Government once promised to exempt the Building Tax against Hotels; then cannot go beyond its words: Apex court
Civil Appeal No. 2480 of 2008
Bench: Justice A. K. Sikri; Justice R. F. Nariman
Case Brief: In the facts of the case, the Government of Kerala by its order (1986), declared the ‘tourism’ as ‘industry’ and as such those who were engaged in the tourism promotional activities were to become automatically eligible for concessions/ incentives as applicable to the industries. Moreover, the Revenue Department’s imposed Building Tax is also exempted as concession. Also, government clarified that the persons eligible for such concessions will including the hotels from 1 to 5 stars. Moreover, appellant’s 3-star hotel project was approved by the Government of India in the city of Calicut. The construction completed in 1991. However, under the Kerala Buildings Tax Act notice for filing returns was issued to the Appellants in 1988. But appellants replied that there was Government order of 1986, hence they have no obligation to furnish any return under that Act. Meanwhile, Amendment Act (1990) was also passed. Thus, the appellants challenged the notice of 1988 in writ petition before High court, which has ordered to relegate the appellants to committee set up under Government order, 1986 to pursue their claims. However, a letter denying the claims was issued, and stated that Section 3A of the Act was omitted from 1993, thus no exemption was grated. However, High Court again asked the committee to consider the matter afresh, which has again rejected the claims. Thus, High Court in the impugned order made in writ petition rejected the claims of appellants as there was no exemption notification issued under said provision. Moreover, High Court held that mere promise to amend the law does not hold out a promise of exemption from payment of building tax.
Thus, now the bench considers the facts and also analysed the various authorities on promissory estoppels, and observed that the foundation of this doctrine is that an unconscionable departure by one party from the subject matter of an assumption which may be of fact or law, present or future and which has been adopted by the other party as the basis of some course of conduct, act or omission, should not be allowed to pass muster. As such, bench found that High Court was incorrect in holding that no notification was issued under section 3A of the Kerala Buildings Tax Act, 1975. Moreover, this bench also observed that the non- issuance of the notification under section 3A was an arbitrary act of the Government which must be remedied by application of the doctrine of promissory estoppel. As such, the bench decided that no building tax can be levied or collected from the appellants in the facts of the present case. Thus, appeal allowed to this extent and judgment of the High Court set aside.
Read the Judgement: M/S Manuelsons Hotels Private Limited Vs. State of Kerala & Ors