TMI Blog2016 (5) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicated above, therefore, we are of the view that no building tax can be levied or collected from the appellants in the facts of the present case - appeal allowed - decided in favor of appellant-assessee. - Civil Appeal No. 2480 of 2008 - - - Dated:- 11-5-2016 - A. K. Sikri And R. F. Nariman, JJ. JUDGMENT R.F. Nariman, J. 1. On 11th July, 1986, the State Government, by a Government Order (G.O.), accepted the recommendations of the Government of India suggesting that tourism be declared an industry . The fallout of this G.O. was that this would enable those engaged in tourism promotional activities to become automatically eligible for concessions / incentives as applicable to the industrial sector from time to time. Apart from various other concessions that were granted, exemption from Building Tax levied by the Revenue Department was one such concession. It was stated in the said G.O. that action to amend the Kerala Building Tax Act, 1975 will be taken separately. The G.O. went on to state that persons eligible for such concessions will, among others, be classified hotels i.e. from 1 to 5 stars. A Committee was set up consisting of three government officers to ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted during such period and in such areas as may be specified in the notification and having such specifications as may be prescribed in the rules in this behalf. Also, to effectuate the said exemption provision, Rule 14A was added in the Kerala Buildings Tax Rules, 1974 as under: Rule 14A (1) The exemption contemplated in Section 3A of the Kerala Building Tax Act, 1975 shall be applicable to the buildings having the following specifications in such Tourism sector and the construction of which is completed during such period as may be specified in the notifications:- (i) Classified hotels (1 to 5 stars) (ii) Motels(which conform to the specification of the Department of Tourism of Kerala/ Central Government) (iii) Restaurants (approved by Classification committee of the Government of India) (iv) Amusement parks and research centres approved by the Government. (v) Ropeways at tourist centres. (vi) Construction of structures like Koothambalam/Auditorium etc by schools/institutions teaching Kalaripayattu and traditional art forms of Kerala. (vii) Institutions teaching surfing, sking, gliding, trekking and similar activities whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Writ Petition on two grounds. First, it stated that as no exemption Notification had, in fact, been issued under Section 3A when it was in existence in the statute book, no claim for exemption from payment of building tax would be allowed. It further held that the mere promise to amend the law does not hold out a promise of exemption from payment of building tax. And finally, the High Court held that the question of now exempting the appellants from building tax would not arise as Section 3A itself had been omitted w.e.f. 1st March, 1993. 10. Shri V. Giri, learned Senior Advocate appearing on behalf of the appellants before us, has argued that the High Court has failed to consider various Supreme Court judgments on promissory estoppel in their true perspective. In his submission, the aforesaid judgment clearly led to the conclusion that when the Government holds out a promise which has been acted upon, except in cases of overriding public interest, which has not been claimed in the facts of the present case, the Government cannot resile from the said promise and must be held to be bound thereby. He added that there was no necessity for the Government to be directed to actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Everyone is subject to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned: the former is equally bound as the latter. It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel. Can the Government say that it is under no obligation to act in a manner that is fair and just or that it is not bound by considerations of honesty and good faith ? Why should the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the Court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. It would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour it. The Government cannot, as Shah, J., pointed out in the Indo-Afghan Agencies case, claim to be exempt from the liability to carry out the promise on some indefinite and undisclosed ground of necessity or expediency , nor can the Government claim to be the sole Judge of its liability and repudiate it on an ex parte appraisement of the circumstances . If the Government wants to resist the liability, it will have to disclose to the Court what are the facts and circumstances on account of which the Government claims to be exempt from the liability and it would be for the Court to decide whether those facts and circumstances ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be compelled to act contrary to the statute, but since Section 4 of the U.P. Sales Tax Act, 1948 confers power on the Government to grant exemption from sales tax, the Government can legitimately be held bound by its promise to exempt the appellant from payment of sales tax. It is true that taxation is a sovereign or governmental function, but, for reasons which we have already discussed, no distinction can be made between the exercise of a sovereign or governmental function and a trading or business activity of the Government, so far as the doctrine of promissory estoppel is concerned. Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it. We are, therefore, of the view that in the present case the Government was bound to exempt the appellant from payment of sales tax in respect of sales of vanaspati effected by it in the State of Uttar Pradesh for a period of three years from the date of commencement of the production and was not entitled to recover such sales tax fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4th June, 1998, the Council of Ministers decided that the decision to abolish purchase tax on milk was not accepted and, consequently, the authorities issued notice to the respondents requiring them to pay purchase tax on milk for the year 1996-1997. 18. In this background, the High Court held that the State Government was bound by its promise and representation to abolish purchase tax. According to the High Court, the absence of a financial notification was no more than a ministerial act which remained to be performed. As the respondents had acted on the representation made, they could not be asked to pay purchase tax for the year 1996-1997. The Writ Petition was allowed and the demand notice of tax for the aforesaid year was struck down. 19. This Court, after adverting to Section 30 of the Punjab General Sales Tax Act, 1948, which gave the State Government the power to exempt from purchase tax, by notification, any of the goods mentioned in the Schedule, recapitulated the entire law of promissory estoppel in great detail. It referred to M/S Motilal Padampat Sugar Mills, (1979) 2 SCR 641 and other judgments, and finally held: The appellant has been unable to establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Multiplex Ors. v. State of Gujarat Ors., (2015) 9 SCC 132 at Para 20. 21. In fact, we must never forget that the doctrine of promissory estoppel is a doctrine whose foundation is that an unconscionable departure by one party from the subject matter of an assumption which may be of fact or law, present or future, and which has been adopted by the other party as the basis of some course of conduct, act or omission, should not be allowed to pass muster. And the relief to be given in cases involving the doctrine of promissory estoppels contains a degree of flexibility which would ultimately render justice to the aggrieved party. The entire basis of this doctrine has been well put in a judgment of the Australian High Court reported in The Commonwealth of Australia v. Verwayen, 170 C.L.R. 394, by Deane,J. in the following words: 1. While the ordinary operation of estoppel by conduct is between parties to litigation, it is a doctrine of substantive law the factual ingredients of which fall to be pleaded and resolved like other factual issues in a case. The persons who may be bound by or who may take the benefit of such an estoppel extend beyond the immediate parties to it, to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of affairs were permitted. In cases falling within category (a), a critical consideration will commonly be that the allegedly estopped party knew or intended or clearly ought to have known that the other party would be induced by his conduct to adopt, and act on the basis of, the assumption. Particularly in cases falling within category (b), actual belief in the correctness of the fact or state of affairs assumed may not be necessary. Obviously, the facts of a particular case may be such that it falls within more than one of the above categories. 5. The assumption may be of fact or law, present or future. That is to say it may be about the present or future existence of a fact or state of affairs (including the state of the law or the existence of a legal right, interest or relationship or the content of future conduct). 6. The doctrine should be seen as a unified one which operates consistently in both law and equity. In that regard, equitable estoppel should not be seen as a separate or distinct doctrine which operates only in equity or as restricted to certain defined categories (e.g. acquiescence, encouragement, promissory estoppel or proprietary estoppel). 7. Es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flexible enough to remedy injustice wherever it is found. And this would include the relief of acting on the basis that a future assumption either as to fact or law will be deemed to have taken place so as to afford relief to the wronged party. 23. In the circumstances, the High Court judgment when it holds that no notification was, in fact, issued under Section 3A of the Kerala Buildings Tax Act, 1975, (which would be sufficient to deny the appellants relief) is, therefore, clearly incorrect in law. 24. However, some of the judgments of this Court have held that a Writ of Mandamus cannot be issued to the executive to frame rules or regulations which are in the nature of subordinate legislation. (See: State of Jammu Kashmir v. A.R. Zakki Ors. 1992 Supp. (1) SCC 548 at paragraphs 10 and 15, and State of Uttar Pradesh and Ors. v. Mahindra and Mahindra Limited (2011) 13 SCC 77 at 81). This is for the reason that a court would then trespass into forbidden territory, as our Constitution recognizes a broad division of powers between legislative and judicial activity. 25. However, though the power to grant exemption under a statutory provision may amount to subordinate legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters into consideration, failure to take relevant matters into consideration, etc, etc. On the facts and circumstances of a case, a subordinate legislation may be struck down as arbitrary or contrary to statute if it fails to take into account very vital facts which either expressly or by necessary implication are required to be taken into consideration by the statute or, say, the Constitution. This can only be done on the ground that it does not conform to the statutory or constitutional requirements or that it offends Article 14 or Article 19(1)(a) of the Constitution. It cannot, no doubt, be done merely on the ground that it is not reasonable or that it has not taken into account relevant circumstances which the Court considers relevant. [para 78] 27. Shri Radhakrishnan pressed into service Kasinka Trading and another v. Union of India and another, (1995) 1 SCC 274. This was a case in which PVC resins were exempted from basic import duty by a notification dated 15.3.1979. The said notification was in force up to and inclusive of 31.3.1981. However, before expiry of the time fixed in the notification, a notification withdrawing such exemption, dated 16.10.1980, was issued. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est, or if legislation was enacted by the legislature authorizing the Government to withdraw the benefit granted by the notification. The larger Bench overruled the Sant Steels case stating that its view of Section 49 of the Electricity Supply Act was plainly incorrect, and that Sections 14 and 21 of the General Clauses Act made it clear that a notification issued under Section 49 could be exercised from time to time, including the power to revoke such notification. 30. However, when it came to the applicability of the doctrine of promissory estoppel, this Court relied upon the observations made in State of Rajasthan and another v. J.K. Udaipur Udyog Ltd. and another, (2004) 7 SCC 673, and Arvind Industries and others v. State of Gujarat and others, (1995) 6 SCC 53. 31. From the State of Rajasthan case, para 25 was quoted by this Court in order to arrive at a conclusion that the recipient of an exemption granted by a fiscal statute would have no legally enforceable right against the Government inasmuch as such right is a defeasible one in the sense that it may be taken away in exercise of the very power under which the exemption was granted. What was missed from that case was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, satisfied that the aforesaid judgment can have no application whatsoever to the facts of the present case. Shree Sidhbali Steels Ltd. has been applied recently in Kothari Industrial Corporation Ltd. v. Tamil Nadu Electricity Board Ors., (2016) 4 SCC 134. 35. Shri Radhakrishnan then referred us to Excise Commissioner, U.P. v. Ram Kumar, (1976) 3 SCC 540 at para 19, for the proposition that it is now well settled by a catena of decisions that there can be no question of estoppel against the Government in the exercise of its legislative, sovereign, or executive powers. 36. This very passage was referred to in M/S Motilal Padampat Sugar Mills and was explained thus: The next decision to which we must refer is that in Excise Commissioner U.P. Allahabad v. Ram Kumar [(1976) 3 SCC 540 : 1976 SCC (Tax) 360 : 1976 Supp SCR 532] . This was also a decision on which strong reliance was placed on behalf of the State. It is true that, in this case, the Court observed that it is now well settled by a catena of decisions that there can be no question of estoppel against the Government in the exercise of its legislative, sovereign or executive powers, but for reasons which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, a discretionary power has to be exercised on facts under Section 3A of the Kerala Buildings Tax Act, 1975. The non-exercise of such discretionary power is clearly vitiated on account of the application of the doctrine of promissory estoppel in terms of this Court s judgments in Motilal Padampat and Nestle (supra). This is for the reason that non-exercise of such power is itself an arbitrary act which is vitiated by non-application of mind to relevant facts, namely, the fact that a G.O. dated 11.7.1986 specifically provided for exemption from building tax if hotels were to be set up in the State of Kerala pursuant to the representation made in the said G.O. True, no mandamus could issue to the legislature to amend the Kerala Buildings Tax Act, 1975, for that would necessarily involve the judiciary in transgressing into a forbidden field under the constitutional scheme of separation of powers. However, on facts, we find that Section 3A was, in fact, enacted by the Kerala legislature by suitably amending the Kerala Buildings Tax Act, 1975 on 6.9.1990 in order to give effect to the representation made by the G.O. dated 11.7.1986. We find that the said provision continued on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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