TMI Blog2022 (7) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... claim is invigorated with the amended Policy dated 06.10.2008 in Ext.P9. In this background, the petitioner claims declaratory relief. In Kasinka Trading v. Union of India [ 1994 (10) TMI 64 - SUPREME COURT] and Shabi Construction Co. v. City Industrial Development Corporation [ 1995 (4) TMI 318 - SUPREME COURT ], it has been considered whether promissory estoppel, which is based on a promise contrary to the law, can be invoked. The decision laid down that the rule of promissory estoppel cannot be invoked for the enforcement of a promise or a declaration which is contrary to law or outside the authority or power of the Government or the person making that promise. 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 this juncture, that the absence of power for issuing exemption notification comes in the way of the declaratory relief sought by the petitioner. To say that the Government has the power to grant exemption from payment of VAT, and different departments in the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 including Sales Tax Act. The Government, in the exercise of its power under Section 10 of the Sales Tax Act, incorporated Sl. No.68 to the First Schedule of notification no. GO (P) No.179/99/TD dated 31.12.1999 and granted total sales tax exemption on the sales from units located in SEZs. The KVAT Act 2003, which came into force with effect from 01.04.2005, did not contain a similar exemption from payment of Value Added Tax. The petitioner, under a bona fide belief, believed that the replacement of the Sales Tax Act by the KVAT did not affect the policy dated 17.06.2003 (Ext.P2) extending tax incentives. On the returns filed by the 1st petitioner under the KVAT Act for the year 2008-09, assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it 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 are repealed consequent to the introduction of the VAT Act by inbuilt statutory exemptions. The 3rd respondent categorically states that Exts.P2 and P3 do not have effect or currency under the VAT regime. To the extent up to 31.03.2005, the 1st petitioner was granted the exemption covered by Exts.P2 and P3. The assessments referred to in the writ petition relate to Assessment Years 2009-10 and 2010-11 and Assessment Year 2007-08 etc. and are made as per law. VAT is a state subject, and the competent Legislature enacted Value Added Tax for assessment and levy of tax for the intra-sale taking place in Kerala. Section 6(7)(b) of VAT deals with exemptions granted to CSEZ units, which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment 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, the petitioners are entitled to the benefit of the declaration in Ext P9, It is also relevant to note that the judgment rendered in Lloyd's case was by a bench of 3 judges, whereas in Amin Merchant's case it was by a bench of 2 judges. Hence the Writ Appeal. 6. The 1st petitioner relied on the correspondence between the Industries Department and the Commercial Tax Department in support of its case that the Policy is still applicable under the VAT regime. Considering the importance of the issue, we have granted liberty and also directed the Chief Secretary of Government to place before the Court the stand of Government for and on behalf of all the Departments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.1476/2019 7. Mr Mohammed Rafiq contends that the judgment under appeal is unsustainable from any perspective, for the judgment under appeal has not appreciated the pleadings and the applicable legal principles to the very case pleaded by the writ petitioner. In the case on hand, the writ petitioner established the unit in Cochin Special Economic Zone in December 2002. On 17.06.2003, i.e., after the establishment of the unit by the petitioner, the Kerala Special Economic Zone Policy was declared, followed by a statutory exemption notice dated 13.02.2004. The Government has extended the benefit as long as the law under which exemption notification was issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 Government to make legislation. 7.3 The exemption on the sales made to DTA is unavailable because the writ petitioner is established in a Special Economic Zone. The petitioner availed a few benefits while establishing the unit on the condition to contribute to the foreign trade of the Country. The sales effected by the writ petitioner to DTA cannot be treated as export, and the said contention is not supported by any law. The judgment under appeal now grants the status of exports or deemed exports to the sales made by the writ petitioner to DTA. The judgment under appeal in paragraph 16, excerpted in paragraph no.5 (supra), takes note of the absence of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA 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 to have been incorporated in Ext.P9 Policy, and the absence of notification under the KVAT Act is not a very important circumstance which could be put against the writ petitioner, because it is a matter of inter-departmental functioning and had nothing to do with the writ petitioner. The reason for praying for declaratory relief is that the petitioner assumes and seeks enforcement of the right created by a combined reading of Exts.P2, P3 and P9 Policies of the State Government. There is no infirmity in the judgment under appeal. 8.2 Learned Senior Counsel emphasizes that a practical view is taken by the State and such right has ripened into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.04.2005 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 states one s entitlement to certain rights. The rights stated briefly could be statutory, constitutional, or vested rights. Judicial discretion is exercised for according a declaratory relief. In other words, judicial discretion is the power of the Court to act, order, or grant a remedy by discerning the course prescribed by law or through or according to the law, what would be the just. In the process, the Court considers the nature of the obligation or right in respect of which relief is sought by the party, the circumstances in which the subject decision came to be made, and the effect of such declaration on the obligation or rights o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toppel' 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 create legal relations or affect a legal relationship to arise in future; knowing or intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the promise or representation would be binding on the party making it and he would not be entitled to go back upon it if it would be inequitable to allow him to do so, Sharma Transport v. Govt. of A.P., (2002) 2 SCC 188, 200, para 131. (f) It is quite fundamental that the doctrine of 'promissory estoppel' cannot be used to compel the public bodies or the Government to carry out the repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 (supra), it has been considered whether promissory estoppel, which is based on a promise contrary to the law, can be invoked. The decision laid down that the rule of promissory estoppel cannot be invoked for the enforcement of a promise or a declaration which is contrary to law or outside the authority or power of the Government or the person making that promise. 10.3 In Bangalore Development Authority v. R Hanumaiah (supra), in paragraph 34, the Supreme Court held as follows: 34 There is no provision in the Act and the Rules framed thereunder enabling BDA to reconvey the land acquired to implement a sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Electric and Engineering Ltd. cases (supra) could be applied albeit correctly to the objections raised by the respondent. Reverting to the circumstances of the case, we notice that the writ petitioner was established in an SEZ in December 2002. On the date of establishment of the industry there is no Policy on tax incentives, or the writ petitioner acted on the promise and made the investment. Ex post facto to the establishment and commencing of production, the Policy was declared and exemption notification, as part of the implementation of the Policy, was extended to the existing industries and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 this juncture, that we hold the absence of power for issuing exemption notification comes in the way of the declaratory relief sought by the petitioner. To say that the Government has the power to grant exemption from payment of VAT, and different departments in the Government have not acted in tandem and notification was not issued either for the continuation of benefit or extension of benefit, the State Legislature preferred to exercise discretion through legislation than by any mode in the matters of fiscal relaxation to units established in SEZ. In our considered view, it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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