Holding

Both the 1979 and 1980 notifications are made under section 10 of the Kerala General Sales Tax Act, 1963; industrial units established before the 21 October 1980 notification are entitled to the five‑year exemption promised in the 1979 order, and the plea of estoppel is not available to those establishing thereafter.

Summary

The Kerala Government issued two notifications under the Kerala General Sales Tax Act, 1963 offering tax concessions to new small‑scale industries. The first, dated 11 April 1979, promised exemption from both sales tax and purchase tax for five years from the start of production. The second, dated 29 September 1980 (gazetted 21 October 1980), withdrew the purchase‑tax exemption and limited the sales‑tax concession. Several industrialists who set up their units after the first notification but before the second claimed they were entitled to the original benefits and pleaded the doctrine of estoppel against the withdrawal. The Kerala High Court dismissed the petitions, holding that the first notification was not made under the statutory power of section 10. The Supreme Court allowed the appeals, holding that both notifications are made under section 10 even though the first did not expressly cite it, that appellants who established their units before the second notification are entitled to the full five‑year exemption, and that the estoppel plea is unanswerable for those who set up after the second notification. The Court directed the parties to bear their own costs.

Issues considered

Whether the 11 April 1979 notification was issued under the power conferred by section 10 of the Kerala General Sales Tax Act, 1963.
Whether the State can withdraw a tax exemption previously granted and whether the doctrine of promissory estoppel can be invoked by industrialists who relied on the earlier concession.
Whether the entitlement to exemption depends on the date of establishment of the industrial unit relative to the second notification.

Legislation cited

Kerala General Sales Tax Act, 1963s. 10

Subjects

tax exemptionsales taxpurchase taxsmall scale industriespromissory estoppelgovernment notificationsection 10Kerala General Sales Tax Act

Judgment

POURNAMI OIL MILLS, ETC.
A
v.
STATE OF KERALA & ANR.

DECEMBER 19, 1986

B [P.N. BHAGWATI CJ AND RANGANATH MISRA,J.]

Kera/a 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.
c Promissory estoppel-Applicability of. .....
' .,.-.

Section 10 of the Kerala General Sales Tax Act, 1963 emJMlwers
the Government in public loterest to make an exemption or reduction in
rates either prospectively or retrospectively in respect of any tax pay-
D able under the Act.

The State Government with a view to boost industrialisation, by
an order dated ! Ith April, 1979 offered incentive to Small Scale in-
dustries, to be set up thereafter, in the fonr of exemption from sales tax
and purchase tax for a period of five years from the date of commence-
E ment of production. By a second order dated 29th September, 1980,
published in the Gazette on 21st October, 1980 purJM1rted 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. ·

F 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.
Tbey 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
G exercise of statutory JMIWer while the second order was issued under
s.lOoftheAct.

Allowing the appeals by Special Leave, the Court,

HELD: I. Where the authority making an order has JMIWer con-
H ferred upon it by statute to that effect, soch an order if made without

654
,.. ..
POURNAMI OIL MILLS v. STATE OF KERALA [MISRA, J.] 655

indicating the section under which it is made, it would be deemed to A
have been ·made under the enabling provislon. 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·Hl

' 2. The appellants who in response to the first order dated April
'T'
11, 1979 set up their industries prior to 21st October, 1980 would be B
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 curtail·
·--+ ment in the exemption before they came to set up their industries. They
..., would be entitled to exemption from-sales la)< only to the limit specified
in the second order. [659G·600A] '
c
3. If in. response to an order made by the Government and in consi·
deration 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 D
the State purports to act differently. In the facts of the present case, ·
however, the plea of estoppel is unanswerable. [6598.F]

,)• Motilal Padampat Sugar Mills Co. Ltd. v. State of V.P. [1979] 2
SCC 409, Baku/ Cashew Co. v. Sales Tax Officer, Qui/on, [1986]
2 sec 365, referred to. E

. 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 0.P. No. 6642 of 1982 F

Soli J. Sorabji, G.V. Iyer, A.S. Nambiar; S. Kumar, E.M.S.
Anam and R.N. Keswani for the Appellants.

T.S.K. Iyer, V.J. FrancisandN.M. PoplifortheRespondents.
G
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. H
656 SUPREME COURT REPORTS [1987] 1 S.C.R.

A 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:

B "Order dated 11.4.1979:

The incentives now given to the industries in the State a;·e
too meagre and inadequate to attract industries to this
State when compared to the incentives available for the

c
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 offer-
ing some incentives by the State to attract new industries
has been under consideration of the Government.

D 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
E depth for indentifying the problems and adoption of vari-
ous measures necessary to promote industrial growth in the
State. A Committee consisting of the following.pfficers was
therefore set up to study the various problems and submit
..
report ............................................. "

I' The Committee finalised its report on 20th March, 1979. The Govern-
ment has considered the recommendations and suggestions of the "j.-
<;ommittee in detail and they are pleased to approve the following
package of measures for promoting industrial development in Kerala:

SMALL SCALE INDUSTRIES:
G
Sales-Tax Concessions:

. 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 .......................... .
H
PO URN AMI OIL MILLS v. STATE OF KERALA [MISRA, J .[ 657

The relevant portion of the second notification reads thus: A
"In exercise of the pov;er conferred by section JO o( the
Kerala General Sales Tax Act ( 15 of 1963) the Government
of Kerala have considered it necessary in the public interest
so io do, hereby make an exemption in respect of the tax
payable under the said Act on the turnover of the sale of B
-+ 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 C
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. D

Provided further that the cumulative sales tax conces-
sions· 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 unit.
E
EXPLANATION:- For the purpose of this notification
new industrial unit under the Small-Scale Industries shall
... mean undertakings set up on or after 1st April, 1979 and·
registered with the Department of Industries and
Commerce as a small-scale. industrial unit.
F
This notification shall be deemed to have come into
force with effect fro1" 1st April, 1979" .·

Section IO of the Kerala General Sales Tax Act at the time the
two orders were made ran thus:
G
"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,
n1ak0 an exemption or reduction in rate· (either pros- H
658 SUPREME COURT REPORTS [ 1987] l S.C.R.

A
pectively or retrospectively) in respect of any tax pay-
able 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
B
(ii) by any specified class of persons in regard to the -r
whole or any part of their turnover.

(2) Any exemption from tax, or reduction in the rate of
tax, notified under sub-sectiol) ( 1): _.,
c (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 m.ay be specified in the notification;

D (3) The Government may, by notification in the Gazette,
cancel or vary any notification issued under sub-section
(l)."

It may be possible to contend with plausibility that in the absence
of an enabling provision in the statute the State Government would ..>(,_
E not have the power tu 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 JO empowering the State Govern-
men! to grant exemption from tax. ,
During the hearing of the appeals it has been contended that the
·F notifications in question were not in exercise of the powers under
~'
section JO 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 statut-
ory powers while the second order was issued in exercise of powers
under section JO. Having read the two orders and the contents, we are
of the view that both the orders are covered by the provisions of
G section JO of the Act though in the earlier order there is no reference
to section JO. It is a well-settled principle of law that where the autho-
rity 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 provi- ~
sion under which it is made, the order would be deemed to have been
made under the provision enabling the making of it, We accordingly
H hold that both the orders are under section 10 of the Act.
POURNAMI OIL MILLS v. STATE OF KERALA (MISRA, J.I 659

~· Under the order dated 11.4.1979, new small-scale units were A
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 produc-
tion. If in response to such an order and in consideration of the conces-
.... sion made available, promoters of any small-scale concern have set up 8
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 eourt were
cited in support of the stand of the appellants that in similar circum-
stani:es the plea of estoppel can be and has been applied and the
-+ leading authority on this point in the case ofM. P. Sugar Mills v. State c
of U.P., [1979] 2 SCC 409. On the other hand, reliance has been
.... placed on behalf of the State on a judgment of this Court in Baku/
Cashew Co. v. Sales Tax Officer, Qui/on, [1986] 2 SCC 365. In Baku/
Company's (supra) case this Court found:

"That there was no clear material to show any definite or D
certain promise had been made by the Minister to the con-
cemed persons and there was no clear material also in sup-
port of the stand that the parties had altered their position
by acting upon the representations a961 suffered any pre-
> judice. On facts, therefore, no case for raising the plea of
estoppel. has been made out." E

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 re- F
trospective exemption. We also find that no-reference was made by the
'I --kl
,. High Court to the decision in M.P. Sugar Mills' case (Supra). Jn 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 G
11.4.1979 gave more of tax exemption than the second one. "fhe sec-
ond notification withdrew the exemption relating to purcha~e 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 II, 1979 set up their industries prior to 21.10.1980
within the State of Kerala would thus be entitled to the exemption H

'
660 SUPREME COURT REPORTS [ 1987] 1 S.C.R.

A 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.
B 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
C · 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.

D P.S.S. Appeal allowed .

•