Pournami Oil Mills, Vs. State of
Kerala & ANR  INSC 275 (19 December 1986)
MISRA RANGNATH MISRA RANGNATH BHAGWATI, P.N.
CITATION: 1987 AIR 590 1987 SCR (1) 654 1986
SCC Supl. 728 JT 1986 1112 1986 SCALE (2)1225
RF 1992 SC1075 (8)
Kerala General Sales Tax Act, 1963: s.
10--Power of Government to grant exemption and reduction of Tax--Small Scale
Industries--Purchase Tax and Sales Tax Concession--Whether could be withdrawn.
Promissory estoppel--Applicability of.
Section 10 of the Kerala General Sales Tax
Act, 1963 empowers the Government in public interest to make an exemption or
reduction in rates either prospectively or retrospectively in respect of any
tax payable under the Act.
The State Government with a view to boost
industrialisation, by an order dated 11th April, 1979 offered incentive to
Small Scale industries, to be set up thereafter, in form of exemption from
sales tax and purchase tax for a period of five years from the date of
commencement of production. By a second order dated 29th September, 1980,
published in the Gazette on 21st October, 1980 purported to be made under s. 10
of the Act, the Government withdrew the exemption relating to purchase tax and
confined the exemption from sales tax to the limit specified.
The appellants who set up their industries
after April 11, 1979, including those who did it after 21st October, 1980,
claimed benefit of exemption from purchase tax and sales tax in terms of the
first order. They pleaded the rule of estoppel against the State Government in
making the second order. The High Court in dismissing their Writ Petitions
proceeded on the footing that the first order was not made in exercise of
statutory power while the second order was issued under I0 of the Act.
Allowing the appeals by Special Leave, the
HELD: I. Where the authority making an order
has power conferred upon it by statute to that effect, such an order if made
without 655 indicating the section under which it is made, it would be deemed
to have been made under the enabling provision. In the instant case, therefore,
both the orders are covered by s. 10, though in the earlier order there was no
reference to the statutory provision. [658G-H]
2. The appellants who in response to the first
order dated April 11, 1979 set up their industries prior to 21st October, 1980
would be entitled to exemption extended and/or promised under that order. Such
exemption would continue for the full period of five years from the date they
started production. New industries set up after 21st October, 1980 would not be
entitled to that benefit as they had noticed of the curtailment in the
exemption before they came to set up their industries. They would be entitled
to exemption from sales tax only to the limit specified in the second order.
3. If in response to an order made by the
Government and in consideration of the concession made available therein the
promoters of any small scale concern set up their industries within the State,
they would certainly be entitled to plead the rule of estoppel in their favour
when the State purports to act differently. In the facts of the present case,
however, the plea of estoppel is unanswerable. [659B.
F] Motilal Padampat Sugar Mills Co. Ltd. v.
State of U.P.  2 SCC 409, Bakul Cashew Co. v. Sales Tax Officer, Quilon,
 2 SCC 365, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 626
of 1986 etc.
From the Judgment and Order dated the 7th
June, 1984 of the Kerala High Court in O.P. No. 6642 of 1982 Soli J. Sorabji,
G.V. lyer, A.S. Nambiar, S. Kumar, E.M.S. Anam and R.N. Keswani for the
T.S.K. Iyer, V.J. Francis and N.M. PopIi for
The Judgment of the Court was delivered by
RANGANATH MISRA, J. All these appeals are by special leave and are directed
against judgments rendered by the Kerala High Court in Writ Petitions filed
before it. The High Court in each case refused to grant relief.
656 Two Notifications/Orders issued by the
State Government are relevant. The first one is dated 11.4. 1979 and the second
is. dated 29.9.1980 which was published in the State Gazette on 21.10.1980. For
convenience, the texts of the two Notifications/Orders are extracted below:
"Order dated 11.4.1979:
The incentives now given to the industries in
the State are too meagre and inadequate to attract industries to this State
when compared to the incentives available for the industries in many other
States. Further there are certain inherent disincentives. also peculiar to this
State such as high wage rates, minimum wages for certain sections, lack of
availability of raw materials, etc. The question of offering some incentives by
the State to attract new industries has been under consideration of the
The question whether any additional incentive
can be given to the industrial concern the State plans to consider in detail
and it was felt that the question of strengthening the traditional industries
which are labour-intensive, rehabilitation of sick units and the promotional
activities for the growth of new industries should be examined in depth for
indentifying the problems and adoption of various measures necessary to promote
industrial growth in the State. A Committee consisting of the following officers
was therefore set up to study the various problems and submit report
....................................." The Committee finalised its report
on 20th March, 1979. The Government has considered the recommendations and
suggestions of the Committee in detail and they are pleased to approve the
following package of measures for promoting industrial development in Kerala:
SMALL SCALE INDUSTRIES:
New industrial Units under small-scale
industries set up after 1.4.1979 will be exempted from the payment of sales-tax
for a period of five years from the date of production
657 The relevant portion of the second
notification reads thus:
"In exercise of the power conferred by
section 10 of the Kerala General Sales Tax Act ( 15 of 1963) the Government of
Kerala have considered it necessary in the public interest so to do, hereby
make an exemption in respect of the tax payable under the said Act on the
turnover of the sale of goods produced and sold by the new industrial units
under the small-scale industries for a period of five years from the date of
commencement of sale of such goods by the said units subject to the conditions
that if the tax collected by any such units by way of tax on their sales shall
be paid over to Government and that the sales tax, if any, already paid by such
units to Government shall not be refunded.
Provided that such units shall produce
proceedings of the General Manager, District Industries Centre, declaring the
eligibility of the units for claiming exemption from sales-tax.
Provided further that the cumulative sales
tax concessions granted to a unit at any point of time within this period shall
not exceed 90 per cent of the cumulative gross fixed capital investment of the
EXPLANATION: for the purpose of this notification
new industrial unit under the SmallScale Industries shall mean undertakings set
up on or after1st April, 1979 and registered with the Department of Industries
and Commerce as a small-scale industrial unit.
This notification shall be deemed to have
come into force with effect from 1st April, 1979".
Section 10 of the Kerala General Sales Tax
Act at the time the two orders were made ran thus:
"Power of Government to grant exemption
and reduction in rate of tax:(1) The Government may, if they consider it
necessary in the public interest, by notification in the Gazette, make an
exemption or reduction in rate (either prospectively or retrospectively) in
respect of any tax payable under this Act;
(i) on the sale or purchase of, any specified
goods or class of goods, at all points or at a specified point or points in the
series of sales or purchases by successive dealers. or (ii) by any specified
class of persons in regard to the whole or any part of their turnover.
(2) Any exemption from tax, or reduction in
the rate of tax, notified under sub-section (1):
(a) may extend to the whole State or to any
specified area or areas therein;
(b) may be subject to such restrictions and
conditions as may be specified in the notification;
(3) The Government may, by notification in
the Gazette, cancel or vary any notification issued under sub-section
(1)." It may be possible to contend with plausibility that in the absence
of an enabling provision in the statute the State Government would not have the
power to give up a part of the tax due to the State and there can be no
estoppel against statute. But that question does not arise here because we have
Section 10 empowering the State Government to grant exemption from tax.
During the heating of the appeals it has been
contended that the notifications in question were not in exercise of the powers
under section 10 of the Act. The High Court has proceeded' on the footing that
the first order dated 11.4.
1979 was not made in exercise of statutory
powers while the second order was issued in exercise of powers under section
10. Having read the two orders and the
contents, we are of the view that both the orders are covered by the provisions
of section 10 of the Act though in the earlier order there is no reference to
section 10. It is a well-settled principle of law that where the authority
making an order has power conferred upon it by statute to make an order made by
it and an order is made without indicating the provision under which it is
made, the order would be deemed to have been made under the provision enabling
the making of it, We accordingly hold that both the orders are under section 10
of the Act.
659 Under the order dated 11.4.1979, new
small-scale units were invited to set up their industries in the State of
Kerala and with a view to boosting of industrialisation, exemption from sales
tax and purchase tax for a period of five years was extended as a concession
and the five-year period was to run from the date of commencement of production.
If in response to such an order and in consideration of the concession made
available, promoters of any smallscale concern have set up their industries
within the State of Kerala, they would certainly be entitled to plead the rule
of estoppel in their favour when the State of Kerala purports to act
differently. Several decisions of this Court were cited in support of the stand
of the appellants that in similar circumstances the plea of estoppel can be and
has been applied and the leading authority on this point in the case of M.P.
Sugar Mills v. State of U.P.,  2 SCC 409.
On the other hand, reliance has been placed
on behalf of the State on a judgment of this Court in Bakul Cashew Co. v.
Sales Tax Officer, Quilon,  2 SCC 365.
In Bakul Company's (supra) case this Court found:
"That there was no clear material to
show any definite or certain promise had been made by the Minister to the
concerned persons and there was no clear material also in support of the stand
that the parties had altered their position by acting upon the representations
and suffered any prejudice. On facts, therefore, no case for raising the plea
of estoppel has been made out." This Court proceeded on the footing that
the notification granting exemption retrospectively was not in accordance with
section 10 of the State Sales Tax Act as it then stood, as there was no power
to grant exemption retrospectively. By an amendment that power has been
subsequently conferred. In these appeals there is no question of retrospective
exemption. We also find that no reference was made by the High Court to the
decision in M.P. Sugar Mills' case (Supra). In our view, to the facts of the
present case, the ratio of M.P. Sugar Mills' case directly applies and the plea
of estoppel is unanswerable.
It is not disputed that the first Order
namely, the one dated 11.4. 1979 gave more of tax exemption than the second
one. The second notification withdrew the exemption relating to purchase tax
and confined the exemption from sales tax to the limit specified in the proviso
of the Notification. All parties before us who in response to the Order of
April 11, 1979 set up their industries prior to 21.10.1980 within the State of
Kerala would thus-be entitled to the exemption 660 extended and/or promised
under that Order. Such exemption would continue for the full period of five
years from the date they started production. New industries set up after 21.10.
1980 obviously would not be ,entitled to that benefit as they had noticed of
the curtailment in the exemption before they came to set up their industries.
In the course of hearing and in the written
submissions furnished on behalf of the State it was contended that the question
as to which of the appellants are entitled to the benefit should be left to the
Sales Tax Authorities to decide. We are of the view that once the law is
settled, that part of the decision may be left to the Departmental authorities
and they may decide the question on merits in appropriate proceeding in
accordance with the law laid down in this judgment.
Each of the appeals is allowed. Parties are
directed to bear their own costs throughout.
P.S.S. Appeal allowed.