1986 (12) TMI 37 - SC - VAT and Sales Tax

Whether any additional incentive can be given to the industrial concern? Held that - It is not disputed that the first Order namely, the one dated 11-4-1979 gave more of tax exemption than the second one. The second notification withdrew the exemption relating to purchase 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 11, 1979 set up their industries prior to 21-10-1980 within the State of Kerala would thus be entitled to the 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 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. Appeal allowed.

Issues:
- Interpretation of notifications issued by the State Government regarding tax exemptions for small-scale industries.
- Determining if the notifications were issued under the statutory powers granted by section 10 of the Kerala General Sales Tax Act.
- Application of the principle of estoppel in cases where industries relied on government incentives to set up their businesses.
- Clarification on the entitlement of tax exemptions for industries set up before and after specific dates mentioned in the notifications.
- Decision on the authority responsible for determining the eligibility of industries for tax benefits.

Analysis:
The Supreme Court heard appeals against judgments of the Kerala High Court regarding notifications issued by the State Government offering tax incentives to industries. The Court examined two notifications, one dated 11-4-1979 and the other dated 29-9-1980, providing tax concessions for small-scale industries. The High Court had differed in its interpretation of whether these notifications were issued under the statutory powers of section 10 of the Kerala General Sales Tax Act. The Supreme Court determined that both notifications fell within the purview of section 10, even though the first notification did not explicitly reference it. The Court applied the principle that an order made under a statute would be deemed to be made under the enabling provision, even if not explicitly stated.

The Court considered the principle of estoppel in cases where industries had set up their businesses in reliance on the government's incentives. Referring to past judgments, the Court held that industries that had acted upon the concessions offered in the notifications could plead estoppel if the State attempted to revoke or alter the benefits. The Court distinguished a previous case where estoppel was not applicable due to lack of clear promises or alteration of positions by the parties. In the present case, the Court found that the plea of estoppel was valid based on the facts and the precedent set by the M.P. Sugar Mills case.

Regarding the entitlement to tax exemptions, the Court clarified that industries established before 21-10-1980, in response to the first notification, were entitled to the full benefits promised for a period of five years from the start of production. Industries set up after this date were not eligible for the same benefits. The Court left the determination of which industries qualified for the benefits to the Sales Tax Authorities, to be decided based on the legal principles established in the judgment.

Ultimately, the Court allowed all the appeals, directing the parties to bear their own costs throughout the legal proceedings. The judgment provided clarity on the interpretation of the notifications, the application of estoppel in such cases, and the entitlement of industries to tax exemptions based on the dates of establishment in response to the government incentives.

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