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. 0. P. 1740 of 1976 on the file of the Kerala High Court filed by
the aforementioned 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 G. 0. Ms. No. 127/7311D, 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
restrospectively 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 cashew nuts 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 G. 0. Ms. No.
143/73/TD, dated November 9, 1973, issued under section 10(3) of the Act
cancelling the abovesaid 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 cashew nuts. 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 the 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 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 cashew nuts 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 the 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 and 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
petitioner were keen that the purchases of raw cashew nuts 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 April 25, 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."
11. Subsequently, for three years, the respondents did not
initiate assessment proceedings 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 on October 12, 1973, a
notification was issued by the fourth respondent, copy of which is hereto
annexed and marked exibit 'A' under section 10 of the said Act giving effect to
such representations. The said notification was published in the Kerala Gazette
on October 23, 1973, clearly stating that the exemption to such purchases was
being accorded on the ground of public interest. Without assigning the reasons
or showing any change of circumstances, in less than twenty days, another
notification was issued on November 9, 1973, a copy of which is hereto annexed
and marked exhibit 'B'withdrawing the said exemption."
In the counter-affidavit filed on behalf of the State
Government, it is stated in paragraphs 18 and 19 thus:
" 18. The averments in para. 11 are denied. The
Cashew Corporation of India wrote to the Government by memorandum dated May 3,
1971, that cashew industry may be exempted from payment of tax under the Kerala
General Sales Tax Act on their purchases of imported raw cashew nuts. The
Ministry of Foreign Trade also addressed a communication to the State Government
dated March 4, 1972, that the matter may be sympathetically considered. The
cashew manufacturers and exporters' associations also moved the Government in
this behalf by memorandum dated March 6, 1972. The Government directed the Board
of Revenue (Taxes) to submit a report in this matter. The matter was engaging
the attention of the Board of Revenue and the State Government for some time. In
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 involve 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 for 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 a heavy burden on the
industry. The Government passed an order (exhibit A) granting the exemption for
the period September 1, 1970, to September 30, 1973. It was resolved then that
tax should be levied from October 1, 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 November 9, 1973 (exhibit B), the earlier Government order
dated October 12, 1973 (exhibit 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 behalf 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 their 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 assurances of any of the ministers.
They were carrying on the business in their factories already. It is not their
case that they would have closed down their factories but for the alleged
representation made to them. Nor is it their case that they gave up a more
advantageous project and diverted their capital towards the cashewnut 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
", It 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 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 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.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 Ls
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 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 ITO v. M. C. Ponnoose
[1970] 75 ITR 174 (SC); [1970] 1 SCR 678 at page 177 of ITR thus :
" Now it is open to a sovereign Legislature to enact
laws which have retrospective operation. Even when Parliament enacts
retrospective laws, such laws are in the words of Willes J. in Phillips v. Eyre
[1870] 40 Law J. Rep. (N.S.) QB 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. Parliament can delegate
its legislative power within the recognised limits. Where any rule or regulation
is made by any 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. Natu [1963] 1
SCR 721-the majority not having expressed any different opinion on the point ;
Modi Food Products Ltd. v. Commissioner of Sales Tax [1955] 6 STC 287 (All); AIR
1956 All 35; India Sugars Refineries Ltd. v. State of Mysore, AIR 1960 Mys 326
and General S. Shivdev Singh v. State Punjab [1959] PLR 514 [FB] ".
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 the 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 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). " (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 to the Kerala cashew nut 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.
