The judgment establishes that promissory estoppel cannot be used to compel the Government to act against the law, particularly in matters related to taxation. It emphasizes that statutory notifications with retrospective effect crystallize the statutory principles applicable to the parties, and no rule of equity can prevail against legislatively ordained rules.

Headnote:
estoppel - State Government's promise of salestax holiday - Kerala General Sales Tax Act, 1963 - S.10 - The court considered the question of estoppel arising from the State Government's promise to recognize a salestax holiday. The judgment discusses the promise made by the Kerala Government through executive orders and a subsequent notification under S.10 of the Kerala General Sales Tax Act, 1963, providing for salestax exemption for new industrial units. The court examined the principle of promissory estoppel and its applicability to public law, particularly in the context of taxation laws. The judgment also delves into the limitations on the State's discretion in making promises and the balance between public interest and fairness to individuals in enforcing promises made by public authorities.
Fact of the Case:

The Kerala Government issued executive orders promising salestax holiday for new industrial units, followed by a notification under S.10 of the Kerala General Sales Tax Act, 1963, providing for salestax exemption. The petitioners alleged that the notification's second proviso, limiting exemption to 90% of the fixed capital investment, was in breach of the earlier promise, and sought full exemption as originally promised.
Finding of the Court:

The court held that the statutory notification issued by the Kerala Government with retrospective effect from 1-4-1979 crystallized the statutory principles applicable to the petitioners. The court rejected the plea of promissory estoppel to compel the Government to honor the original promise, emphasizing that no rule of equity could prevail against legislatively ordained rules. The court upheld the validity of the notification and dismissed the petitions.
Issues: The primary issue was the applicability of estoppel to the State Government's promise of salestax holiday and the subsequent notification imposing limitations on the exemption. The court also addressed the plea of discrimination and the refusal of District Industries Officers to grant certificates to the units.
Ratio Decidendi: The court held that promissory estoppel could not be used to compel the Government to act against the law, particularly in matters related to taxation. The judgment emphasized that the statutory notification with retrospective effect crystallized the statutory principles applicable to the petitioners, and no rule of equity could prevail against legislatively ordained rules.
Final Decision: The Original Petitions were dismissed, and the petitioners were permitted to pay off the tax due in six equal monthly installments.

Judgment :-

1. A question of estoppel, arising from a promise of the State Government to recognise a "salestax holiday", arises for consideration in these Original Petitions filed under Art.226 of the Constitution of India. "

2. Based on the report of a committee appointed to examine methods for strengthening the traditional labour-incentive industries of the State, rehabilitation of sick units and growth of new industrial units, the Kerala Government came out with an order on 11-4-1979, approving a package measure for promoting industrial development. So far as small scale industries were concerned, the package included promise of subsidies, development plots, electricity tariff concession, exemption from minimum guarantee (for supply of electrical energy) and salestax concession. In regard to the last-mentioned concession, the proposal was to exempt small scale industries set up after 1-4-1979 from salestax for a period of five years from the date of production. Mini Industrial units, Women's Industrial units and Smalt Scale units set up by Harijans were to get the exemption for three years. The concession was also to be prospectively extended to existing units of the above three categories Some time later, the position was further examined and another G.O. was issued, on 8-11-1979, and in supersession of the earlier orders, providing for the following "salestax concession":

"New small scale industrial units set up after 1-4-1979 will be exempted from the payment of tax for a period of 5 years from the date of production. Small scale industrial units set up after 1-4-1979 by women and Harijans anywhere in the State, and all Small Scale industries set up after 1-4-1979 in the Mini Industrial Estates, will be exempted from payment of salestax for 6 years from the date of production. This concession will be available also to industries in these three categories which have not completed six year period. However, the salestax if any already paid by the unit will not be refunded on any account."

In order to give statutory backing to the "holiday", Government issued the following notification, in exercise of power under S.10 of the Kerala General Sales Tax Act, on 29-9-1980:

"In exercise of the powers conferred by S.10 of the Kerala General Sales Tax Act, 1963 (15 of 1963). the Government of Kerala, having considered it necessary in the public interest so to do, hereby make an exemption in respect of the tax payable under the said Act on the turnover on the sale of goods produced and sold by the New Industrial Units under the Small Scale Industries for a period of five years from the date of commencement of sale of such goods by the said units subject to the conditions that the tax if any collected by such units by way of tax on their sales shall be paid over to Government and that salestax if any, already paid by such units to Government shall not be refunded.

Provided that such units shall produce proceedings of the General Manager, District Industries Centre declaring the eligibility of the units for claiming exemption from salestax.

Provided further that the cumulative salestax concession granted to a unit at any point of time within this period shall not exceed 90% of the cumulative gross fixed capital investment of the unit.

Explanation: For the purpose of this notification "New industrial units under the Small Scale Industries" shall mean undertakings set up on or after 1st April, 1979, and registered with the Department of Industries and Commerce as a small scale industrial unit, (but shall not include old industrial units under the Small Scale industries closed down and reopened under a new banner and style of business, after 1st April, 1979).

This notification shall be deemed to have come into force with effect from 1st April 1979."

The challenge is primarily to the Second proviso to the notification, restricting exemption to 90 percent of the fixed capital investment. It is said that relying on the promise held out in the two Go

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