|CASE NAME||Pournami Oil Mills v. The State Of Kerala, 1987 AIR 590|
|COURT||Before the Supreme Court of India|
|DECIDED ON||December 19, 1986|
|COUNSEL FOR PETITIONER||Soli Sorabjee, GV Iyer, AS Nambiar, S Kumar, EMS Anam, Rn Kewani|
|COUNSEL FOR RESPONDENT||TSK Iyer, VJ Francis, NM Popli|
In the present case certain industries were exempted from taxes under the Kerala Sales Tax Act. With a view to promoting industrialisation, Section 10 of the said Act empowered the State Government to make exemption or reduction in tax for certain industries. Subsequently, the Government of Kerala issued two notification which granted exemptions as mentioned under section 10. However, out of two, only one notification mentioned about the application of section 10 of the act while the other did not. The application of Doctrine of Estoppel was in question in the present case, which was upheld by the Honourable Supreme Court of India.
|AUTHOR OF THE BRIEF||Aarsh Chokshi, Student at Gujarat National Law University.|
|KEYWORDS||Doctrine of Promissory Estoppel, Statutory Powers, Section 10 (Kerala Sales Tax Act).|
Brief facts and procedural history:
Section 10 of the Kerala sales tax act, 1963 empowered the state government to make exemption or reduction in tax rates with a view to promoting industrialisation.
On 11th April 1979, a notification was issued by the government for purchase and sales tax exemption for small scale industries. No mention of section 10 was done in this notification. On 21st October 1980, Government withdrew the exemption from purchase tax fully and sales tax partially (section 10 was mentioned in this order).
The appellants consisted of those who set up their industries after April 1979 and those who set up industry after 21 October 1980. They filed a writ petition in high court and appealed the doctrine of estoppel should be applied against the state government. The high court rejected their writ petition and held that first order was not made in exercise of statutory power.
Issues before the court:
- Whether the state government under its statutory power makes the first order, even though no mention of section 10 is done in the said order?
- Whether the doctrine of estoppel, applies against the state government in this case?
Arguments for the appellants:
- The appellants primarily relied on the case of MP Sugar Mills v. the State of UP, and contended that doctrine of estoppel applies against the state government in this case.
- In the case of MP Sugar Mills v. State of UP, it was held that Where the government makes a promise, even in sovereign, administrative or governmental capacity, knowing or intending that it would be acted on by the promisee and, in fact, promisee, acting in reliance on it, alters his position, the Government will be abstained to go back on its promise if it will be inequitable to do so, notwithstanding that there is no consideration for the promise and promise is, in fact, is not recorded in form of a formal contract as required by Art.299 of Constitution.
Arguments for the respondents:
- The respondents contended that first order made by the state government was not in the exercise of its powers; hence, appellants are not entitled to any exemption in this case.
Ratio of the court:
- The court held that both orders were covered under Section 10 of the said act. When an authority makes an order in exercise of a statutory power, even though it is not mentioned in the order, it is deemed to have been made under the statutory power.
- The parties, who had set up business in response to first order were entitled to exemption as promised under the said order.
- It was in response to the State Government’s order and consideration of concession, the appellants set up their industry there. Hence, they were entitled to plead the rule of estoppel and ratio of MP Sugar Mills case was made directly applicable.
- The appellants who had set up their industries after 21st October 1980 were not entitled to exemption as they had notice of the order before setting up their business.