The Government did not have the power to impose the condition about the non-applicability of the explanation for the purpose of availing the reduction in the rate of tax on the sales of coconut oil and oil-cake retrospectively, and the doctrine of promissory estoppel had considerable force.

T. L. VISWANATHA IYER, J. - These original petitions are filed by oil millers who feel aggrieved by a part of the Notification S.R.O. No. 781 of 1989 issued by the Government on May 18, 1989, under section 10 of the Kerala General Sales Tax Act, 1963. The notification has been given retrospective effect from July 1, 1987. The notification has ceased to be in effect on March 31, 1992. To understand the grievance of the petitioners, it is necessary to state the history of the reduction in the rate of purchase/sales tax relating to coconut, copra, coconut oil and coconut oil-cake over the years. The statute concerned is the Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the Act").

2. Petitioners are all oil millers who purchase coconut and copra, for crushing in their oil mills, and sell the resultant oil and oil-cake produced out of such coconut or copra either within the State or in the course of inter-State trade. Coconut and copra constitute entry No. 6 in the Second Schedule to the Act, liable to tax at 4 per cent at the point of last purchase. Similarly coconut oil and oil cake were entries 60 and 29, respectively in the First Schedule to the Act up to July 1, 1987, when they were liable to tax at 4 per cent up to September 16, 1980 and thereafter at 5 per cent on the first sale within the State. The First Schedule was recast with effect from July 1, 1987, by which coconut oil and oil-cake became entries 50 and 51 therein with the rate of tax and point of levy remaining the same at 5 per cent, and the first sale within the State. There was an explanation to these entries which stated that where tax had been levied in respect of copra or coconut, the tax leviable on the coconut oil and oil-cake produced out of such coconut or copra shall be reduced by the amount of tax levied on such coconut or copra. In other words, the position was that the oil miller selling coconut oil and oil-cake got a reduction, from the tax payable by him on such sales, of the amount of tax paid by him on the purchase of the coconut or copra out of which the coconut oil and oil-cake were produced. This was the position under the Act after July 1, 1987.

3. Purchase of coconut and copra, and the sales of coconut oil and oil-cake, had been the subject of reductions in the rate of tax payable, under three Notifications S.R.O. Nos. 137/69, 854/74 and 388/79. By S.R.O. No. 137/69 which came into force and had effect from April 1, 1969, the Government reduced the rate of tax payable under the Act, by an oil miller, in respect of his purchases of coconut or copra, which were used by him for production of coconut oil and cake in his mill within the State for sale, to 2 per cent. This notification dealt with purchases of coconut and copra. The subsequent two notifications related to sales of coconut oil and oil-cake. By S.R.O. No. 854/74, the Government reduced the rate of tax, payable under the Act, by an oil miller in the State, on the sale of coconut oil and oil-cake produced in his mill, to a dealer, for sale by such dealer in the course of inter-State trade or commerce, including transfer to any other place of business or to an agent or principal situate out of the State, from 5 per cent to 1 per cent, subject to the condition that the oil miller produced before the assessing authority, a declaration from the purchasing dealer testifying that he had actually sold the goods, in the course of inter-State trade or commerce or transferred them in the manner referred to above. This notification is dated November 21, 1974.

4. The next Notification S.R.O. No. 388/79 dealt with the sales of coconut oil to soap manufacturers in the State, for use in the manufacture of soap within the State, and reduced the rate of tax from 5 per cent to 1 per cent. This notification came into force from April 1, 1979.

5. The position as under these notifications, which were all in force on July 1, 1987, when the First Schedule to the Act was recast as men