1993 (4) TMI 282 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Retrospective effect of Notification S.R.O. No. 781 of 1989.
2. Validity of the condition imposed by the notification.
3. Doctrine of promissory estoppel.

Summary:

Issue 1: Retrospective Effect of Notification S.R.O. No. 781 of 1989

The petitioners, oil millers, challenged the retrospective application of Notification S.R.O. No. 781 of 1989 issued by the Government on May 18, 1989, u/s 10 of the Kerala General Sales Tax Act, 1963. The notification, effective from July 1, 1987, consolidated three previous notifications and altered the tax rates on coconut, copra, coconut oil, and oil-cake. The court held that while the Government has the power u/s 10(1) to grant exemptions or reduce tax rates retrospectively, it does not have the power u/s 10(3) to cancel or vary such notifications retrospectively. Therefore, the retrospective application of the notification was invalid.

Issue 2: Validity of the Condition Imposed by the Notification

The petitioners contended that the condition imposed by the notification, which excluded the application of the explanation to entries 50 and 51 of the First Schedule, effectively withdrew an exemption they were enjoying. The court found that the Government's power to issue notifications u/s 10 does not extend to imposing conditions retrospectively. Consequently, the condition that the explanation to entries 50 and 51 shall not apply to such sales was held to be inoperative up to May 18, 1989.

Issue 3: Doctrine of Promissory Estoppel

The petitioners argued that they had not collected any tax on their sales of coconut oil and oil-cake based on the earlier notifications and the explanation, and thus, they should be protected under the doctrine of promissory estoppel. Although the court found considerable force in this submission, it deemed it unnecessary to consider this issue in detail given the decision on the retrospective application of the notification.

Conclusion:

The original petitions were allowed to the extent that the condition "the explanation to the entries coconut oil and coconut oil cake in the First Schedule to the Act, shall not apply to such sales" in clause (ii) of Notification S.R.O. No. 781/89 shall operate only prospectively from May 18, 1989. The assessments for the period from July 1, 1987, to May 17, 1989, were to be modified accordingly. No order as to costs.

Petitions allowed.