TMI Blog1984 (4) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... period of five years from the date of production. Mini industrial units, women's industrial units and small-scale units set up by harijans were to get the exemption for three years. The concession was also to be prospectively extended to existing units of the above three categories. Some time later, the position was further examined and another G.O. was issued, on 8th November, 1979, and in supersession of the earlier orders, providing for the following "sales tax concession": "New small scale industrial units set up after 1-4-1979 will be exempted from the payment of tax for a period of 5 years from the date of production. Small scale industrial units set up after 1-4-1979 by women and harijans anywhere in the State, and all small scale industries set up after 1-4-1979 in the Mini Industrial Estates, will be exempted from payment of sales tax for 6 years from the date of production. This concession will be available also to industries in these three categories which have not completed six year period. However, the sales tax if any already paid by the unit will not be refunded on any account." In order to give statutory backing to the "holiday", Government issued the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also, but they will be noticed and dealt with separately. 3.. Promissory estoppel is a rule of equity sometime applied by the Courts to prevent a person from asserting a legal right if he is found guilty of such inequitable conduct as requires the intervention of equity to protect the other party. The principle is that where by his words or conduct one party to a transaction makes to the other a promise which is intended to affect the legal relationship between the two, and the other party acts upon it by altering his position, the party making the promise will not be allowed to act inconsistently with it. The question is how far this principle of private law estoppel can be extended to public law, so as to compel public authorities or agencies to adhere to the representations made on their behalf. In a dispute between citizen and citizen, it is comparatively easy to find out where equity or justice lies; but in a dispute between a citizen and a public authority, elements of public interest intervene. For example, suppose a citizen is told, when land acquisition proceedings are in contemplation, that his land will not be acquired for the public purpose in view. Based on this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power exercised in a given case involves a duty "to act for the public good". Public good itself is an elusive concept depending upon certain philosophies or outlook. It will not also be easy to strike a balance between public benefit and fairness to the individual, even if it is possible to distinguish between proper and improper exercise of the power concerned. One of us (myself) had had the occasion to deal with problems relating to public law estoppel, in Govindan v. Cochin Shipyard 1983 KLT 1083, and to observe: "In most of its branches, law touches upon human behaviour classified as proper or improper by standards of current social consciousness. Law attempts to strike a balance, imposing certain minimum standards of conduct; and when an individual feels that the restrictions are unreasonable or unfair in the light of contemporary values, he reacts with anger and frustration, inviting sanctions the laws have imposed. Conventional morality and enlightened criticism have been influencing the development of law at all times, and in a sense, law is institutionalised ethics. The difference between moral and legal authority however survives because moral principles continue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by notification, only when the Government considers it necessary to do so "in the public interest". And when a notification granting exemption is issued under the section, the Government can decline to collect tax only to the extent recognised by the notification. For the Court to tell a Government that it should go further, ignoring the limits of the notification, will be to compel it to violate the law. And if the Court is to hold that the exemption recognised by a notification falls short of a promise held out earlier, and compels the State on that ground to honour the promise in full, the Court will be entering the realm of policy, and practically exercising the power under section 10 by itself. Is it more important to protect private interests based on promise than public interest reflected in the taxing policy? As between public interest which is in a way served by compelling the State to keep its faith with the public, and the public interest supposed to underly a legislative measure, which one is the Court to prefer? As the decided cases relating to taxation laws and promises held out in their background show, the judicial choice has not been uniform. 5.. The petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Anglo-Afghan Agencies case AIR 1968 SC 718 and the supremacy of the rule of lawwas established." His lordship was however free to recognise that where overriding public interest required that a Government should not be held to its word, Courts would be glad to relieve the Government from its promise, provided adequate and satisfactory reasons were advanced to justify the change in policy. It was hinted that a promise made by a person or an officer incompetent to bind the Government, could not also be enforced. Promissory estoppel was also powerless against exercise of legislative power, or in the matter of compelling a public authority to act against the law. Turning however to the facts of the case before the Court, with particular reference to the claim for exemption from tax liability, his Lordshid said: "Here, the appellant clearly altered its position by borrowing moneys from various financial institutions, purchasing plant and machinery from M/s. De Sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As sales tax would include purchase tax also, and as the notification granted exemption only for tax payable for the turnover of goods sold, the problem was aggravated. The second proviso should therefore be struck down or ignored, it is contended and the Government compelled to give full exemption from sales tax and purchase tax as originally promised. 6.. Had the decision in the Sugar Mills case [1979] 44 STC 42 (SC); AIR 1979 SC 621 stood alone, we would have been compelled to give serious consideration to this plea, despite noticeable differences in the fact-situation, to which reference will presently be made. In K.L. Ahuja v. State of H.P. [1981] 47 STC 135 the Himachal Pradesh High Court implicitly followed its lead and restrained the State from levying sales tax under a statutory notification, as it fell short of certain earlier commitments of the State. A Division Bench of the Delhi High Court, consisting of Prakash Narain and Kirpal, JJ., did likewise in the matter of duty payable under the Customs Act, in Modern Mills v. Union of India 1980 ELT 639. In the meanwhile, however, another Bench of the Supreme Court expressed certain reservations about the wide formulations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, 1979, therefore, the law was that the petitioners could have claimed exemption only in accordance with its terms. Even on the principles enunciated by Bhagwati, J., promissory estoppel could not be used to compel the Government or a public authority to act against the law, and short of compelling the State to act against the law, as statutorily enforced by the notification with retrospective effect from 1st April, 1979, there is no method of compelling the Kerala Government to give the petitioners the benefit of full exemption as prayed for. The petitioners could have been relieved of their liability to pay tax only in accordance with the statute; and the statutory method was to issue a notification under section 10. When the State Government exercised this power and issued a notification, the statutory principles applicable to the petitioners, right from 1st April, 1979, became crystallised. And no rule of equity evolved by Courts could have prevailed against the rules so legislatively ordained. As pointed out by the Supreme Court in Narinder Chand v. Union Territory AIR 1971 SC 2399: "The power to impose a tax is undoubtedly a legislative power. That power can be exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bound to recognise the exemption from the beginning of the financial year itself. The Court rejected this contention and held: "There can be no estoppel against a statute. If the law requires that a certain tax be collected, it cannot be given up, and any assurance that it would not be collected, would not bind the State Government, whenever it chose to collect it." We are of the view that the facts of the present case, in so far as they are relevant are practically indistinguishable from Mathra Parshad [1962] 13 STC 180 (SC); AIR 1962 SC 745 and that the law as laid down by the Constitution Bench should be given effect to. 9.. Gujarat State Financial Corporation v. Lotus Hotels AIR 1983 SC 848 was a case where a statutory duty was found, and the Court was satisfied that the Financial Corporation was acting arbitrarily; no question connected with the enforcement of a taxation law was involved. The plea based on Income-tax Officer v. Ponnoose 1969 KLT 641 that the full benefit of the Government orders could not have been taken away retrospectively overlooks the clear language of section 10; and if the second proviso in question was beyond Government's power under section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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