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SUPREME COURT OF INDIA
A.K. Sikri, R.F. Nariman, JJ.
M/s Manuelsons Hotels Private Limited – Appellant
Versus
State of Kerala & Others – Respondents
Civil Appeal No. 2480 of 2008
Decided On : 11-05-2016
(1979) 2 SCR 641; (1997) 3 SCC 398; (2004) 6 SCC 465; (1986) Supp. SCC 728; (2015) 9 SCC 132; 170 C.L.R. 394 – Relied upon
(b) Constitution of India – Article 32 and 226 – Validity of power to grant exemption under a statutory provision amounting to subordinate legislation – Exercise of the power being discretionary, amenable to same tests for validity as executive or administrative action – Wednesbury principle – Abuse of such discretionary power may be struck down – Mandamus cannot be issued to frame rules and regulations. (Para 24, 25)
1992 Supp. (1) SCC 548; (2011) 13 SCC 77; (1985) 1 SCC 641 – Relied upon
(1995) 1 SCC 274; (2011) 3 SCC 193; (2004) 7 SCC 673; (1995) 6 SCC 53 – Distinguished
(2016) 4 SCC 134 – Referred
© Promissory Estoppel – Against Government in the exercise of its legislative, sovereign, or executive powers – No absolute bar – Further instantly there is no overriding public interest to which the principle of promissory estoppel must yield. (Para 35, 37, 39)
(1979) 2 SCR 641 – Relied upon
(1976) 3 SCC 540; (2002) 2 SCC 188; (2005) 1 SCC 625; (1979) 1 SCC 137 – Distinguished
(d) Kerala Buildings Tax Act, 1975 – Section 3A – Discretionary power had to be exercised – Not done – Principle of promissory estoppel vitiating such non-exercise of discretionary power – G.O. dated 11.7.1986 specifically providing for exemption from building tax – Section 3A enacted in pursuance thereof – Remaining on statute book from 6.9.1990 to 1.3.1993 – Appellants relying on G.O. dated 11.7.1986 constructing a hotel building by 1991 – Entitled to exemption – Denial on ground of non-issuance of notification u/s 3A – Appellant held entitled to exemption from building tax till 1.3.1993 upto which section 3A was applicable. (Para 39)
(1979) 2 SCR 641; (2004) 6 SCC 465 – Relied upon
Facts of the case:
Notice for filing returns under the Kerala Buildings Tax Act was issued to the appellants on 5th September, 1988. The appellants replied that they relied upon the G.O. dated 11th July, 1986 and stated that they were under no obligation to furnish any return under the said Act as they were exempt from payment of building tax.
By a Writ Petition filed in 1989, the appellants challenged the notice dated 5th September, 1988. The High Court relegated the appellants to the Committee set up under the 1986 G.O. to pursue their claim.
By a letter dated 6th February, 1997, the exemption promised by the G.O. of 1986 was denied to the appellants stating that as Section 3A had been omitted w.e.f. 1st March, 1993, the power to grant exemption had itself gone and, therefore, no such exemption could be given to the appellants.
A notice dated 28th April, 1997 was issued by the authorities asking the appellants to submit the necessary statutory return under the Kerala Buildings Tax Act.
This notice was challenged in O.P. No. 9601 of 1997 which was allowed by the High Court.
The authorities once again rejected the appellant’s application for exemption from property tax. This order was challenged in Writ Petition which was rejected.
Finding of the Court:
Impugned judgment cannot be sustained.
Result: Appeal partly allowed.
JUDGMENT :
R.F. Nariman, J.
1. On 11th July, 1986, the State Government, by a Government Order (G.O.), accepted the recommendations of the Government of India suggesting that tourism be declared an “industry”. The fallout of this G.O. was that this would enable those engaged in tourism promotional activities to become automatically eligible for concessions/incentives as applicable to the industrial sector from time to time. Apart from various other concessions that were granted, exemption from Building Tax levied by the Revenue Department was one such concession. It was stated in the said G.O. that action to amend the Kerala Building Tax Act, 1975 will be taken separately. The G.O. went on to state that persons eligible for such concessions will, among others, be classified hotels i.e. from 1 to 5 stars. A Committee was set up consisting of three government officers to oversee the aforesaid scheme.
2. Vide a letter dated 25th March, 1987, the Government of India approved the hotel project of the appellants, being a 55 double room 3 star hotel project to be set up in the city of Calicut.
3. Pursuant to the aforesaid G.O. dated 11th July, 1986 and the aforesaid approval, the appellants began constructing the hotel building, which was completed in the year 1991. Notice for filing returns under the Kerala Buildings Tax Act was issued to the appellants on 5th September, 1988. The appellants replied that they relied upon the G.O. dated 11th July, 1986 and stated that they were under no obligation to furnish any return under the said Act as they were exempt from payment of building tax.
4. In pursuance of the said G.O. dated 11th July, 1986, the Kerala Buildings Tax Amendment Act of 1990 was passed with effect from 6th November, 1990. The Objects and Reasons for said amendment act read as follows:
“STATEMENT OF OBJECTS AND REASONS
The Government has declared tourism as an industry with a view to develop tourism in the State and announce various concessions to tourism related activities as per GO (P) 224/86/GAD dated 11.07.1986. One of the concessions declared by Government was to exempt the buildings constructed in relation to tourism from the provisions of the Kerala Building Tax Act, 1975.
For achieving the above said purpose the Kerala Building Tax Act, 1975 has to be amended suitably and the Government have decided to amend the Kerala Building Tax Act 1975 for the purpose.
As the above proposal had to be given effect to immediately and as the Legislative assembly was not in session the Kerala Building Tax (Amendment) Ordinance, 1990 (Ordinance No.8 of 1990) was promulgated by the Governor of Kerala on the 2nd day of November, 1990, and published in the Kerala Gazette Extraordinary dated 6th day of November, 1990.
The Bill seeks to replace the said ordinance by an Act of Legislature.
(Published in KG Ex No.1159 dt 7.12.1990)”
5. In pursuance of the said object, Section 3A was added, which reads as under:
“3A.(1) Power to make exemption:- The Government may, if they consider it necessary so to do for the promotion of tourism, by notification in the Gazette make exemption from the payment of building tax under the Act in respect of any building or buildings the construction of which is completed during such period and in such areas as may be specified in the notification and having such specifications as may be prescribed in the rules in this behalf.”
Also, to effectuate the said exemption provision, Rule 14A was added in the Kerala Buildings Tax Rules, 1974 as under:
“Rule 14A
(1) The exemption contemplated in Section 3A of the Kerala Building Tax Act, 1975 shall be applicable to the buildings having the following specifications in such Tourism sector and the construction of which is completed during such period as may be specified in the notifications:-
(i) Classified hotels (1 to 5 stars)
(ii) Motels (which conform to the specification of the Department of Tourism of Kerala/Central Government)
(iii) Restaurants (approved by Classification committee
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