IN THE HIGH COURT OF KERALA AT ERNAKULAM
WA.No. 2210 of 2009()
1. M/S.K.P.ISSAC & SONS PVT. LTD.,
... Petitioner
Vs
1. THE TAHSILDAR,
... Respondent
2. STATE OF KERALA,
3. THE SECRETARY TO GOVERNMENT,
4. THE SECRETARY,
For Petitioner :SRI.GEORGE THOMAS (MEVADA)
For Respondent : No Appearance
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice V.K.MOHANAN
Dated :22/10/2009
O R D E R
C.R.
C.N.RAMACHANDRAN NAIR &
V.K.MOHANAN, JJ.
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Writ Appeal Nos.2210 & 361 of 2009
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Dated this the 22nd day of October, 2009.
JUDGMENT
Ramachandran Nair, J.
The connected Writ Appeals, one filed by the hotelier and the
other filed by the State, arise from same judgment of learned Single
Judge wherein he upheld the assessment and demand of building tax in
respect of the hotel building, but waived the interest payable for belated
payment of tax. While the hotelier has filed the Writ Appeal pressing
for exemption, Government has filed Writ Appeal against the
observation made by the learned Single Judge that the State has done a
moral wrong to the hotelier and against waiver of interest granted by
the learned Single Judge on this ground. We have heard Sri.George
Thomas Mevada, counsel appearing for the hotelier and the
Government Pleader appearing for the State and Governmental
authorities.
2. The case of the hotelier is that they constructed a hotel at
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Munnar essentially to cater to the needs of the tourists visiting Kerala
based on Ext.P1 issued by the Government of Kerala by which State
Government following guidelines issued by the Central Government
declared tourism as an industry and offered various incentives
including exemption from building tax based on amendment to be
made to the Kerala Building Tax Act, 1975. The conceded position is
that even though Government proposed action to amend the Building
Tax Act vide Ext.P1 dated 11.7.1986, amendment was made
introducing a new provision, Section 3A only with effect from
6.11.1990. However, the hotelier in this case has completed
construction of the hotel and commissioned the hotel project in
September 1990. In other words, the amendment to the statute based
on the declaration made by the Government in Ext.P1 was after the date
of completion and commissioning of the hotel project by the hotelier.
Strangely, the newly introduced provision, Section 3A of the Kerala
Building Tax Act, which authorised the Government to grant
exemption from payment of building tax in respect of buildings to be
specified with reference to period of construction or class of building
or the area in which the said buildings are located, remained in the
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statute only for a short time because Section 3A was deleted by Finance
Act, 1993 with effect from 1.3.1993. It is also to be noted that no
notification was issued by the Government under Section 3A during the
short period during which the provision was in force in the statute. In
other words, the Government’s offer of incentive in the form of
building tax exemption to tourism related industry remained a dead
letter. The case of the hotelier as projected by his counsel is that
Ext.P1 is a firm offer binding on the Government and so much so, by
applying the rule of promissory estoppel the hotelier is entitled to
exemption from building tax for the hotel building. The learned Single
Judge following Division Bench judgment in MAY FLOWER
HOTELS LTD. V. STATE OF KERALA reported in 2007(2) KLT 41
rejected the claim, against which Writ Appeal is filed by the hotelier.
3. Learned counsel for the hotelier contended that the Division
Bench has rejected the claim because no plea of promissory estoppel
was made or proved in the case decided by the court. On the other
hand his contention is that the hotelier in this case started construction
of the hotel after 11.7.1986 after Ext.P1 was issued and construction of
the hotel itself was completed by September 1990 making the hotelier
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eligible for exemption from building tax in respect of the hotel building
as hotel is a tourism related industry. Government Pleader on the other
hand contended that rule of promissory estoppel does not apply
because there was no promise as such made by the Government in as
much as Ext.P1 is only a policy decision declared by the Government.
We are inclined to accept the contention of the learned Government
Pleader because on going through Ext.P1 it is made very clear that
exemption from building tax offered by the Government will be subject
to amendment to be made to the Kerala Building Tax Act, 1975. In
order to decide whether Government had in fact made a promise to the
tourism related industry for granting exemption to hotel buildings, the
first thing to be considered is whether it was within the powers of the
Government to grant building tax exemption through Government
Orders. The liability for building tax including provision for
exemption are comprehensively covered by legislation, namely the
Kerala Building Tax Act, 1975. Government can make promises only
within the powers conferred on it and admittedly the statute at the time
of issue of Ext.P1 by the Government on 11.7.1986 did not contain any
provision authorising the Government to grant exemption to hotel
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buildings or to any building in the tourism related industry. In fact,
Government was well aware of their limitation in offering exemption
and that is clear from Ext.P1 itself because it is clearly stated that
amendment to the Building Tax Act to provide for exemption to
buildings in the tourism related industry will be taken up separately.
Therefore, in our view, the offer made in Ext.P1 which is only a policy
statement cannot be treated as promise capable of implementation
because the Government cannot commit the Legislature to make any
law and all what it could do is to pilot a Bill in the Assembly in this
regard, which was in fact done by the Government. However, what is
clear from the subsequent legislation in the form of introduction of
Section 3A and the later withdrawal of the same is that the Government
on reconsideration felt as a matter of policy that there is no need to
grant exemption from building tax to tourism related industry including
hotel buildings. Being a policy matter, the court has no business to
consider whether Government should have in fact granted exemption to
hotel buildings or buildings in the other tourism related industry. All
what this court can consider is whether there is a breach of promise
atleast in the form of a breach in regard to the promise made by the
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Government. It is to be noted that even during the period of around
three years when Section 3A was in the statute, Government did not
choose to issue any notification granting exemption to any building in
the tourism industry including hotel buildings. This clearly shows that
there is a complete deviation in the policy of the Government in
granting incentive to hotels in the form of exemption from building tax.
It is stated that other incentives like investment subsidy, financial
assistance from financial institutions etc., promised under Ext.P1 were
in fact made available to hotel industry and other tourism related
industry. We, therefore, hold that there was no specific promise by
the Government under Ext.P1 to grant exemption to hotel buildings and
so much so, the claim of the hotelier in this case for exemption is
without any basis. It is to be noted that there was boom in the tourism
industry in the 1990s which is continuing and large number of hotels
including star hotels are built in Kerala and no hotel has ever been
granted any building tax exemption. Further, it is common knowledge
that tourism industry, particularly hotels are making huge profits and if
the Government in their wisdom decides not to grant any building tax
exemption to the hotel industry, it is not for the court to consider the
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eligibility. Further, we find that this is only a policy matter and all
what has taken place is shifting the policy by the Government,
whatever be the reason for the same. There is no justification for the
court to make adverse comment about motives of the Government in
policy matters. Therefore, we vacate the adverse remark made by the
learned Single Judge that the action of the Government in not granting
exemption is morally incorrect.
4. Government Pleader submitted that interest under Section 19
(2) of the Act is mandatory and the court has no powers to waive
statutory interest. According to him, the reason for waiving interest
that weighed with the learned Single Judge is that the Government did
a moral wrong in not extending the building tax exemption first
promised and since we have vacated such finding, the waiver of interest
granted also should be reversed. However, counsel appearing for the
hotelier contended that during the pendency of Writ Petitions, the court
had granted stay against recovery proceedings and it is within the
powers of the court to waive interest if the court feels that delay in
payment is not attributable to the hotelier. We find force in this
contention because admittedly stay was granted, which means that the
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court admitting the case found that there is a prima facie case for the
appellant. However, we do not think there is any need to consider
whether compensatory interest provided under the statute for delayed
payment of tax could be waived in exercise of powers conferred on the
High Court under Article 226 of the Constitution of India on facts of
this case. In view of the stay granted by this court that remained in
force till disposal of the W.P.(C), we find no ground to interfere with
the judgment of the learned Single Judge in waiving interest, more so
because full tax remains paid.
Writ Appeals are disposed of as above.
C.N.RAMACHANDRAN NAIR
Judge
V.K.MOHANAN
Judge
pms