Holding

The Court held that the appellants were not entitled to relief on promissory estoppel or on the basis of the 1973 exemption, as the Government lacked authority to grant retrospective exemption and validly cancelled the notification.

Summary

The appellants, cashew processors in Kerala, claimed that a 12 Oct 1973 government notification granting a retrospective sales‑tax exemption for purchases of imported raw cashew nuts (Sept 1970‑Sept 1973) could not be withdrawn and that the State was estopped from levying tax because ministers had assured them in 1971 that no tax would be imposed. The State later cancelled the exemption by a notification dated 9 Nov 1973. The Supreme Court examined whether the representations amounted to a clear, unambiguous promise sufficient for promissory estoppel and whether the State had statutory authority to cancel the earlier notification. It held that the alleged ministerial statements were vague, the appellants did not show they altered their position or suffered prejudice, and therefore the estoppel plea failed. Moreover, at the time of the 1973 exemption the Kerala General Sales Tax Act did not empower the Government to issue retrospective exemptions; such power was only conferred by a 1980 amendment, rendering the 1973 exemption ineffective. Consequently, the State’s cancellation under section 10(3) was valid and the appeal was dismissed.

Issues considered

Whether the appellants could invoke promissory estoppel against the State Government based on alleged ministerial representations.
Whether the Kerala Government had the statutory power under section 10 of the Kerala General Sales Tax Act, 1963 to grant a retrospective tax exemption in 1973.
Whether the State could validly cancel the exemption notification under section 10(3) of the Act.

Legislation cited

Central Sales Tax Act, 1956s. 2(ab)
Kerala Act 19 of 1980 (amendment to the Kerala General Sales Tax Act)s. 10(1)
Kerala General Sales Tax Act, 1963s. 10(1), s. 10(3), s. 5

Subjects

promissory estoppeltax exemptionretrospective legislationsubordinate legislationcancellation of notificationKerala General Sales Tax Actsales taxcashew industry

Judgment

610

A ¥--
BAKUL CASHEW CO. & ORS.
v.
SALES TAX OFFICER QUILON &ANR.

MARCH 12 , 198&

[E.S. VENKATARAMlAH AND M.P. THAKKAR, JJ.]
B
Promissory estoppel, plea of - Phrases used by Ministers ?"- '
which cannot form the basis for a plea of estoppel, detailed -
Sales Tax exemption granted retrospectively by the State
Government by GOMS 127/73/ID dated 12.10.1973 withdrawn. by a
later GOMS 143/73/ID dated 9. ll.1973 is.sued under section
c 10(3) of the Kerala General Sales Tax Act, 1963 (Kerala Act 15
of 1963) as amended, validity of - Power of G6vemment to
cancel the earlier Notification vis-a-vis the right of the
Cashew Factory owners to secure the exemption.
...
The appellants are Cashew Processors owning arW./or ' ~
D
working cashew factories wherein nearly about 80 per cent of
the raw nuts processed were being imported during the relevant
time from Af ~ican countries. The import of raw nuts were
canalised through the Cashew Corporation of India and they
were allotted to the appellants and various other factory
owners who were engaged in the business of processing
E
cashewnuts. There was delay in making the assessment of sales
tax payable by them under section 5 of the Kerala General
Sales Tax Act, 1963 during the period 1970 to 1974 and the
Department co111Denced to make assessments in or about the year 1
1974. The Government in the meantime issued a Notification ·
dated 12.10.73 granting exemption to cashew manufacturers for
F
the period between September 1, 1970 and September 30, 1973
and had later cancelled it by Notification dated 9.11.73, that
is within three weeks of the earlier Notification granting
exemption.

The appellants filed a writ petition contending: (i)
G
that the Government waa precluded by the rule of promissory ..,_
estoppel from claiming the purchase tax in respect of
cashewnuts imported from African countries; and (ii) that the
subsequent withdrawal of the exemption granted on 12.10.73 waa
bad. The Writ Petitions having been dismissed, the appellants
have come up in appeal by way of special leave.
H
BAKUL CASHEW CO. v. S.T.O. 611

• -r Dismissing the appeal, the Court A

HELD : 1.1 The appellants in the instant case, are not
entitled to any relief either on the principle of promissory
estoppel or on the basis of the earlier Notif icatibn issued
under section 10 of the Kerala General Sales Tax Act, 1963.
[621 E-F] B

~, 1.2 The whole case of the promissory estoppel lacks the
necessary factual foundation. In the instant case, the
allegations made in the petition do not establish (i) that
there was a definite representation by the Government to the
effect that ~he Government will not levy the tax; (ii) that
the appellants in fact altered their position by acting upon c
such representation; and (iii) that they had suffered from
some prejudice sufficient to constitute an estoppel. [617 F-G]

-~ 1. 3 In cases of this nature, the evidence of
; representation should be clear and unambiguous. It "must be
certain to every intent." The statements that are made by D
ministers at such meetings, such as, "let us see", "we shall
consider the question of granting of exemption
sympathetically", "we shall get the matter· examined", ''you
have a good case for exemption" etc. even if true, cannot form
the basis for -a plea of estoppel. The events that have taken
place subsequently belie the fact of any such promise by the E
ministers. In fact the Cashew Corporation of India had made a
representation to the Government of India on May 7, 1971 and
-\the Government of India wrote to the State Government on March
4, 1972 urging that the exemption prayed for by the· cashew
manufacturers may be favourably considered by the Government
of Kerala. The Government of Kerala however rejected the said F
request. Then on further pressure being put upon it, it issued
the notification dated October 12, 1973 and i111111ediately
thereafter withdraw it after it encountered severe public
criticism. This conduct on their part is not consistent with
the appellants' case that they had actually promised in the
.$ear 1971 to exempt the cashew trade from payment of the sales G
'tax. [617 C-F]

2.1 The State Government had the necessary power to
cancel any Notification earlier issued, which power of
cancellation has been expressly conferred by section 10 (3) of
Kerala General Sales Tax Act. The authority which can issue a H
612 SUPREME COURT REPORTS [1986] 1 s.c.R.

A
Notification may certainly cancel it also. The State ', •
Government did so and cancelled the eJlrlier Notification
as there was a public hue and cry that the State Government
had shown undue fafour to the Kerala Cashewnut factory owners
at a time when the State Government was p!tssing through grave
and difficult financial position. Moreover the transactions in
B question related to the past period. [618 II, 621 D-E)

2.2 An authority which has the power to make subordinate ~
legislation cannot make ·it with retrospectllve effect unless it
is so authorised by the Legislature which has conferred that
power on it. The power of exemption in the instant case was
C exercised through a retrospective Notification which was a
piece of subordinate legislation. Further •)n the date on which
the notification was issued the Kerala Government had no such
power under section 10 of the Act as it stood then to issue a
notification granting exemption with retrospective effect.
Such power was actually conferred on llt later on by the -,,
o Kerala Legislature only by way of amendment in 1980 by Kerala
Act 19 of 1980. By the addition of the words "either
prospectively or retrospectively" in sub-section (1) of
section 10 the State Legislature has now conferred the
necessary power on the State Government to grant exeq>tion
with retrospective effect. This amendment also suggests that
E l!Jlrlier the Government had no such power to grant exemption
with retrospective effect. [619 A-B; 620 R~; 621 A-CJ

Income Tax Officer v. M.C. Poanooee & Ors., [1970] l
S.C.R. 678 referred to. ~
'
F CIVIL APPELLATE JURISDICTION Civil Appeal No. 1725
(NT) of 1977.

From the Judgment and Order dated lat December, 1976 of
the Kerala High Court in O.P. No. 1740 of 1976.

G P. Govindan Nair, Mrs. A.K. Verma, S. Sukumaran and D.N.
Misra for the Appellants. \.

T.S. Krishnanurthy Iyer, Karunakaran Nambiar and V.J.
Francis for the Respondents.

II
BAKUL CASHEW co. v. s.r.o. [VENKATARAMIAR, J.] . 613

A
'"""' The Judgment of the Court was delivered by

VENKATARAMIAH, J. This appeal by special leave is filed
against the judgment dated December 1, 1976 in the petition
bearing Writ Petition No. O.P. 1740 of 1976 on the file of the
Kerala High Court filed by the afore-mentioned 26 appellants B
and 20 others. They prayed in the Writ Petition inter alia for
> -<
tl:).e issue of a writ in the nature of mandalllls to the State
Government of Kerala to give effect to the notification issued
by the State Government bearing No. G,0,MS. 127 /73/ID dated
October 12, 1973 under section 10 of the Kerala General Sales
Tax Act, 1963 (15 of 1963) (hereinafter referred to as 'the
Act') by which the State Government had retrospectively C
granted an exemption in respect of the tax payable under
section 5 of the said Act by the cashew manufacturers in that
State on the purchase turnover of cashewnuts imported from
outside India through the Cashew Corporation of India for the
.., period between September 1, 1970 and September 30, 1973 after
' quashing the subsequent notification bearing No. G.O.MS. D
143/73/TD dated November 9, 1973 issued under section 10(3) of
the Act cancelling the above said notification dated October
12, 1973. The appellants and the other persons who had filed_
the writ petition before the High Court are cashew processors
owning and/or working cashew factories wherein nearly about 80
per cent of the raw nuts processed were being iqiorted during E
the relevant• time from African countries. The import of raw
nuts was canalised through the Cashew Corporation of India and
they were allotted to the appellants and various other factory
' owners who were engaged in the business of processing
cashewnuts. It appears that there was delay in making the
assessment of tax payable by them under section 5 of the Act F
. during the periods 1970 to 1974 and the Department commenced
to make assessments in or about the year 1974. The Government
in the meanwhile had issued the noti.Hcation dated October 12,
1973 granting exemption to cashew manufacturers for the period
' between September 1, 1970 and September 30, 1973 and had later
on cancelled it by notification dated November 9, 1973 within G
~ about three weeks from the date on which the exemption had
been granted. It is not necessary to ref er to all the
allegations made in the writ petition for purposes of this
case since the only point urged before us relates to the right
of the appellants to secure the exemption as stated in the
notifieation dated October 12, 1973 by virtue of the rule of H
614 SUPREME COURT REPORTS [19861 i s.c.R.
A
promissory estoppel. The appellants urged two contentions
before the High Court in support of their plea : (i) that the
Government was precluded by the nile of promissory estoppel
from claiming the purchase tax in respect of cashewnuts impor-
ted from African countries and (ii) that the exemption that
had been granted on October 12, 1973 could not be withdrawn by
the subsequent notification issued on November 9, 1973, In
support of first limb of their argument the appellants
depended upon the representation which was alleged to have
been made on behalf of the Government by the Chief Minister,
the Industries Minister and the Revenue Minister at a meeting
held on April 25, 1971 and in support of their second
c contention they depended upon section 10 of the Act, The
Government contested the case of the appellants on both these
points, The High Court upheld the case of the State Government
and rejected the said contentions, It, however, directed the
Kerala Sales Tax Appellate Tribunal to make assessments taking
into account the other contentions of the assessees. This
D appeal by special leave is filed against the judgment of the
High Court of Kerala in the said writ petition.

The allegations regarding the plea based on promissory
estoppel are found in Paragraphs 10 & 11 of the petition which
reads thus
E
"10. When the scheme of canalisation came to be
introduced in September, 1970, the members of the
cashew industry iike the first petitioners were
keen that the purchases of raw cashewnuts in the f
form of allotment from the said Corporation should
F not be subjected to tax under the said Act as was
the case under the open general licence scheme. The ~
then Chairman of the said Corporation, Shri M. C.
Sarin, as also its Managing Director Shri Z.K.
Joseph assured the members of the cashew industry
that such purchases would not be exigible to tax
G under the said Act. In a meeting held on the 25th
April 1971 where Shri Z. K. Joseph of the said ..,..
Corporation was also present the representatives of
the industry were assured by the Chief Minister
Shri Achuta Menon, the then Industries Minister
Shri N.E. Bellaram and the then Revenue Minister
H Baby John that no tax would be levied under the
said Act on the turnover of African raw nuts.
BAKUL CASHEW CO. v. S.T.O. [VENKATARAMIAH, J.) 615

A
11. Subsequently, for three years, the Respondents
did not initiate assessmer.t proceeding against the
allottees like the first petitioner and gave the
allottees to believe that no tax would be levied on
such purchases, relying upon which the allottees
have quoted prices for exports and made huge B
conmitments. If such imports were to be regarded as
taxable purchases by the respondents, the
allottees, like the first petitioner would not have
made commitments with the foreign buyers. In fact,
as late as 12th October, 1973, a notification was
issued by the fourth respondent, a copy of which is
hereto annexed and marked Exh. 'A' under section 10 c
of the said Act giving effect to such
representations. The said notification was
published in Kerala Gazette on 23rd October, 1973,
clearly stating that the exemption to · such

-
purchases was being accorded on the ground of
public interest. Without assigning reasons or o
showing any change of circumstances, in less than
twenty days, another notification was issued on 9th
November, 1973, a copy of which is hereto annexed
and marked Exh. 'B' withdrawing the said
exempt ion."
E
In the counter-affidavit filed on behalf of the State
Government it is stated in Paragraphs 18 & 19 thus :

"18. The averments in para 11 are denied. The
t Cashew Corporation of India wrote to the Government
by Memorandum dated 3. 5.1971 that cashew industry F
may be exempted from payment of tax under the
Kerala General Sales Tax Act on their purchases of

..
. ;' imported raw cashewnuts. The Ministry of Foreign
Trade also addressed a communication to the State
Government dated 4.3.1972 that the matter may be
sympathetically considered. The cashew manufactu- G
J rers and exporters' Associations also moved the
\
Government in this behalf by memorandum dated 6.3.
1972. The Government directed the Board of Revenue
(Taxes) to submit a report in the matter. The
matter was engaging the attention of the Board of
Revenue and the State Government from some time. In H
616 SUPREME COURT REPORTS [1986] l S.C,R,
A

view of very heavy stakes involved in the matter, r- ·.
the Government had to analyse the entire situation,
especially with reference to the very high aroount
of the Revenue involved. It was reported that the
grant of exemption _wil1 involved loss of revenue
B of at least one crore of rupees per annum. After
consideration of the matter the State Government
decided to reject the request of exemption prayed
for. The Cashew Corporation of India and the ~
Government of India were gi Ven a reply e,
comnunicating the decision of the State Government
c in February, 1973. Thereafter the Kerala State
Cashew Development Corporation requested the Govt.
to re-examine the decision as the levy of tax would
be heavy burden on the industry. The Government
passed an order (Ext.A) granting the exemption for
the period 1,9,1970 to 30,9,1973, It was resolved
D then that tax should be levied from l, 10.1973 on- ,
wards. There was considerable criticism about the .,_
grant of exemption especially in the context of the
grave and . difficult financial position · of the
State. After mature consideration, by notification
dated 9,11,1973 (Ext.B) the earlier Government
E order dated 12.10.1973 (Ext.A) was cancelled.

19, The allottees were not given to believe that no
tax would be levied on such purchases •••••••••••• 11

In the reply affidavit filed on behlaf of the appellants ·•I
F the above allegations. made in the counter-affidavit are
denied.

The allegations in the appeal do not contain any
information about who was present at the so called meeting, \ ,
what representation was actually made, whether any of the , .,
G appellants acted on the basis of the said representation and
how he was prejudiced thereby. No material in the form of
document"i in support of that plea that they altered their ~
price structure relying upon the alleged representation was
also produced by the appellants. The appellants were owners of
existing factories. None of them is shown to have established
H any new factory relying on the representation of any of the
ministers. They were carrying o~ the business in their
BAKUL CASHEW CO. v, S.T.O. [VENKATARAMIAH, J.) 617
A
I ·1 factories already. It is not their case that they would have
' '
closed down their factories but for the alleged representation
made to them. Nor it is their case that they gave up a more
advantageous project and diverted their capital towards the •
cashewnut factory believing that the Government would grant
B
exemption ; from payment of tax and had suffered any loss
thereby. It is contended that the officer who had filed the
counter-affidavit could not have known what transpired at the
-< alleged meeting. The same plea is available against the
appellants too. The person who has sworn to the affidavit on
behalf of the appellants also does not say that he was present
at the meeting or that he had any personal knowledge about
what transpired at the meeting. He does not give any material c
details about what actually transpired there. In cases of this
nature the evidence of representation should be clear and
unambiguous. It 'nust be certain to every intent'. The state-
ments that are made by ministers at such meetings, such as,
'let us see', 'we shall consider the question of granting of
D
exemption sympathetically', 'we shall get the matter
examined', 'you have a good case for exemption' etc. even if
true, cannot form the basis for a plea of estoppel. Moreover,
the events that have taken' place subsequently belie the fact
of any such promise by the ministers. It is seen that the
Cashew Corporation of India had made a representation to the
E
Government of India on May 7, 1971 and the Government of India
wrote to the State Government on March 4, 1972 urging that the
exemption prayed for by the cashew manufacturers may be
favourably considered by the Government of Kerala. The Govern-
t ment of Kerala however rejected the said request. Then on
further pressure being put upon it, it issued the notification
F
dated October 12, 1973 and immediately thereafter withdrew it
after it encountered severe public criticism, This conduct on
thei.r part is not consistent with the appellants' case that
they had actually promised in the year 1971 to exempt the
cashew trade from payment of the tax. Th~ allegations made in
the petition do not establish (i) that there was a definite
representation by the Government to the effect that the G

·~
Government will not levy the tax; (ii) that the appellants in
fact altered their position bY. acting upon such represen-
tation, and (iii) that they had suffered some prejudice suffi-
cient to constitute an estoppel• Hence the whole case of
promissory estoppel lacks the necessary factual foundation. It
H
is, therefore, unnecessary to consider the question of law
618 SUPREME COURT REPORTS [1986] l S.C.R.

A
whether the plea of promissory estoppel can be raised against
a legislation which levies tax and whether an assessee can
claim exemption from a tax levied by the legislature merely on
the basis of a rnpresentation of a minister.

We shall now proceed to consider the plea relating to the
B power of the Government to cancel the notification issued
under section 10(1) of the Act.

During the relevant period section 10 of the Ac.t read
thus

c "10. Power of Government to grant exemption and
reduction in rate of tax : (1) The Government may,
if they consider it necessary in - the public
interest, by notification in the Gazette, make an
exemption or reduction in rate in respect of any
tax payable under this Act :
D
(i) on the sale or purchase of any specified goods
or class of goods, at all points or at a specified
point or points in the series of sales or purchase
by successive dealers, or

E (ii) by any specified class of person, in regard to
the whole or any part of their turnover.

(2) Any exemption from tax, or reduction in the
rate of tax, notified under sub-section (1). - t

F (a) may extend to the whole State or any specified
area or areas therein,

(b) may be subject to such restrictions and
conditions as may be specified in the notification. •
G (3) The Government may, by notification in the
Gazette, cancel or vary any notification issued 1,.-
under sub-section (1)."

As regards the power of Government to cancel the
notification which had been issued earlier, the High Court has
H upheld the power of the Government to do so. We think that the
BAKULCASllEWCU. v. s.r.o. [VENKATARAMIAH, J.] 619

A
~ High Court was right in takl.ng that view. The liability to pay
sales tax arose at the point of time when the purchases were
made. The power of exemption in the instant case was exercised
through a retrospective notification which was a piece of
subordinate legislation. It has been held by this Court that
an authority which has the power to make subordinate
B
legislation cannot make it with retrospective effect unless it
is so authorised by the legislature which has conferred that
_.. power on it. The law on the above point is neatly summarised
in Income Tax Officer v. M.C. Ponnoosse & Ors. [1970] 1 S.C.R,
678 at pages 681-682 thus :

"Now it is open to a soverign legislature to enact
laws which have retrospective operation. Even when
c
the Parliament enacts retrospective laws such laws
are - in the words of Willes, J. in Phillips v.
Eyre (40 La~ J, Rep (N.S.) Q.B. 28 at p.37) - 'no
doubt prima facie of questionable. policy and
contrary to the general principle that legislation
D
by which the conduct of mankind is to be regulated
ought, when introduced for the first time, to deal
with future acts, and ought not to change the
character of past transactions carried on upon the
faith of the then existing law.' The courts will
not, therefore, ascribe retrospectivity to new laws
E
affecting rights unless by express words or
necessary implication it appears that such was the
intention of the legislature. The Parliament can
delegate its legislative power within the
recognised limits. Where any rule or regulation is
made by the person or authority to whom such powers
F
have been delegated by the legislature it may or
may not be possible to make the same so as to give
retrospective operation. It will depend on the
language employed in the statutory provision which
may in express terms or by necessary implication
empower the authority concerned to make a rule or G
regulation with retrospective effect. But where no
such language is to be found it has been held by
the courts. that the person or authority exercising
subordinate legislative functions cannot make a
rule, regulation or bye-law which can operate with
retrospective effect; (see Subba Rao, J, in Dr.
H
Indramani fyarelal Gupta v. W.R. Nathu & Others
620 SUPREME COURT REPORTS [1986] 1 s.c.R.. ._,_

A
(1963 S.C.R. 721) - the majority not having
expressed any different opinion on the point; Modi
Food Products Ltd. v. ColJlllissioner of Sales Tax
U.P. (A.l.R. 1956 All. 35); India Sugar Refineries
Ltd. v. State of Mysore (A.l.R. 1960 Mys. 326) and
General S. Shivdev Singh & Aor. v. The State of
B Punjab & Others (1959 P.L.R. 514)."

In the instant case on the date on which the notification ,_
was issued the Ker ala Government had no such power under
section 10 of the Act as it stood then to issue a notification
granting exemption with retrospective effect. Such power was
c actually conferred on it later on by the Kerala Legislature
only by way of amendment in 1980 by Kerala Act 19 of 1980. Now
section 10 of the Act reads thus :

"10. Power of Government to grant exemption and
reduction in rate of tax - (1) the Government may,
o if they consider it necessary in the public !-
interest by notification in the Gazette, make an
exemption or reduction in rate, either
prospectively or retrospectively in respect of any
tax payable under this Act:-

E (i) on the sale or purchase of any specified goods
or class of goods, at all points or at a specified
point or points in the series of sales or p~rchases
by successive dealers, or

(ii) by any specified class of persons in regard to f
F the whole or any part of the turnover.

(2) Any exemption from tax, or reduction in ~he
rate of·tax, notified under sub-section (1), -

(a) may extend to the whole State or to any
G spccif ied area or areas therein, -

(b) may be subject to such restriction and ~
conditions as may be specified in the notification.

(3) The Government may by notification in the
H
BAKUL CASHEW CO. v. S. T.O. [VENKATARAMIAH, J.] 621

A
Gazette cancel or vary any notification issued
under sub-section .0)."
(emphasis added)

By the addition of the words 'either prospectively or
retrospectively' by the aforesaid amendment, the State B
Legislature has now conferred the necessary power on the State
Government to grant exemption with retrospective effect. This
-<amendment also suggests that earlier the Government had no
such power to grant exemption with retrospective effect.

Hence the impugned notification which granted exemption
on October 12, 1973 for the earlier period between September C
1, 1970 and September 30, 1973 was ineffective. It was also
not shown that relying upon the notification during the period
between October 12, 1973 and November 9, 1973 the appellants
had done any act which attracted the rule of estoppel. The
~ authority which can issue a notification may cancel it also.
Section 10(3) of the Act confers such power of cancellation D
expressly. The State Government did so and cancelled the
earlier notification as there was a public hue and cry that
the State Government had shown undue favour of the Kerala
cashewnut factory owners at a time when the State was passing
through grave and difficult financial position. Moreover the
transactions in question related to the past period. E

Hence the appellants are not entitled to any relief
either on the principle of promissory estoppel or on the basis ·
rof the earlier notification issued under section 10 of the
Act.
p
We agree with the High Court that the appellants had not
'
' made out any case. The appeal is dismissed.

Before concluding we may refer to a submission ~e on
behalf of the appellants that by virtue of the amendment by
Act 103 of 1976 to the Central Sales Tax Act, 1956 by the G
., introduction of section 2(ab) in it they are entitled to
'certain relief. We have not considered the effect of the said
amendment on the transact ions in quest ion. We express no
opinion on it. It is open to the appellants to raise the point
in the assessment proceedings or in any other proceedings
under the Act which may be pending now. H
There will be no order as to costs.
S.R. Appeal dismissed.