# AUGUSTAN TEXTILE COLOURS LIMITED (NOW AUGUSTAN TEXTILE COLOURS PVT LIMITED) v. DIRECTOR OF INDUSTRIES & ANR

- **Citation:** [2022] 15 S.C.R. 104
- **Court:** Supreme Court of India
- **Decided:** 2022-04-08
- **Case number:** Civil Appeal No. 2830 of 2022
- **Bench:** K. M. Joseph, Hrishikesh Roy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/augustan-textile-colours-limited-now-augustan-textile-colours-pvt-limited-v-35488
- **Pages:** 33

## Headnote

Kerala General Sales Tax Act,1963 - s.10 - Sick Industrial
Companies (Special Provisions) Act, 1985 - ss.17,18, 19 and 20 -
Tax exemption - The case involves the withdrawal of tax exemption
benefits granted to the appellant, who had revived a sick industrial
unit under the Sick Industrial Companies Act - Government by
exercising its power under Section 10(3) of the KGST Act, 1963 by
an order of 2006 withdrew the exemption granted earlier - This
prompted the appellant to file a petition in the High Court
challenging the 2006 order - The High Court doubted whether the
exemption could have been extended to the appellant alone instead
of a class of industries and upheld the order of Government - The
appellant approached the Supreme Court - Held: (Per Hrishikesh
Roy, J.) : The power to grant exemption u/s 10(1) is in respect of a
class of persons and was never intended for an individual industrial
unit like appellant - When this aberration was noticed and it was
seen that amongst similarly engaged units in the same business, the
appellant was the only one enjoying the benefit of exemption, the
2006 government order was issued withdrawing the exemption
granted - Even though appellant was granted benefit of tax
exemptions, it cannot be continued for further assessment years, as
that would amount to perpetuating and condoning a wrong, which
is opposed to public policy - Benefit of equitable doctrine of
estoppel cannot be extended to the appellant as in that case the
State Authority would be obligated to act in a manner which is
contrary to legislative mandate - Judgment of High Court was upheld
- (Per K.M Joseph, J.) (concurring): Appellant cannot pitch its case
higher than at the limit under Order dated 25.11.1994 - Exemption
of sales tax is contemplated for a period of two years - Maximum
period in any case is 5 years - In the case of the appellant, the
appellant enjoyed the benefit of the exemption till it was withdrawn
 [2022] 15 S.C.R. 104
104
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on 21.11 2006 - Appellant enjoyed the benefit of exemption for
nearly 4 years - Appellant is a company which is making profits -
Appeal must fail.
Dismissing the appeal, the Court
HELD:
Per Hrishikesh Roy, J.:
1.The gap between the 2004 Government Order and the
Government Order dated 21.11.2006 shows that the appellant
was enjoying the benefit for a fair duration. Significantly, the power
to grant such tax benefit is not seen in any other State Legislation
but only in Section 10(1) of the Kerala General Sales Tax Act,
1963. The power to grant exemption under Section 10(1) is
however in respect of a class of persons and was never intended
for an individual industrial unit like the appellant. When this
aberration was noticed and it was seen that amongst similarly
engaged units in the same business, the appellant was the only
one enjoying the benefit of exemption, the 2006 government
order was issued withdrawing the exemption granted on
20.3.2004. [Para 20][115-G-H; 116-A-B]
2. Undoubtedly, the government was empowered under
Section 10(3) to withdraw the exemption at any time and therefore,
it cannot be said that the principle of promissory estoppel by
itself, will facilitate the appellant to challenge the 2006
Government Order. It must be pointed out that a number of
concessions were offered to the appellant under the 2004
Government order and it is discernible that payments under
several heads were not set apart for the appellant, notwithstanding
their role in revival of the sick unit. [Para 21][116-B-C]
3. The present dispute pertinently is only with regard to
the exemption relatable to sales tax/works contract tax and it is
nobody's case that past arrears of sales tax/works contract tax
payable by the sick units, were completely waived. Factoring this,
the writ court as well as the Division Bench opined that subclause (1)(b) of 2004 Government Order relating to waiver of tax
in the State is of such wide amplitude that the same must be seen
as uncertain and vague. Als

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SUPREME COURT REPORTS
[2022] 15 S.C.R.
AUGUSTAN TEXTILE COLOURS LIMITED (NOW AUGUSTAN
TEXTILE COLOURS PVT LIMITED)
v.
DIRECTOR OF INDUSTRIES & ANR.
(Civil Appeal No. 2830 of 2022)
APRIL 08, 2022
[K. M. JOSEPH AND HRISHIKESH ROY, JJ.]
Kerala General Sales Tax Act,1963 - s.10 - Sick Industrial
Companies (Special Provisions) Act, 1985 - ss.17,18, 19 and 20 -
Tax exemption - The case involves the withdrawal of tax exemption
benefits granted to the appellant, who had revived a sick industrial
unit under the Sick Industrial Companies Act - Government by
exercising its power under Section 10(3) of the KGST Act, 1963 by
an order of 2006 withdrew the exemption granted earlier - This
prompted the appellant to file a petition in the High Court
challenging the 2006 order - The High Court doubted whether the
exemption could have been extended to the appellant alone instead
of a class of industries and upheld the order of Government - The
appellant approached the Supreme Court - Held: (Per Hrishikesh
Roy, J.) : The power to grant exemption u/s 10(1) is in respect of a
class of persons and was never intended for an individual industrial
unit like appellant - When this aberration was noticed and it was
seen that amongst similarly engaged units in the same business, the
appellant was the only one enjoying the benefit of exemption, the
2006 government order was issued withdrawing the exemption
granted - Even though appellant was granted benefit of tax
exemptions, it cannot be continued for further assessment years, as
that would amount to perpetuating and condoning a wrong, which
is opposed to public policy - Benefit of equitable doctrine of
estoppel cannot be extended to the appellant as in that case the
State Authority would be obligated to act in a manner which is
contrary to legislative mandate - Judgment of High Court was upheld
- (Per K.M Joseph, J.) (concurring): Appellant cannot pitch its case
higher than at the limit under Order dated 25.11.1994 - Exemption
of sales tax is contemplated for a period of two years - Maximum
period in any case is 5 years - In the case of the appellant, the
appellant enjoyed the benefit of the exemption till it was withdrawn
 [2022] 15 S.C.R. 104
104
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on 21.11 2006 - Appellant enjoyed the benefit of exemption for
nearly 4 years - Appellant is a company which is making profits -
Appeal must fail.
Dismissing the appeal, the Court
HELD:
Per Hrishikesh Roy, J.:
1.The gap between the 2004 Government Order and the
Government Order dated 21.11.2006 shows that the appellant
was enjoying the benefit for a fair duration. Significantly, the power
to grant such tax benefit is not seen in any other State Legislation
but only in Section 10(1) of the Kerala General Sales Tax Act,
1963. The power to grant exemption under Section 10(1) is
however in respect of a class of persons and was never intended
for an individual industrial unit like the appellant. When this
aberration was noticed and it was seen that amongst similarly
engaged units in the same business, the appellant was the only
one enjoying the benefit of exemption, the 2006 government
order was issued withdrawing the exemption granted on
20.3.2004. [Para 20][115-G-H; 116-A-B]
2. Undoubtedly, the government was empowered under
Section 10(3) to withdraw the exemption at any time and therefore,
it cannot be said that the principle of promissory estoppel by
itself, will facilitate the appellant to challenge the 2006
Government Order. It must be pointed out that a number of
concessions were offered to the appellant under the 2004
Government order and it is discernible that payments under
several heads were not set apart for the appellant, notwithstanding
their role in revival of the sick unit. [Para 21][116-B-C]
3. The present dispute pertinently is only with regard to
the exemption relatable to sales tax/works contract tax and it is
nobody's case that past arrears of sales tax/works contract tax
payable by the sick units, were completely waived. Factoring this,
the writ court as well as the Division Bench opined that subclause (1)(b) of 2004 Government Order relating to waiver of tax
in the State is of such wide amplitude that the same must be seen
as uncertain and vague. Also importantly, such exemption cannot
continue indefinitely and particularly not beyond the point at which
the revival of the sick unit is seen. [Para 22][116-D-E]
AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE
COLOURS PVT LTD.) v. DIRECTOR OF INDUSTRIES
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4. Section 10(1)(ii) of the KGST Act enables the State to
grant exemption from sales tax only with respect to "any specific
class of persons in regard to the whole or any part of their turnover"
and since the 2004 Government Order benefitted only a single
unit i.e. the appellant, it is difficult to accept that the solitary
industrial unit which was being revived under the BIFR Scheme,
would form a class by itself. Therefore, contention to the contrary
by the appellant is considered and rejected with the reasoning
that the exemption by 2004 Government Order was not made
applicable to all sick industrial units of the state, engaged in the
like activities of bleaching, dyeing etc. [Para 23][116-E-G]
5. On the argument of the appellant based on the principles
of promissory estoppel, as earlier noted, the tax exemption in
the present matter was not given to a class of persons and the
appellant is made the sole beneficiary. This is contrary to Section
10 of the KGST Act. The 21.11.2006 withdrawal order was
therefore issued, when it was discovered that this was a case of
exemption to an individual unit and that is impermissible under
Section 10 of the KGST Act. Such being the position, the benefit
of the equitable doctrine of estoppel cannot be extended for the
appellant as in that case the State authority would be obliged to
act in a manner which is contrary to the legislative mandate. [Para
27][117-E-G]
6. The equitable principle of promissory estoppel cannot
be invoked for enforcing promises in the teeth of the provisions
of law. Having concluded that the Government Order
(20.03.2004), granting Sales Tax/ Works Contract Tax exemption
was ultra vires the Section 10(1) of the KGST Act, the promise,
in furtherance of Government Order, in the form of BIFR Scheme
dated 17.01.2005 being unlawful, cannot in our view, be enforced
on equitable consideration. [Para 31][118-F-G]
7. Even though the appellant was granted benefit of tax
exemptions under the 2004 government order, this was ultra vires
the Section 10 KGST Act. Such exemption cannot be continued
for further assessment years, as that would amounts to
perpetuating and condoning a wrong, which is opposed to public
policy. [Para 33][119-B-C]
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8. The Division Bench concluded that the appellant does
not form a separate class of its own. Hence, the 2004 government
order was held to be ultra vires the Section 10(1) of the KGST
Act. The appellant has failed to bring to our attention, any
intelligible differentia, based on which it can be said that they
constitute a unique, separate class of its own. In absence of such
differentiating factor, the benefit of tax exemptions being granted
to the appellant, to the exclusion of all other sick industries
involved in similar activities, do not appear to be reasonable and
should be seen as arbitrary. The 2004 government order was not
only ultra vires Section 10(1) of KGST Act, but also falls short by
principle of reasonableness, fairness, and non arbitrariness. The
2006 government order withdrawing the tax exemption was in
fact issued to remedy this very mischief. Hence, the appellant
cannot invoke the principle of legitimate expectation against the
2006 government order. [Para 41][122-B-D]
State of Gujarat vs. Arcelor Mittal Nippon Steel India
Ltd. (2022) SCC OnLine SC 76 (14); Pournami Oil
Mills and Others vs. State of Kerala and Anr. 1986
(Supp) SCC 728 : [1987] 1 SCR 654 (18); M/s. Motilal
20 Padampat Sugar Mills vs. State of Uttar Pradesh &
Ors. (1979) 2 SCC 409 : [1979] 2 SCR 641 (28); Amrit
Banaspati Co. Ltd. vs. State of Punjab & Anr. (1992) 2
SCC 411 : [1992] 2 SCR 13 (29); Bangalore
Development Authority vs. R. Hanumaiah (2005) 12
SCC 508 : [2005] 3 Suppl. SCR 901 (30); Voltas Ltd.
vs. State of A.P. (2004) 11 SCC 569 : (34); Monnet
Ispat & Energy Ltd. vs. Union of India (2012) 11 SCC
1 : [2012] 7 SCR 644 (36); Pawan Alloys & Casting
Pvt. Ltd., Meerut vs. U.P. State Electricity Board and
Others (1997) 7 SCC 251 : [1997] 3 Suppl. SCR 266
(42) - referred to.
MRF Ltd., Kottayam vs. Asst. Commissioner (Assessment)
Sales Tax & Ors. (2006) 8 SCC 702 : [2006] 6 Suppl.
SCR 417 (38) - distinguished.
Case Law Reference
(2022) SCC OnLine SC 76
referred to
Para 14
AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE
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[1987] 1 SCR 654
referred to
Para 18
[1979] 2 SCR 641
referred to
Para 28
[1992] 2 SCR 13
referred to
Para 29
[2005] 3 Suppl. SCR 901
referred to
Para 30
(2004) 11 SCC 569
referred to
Para 34
[2012] 7 SCR 644
referred to
Para 36
[2006] 6 Suppl. SCR 417
distinguished
Para 38
[1997] 3 Suppl. SCR 266
referred to
Para 42
Per K.M Joseph, J. (Concurring):
1. There is merit in the contention of the appellant that the
exemption granted initially, dated 20.03.2004, was not one which
is premised under Section 10 of the Act. The exemption was
granted in terms of the scheme under Section 19 of the Act. This
is an exemption which was given under statutory provisions. In
other words, consent being forthcoming from the state, a scheme
being sanctioned under section 19 providing for financial
assistance in the form of tax exemption, inter alia, the
Government became obliged to honour its consent and the dictate
of the statute. [Para 11][133-F-G]
2. It will be inequitable to the company and against public
interest also, as it frustrates the object of law to allow a scheme
to be sanctioned inducing all parties to proceed on the basis that
a company would be redeemed from its financial dire-straits and
the crucial financial assistance indispensable to the said process
is not forthcoming from the State. The aforesaid interpretation
placed hereinbefore would harmonise the Central and the State
Act. It will also give life to the Sick Companies Act as it would
clearly further the object of the law. Therefore, the exemption
granted can be understood as springing from the provisions of
Section 19(3) read with 19(1) in this regard. Thus, the exemption
is not to be treated as falling under Section 10 of the State Act. In
other words, Section 10 cannot be treated as the sole repository
of power to grant exemption. [Para 12][133-G-H; 134-A-B]
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3. It is quite clear that the appellant cannot pitch its case
higher than at the limit under Order dated 25.11.1994. Therefore,
exemption of sales tax is contemplated for a period of two years.
However, it further provides that it cannot be for more than five
years or beyond the date the net worth of the company becomes
positive whichever is earlier. Therefore, the maximum period in
any case is 5 years. In the case of the appellant, the appellant
enjoyed the benefit of the exemption till it was withdrawn on 21.11
2006. The said order in turn was withdrawn on 01.10.2007. It is
no doubt true that on 29.02.2008, the order dated 01.10.2007
came to be withdrawn. The writ petition was filed by the appellant.
It would appear that for a period of nearly 4 years, the appellant
enjoyed the benefit of exemption in all. No doubt, the appellant
did point out that there is no exercise carried out to find out as to
when the net worth has turned positive. [Para 19][135-H; 136-AC]
Mahindra and Mahindra Limited and Ors. vs. State of
Andhra Pradesh and Ors. 1986 (63) STC 274 (16) -
referred to.
Case Law Reference
1986 (63) STC 274
 referred to
Para 16
CIVIL APPELLATE JURISDICTION : Civil Appeal No.2830
of 2022.
From the Judgment and Order dated 28.09.2017 of the High Court
of Kerala at Ernakulam in Writ Appeal No.2021 of 2012.
Ritin Rai, Sr. Adv., Siddhartha Jha, Parth Maniktala, Advs. for the
Appellant.
C. K. Sasi, Abdulla Naseeh V. T., Ms. Meena K. P., Advs. for the
Respondents.
The Judgments of the Court were delivered by
HRISHIKESH ROY, J.
Leave granted.
1. Heard Mr. Ritin Rai, the learned Senior Counsel representing
the appellant. Also heard Mr. C.K. Sasi, the learned counsel representing
the respondents.
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2. The issue to be considered here is whether the benefit of tax
exemption in respect of works contract granted in the process of revival
of the industry, under the relevant provisions of the Sick Industrial
Companies Act, 1985 (for short "the SICA") based on the Kerala
Government communication dated 20.3.2004 (Ext. P-2) can be
withdrawn, by the subsequent government order dated 21.11.2006 (Ext.
P-3).
3. It was the appellant's say that they had taken over a sick
industrial unit by the name of M/s Teak Tex Processing Complex Ltd.,
which was engaged in dyeing of clothes. The Kerala based unit was not
operational for a considerable period when attempt was made, for revival
of the unit under SICA. In the proceedings that were pending before the
Board for Industrial and Financial Reconstruction (for short "BIFR"),
the authorities were assessing the possibility of revival of the unit. At
that stage, the appellant offered to make investment for revival of the
company following which, discussions were held amongst the
stakeholders and various concessions were offered to the appellant.
4.1 In tune with the recommendation of the Empowered
Committee constituted for the purpose, the Government Order was issued
on 20.3.2004 whereby the recommendations of the Committee were
accepted. The relevant clause incorporating the measures relating to
Sales Tax/Works Contract Tax, are as under:-
"Sales Tax/Works Contract Tax
(a)
The past arrears of Sales Tax/Works contract tax will be
completely waived.
(b)
Works contract Tax on processing of Fabrics like bleaching
and dyeing etc. will be exempted in the State"
4.2 In furtherance of the 2004 Government Order, the revival
proposal envisaged the taking over by the appellant entire assets of the
sick unit for a sum of Rs.10 crores and the BIFR Sanctioned Scheme
dated 17.01.2005 mentioned the relief measures under clause 7.2.1
pertaining to sales tax/works contract tax. They read as follows:-
"7.2.1 Sales Tax/Works Contract Tax
(a)
To waive past arrears of Sale Tax Works Contract Tax
completely
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(b)
To exempt works contract tax on processing of fabrics like
bleaching and dyeing etc. in future."
5. The appellant availed the waiver benefit of past tax arrears of
the sick unit on the basis of the BIFR Sanctioned Scheme dated 17.01.2005
(Ext. P-1) which assured waiver of Works Contract Tax on processing
of fabrics like bleaching and dyeing etc. After about 30 months of such
arrangement, the Government issued another Order on 21.11.2006
exercising the power under Section 10(3) of the Kerala General Sales
Tax Act, 1963 (for short "the KGST Act") where it was said that the
benefit of exemption can only be granted to a specified class of goods or
a particular class of persons, and the appellant who is one amongst several
industrial units doing similar nature of work within the State of Kerala,
cannot be allowed the benefits of exemption of Works Contract Tax.
After issuance of G.O. order dated 21.11.2006, withdrawing the
concession in question, on 1.10.2007, the Government has withdrawn
G.O.No.110/06/1D dated 21.11.2006, as the concession was one already
allowed in the rehabilitation scheme of the BIFR of the company.
However, on 29.02.2008 again, the Government in the Tax Department
requested to cancel the GO dated 01.10.2007 as it did not have any
legally binding effect and thereupon GO dated 01.10.2007 in turn was
cancelled with immediate effect. Accordingly, it was decided to withdraw
the tax waiver/exemption granted to the appellant which prompted them
to file the W.P.(C) No. 5677 of 2007 before the High Court of Kerala.
6. It was contended by the appellant that they attempted to revive
and nurse back a sick company under BIFR and with due deliberations
and the recommendations of the Empowered Committee, the incentive
measures to be offered to the appellant, have been worked out and
finalized as per the scheme. The appellant is actively working in the
process of revival of the sick unit and at that stage, it was not open to the
State of Kerala to resile from their promise by issuing the Government
Order dated 21.11.2006. According to the appellant, the exemption granted
vide the 2004 Government Order was issued as a "package deal" in
course of revival of the sick unit in conformity with the relevant provisions
of the SICA and once consent was given and proceedings were finalized
in terms of Section 19(1) or 19(2), the same would be binding upon all
the stakeholders as is provided under Section 19(3) of SICA. It was
therefore argued that the benefit of tax exemption granted by the State
under the Scheme, is binding on the State under the provisions of Section
AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE
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19(3) of SICA and the State must be held accountable to their promise.
It was the say of the appellant that the incentives were not granted
under Section 10(1) of the KGST Act, and therefore the tax exemption
could not have been withdrawn by invoking the powers under Section
10(3) of the same Act. The appellant unequivocally rejected a suggestion
by this Court that the appellant might not constitute a unique class of
one, in whose favour a tax exemption under Section 10(1) KGST Act
can be granted legally. The appellant however failed to point out any
other provision in any statute, which empowered the State Government
to grant such tax exemptions. While reviving the sick unit, the appellant
earned profit in 2015, but incurred loss in subsequent three years. The
recent years i.e., 2019 and 2020 are however profitable years for the
appellant.
7. The respondents, on the other hand, contend that the 20.03.2004
Government Order confers various benefits, and the exemption from
sales tax/works contract tax is only one of those benefits offered for
revival of the sick unit. According to the learned Government Counsel,
the source of power to grant tax exemption is traceable only to Section
10(1) of the KGST Act and merely because the 20.03.2004 Government
Order does not specifically refer to the source of power, the same cannot
aid the appellant, as specific reference is made to Section 10(3) of the
KGST Act, while withdrawing the exemption. The learned government
advocate further argues that when exemption is given, it is always open
for the government to cancel, vary or modify the same, bearing the
public interest in mind, and since no time limit was specified on the liability
in respect of sales tax/works contract tax, the withdrawal of benefit by
the Government Order dated 21.11.2006, is well within the power and
competence of the government.
8. The records available would show that the following benefits/
concessions were extended to the appellant for revival of the sick unit:
"1) Sales Tax/Works Contract Tax
2) Electricity Dues
3) Water Charges
4) Pollution Control Water Cess
5) Panchayat Taxes and Levies
6) The ownership of land"
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9. It is further seen that the benefits offered, inter alia, were
waiver of past arrears particularly under the Sales Tax/Works Contract
Tax. For other charges like electricity dues, water charges, Pollution
Control Water Cess, the principal amount in the arrears were to be paid
without the obligation to bear the interest or penalty burden, from the
date of commencement of the commercial production. Specifically for
the Sales Tax/Works Contract Tax, under clause 1(b), it is not very clear
as to whether the benefit intended for process of fabrics like bleaching,
dyeing etc. will be available individually to the appellant or was intended
to be availed by this class of industries, many of which are operating in
the State of Kerala. It further raises questions in regard to the scope and
extent of exemption that could be provided under Section 10 of the KGST
Act.
10. Adverting to the mandate of Section 10 of the KGST Act, the
learned Single Judge of the High Court doubted whether the exemption
could have been extended to the appellant alone as opposed to a class of
industries and the court commented that "such a course of exemption
throughout the State was not brought about". The learned Judge
observed that the 2004 Government Order was based on the
recommendation of the Empowered Committee with due discussion
amongst the stakeholders, and those were with specific reference to the
concessions to be extended to new promoters for revival of sick units, in
light of the government order dated 25.11.1994.
11. It was noted by the learned Single Judge upon perusal of the
1994 Government Order that there are two separate channels of benefits/
reliefs i.e. (a) non-fiscal; and (b) fiscal, and under item no. 2, the
exemption was granted for works contract tax on processing of fabrics
like bleaching, dyeing etc.
12. The above would show that the fiscal measures refer to
exemption/deferment of sales tax, purchase tax, electricity dues for two
years, but not exceeding five years or till the date, the net worth of the
company became positive, whichever is earlier. Thus, the outer cap of
five years was specified in the 1994 Government order and the benefits
could not have been intended to continue without limit.
13. Even though the 2004 Government Order, and the BIFR
Sanctioned Scheme of 2005 were enacted in furtherance of 1994
Government Order, both these documents do not specify the time line
for tax exemptions prescribed in the 1994 government order.
AUGUSTAN TEXTILE COLOURS LTD. (NOW AUGUSTAN TEXTILE
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14. Recently this Court in the case of State of Gujarat Vs. Arcelor
Mittal Nippon Steel India Ltd.1 has held that exemption provisions and
notifications are to be strictly interpreted in accordance with legislative
intent without any addition or subtraction. A Division Bench of this Court
speaking through Justice M. R. Shah held that:
"14.2 It is settled law that the notification has to be
read as a whole. If any of the conditions laid down in the
notification is not fulfilled, the party is not entitled to the
benefit of that notification. An exception and/or an exempting
provision in a taxing statute should be construed strictly and
it is not open to the court to ignore the conditions prescribed
in industrial policy and the exemption notifications.
14.3 The exemption notification should be strictly
construed and given meaning according to legislative
intendment. The Statutory provisions providing for exemption
have to be interpreted in the light of the words employed in
them and there cannot be any addition or subtraction from
the statutory provisions.
14.4 As per the law laid down by this Court in catena
of decisions, in the taxing statute, it is the plain language of
the provision that has to be preferred, where language is plain
and is capable of determining defined meaning. Strict
interpretation to the provision is to be accorded to each case
on hand. Purposive interpretation can be given only when
there is an ambiguity in the statutory provision or it alleges to
absurd results, which is so not found in the present case."
15. Accordingly, in the present matter, the 2004 government order
granting tax exemptions should be read as a whole and in absence of
any time line being prescribed, such a time line in our opinion, cannot be
imported from the 1994 government order.
16. Furthermore, Sales tax in the State of Kerala is chargeable
under Section 5 of the KGST Act which makes it obligatory upon the
State to realize the tax in respect of sales transaction. Section 10 deals
with the power of exemption and sub-Section (3) thereof confers the
power to have the order of exemption "varied or modified", in the
manner specified.
1 (2022) SCC OnLine SC 76.
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17. The benefit of exemption to tax must therefore be traceable
to powers conferred under the KGST Act and such benefits could not
have been granted in terms of the BIFR Scheme dated 17.01.2005 giving
effect to the Government Order issued on 20.3.2004. In the 2006
Government Order withdrawing the benefits, the government has
specifically adverted to Section 10 of KGST Act and as such the nonmentioning of the provisions of Section 10(1) of the KGST Act in the
2004 Government Order, would not assist the appellant in any significant
measure.
18. In Pournami Oil Mills and Others vs. State of Kerala and
Anr.2, Justice Ranganath Misra, as he was then, opined as follows:-
"6......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...."
The present understanding finds support from the above proposition
of law laid down by this Court in Pournami Oil Mills (supra).
19. Insofar as the benefits of tax exemption from the works contract
on processing of fabrics, being in conformity with the stipulations under
paragraph 7.2.1 of the BIFR Scheme dated 17.01.2005, it must be noticed
that Sub-clause (b) of paragraph 7.2.1 is not exactly the same as
paragraph 1(b) of the 2004 Government Order, as in the latter case, it is
with reference to proposed plan of action, to provide exemption to similar
units within the state of Kerala.
20. What is of significance is that similarly situated fabric
processing units in the state are obliged to meet their tax obligation for
the Works Contract Tax and that is why in the 2006 Government Order,
it was specifically stated that exemption for such taxable events, cannot
be confined to the appellant alone. The gap between the 2004 Government
Order and the Government Order dated 21.11.2006 shows that the
appellant was enjoying the benefit for a fair duration. Significantly, the
power to grant such tax benefit is not seen in any other State Legislation
but only in Section 10(1) of the KGST Act. The power to grant exemption
under Section 10(1) is however in respect of a class of persons and was
2 1986 (Supp) SCC 728
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never intended for an individual industrial unit like the appellant. When
this aberration was noticed and it was seen that amongst similarly engaged
units in the same business, the appellant was the only one enjoying the
benefit of exemption, the 2006 government order was issued withdrawing
the exemption granted on 20.3.2004.
21. Undoubtedly, the government was empowered under Section
10(3) to withdraw the exemption at any time and therefore, it cannot be
said that the principle of promissory estoppel by itself, will facilitate the
appellant to challenge the 2006 Government Order. It must be pointed
out that a number of concessions were offered to the appellant under
the 2004 Government Order and it is discernible that payments under
several heads were not set apart for the appellant, notwithstanding their
role in revival of the sick unit.
22. The present dispute pertinently is only with regard to the
exemption relatable to sales tax/works contract tax and it is nobody's
case that past arrears of sales tax/works contract tax payable by the
sick units, were completely waived. Factoring this, the writ court as well
as the Division Bench opined that sub-clause (1)(b) of 2004 Government
Order relating to waiver of tax in the Stateis of such wide amplitude that
the same must be seen as uncertain and vague. Also importantly, such
exemption cannot continue indefinitely and particularly not beyond the
point at which the revival of the sick unit is seen.
23. As earlier discussed, Section 10(1)(ii) of the KGST Act enables
the State to grant exemption from sales tax only with respect to "any
specific class of persons in regard to the whole or any part of their
turnover" and since the 2004 Government Order benefitted only a single
unit i.e. the appellant, it is difficult to accept that the solitary industrial
unit which was being revived under the BIFR Scheme, would form a
class by itself. Therefore, contention to the contrary by the appellant is
considered and rejected with the reasoning that the exemption by 2004
Government Order was not made applicable to all sick industrial units of
the state, engaged in the like activities of bleaching, dyeing etc.
24. It is also relevant to point out that the government order dated
25.11.1994 clearly reflected the government's intention to consider each
sick industrial unit on a case to case basis.
25. Next, the Court must examine whether the appellant can raise
contention on the validity of 2006 Government Order in the context of
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the sanctioned scheme of restriction approved by the BIFR and the
binding nature of the scheme under Section 19(3) of SICA. This question
arises since the contentions in this regard were earlier argued and rejected
by the learned Single Judge, and the judgment, dated 13.3.2012 in Writ
Petition No.5677 of 2007 has worked itself out with the representations
submitted by the appellant pursuant to the Writ Court's judgment and the
speaking order passed thereafter by the government on 5.10.2012 rejecting
the appellant's representation. Significantly, the speaking order was not
challenged. Instead, the appellant filed the Writ Appeal against the learned
Single Judge's order, granting limited relief of enabling them to file a
representation and directing the State to pass a speaking order after
affording hearing to the appellant. As the appellant had presented their
representation on the strength of the order of the Writ Court and thereby
have accepted the judgment, the appellant cannot thereafter in our view,
challenge the said judgment through a Writ Appeal when an adverse
order is passed against them, by the government.
26. One is certain that it would be legally impermissible to grant
tax exemption, contrary to the provisions of the KGST Act. The special
exemption is provided to a single unit under the BIFR proceeding and
the State cannot in our opinion be compelled to act contrary to the
provisions of the KGST Act, on the strength of binding nature of the
scheme under Section 19(3) of SICA.
27. On the argument of the appellant based on the principles of
promissory estoppel, as earlier noted, the tax exemption in the present
matter was not given to a class of persons and the appellant is made the
sole beneficiary. This is contrary to Section 10 of the KGST Act. The
21.11.2006 withdrawal order was therefore issued, when it was
discovered that this was a case of exemption to an individual unit and
that is impermissible under Section 10 of the KGST Act. Such being the
position, the benefit of the equitable doctrine of estoppel cannot be
extended for the appellant as in that case the State authority would be
obliged to act in a manner which is contrary to the legislative mandate.
28. The equitable principle of promissory estoppel was propounded
by this Court in the case of M/s. Motilal Padampat Sugar Mills Vs.
State of Uttar Pradesh & Ors.3 In the same very case, it was however
observed that the legal principle cannot be invoked to compel anyone to
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do anything, contrary to law. Justice P. N. Bhagawati for the Division
Bench wrote the following:-
"28...It may also be noted that promissory estoppel cannot
be invoked to compel the Government or even a private party
to do an act prohibited by law..."
29. The above judgment in Motilal Padampat(Supra) was
followed in the case of Amrit Banaspati Co. Ltd. Vs. State of Punjab
& Anr.4wherein, this Court carved out unlawful/illegal promise as an
exception to the principle of promissory estoppel. But, the observation in
this case in reference to an unlawful promise was not laid down as a
ratio, but at best an Obiter dicta.
30. In the later case of Bangalore Development Authority Vs.
R. Hanumaiah5, it was however specifically declared that the equitable
principle of promissory estoppel cannot be invoked for condoning or
enforcing a promise, expressly prohibited by a statute. This Court speaking
through Justice Ashok Bhan pronounced as under:
"34. ...In absence of any provision in the Act or the Rules
framed thereunder authorizing BDA to reconvey the land,
direction cannot be issued to BDA to reconvey a part of the
land on the ground that it had promised to do so. The rule of
promissory estoppel cannot be availed to permit or condone
a breach of law. It cannot be invoked to compel the
Government to do an act prohibited by law. It would be going
against the statute. The principle of promissory estoppel would
under the circumstances be not applicable to the case in hand."
31. From the above reading of the relevant judgments, it is
abundantly clear that the equitable principle of promissory estoppel cannot
be invoked for enforcing promises in the teeth of the provisions of law.
Having concluded that the Government Order (20.03.2004), granting
Sales Tax/ Works Contract Tax exemption was ultra vires theSection
10(1) of the KGST Act, the promise, in furtherance of Government Order,
in the form of BIFR Scheme dated 17.01.2005 being unlawful, cannot in
our view, be enforced on equitable consideration.
32. Further, in Arcelor Mittal Nippon Steel (Supra) this Court
has held that:
4 (1992) 2 SCC 411.
5 (2005) 12 SCC 508.
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"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."
33. In the case at hand, even though the appellant was granted
benefit of tax exemptions under the 2004 government order, this was
ultra vires the Section 10 KGST Act. Such exemption cannot be
continued for further assessment years, as that would amounts to
perpetuating and condoning a wrong, which is opposed to public policy.
34. It would be apposite now to advert to Voltas Ltd. Vs. State of
A.P.,6 where a BIFR proceeding was being considered and the ratio
therein will shed some light on the present matter. In that case, the Voltas
Ltd. agreed to take over the refrigeration unit of 'Hyderabad Allwyn
Ltd.' (A Sick Company) vide a Memorandum of Understanding with the
state government, subject to BIFR approval. The state government, for
incentivizing the appellant, issued government order dated 20.01.1994
granting sales tax deferral for a period of 7 years. The said deferral was
reflected in the BIFR Sanctioned Scheme dated 04.04.1994. Later, the
state government issued another order on 18.08.1995, whereby 18%
interest was levied on the sales tax component so deferred. The interest
sum was payable after 7 years in lump sum. Dealing with the challenge
to the government decision, this Court by a short order upheld the
Government Order dated 18.08.1995 with the observation that the interest
was imposed under relevant provisions of AP General Sales Tax Act,
1957 (APGST Act). Further, even though the payment of sales tax was
deferred for 7 years vide Government Order dated 20.01.1994 and the
BIFR sanctioned scheme dated 04.04.1994, both pertinently were silent
on the interest aspect. Hence, this Court held that as there was no express
waiver of interest, the provisions of APGST Act would prevail over the
BIFR scheme.
35. In the case at hand, the government order dated 20.03.2004,
as well as the BIFR sanctioned scheme, are silent on the duration of tax
exemption for the works contract. In any case the tax exemptions cannot
continue indefinitely. Hence, the ratio in Voltas Ltd. (Supra) involving a
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BIFR scheme and a government decision which diminishes the incentives
for the company, do lend support for the impugned decisions of the High
Court. In other words, the Kerala government, notwithstanding the BIFR
scheme for the sick company was entitled to withdraw the tax
exemptions, by issuing the government order dated 21.11.2006 under
Section 10(3) of the KGST Act.
36. Justice H. L. Gokhale, in his concurring judgment in the case
of Monnet Ispat & Energy Ltd. Vs. Union of India,7 highlighted the
difference between the doctrine of promissory estoppel and the doctrine
of legitimate expectation:
"289.As we have seen earlier, for invoking the principle of
promissory estoppel there has to be a promise, and on that
basis the party concerned must have acted to its prejudice...
290....Alternatively, the appellants are trying to make a case
under the doctrine of legitimate expectations. The basis of
this doctrine is in reasonableness and fairness. However, it
can also not be invoked where the decision of the public
authority is founded in a provision of law, and is in consonance
with public interest..."
37. While the equitable principle of promissory estoppel requires
a valid promise, based on which the promisee has changed its position, it
is necessary to observe that the principle of legitimate expectation does
not take into account such considerations. Instead, it is rooted in
fundamental ideas like reasonableness, fairness and non-arbitrariness.
38. In the case of MRF Ltd., Kottayam Vs. Asst. Commissioner
(Assessment) Sales Tax & Ors.8 the Kerala government in order to
incentivize investment and industrial growth, entered into a Memorandum
of Understanding on 06.10.1993, under which tax incentives were offered
to the company if they invested above Rs. 50 crores for expanding the
existing industrial unit in the State. In the government order dated
03.11.1993 issued under Section 10 of KGST Act, exemptions were
provided for 7 years for all expanding industrial units. An addendum to
the Memorandum of Understanding was executed on 10.04.1996,
explicitly stating that the industry was eligible for tax exemptions under
government Order dated 03.11.1993. Pursuant to such encouragement,
7 (2012) 11 SCC 1.
8 (2006) 8 SCC 702.
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MRF Ltd. invested Rs. 80 Crores for expansion, and then commenced
operations on 31.12.1996. They were also issued the eligibility certificate
on 10.11.1997, granting tax exemption from 31.12.1996 to 29.12.2003,
by the Kerala government. Subsequently the government order was issued
on 15.01.1998, amending its 1993 Order adding sub-clause (h) to the
negative list. This excluded MRF's activities from the definition of
'manufacture'. The same in effect extinguished the tax exemptions
granted vide the 1993 government order.