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2006 DIGILAW 166 (KER)

Mayflower Hotels (P) Ltd. v. State of Kerala

2006-03-09

K.M.JOSEPH, K.S.RADHAKRISHNAN

body2006
Judgment :- Joseph, J. Common questions of law having arisen in the Original Petitions and Writ Appeals, they are being disposed of by a common Judgment. 2. The Government of Kerala issued Order dated 11-7-1986 wherein it was ordered that tourism will be treated as an industry. Concessions were announced. It included, inter alia, "exemption from building tax levied by the Revenue Department”. It was also stated in the said Order that action to amend the Kerala Building Tax Act will be taken separately. This position would appear to have been reiterated by its Order dated 30-11-1990. Therein, it was stated as follows: "The Ordinance amending the Kerala Building Tax Act has been notified on 6-11-1990. Department of Taxes will issue the notification under Section 3A of the Ordinance." Section 3A was inserted with effect from 6-11-1990. It reads as follows: "3A. Power to make exemption.--(1) 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." The said provision was, however, deleted with effect from 1-3-1993 by the Kerala Finance Act, 1993 (Act 13 of 1993). The Rules came into force as the Kerala Building Tax (Amendment) Rules, 1991 with effect from 11-10-1991. Rule 11A was added. It provides as follows: "11a (1) The exemption contemplated in Section 3A of the Kerala Building Tax Act, 1975 shall be applicable to the building having the following specifications in such Tourism sector and the construction of which is completed during such period as may be specified in the notification,- (i) Classified Hotels (1 to 5 star). (ii) Hotels (which conform to the specification of the Department of Tourism of Kerala, Central Government). (iii) Restaurants (approved by classification Committee) of the Government of India. (iv) Amusement Parks and recreation centres approved by the Government. (v) Ropways at tourist centres. (vi) Construction of structure like Koothambalam/Auditorium etc. by schools/institutions teaching Kalaripayattu and traditional art form of Kerala. (vii) Institution teaching surfing, sking, gliding, trekking and similar activities which will promote tourism. (iii) Restaurants (approved by classification Committee) of the Government of India. (iv) Amusement Parks and recreation centres approved by the Government. (v) Ropways at tourist centres. (vi) Construction of structure like Koothambalam/Auditorium etc. by schools/institutions teaching Kalaripayattu and traditional art form of Kerala. (vii) Institution teaching surfing, sking, gliding, trekking and similar activities which will promote tourism. (viii) Exclusive handicrafts emporiums (approved by the State/Central Apartment of Tourism). (2) The area so notified shall be approved Tourist Centres and such other locations certified by a Committee consisting of Secretary to Government, Tourism Department, Secretary to Government, Tourism. (3) The period of exemption shall be 10 years or such shorter period in respect of specific areas as may be notified in the Gazette based on the recommendation of the Committee." 3. It is not in dispute that a notification contemplated within Rule 11 A was not issued. The complaint of the petitioners and appellants is that they are not given the benefit of exemption from the Kerala Building Tax Act. In O. P. No. 20436/98, the allegation is that a major part of the construction of the building was completed in stages in 1986 - 1987 and the balance portion in 1991 - 1992. It is their case that the petitioner was granted the benefit of concessional tariff on the basis that it is classified as a Motel approved by the Department of Tourism. It is their case that Ext. P-13 is liable to be quashed. Ext. P-13 is the order noting that the petitioners have not complied with the provisions of Section 13(4) of the Act and a Revision cannot be entertained. They also seek a declaration that the amendment to Section 3A omitting Section 3A(1) with effect from 1-3-1993 cannot have any retrospective effect in relation to hotel buildings constructed prior to 1-3-1993. It is their case that the hotels established by them promote tourism and the Restaurant is approved by the Government of India. It is their further case that the Motel was exempt from payment of tax before the omission of Section 3A. Ext. P-5 would show that the Managing Director of the Kerala Tourism Development Corporation has stated that since the Motel is an approved Motel, it is liable for exemption from building tax. 4. It is their further case that the Motel was exempt from payment of tax before the omission of Section 3A. Ext. P-5 would show that the Managing Director of the Kerala Tourism Development Corporation has stated that since the Motel is an approved Motel, it is liable for exemption from building tax. 4. In O.P.No.17037/94 with reference to the orders dated 11-7-1986 and 30-11-1990 which have already been referred to, the petitioner would allege that attracted by the order dated 11-7-1986, she started the construction as a single star tourist home investing its own money and raising loans. Ext. P-3 would show that it is stated therein that the request of the petitioner for exemption from building tax maybe taken up with the Taxes Department after the hotel has been duly classified. Ext. P-5 dated 19-9-1991 reads as follows: "Inviting your attention to the references cited, I am directed to inform you that the request for exemption from payment of Building Tax, for the promotion of Tourism can be examined in detail only after the rules in this behalf are issued and only if all the conditions specified in the rules are satisfied and the building in question conforms to the specifications stipulated in the rules. However, it may be seen you have also not produced any evidence to prove that the building in question has been classified under any of the items specified in pars 5 of GO. (P) No. 224/86/GAD dated 11-6-1986. When heard, your basic contention was the building is incomplete and the assessment premature. On enquiry from Government, it was found out that the above contention is not true to the facts. Further it was noted that the room in the building are let out to the tourists etc." The request of the petitioner was rejected. Ext. P-6 would show that the Director of the Department of Tourism has pointed out certain defects for considering the petitioner's application for star classification. It is dated 11-5-1992. Ext. P-9 dated 16-11-1994 would show that the Committee had not yet conducted the inspection as it was reconstituted. There was a request for keeping the proceedings for levying building tax in abeyance. It is the petitioner's case that he took necessary steps to rectify the defects. It is dated 11-5-1992. Ext. P-9 dated 16-11-1994 would show that the Committee had not yet conducted the inspection as it was reconstituted. There was a request for keeping the proceedings for levying building tax in abeyance. It is the petitioner's case that he took necessary steps to rectify the defects. She would contend that acting on the promise contained in the Order dated 11-7-1986, she has altered her position to her disadvantage and now the Government cannot go back from the assurance. There is no prayer seeking to quash Ext. P-5. 5. In O.P. No. 21654/97, the petitioner challenges Exts. P-19 and P-20. A direction is sought to dispose of Ext. P-7 request for total exemption from building tax. Ext. P-19 is the order issued by the Tahsildar assessing the petitioner to Rs. 10,01,250 as building tax. The allegation of the petitioner is that the petitioner completed the construction of the building in 1987 April and Completion Certificate was issued on 1-4-1987. It was assessed to tax vide Ext. P-1. The Electricity Board has given Ext.P-4 Certificate showing that the petitioner is entitled to concession. Ext. P-9 is the Rule incorporated in the Building Tax Rules which has been referred to. There was Ext. P-14 order assessing the petitioner to tax. It is stated to be against Section 3 A of the Kerala Building Tax Act and Rule 11 of the Kerala Building Tax Rules and also against the Government Orders. By Ext. P- 15, Ext. P-14 assessment order was quashed. Ext. P-19 is the order of assessment passed pursuant to Ext.P-15 Judgment. Petitioner would complain that the objection of the petitioner was not considered. Petitioner would also contend that in Ext. P-14, it is pointed out that the building was assessed by the Cochin Corporation on 29-3-1988, and that the annual rental value has to be taken. It is also pointed out that the plinth area shown is incorrect. Petitioner's case is that it has been given all other benefits including concessional tariff for electricity on the basis of the Government Order treating tourism as industry. It is pointed out that as per Ext. P-3, the petitioner's hotel was classified as three star. Ext. P-7 request for grant of total exemption is liable to be allowed, it is contended. 6. It is pointed out that as per Ext. P-3, the petitioner's hotel was classified as three star. Ext. P-7 request for grant of total exemption is liable to be allowed, it is contended. 6. The appellants in W.A. No. 184/06 would submit that the petitioner in the Original Petition, whose legal representatives the appellants are, constructed a one star hotel which was completed in late August, 986. It is stated that even before the construction was commenced, there was a clear direction issued by the Government of India to treat the classified hotels as exempted from payment of building tax. There was wide publicity, it was alleged, to the same. Concession was made available in the form of concessional tariff by the Kerala State Electricity Board. Petitioner was assessed to tax. Exts.P-3, P-4 and P-I1 were challenged. A direction is sought to the respondents to take action to see that the petitioner is exempt from payment of tax under the Kerala Building Tax Act. The learned Single Judge dismissed the writ petition finding that the Revisional Authority has considered the contentions in Ext. P- I 1 order by holding that there is no provision in the Kerala Building Tax Act, 1975 providing any such exemption, and that an executive order cannot override the statutory provisions in the Act. The omission of Section 3 A was taken note of. It was also found that there was no case of promissory estoppel. 7. We heard the learned counsel appearing for the petitioners/appellants and the learned Special Government Pleader for Taxes, Shri Raju Joseph. Learned counsel for the petitioners/appellants would submit that having regard to the facts as stated, a clear case has been made out for the grant of benefit of exemption from payment of tax under the Kerala Building Tax Act. Reliance was placed on the decision of the Apex Court in State of Punjab v. Nestle India Ltd. and Another (2004) 6 S.C.C. 465. Shri George Thomas would also contend that the petitioner is entitled to the benefit of exemption from payment of building tax. Reliance was placed on the decision of the Apex Court in State of Punjab v. Nestle India Ltd. and Another (2004) 6 S.C.C. 465. Shri George Thomas would also contend that the petitioner is entitled to the benefit of exemption from payment of building tax. It is submitted on behalf of the petitioner in O.P. No. 21654/97 that even assuming that the petitioner is liable to pay building tax, the impugned order is liable to be set aside in view of the fact that the petitioner is entitled to have the building assessed under the law as it stood prior to the introduction of the plinth area as the criterion for assessing tax. Learned counsel would rely on the provisions of the Government Orders which have been referred to. Reference is also made to the enacting of Section 3 A. It is submitted that it is arbitrary on the part of the Government not to extend the benefit as held out in the Government Orders. Learned Special Government Pleader for Taxes, would submit that no case has been made out by the petitioners or the appellants for granting any relief. He would also submit that there was no basis at all to the plea of promissory estoppel. He would submit that pleadings do not bear out the plea. 8. The plea of promissory estoppel is a plea which has to be founded in the pleadings. It cannot be open to doubt that it has to be averred that it was acting on the basis of a promise that the parties decided to set up the hotel or motel. It cannot be in the region of dispute that the principles of promissory estoppel cannot be invoked either to direct the State to act contrary to the law, nor to direct the Legislature to exercise its legislative power. 9. In State of Punjab v. Nestle India Ltd. and Another (2004) 6 S.C.C. 465 the Court had to deal with a situation where acting on the basis of the representation made, without a discordant note being struck, the parties would not be rendered liable to pay tax on the product, the petitioners had acted to their detriment and there existed power with the Government to grant exemption. It was in the concepts of the facts as established in the case that the Apex Court proceeded to hold as follows: "In view of Sections 6(2), 31, 30 and 30 A of the Punjab GST Act, 1948, the State Government had the power to exempt or abolish milk as a taxable commodity. There was nothing in law which prohibited it from doing so. The representation to exempt milk was made by persons who had the power to implement the representation. Of course, the Government cannot rely on a representation made without complying with the procedure prescribed by the relevant statute, but a citizen may and can compel the Government to do so, if the factors necessary for founding a plea of promissory estoppel are established. Such a proposition would not 'fall foul of our constitutional scheme and public interest'." In these cases, on the other hand, it is to be noted that what is stated in the Order dated 11-7-1986 is that the persons establishing hotel buildings specified therein would be exempted from the Building Tax, and that the Kerala Building Tax Act would be suitably amended. Prior to the incorporation of Section 3 A on 6-11-1990, in the Act, there did not exist any power with the State to grant any exemption in favour of hotels or motels which are classified and meant for promoting tourism. Section 3A was brought onto the statute book in November, 1990 and it had a short life till it was omitted with effect from 1-3-1993. There cannot be any dispute that as and when the petitioners had started the construction of the building, there was no notification issued acting under Section 3 A of the Act exempting the same from exigibility to tax and what is more, Section (3A) itself was not on the statute book. In the decision in Sharma Transport represented by D.P. Sharma v. Government of A.P. and others (2002) 2 S.C.C. 188, the Apex Court held as follows: "Doctrine of ‘promissory estoppel' has been evolved by the courts, on the principles of equity, to avoid injustice. But before the rule of `promissory estoppel' can be invoked, it has to be shown that there was a declaration or promise made which induced the party to whom the promise was made to alter its position to its disadvantage. But before the rule of `promissory estoppel' can be invoked, it has to be shown that there was a declaration or promise made which induced the party to whom the promise was made to alter its position to its disadvantage. It is equally settled law that the promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is prohibited by law or which was devoid of the authority or power of the Officer of the Government or the public authority to make." There is no plea of promissory estoppel as such in O. P. No. 20436/98. In fact, the allegation is that a major part of the construction of the building was completed in stages in 1986-1987 and the balance portion in 1991 -1992. There is no reliable pleading that it was relying on the Order dated 11-7-1986 that the petitioners had started or carried out the construction. The same is the position in regard to the pleadings in the other cases. We feel that the petitioners have not established a case of promissory estoppel. 10. We find that Section 3A contemplated the issuance of the notification granting exemption from payment of building tax, the construction which was completed during such period and such areas as is to be specified in the notification. There was freedom with the Government in regard to its choice of the area, as it, no doubt, had in relation to the building or buildings. As far as the specifications referred to in the said Section are concerned, they have come to be prescribed by the Rules with effect from 11-10-1991. It is clear that in the absence of a notification, there cannot be any legal claim for the grant of exemption from payment of building tax. In other words, during the brief period of its existence, no notification came to be published, and a claim for exemption from building tax would not be maintainable. Section 3 A was not in existence at the time when the Order dated 11-7-1986 was issued. In other words, during the brief period of its existence, no notification came to be published, and a claim for exemption from building tax would not be maintainable. Section 3 A was not in existence at the time when the Order dated 11-7-1986 was issued. In other words, there was no legal authority with the Government when it issued the order on 11-7-1986 to grant exemption, unlike in the facts of the case reported in State of Punjab v. Nestle India Ltd. and another (2004) 6 S.C.C. 465, where, at the time of making of the representation containing the promise, there existed statutory power with the State of Punjab to grant exemption by issuance of notification. 11. We find that the contention of the petitioner in O. P. No. 20436/98 that the Motel was exempt from payment of building tax before the omission of Section 3A is untenable, as it was not exempted either in point of fact or in law. Therefore, the case built up of the effect of the retrospective nature of the omission of Section 3A is liable to be rejected. We find that the appellants in the Writ Appeals have failed to make out a case for interference. We do not think that the reasoning given by the learned Single Judge in the Judgment are liable to be overturned. However, in regard to O. P. No. 21654/97, we feel that there is some merit in the complaint of the petitioner that the objection raised by the petitioner in regard to the assessment being on the basis of the plinth area, and not on the basis of the capital value as requested by the petitioner, is liable to be accepted. Accordingly, Ext. P-19 order in O. P. No. 21654/97 is quashed, in view of the fact that tax was assessed employing the criterion of plinth area instead of the method applicable prior to the amendment. The Assessing Authority will consider the matter and take a decision in accordance with law. We make it clear that the petitioner is not entitled to be granted exemption from payment of building tax. O. P. No. 20436/98, W. A. Nos. 1135/00 and 184/06 are dismissed.