AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 918
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....EZ), Kakkanad. The 1st petitioner, because of its location in a Special Economic Zone (SEZ), claims statutory/other benefits given to units located in an SEZ. As part of its turnover, the 1st petitioner claims to have two portfolios: viz. exports outside the country and deemed exports in the permitted Domestic Tariff Area (for short 'DTA'). The petitioner, for availing the benefits, is subjected to the condition of obtaining positive foreign exchange earnings. In December 2002, the 1st petitioner commenced its operations from CSEZ. 3.1 The 1st petitioner in this writ petition raises a fundamental issue viz. whether the units in SEZs registered under the Kerala General Sales Tax Act 1963 (for short 'Sales Tax Act')/VAT, the sales tax be levied and demanded on deemed export to DTA; and alternatively, whether the petitioner is entitled to exemption from levy of sales tax because of the policy decision of the State Government declared for units established in SEZs in the State of Kerala. The Kerala Special Economic Zone Policy dated 17.06.2003 of the State Government holds out an incentive from levy of sales tax, duties, local taxes, and levies on the sales attracting tax liability in....
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....e DTA sales by units in the SEZs. The 1st petitioner, in terms of Ext.P2 Policy, read with Ext.P9 Policy is entitled to claim exemption of payment of VAT up to the Assessment Year 2012-13. The State Government is bound by the Policies covered by Exts.P2 and P9. The Doctrine of Promissory Estoppel precludes the State and its Officers from demanding VAT from the 1st petitioner on the sales effected by the 1st petitioner to DTA. The absence of a notification under VAT could not be a ground for refusing or denying the incentive/benefit, for the Policy of the Government guides the authorities on this behalf. Reply of Respondents 4. The Assistant Commissioner (Law) filed counter-affidavit dated 09.09.2013. The averments made and the foundation in the writ petition for the declaratory relief, are categorically denied. The claim of 1st petitioner on DTA sales, namely sales from CSEZ to within the State of Kerala as deemed exports, is incorrect. The claim for exemption of payment of tax is covered by Exts.P2 and P3, but with effect from 01.04.2005 KVAT Act 2003 is implemented in place of the Sales Tax Act. It is stated the notifications issued by the Government during the Sales Tax regime....
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....ed that the benefits covered by Ext.P9 Policy are granted to units established in SEZs. It is further held that the Policy in Ext.P9 intended for SEZ is not disputed, and Llyod Electric and Engineering Ltd.'s case is more or less similar to the issue on hand. By holding that two Departments of Government cannot speak in two different voices, the benefit of tax exemption is denied. The reasons stated by the respondent for denying the benefit, viz. the absence of a notification exempting payment of VAT under the KVAT Act, is unsustainable because when the Government is encouraging the Special Economic Zone, it is only just and proper that the Policy announced by the Government is allowed to be implemented, i.e., under the VAT regime. Yet another finding in the judgment on which serious contentions are raised by the appellant, for convenience, is excerpted hereunder: "16. ......... Therefore though exemptions are to be granted by issuing notifications as prescribed under the Act and the earlier notifications ceased to exist by operation of Section 32 (1) of the KVAT Act, 2003, and though Section 6 (7) (b) exempt the units in SEZ from payment of tax for sale to the units alone, t....
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....present, under the VAT regime, sales to SEZ at the first point alone are exempted from sales tax. SEZ Policy does not envisage sales from SEZ to DTA as deemed export. The claim of the petitioner for exemption of payment of sales tax on sales made from SEZ to DTA is untenable. Summarized the objections for the relief of declaration and extension of Doctrine of Promissory Estoppel, the reply of the Additional Chief Secretary needs to be reproduced, which reads thus: "1. After the enactment of KVAT Act, no exemption can be granted unless otherwise provided under the said Act and the exemptions already granted under the KSALES TAX Act will cease to exist from the date of the promulgation of the new Act. 2. Clause 6 of the SEZ policy of the Government of Kerala dated 06.10.2008 shall have effect from the date of policy and the industrial units can be granted exemption from tax, subject to the legal provisions in the enactment. 3. In this particular case, Government has no objection to give the benefits till KVAT act came into force. However, after the enactment, Government has no statutory power to provide such exemption and hence the policy could not be given effect to." W.A. No....
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....m payment of Sales Tax was granted. If a minimum or maximum period is stipulated and during the currency of the stated period, changes are carried out to a declared policy, then an argument is available. The converse, according to him, is that the State Government or, for that matter, State Legislature, have retained the discretion to make necessary changes to the notification in Ext.P3 dated 13.02.2004. The right claimed by the petitioner rests on the amended Policy made in Ext.P9. Ext.P9 does not create a right, either statutory or vested, in favour of the petitioner and the declaratory relief, for any purpose, acts counter to the competence of the State Legislature and the KVAT Act. It is vehemently argued that the Doctrine of Promissory Estoppel, in the case on hand, is set up against the jurisdiction of the State Legislature, there cannot be Promissory Estoppel against a Statute, and the power of the State Legislature in bringing forth legislation is within its competence. The exemptions sought are in respect of indirect taxes, and the equitable Principle of Promissory Estoppel is very liberally applied by the impugned judgment against the power and competence of the State Gov....
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....963 amendment to Schedule 1 of the Sales Tax Act was introduced. Sl No.68 in Schedule 1 to Sales Tax Act deals with the class of industrial undertakings and other establishments, trading units, and developers in the SEZ from payment of tax. Therefore, the Policy resulted in exemption from payment of State taxes and even with the consolidation and amendment of law by the KVAT Act, the declared policy of the State cannot and could not be bypassed. The petitioner places its right to Ext.P9 Policy and claims the benefit of exemption from State taxes up to 2012-13 by reckoning the commencement of the industry in December 2002. The Assessment Orders on DTA sales are contrary to the policy covered by Exts.P3 and P9. 8.1 By relying on the very judgments considered by the learned Single Judge, he canvasses that a statement in the form of a promise has been treated as a sufficient requirement for granting the benefit of the exemption on the Principle of Promissory Estoppel in the reported cases. It is argued that Ext.P9 is a Policy document declared and released by the State Government, with a full understanding or requirements of law under the KVAT Act. What cannot be carried out ought not....
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.... relief by referring to the Promissory Estoppel operates against the competence of the State Legislature and the Statute. Therefore, the declaration prayed for per se is illegal, unconstitutional and unavailable to the petitioner. 9.1 We notice from the undisputed circumstances that the writ petitioner, based on a promise in the form of a Policy document, did not establish the industry in CSEZ. On the contrary, in its pleading, it is averred that the writ petitioner established the industry in CSEZ in December 2002, i.e., prior to the Policy in Ext.P3. The Policy document and the exemption are dated 17.06.2003 and 13.02.2004. Between 01.04.2005 and 06.10.2008, there was no order of the State Government enabling the petitioner or similarly situated units to continue to claim the exemption granted from payment of sales tax by Ext.P3. The claim is invigorated with the amended Policy dated 06.10.2008 in Ext.P9. In this background, the petitioner claims declaratory relief. 9.2 The prayer as made in the writ petition, namely writ of mandamus, or declaration, is a discretionary relief, either as common law or constitutional remedy. Declaration, by its very nature, is a judgment that sta....
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....on pay despite it, the one who gave the promise or assurance cannot afterwards be allowed to revert to their previous legal relations as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualification which he himself has so introduced.", Halsbury's Laws of England, Fourth Edition, Vol.16 in Para 1514 at page 1017 (c) Doctrine of "promissory estoppel" has been evolved by the Courts on the principle of equity to avoid injustice, Ashok Kumar Maheshwari v. State of UP, 1988 SCC LSS 592 at 597 [Indian Evidence Act (1 of 1872), S. 115]. (d) The rule of 'promissory estoppel' can be invoked only when it is shown that there was a declaration or promise made which induced the party to whom the promise was made to alter its position to its disadvantage. Doctrine of 'promissory estoppel' has been evolved by the Courts on the principle of equity, to avoid injustice., Sharma Transport v. Govt. of A.P., (2002) 2 SCC 188, 200] (e) The principle of 'promissory estoppel' is that where one party has by his word or conduct made to other a clear and unequivocal promise or representation which is intended to creat....
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..... There is no reason why it should be given only a limited application by way of defence. It can be the basis of a cause of action. *** *** *** It is true that to allow promissory estoppel to found a cause of action would seriously dilute the principal which requires consideration to support a contractual obligation, but that is no reason why this new principle, which is a child of equity brought into the world with a view to promoting honesty and good faith and bringing law closer to justice, should be held in fetters and not allowed to operate in all its activist magnitude, so that it may fulfil the purposes for which it was conceived and born. (Paras 12 and 13) 10.1 In Home Secretary, U.T. Of Chandigarh v. Darshjit Singh Grewal case (supra) while dealing with the applicability of the Principle of Promissory Estoppel against the statutory provision, the Supreme Court held that "....It is thus abundantly clear that an equitable rule by the rule of promissory estoppel cannot be invoked to repeal a statutory provision - which can indeed be termed mandatory." 10.2 In Kasinka Trading v. Union of India and Shabi Construction Co. v. City & Industrial Development Corporation (supr....
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....and." 34. From the above reading of the relevant judgments, it is abundantly clear that the equitable principle of promissory estoppel cannot be invoked for enforcing promises in the teeth of the provisions of law. Having concluded that the Government Order (20.03.2004), granting Sales Tax/Works Contract Tax exemption was ultra vires the Section 10(1) of the KSALES TAX Act, the promise, in furtherance of Government Order, in the form of BIFR Scheme dated 17.01.2005 being unlawful, cannot in our view, be enforced on equitable consideration. 35. Further, in Arcelor Mittal Nippon Steel (Supra) this Court has held that: "22.... The principle of promissory estoppel shall not be applicable contrary to the Statute. Merely because erroneously and/or on misinterpretation, some benefits in the earlier assessment years were wrongly given, cannot be a ground to continue the wrong and to grant the benefit of exemption though not eligible under the exemption notification." (emphasis supplied) 11. The judgment under appeal considers the decisions relied on by the writ petitioner. We notice that the consideration before us is whether the ratio laid down in Nestle India Ltd. and Llyod Ele....
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....olicy of the State, or where any application or other proceedings is pending on the date of commencement of this Act, such exemption granted or due to be granted shall have operation only till the day preceding the date of commencement of this Act: Provided that the Government may, by notification, which may be subject to such conditions and restrictions as may be specified therein, order to defer the payment of the whole or any part of the tax payable by such industrial units under this Act, which shall not be more than the unavailed portion of the exemption to which such unit would have been eligible had the notification issued under the KSALES TAX Act, 1963 (15 of 1963) been in force on the date of commencement of this Act, and that the tax or taxes so deferred shall be repaid, after the expiry of the period for which such deferment is granted, in such instalments over a period of five years, in such manner as may be specified." 11.1 Ext.P9 Policy grants exemption from payment of sales tax/VAT and the said Policy by itself is not an enforceable document since Ext.P9 envisages issuance of a notification for giving effect to the Policy decisions borne out by Ext.P9. It is at th....