. According to the learned counsel, therefore, a reading of the judgments of this Court would necessarily lead to granting of relief to his client. 11. Shri Radhakrishnan, learned senior counsel appearing on behalf of the respondents, countered these submissions and supported the impugned judgment of the High Court. According to Shri Radhakrishnan, a mandamus cannot be issued to the executive to frame or amend the law. In any event, according to the learned counsel, Section 3A having been deleted w.e.f. 1st March, 1993, it is clear that no relief can be granted to the appellants as on date. 12. Having heard the learned counsel for both the sides, we are of the view that it will first be necessary to examine the doctrine of promissory estoppel as laid down in M/S Motilal Padampat Sugar Mills, (1979) 2 SCR 641 and as followed in State of Punjab v. Nestle India Ltd., (2004) 6 SCC 465. 13. In the M/S Motilal Padampat Sugar Mills case, the appellant before this Court was primarily engaged in the business of manufacture and sale of sugar. An assurance was give....
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.... rectitude while dealing with its citizens"? There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obligations; but, let it be said to the eternal glory of this Court, this doctrine was emphatically negatived in the Indo-Afghan Agencies case and the supremacy of the rule of law was established. It was laid down by this Court that the Government cannot claim to be immune from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. If the Government does not want its freedom of executive action to be hampered or restricted, the Government need not make a promise knowing or intending that it would be acted on by the promisee and the promisee would alter his position relying upon it. But if the Government makes such a promise and the promisee acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such promise like any other private individual. The law cannot acquire legitimacy and gain social acceptance unless it accor....
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....ility against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from the liability: the Government would have to show what precisely is the changed policy and also its reason and justification so that the Court can judge for itself which way the public interest lies and what the equity of the case demands. It is only if the Court is satisfied, on proper and adequate material placed by the Government, that overriding public interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to enforce the promise against the Government. The Court would not act on the mere ipse dixit of the Government, for it is the Court which has to decide and not the Government whether the Government should be held exempt from liability. This is the essence of the rule of law. The burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the Court would insist on a highly rigorous standard of p....
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.... Court then went on to hold that since the Government is bound to exempt the appellant from payment of sales tax for a period of three years w.e.f. 2nd July, 1970, being the date of commencement of the production of Vanaspati, the appellant would not be liable to pay any sales tax, subject only to the State's claim to retain any part of such amount under any provision of law. In the absence of such claim, the State would have to refund the amount of sales tax collected by it from the appellant with interest thereon. 16. It is important to notice that the necessary exemption Notification in Motilal Padampat's case had not been issued under Section 4 of the U.P. Sales Tax Act, 1948. Yet, this Court held that sales tax for the period in question could not be recovered. This was done presumably because promissory estoppel is itself an equitable doctrine. One of the maxims of equity is that one must regard as done that which ought to be done. In this view of the matter, it is obvious that the High Court judgment is incorrect when it holds that as no exemption Notification was, in fact, issued by the Government under Section 3A, the petitioner would have to be denied relief. This judgme....
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....orce the estoppel against the State Government. The representation was made by the highest authorities including the Finance Minister in his Budget speech after considering the financial implications of the grant of the exemption to milk. It was found that the overall benefit to the State's economy and the public would be greater if the exemption were allowed. The respondents have passed on the benefit of that exemption by providing various facilities and concessions for the upliftment of the milk producers. This has not been denied. It would, in the circumstances, be inequitable to allow the State Government now to resile from its decision to exempt milk and demand the purchase tax with retrospective effect from 1-4-1996 so that the respondents cannot in any event readjust the expenditure already made. The High Court was also right when it held that the operation of the estoppel would come to an end with the 1997 decision of the Cabinet. In the case before us, the power in the State Government to grant exemption under the Act is coupled with the word "may" - signifying the discretionary nature of the power. We are of the view that the State Government's refusal to exerc....
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....el by conduct can be the origin of primary rights of property and of contract. 2. The central principle of the doctrine is that the law will not permit an unconscionable - or, more accurately, unconscientious - departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption be not adhered to for the purposes of the litigation. 3. Since an estoppel will not arise unless the party claiming the benefit of it has adopted the assumption as the basis of action or inaction and thereby placed himself in a position of significant disadvantage if departure from the assumption be permitted, the resolution of an issue of estoppel by conduct will involve an examination of the relevant belief, actions and position of that party. 4. The question whether such a departure would be unconscionable relates to the conduct of the allegedly estopped party in all the circumstances. That party must have played such a part in the adoption of, or persistence in, the assumption that he would be guilty of unjust and oppre....
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....umed fact or state of affairs (which one party is estopped from denying) may be relied upon defensively or it may be used aggressively as the factual foundation of an action arising under ordinary principles with the entitlement to ultimate relief being determined on the basis of the existence of that fact or state of affairs. In some cases, the estoppel may operate to fashion an assumed state of affairs which will found relief (under ordinary principles) which gives effect to the assumption itself (e.g. where the defendant in an action for a declaration of trust is estopped from denying the existence of the trust). 8. The recognition of estoppel by conduct as a doctrine operating consistently in law and equity and the prevalence of equity in a Judicature Act system combine to give the whole doctrine a degree of flexibility which it might lack if it were an exclusively common law doctrine. In particular, the prima facie entitlement to relief based upon the assumed state of affairs will be qualified in a case where such relief would exceed what could be justified by the requirements of good conscience and would be unjust to the estopped party. In such a case, relief framed on the ....
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.... the same tests in administrative law, as is executive or administrative action, as to its validity - one of these tests being the well-known Wednesbury principle under which a court may strike down an abuse of such discretionary power on grounds that irrelevant circumstances have been taken into account or relevant circumstances have not been taken into account (for example). This is clearly exemplified in Indian Express Newspapers (Bombay) Private Limited and others v. Union of India and others, (1985) 1 SCC 641. 26. In that case, by a notification dated 15.7.1977 issued under Section 25(1) of the Customs Act, a total exemption from customs duty was granted on imported newsprint. On 1.3.1981, the said Notification was superseded by the issue of a fresh notification which exempted customs duty beyond 15%. The second notification was the subject matter of challenge in the aforesaid judgment in this Court. In an instructive passage in the judgment under Heading V entitled "Are the impugned notifications issued under Section 25 of the Customs Act, 1962 beyond the reach of Administrative Law?" this Court proceeded by assuming that the power to grant exemption under Section 25 of the ....
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....sentation had been made on facts, and that it could not be said that a notification could not be rescinded or modified before the date of expiry even if the Government is satisfied that it was necessary in the public interest to rescind it. 28. This case is clearly distinguishable in that it was held (see paragraphs 22 and 27) that no incentive to set up any industry to use PVC resins had been made, and secondly, it was found necessary in public interest to rescind or withdraw such notification. On the facts of the present case, it is clear that a clear representation/promise had been made pursuant to which the State actually amended the Kerala Building Tax Act, 1975 by inserting Section 3A. And equally, there is no claim in the present case that there is any change in circumstance because of overriding public interest so that the doctrine of promissory estoppel cannot be said to apply. 29. Shri Radhakrishnan also referred to a judgment of this Court in Shree Sidhbali Steels Limited and others v. State of Uttar Pradesh and others, (2011) 3 SCC 193. On the facts in that case, a new industrial policy dated 30.4.1990 was declared by the State Government assuring the grant of 33.33% ....
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.... the State Government to grant exemptions both under Section 15 of the RST Act and Section 8(5) of the CST Act in the public interest, the State Government was competent to modify or revoke the grant for the same reason. Thus what is granted can be withdrawn unless the Government is precluded from doing so on the ground of promissory estoppel, which principle is itself subject to considerations of equity and public interest. (See STO v. Shree Durga Oil Mills). The vesting of a defeasible right is therefore, a contradiction in terms. There being no indefeasible right to the continued grant of an exemption (absent the exception of promissory estoppel), the question of the respondent Companies having an indefeasible right to any facet of such exemption such as the rate, period, etc. does not arise." (at Para 26) 32. The aforesaid paragraph 26 has been noticed by this Court in Mahabir Vegetable Oils (P) Ltd. and another v. State of Haryana and others, (2006) 3 SCC 620, (see paragraphs 34 and 35). It is clear, therefore, that the reliance by this Court in the Shree Sidhbali Steels Ltd. case upon the aforesaid judgment when it comes to non application of the principle of promissory est....
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....ed in the Indo-Afghan Agencies case. ... It will thus be seen from the decisions relied upon in the judgment that the Court could not possibly have intended to lay down an absolute proposition that there can be no promissory estoppel against the Government in the exercise of its governmental, public or executive powers. That would have been in complete contradiction of the decisions of this Court in the Indo-Afghan Agencies case, Century Spinning and Manufacturing Co. case and Turner Morrison case and we find it difficult to believe that the Court could have ever intended to lay down any such proposition without expressly referring to these earlier decisions and overruling them. We are, therefore, of the opinion that the observation made by the Court in Ram Kumar case does not militate against the view we are taking on the basis of the decisions in the Indo-Afghan Agencies case, Century Spinning & Manufacturing Co. case and Turner Morrison case in regard to the applicability of the doctrine of promissory estoppel against the Government." [SCR at pp. 689, 691] 37. Shri Radhakrishnan then referred us to the judgment in Sharma Transport v. Govt. of A.P., (2002) 2 SCC 188 at parag....