Bakul Cashew Co. & Ors Vs. Sales
Tax Officer Quilon & ANR [1986] INSC 38 (12 March 1986)
VENKATARAMIAH, E.S. (J) VENKATARAMIAH, E.S.
(J) THAKKAR, M.P. (J)
CITATION: 1987 AIR 2239 1986 SCR (1) 610 1986
SCC (2) 365 1986 SCALE (1)380
ACT:
Promissory estoppel, plea of - Phrases used
by Ministers which cannot form the basis for a plea of estoppel, detailed Sales
Tax exemption granted retrospectively by the State Government by GOMS 127/73/ID
dated 12.10.1973 withdrawn by a leter GOMS 143/73/ID dated 9.11.1973 issued
under section 10(3) of the Kerala General Sales Tax Act, 1963 (Kerala Act 15 of
1963) as amended, validity of - Power of Government to cancel the earlier
Notification vis-a-vis the right of the cashew Factory owners to secure the
exemption.
HEADNOTE:
The appellants are Cashew Processors owning
and/or working cashew factories wherein nearly about 80 per cent of the raw
nuts processed were being imported during the relevant time from African
countries. The import of raw nuts were canalised through the Cashew Corporation
of India and they were allotted to the appellants and various other factory
owners who were engaged in the business of processing cashewnuts. There was
delay in making the assessment of sales tax payable by them under section 5 of
the Kerala General Sales Tax Act, 1963 during the period 1970 to 1974 and the
Department commenced to make assessments in or about the year 1974. The
Government in the meantime issued a Notification dated 12.10.73 granting
exemption to cashew manufacturers for the period between September 1, 1970 and
September 30, 1973 and had later cancelled it by Notification dated 9.11.73,
that is within three weeks of the earlier Notification granting exemption.
The appellants filed a writ petition
contending: (i) that the Government was precluded by the rule of promissory
estoppel from claiming the purchase tax in respect of cashewnuts imported from
African countries; and (ii) that the subsequent withdrawal of the exemption
granted on 12.10.73 was bad. The Writ Petitions having been dismissed, the
appellants have come up in appeal by way of special leave.
611 Dismissing the appeal, the Court ^
HELD : 1.1 The appellants in the instant
case, are not entitled to any relief either on the principle of promissory
estoppel or on the basis of the earlier Notification issued under section 10 of
the Kerala General Sales Tax Act, 1963.
[621 E-F]
1.2 The whole case of the promissory estoppel
lacks the necessary factual foundation. In the instant case, the allegations
made in the petition do not establish (i) that there was a definite
representation by the Government to the effect that the Government will not
levy the tax; (ii) that the appellants in fact altered their position by acting
upon such representation; and (iii) that they had suffered from some prejudice
sufficient to constitute an estoppel. [617 F- G]
1.3 In cases of this nature, the evidence of
representation should be clear and unambiguous. It "must be certain to
every intent." The statements that are made by ministers at such meetings,
such as, "let us see", "we shall consider the question of
granting of exemption sympathetically", "we shall get the matter
examined", "you have a good case for exemption" etc. even if
true, cannot form the basis for a plea of estoppel. The events that have taken
place subsequently belie the fact of any such promise by the ministers. In fact
the Cashew Corporation of India had made a representation to the Government of
India on May 7, 1971 and the Government of India wrote to the State Government
on March 4, 1972 urging that the exemption prayed for by the cashew
manufacturers may be favourably considered by the Government of Kerala. The
Government of Kerala however rejected the said request. Then on further
pressure being put upon it, it issued the notification dated October 12, 1973
and immediately thereafter withdraw it after it encountered severe public
criticism. This conduct on their part is not consistent with the appellants'
case that they had actually promised in the year 1971 to exempt the cashew
trade from payment of the sales tax. [617 C-F]
2.1 The State Government had the necessary
power to cancel any Notification earlier issued, which power of cancellation
has been expressly conferred by section 10 (3) of Kerala General Sales Tax Act.
The authority which can issue a 612 Notification may certainly cancel it also.
The State Government did so and cancelled the earlier Notification as there was
a public hue and cry that the State Government had shown undue favour to the
Kerala Cashewnut factory owners at a time when the State Government was passing
through grave and difficult financial position. Moreover the transactions in
question related to the past period. [618 H, 621 D-E]
2.2 An authority which has the power to make
subordinate legislation cannot make it with retrospective effect unles it is so
authorised by the Legislature which has conferred that power on it. The power
of exemption in the instant case was exercised through a retrospective
Notification which was a piece of subordinate legislation.
Further on the date on which the notification
was issued the Kerala Government had no such power under section 10 of the Act
as it stood then to issue a notification granting exemption with retrospective
effect. Such power was actually conferred on it later on by the Kerala
Legislature only by way of amendment in 1980 by Kerala Act 19 of 1980. By the
addition of the words "either prospectively or retrospectively" in
sub-section (1) of section 10 the State Legislature has now conferred the
necessary power on the State Government to grant exemption with retrospective
effect. This amendment also suggests that earlier the Government had no such
power to grant exemption with retrospective effect. [619 A-B; 620 B-C; 621 A-C]
Income Tax Officer v. M.C. Ponnoose & Ors., [1970] 1 S.C.R. 678 referred
to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
1725 (NT) of 1977.
From the Judgment and Order dated 1st
December, 1976 of the Kerala High Court in O.P. No. 1740 of 1976.
P. Govindan Nair, Mrs. A.K. Verma, S.
Sukumaran and D.N. Misra for the Appellants.
T.S. Krishnamurthy Iyer, Karunakaran Nambiar
and V.J. Francis for the Respondents.
613 The Judgment of the Court was delivered
by VENKATARAMIAH, J. This appeal by special leave is filed against the judgment
dated December 1, 1976 in the petition bearing Writ Petition No. O.P. 1740 of
1976 on the file of the Kerala High Court filed by the afore-mentioned 26
appellants and 20 others. They prayed in the Writ Petition inter alia for the
issue of a writ in the nature of mandamus to the State Government of Kerala to
give effect to the notification issued by the State Government bearing No.
G.O.MS. 127/73/ID dated October 12, 1973
under section 10 of the Kerala General Sales Tax Act, 1963 (15 of 1963) (hereinafter
referred to as 'the Act') by which the State Government had retrospectively
granted an exemption in respect of the tax payable under section 5 of the said
Act by the cashew manufacturers in that State on the purchase turnover of
cashewnuts imported from outside India through the Cashew Corporation of India
for the period between September 1, 1970 and September 30, 1973 after quashing
the subsequent notification bearing No. G.O.MS. 143/73/TD dated November 9,
1973 issued under section 10(3) of the Act cancelling the above said
notification dated October 12, 1973. The appellants and the other persons who
had filed the writ petition before the High Court are cashew processors owning
and/or working cashew factories wherein nearly about 80 per cent of the raw
nuts processed were being imported during the relevant time from African
countries. The import of raw nuts was canalised through the Cashew Corporation
of India and they were allotted to the appellants and various other factory
owners who were engaged in the business of processing cashewnuts. It appears
that there was delay in making the assessment of tax payable by them under
section 5 of the Act during the periods 1970 to 1974 and the Department
commenced to make assessments in or about the year 1974. The Government in the
meanwhile had issued the notification dated October 12, 1973 granting exemption
to cashew manufacturers for the period between September 1, 1970 and September
30, 1973 and had later on cancelled it by notification dated November 9, 1973
within about three weeks from the date on which the exemption had been granted.
It is not necessary to refer to all the allegations made in the writ petition
for purposes of this case since the only point urged before us relates to the
right of the appellants to secure the exemption as stated in the notification
dated October 12, 1973 by virtue of the rule of 614 promissory estoppel. The
appellants urged two contentions before the High Court in support of their plea
:
(i) that the Government was precluded by the
rule of promissory estoppel from claiming the purchase tax in respect of
cashewnuts imported from African countries and
(ii) that the exemption that had been granted
on October 12, 1973 could not be withdrawn by the subsequent notification issued
on November 9, 1973. In support of first limb of their argument the appellants
depended upon the representation which was alleged to have been made on behalf
of the Government by the Chief Minister, the Industries Minister and the
Revenue Minister at a meeting held on April 25, 1971 and in support of their
second contention they depended upon section 10 of the Act. The Government
contested the case of the appellants on both these points. The High Court
upheld the case of the State Government and rejected the said contentions. It,
however, directed the Kerala Sales Tax Appellate Tribunal to make assessments
taking into account the other contentions of the assessees. This appeal by
special leave is filed against the judgment of the High Court of Kerala in the
said writ petition.
The allegations regarding the plea based on
promissory estoppel are found in Paragraphs 10 & 11 of the petition which
reads thus:-
"10. When the scheme of canalisation
came to be introduced in September, 1970, the members of the cashew industry
like the first petitioners were keen that the purchases of raw cashewnuts in
the form of allotment from the said Corporation should not be subjected to tax
under the said Act as was the case under the open general licence scheme.
The then Chairman of the said Corporation,
Shri M.C. Sarin, as also its Managing Director Shri Z.K. Joseph assured the
members of the cashew industry that such purchases would not be exigible to tax
under the said Act. In a meeting held on the 25th April 1971 where Shri Z.K.
Joseph of the said Corporation was also present the representatives of the
industry were assured by the Chief Minister Shri Achuta Menon, the then
Industries Minister Shri N.E. Bellaram and the then Revenue Minister Baby John
that no tax would be levied under the said Act on the turnover of African raw
nuts.
615
11. Subsequently, for three years, the
Respondents did not initiate assessment proceeding against the allottees like
the first petitioner and gave the allottees to believe that no tax would be
levied on such purchases, relying upon which the allottees have quoted prices
for exports and made huge commitments. If such imports were to be regarded as
taxable purchases by the respondents, the allottees, like the first petitioner
would not have made commitments with the foreign buyers. In fact, as late as
12th October, 1973, a notification was issued by the fourth respondent, a copy
of which is hereto annexed and marked Exh.
'A' under section 10 of the said Act giving
effect to such representations. The said notification was published in Kerala
Gazette on 23rd October, 1973, clearly stating that the exemption to such
purchases was being accorded on the ground of public interest. Without
assigning reasons or showing any change of circumstances, in less than twenty
days, another notification was issued on 9th November, 1973, a copy of which is
hereto annexed and marked Exh. 'B' withdrawing the said exemption." In the
counter-affidavit filed on behalf of the State Government it is stated in
Paragraphs 18 & 19 thus :
"18. The averments in para 11 are
denied. The Cashew Corporation of India wrote to the Government by Memorandum
dated 3.5.1971 that cashew industry may be exempted from payment of tax under
the Kerala General Sales Tax Act on their purchases of imported raw cashewnuts.
The Ministry of Foreign Trade also addressed a communication to the State
Government dated 4.3.1972 that the matter may be sympathetically considered.
The cashew manufacturers and exporters' Associations also moved the Government
in this behalf by memorandum dated 6.3.1972. The Government directed the Board
of Revenue (Taxes) to submit a report in the matter. The matter was engaging
the attention of the Board of Revenue and the State Government from some time.
In 616 view of very heavy stakes involved in the matter, the Government had to
analyse the entire situation, especially with reference to the very high amount
of the Revenue involved. It was reported that the grant of exemption will
involved loss of revenue of at least one crore of rupees per annum. After
consideration of the matter the State Government decided to reject the request
of exemption prayed for. The Cashew Corporation of India and the Government of
India were given a reply communicating the decision of the State Government in
February, 1973. Thereafter the Kerala State Cashew Development Corporation
requested the Govt. to re-examine the decision as the levy of tax would be
heavy burden on the industry. The Government passed an order (Ext.A) granting
the exemption for the period 1.9.1970 to 30.9.1973. It was resolved then that
tax should be levied from 1.10.1973 onwards. There was considerable criticism
about the grant of exemption especially in the context of the grave and
difficult financial position of the State.
After mature consideration, by notification
dated 9.11.1973 (Ext.B) the earlier Government order dated 12.10.1973 (Ext.A)
was cancelled.
19. The allottees were not given to believe
that no tax would be levied on such purchases............" In the reply
affidavit filed on behlaf of the appellants the above allegations made in the
counter- affidavit are denied.
The allegations in the appeal do not contain
any information about who was present at the so called meeting, what
representation was actually made, whether any of the appellants acted on the
basis of the said representation and how he was prejudiced thereby. No material
in the form of documents in support of that plea that they altered their price
structure relying upon the alleged representation was also produced by the
appellants. The appellants were owners of existing factories. None of them is
shown to have established any new factory relying on the representation of any
of the ministers. They were carrying on the business in their 617 factories
already. It is not their case that they would have closed down their factories
but for the alleged representation made to them. Nor it is their case that they
gave up a more advantageous project and diverted their capital towards the cashew
nut factory believing that the Government would grant exemption from payment of
tax and had suffered any loss thereby. It is contended that the officer who had
filed the counter-affidavit could not have known what transpired at the alleged
meeting. The same plea is available against the appellants too. The person who
has sworn to the affidavit on behalf of the appellants also does not say that
he was present at the meeting or that he had any personal knowledge about what
transpired at the meeting.
He does not give any material details about
what actually transpired there. In cases of this nature the evidence of
representation should be clear and unambiguous. It 'must be certain to every
intent'. The statements that are made by ministers at such meetings, such as, 'let
us see', 'we shall consider the question of granting of exemption
sympathetically', 'we shall get the matter examined', 'you have a good case for
exemption' etc. even if true, cannot form the basis for a plea of estoppel.
Moreover, the events that have taken place subsequently belie the fact of any
such promise by the ministers. It is seen that the Cashew Corporation of India
had made a representation to the Government of India on May 7, 1971 and the
Government of India wrote to the State Government on March 4, 1972 urging that
the exemption prayed for by the cashew manufacturers may be favourably
considered by the Government of Kerala.
The Government of Kerala however rejected the
said request.
Then on further pressure being put upon it,
it issued the notification dated October 12, 1973 and immediately thereafter
withdrew it after it encountered severe public criticism. This conduct on their
part is not consistent with the appellants' case that they had actually
promised in the year 1971 to exempt the cashew trade from payment of the tax.
The allegations made in the petition do not establish (i) that there was a
definite representation by the Government to the effect that the Government
will not levy the tax; (ii) that the appellants in fact altered their position
by acting upon such representation, and (iii) that they had suffered some
prejudice sufficient to constitute an estoppel. Hence the whole case of
promissory estoppel lacks the necessary factual foundation. It is, therefore,
unnecessary to consider the question of law 618 whether the plea of promissory
estoppel can be raised against a legislation which levies tax and whether an
assessee can claim exemption from a tax levied by the legislature merely on the
basis of a representation of a minister.
We shall now proceed to consider the plea
relating to the power of the Government to cancel the notification issued under
section 10(1) of the Act.
During the relevant period section 10 of the
Act read thus :
"10. 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 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 purchase by successive dealers, or (ii) by any specified
class of person, 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 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)." As regards the power of Government to cancel the notification which
had been issued earlier, the High Court has upheld the power of the Government
to do so. We think that the 619 High Court was right in taking that view. The
liability to pay sales tax arose at the point of time when the purchases were
made. The power of exemption in the instant case was exercised through a
retrospective notification which was a piece of subordinate legislation. It has
been held by this Court that an authority which has the power to make
subordinate legislation cannot make it with retrospective effect unless it is
so authorised by the legislature which has conferred that power on it. The law
on the above point is neatly summarised in Income Tax Officer v. M.C. Ponnoosse
& Ors. [1970] 1 S.C.R. 678 at pages 681-682 thus :
"Now it is open to a soverign
legislature to enact laws which have retrospective operation. Even when the
Parliament enacts retrospective laws such laws are - in the words of Willes, J.
in Phillips v.
Eyre (40 Law J. Rep (N.S.) Q.B. 28 at p.37) -
'no doubt prima facie of questionable policy and contrary to the general
principle that legislation by which the conduct of mankind is to be regulated
ought, when introduced for the first time, to deal with future acts, and ought
not to change the character of past transactions carried on upon the faith of
the then existing law.' The courts will not, therefore, ascribe retrospectivity
to new laws affecting rights unless by express words or necessary implication
it appears that such was the intention of the legislature. The Parliament can
delegate its legislative power within the recognised limits. Where any rule or
regulation is made by the person or authority to whom such powers have been
delegated by the legislature it may or may not be possible to make the same so
as to give retrospective operation. It will depend on the language employed in
the statutory provision which may in express terms or by necessary implication
empower the authority concerned to make a rule or regulation with retrospective
effect. But where no such language is to be found it has been held by the
courts that the person or authority exercising subordinate legislative
functions cannot make a rule, regulation or bye- law which can operate with
retrospective effect;
(see Subba Rao, J. in Dr. Indramani Pyarelal
Gupta v. W.R. Nathu & Others 620 (1963 S.C.R. 721) - the majority not having
expressed any different opinion on the point; Modi Food Products Ltd. v.
Commissioner of Sales Tax U.P. (A.I.R. 1956 All. 35); India Sugar Refineries
Ltd. v. State of Mysore (A.I.R. 1960 Mys. 326) and General S. Shivdev Singh
& Anr. v. The State of Punjab & Others (1959 P.L.R. 514)." In the
instant case on the date on which the notification was issued the Kerala
Government had no such power under section 10 of the Act as it stood then to
issue a notification granting exemption with retrospective effect.
Such power was actually conferred on it later
on by the Kerala Legislature only by way of amendment in 1980 by Kerala Act 19
of 1980. Now section 10 of the Act reads thus :
"10. 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 the
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
restriction and conditions as may be specified in the notification.
(3) The Government may by notification in the
621 Gazette cancel or vary any notification issued under sub-section (1)."
(emphasis added) By the addition of the words 'either prospectively or
retrospectively' by the aforesaid amendment, the State Legislature has now
conferred the necessary power on the State Government to grant exemption with
retrospective effect. This amendment also suggests that earlier the Government
had no such power to grant exemption with retrospective effect.
Hence the impugned notification which granted
exemption on October 12, 1973 for the earlier period between September 1, 1970
and September 30, 1973 was ineffective. It was also not shown that relying upon
the notification during the period between October 12, 1973 and November 9,
1973 the appellants had done any act which attracted the rule of estoppel. The
authority which can issue a notification may cancel it also. Section 10(3) of
the Act confers such power of cancellation expressly. The State Government did
so and cancelled the earlier notification as there was a public hue and cry
that the State Government had shown undue favour of the Kerala cashewnut
factory owners at a time when the State was passing through grave and difficult
financial position.
Moreover the transactions in question related
to the past period.
Hence the appellants are not entitled to any
relief either on the principle of promissory estoppel or on the basis of the
earlier notification issued under section 10 of the Act.
We agree with the High Court that the
appellants had not made out any case. The appeal is dismissed.
Before concluding we may refer to a
submission made on behalf of the appellants that by virtue of the amendment by
Act 103 of 1976 to the Central Sales Tax Act, 1956 by the introduction of
section 2(ab) in it they are entitled to certain relief. We have not considered
the effect of the said amendment on the transactions in question. We express no
opinion on it. It is open to the appellants to raise the point in the
assessment proceedings or in any other proceedings under the Act which may be
pending now.
There will be no order as to costs.
S.R. Appeal dismissed.
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