M/S.K.P.ISSAC & SONS PVT.LTD. v. Tahsildar, Devikulam and Others

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN THURSDAY, THE 27TH NOVEMBER 2008 / 6TH AGRAHAYANA 1930 OP.No. 33330 of 2002(P) ----------------------- PETITIONER(S): --------------- M/S.K.P.ISSAC & SONS PVT.LTD., 41/52, KUREETHADAM BUILDING, ST.ALBERT'S COLLEGE ROAD, COCHIN-18, REPRESENTED BY ITS MANAGING DIRECTOR SRI.ISSAC FRANCIS. BY ADV. SRI.GEORGE THOMAS (MEVADA) SRI.BABI KURUVILLA RESPONDENT(S): - --------------- 1. THE TAHSILDAR, DEVIKULAM. 2. STATE OF KERALA, REP.BY THE CHIEF SECRETARY, SECRETARIATE, TRIVANDRUM. 3. THE SECRETARY TO GOVERNMENT, GENERAL ADMN. (TOURISM-B) DEPARTMENT, SECRETARIATE, TRIVANDRUM. 4. THE SECRETRY, LOCAL SELF GOVERNMENT - (N) DEPARTMENT, SECRETARIATE, TRIVANDRUM. GOVERNMENT PLEADER SRI. TEEK CHAND THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 27/11/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: PETITIONER'S EXHIBITS: O.P.NO. 33330/2002. ----------------------------------------------------------------EXT.P1 TRUE COPY OF GOVT. ORDER DT. 11-7-1986. EXT.P2 ASSESSMENT ORDER DT. 16-11-1991. EXT.P3 R.R. NOTICE DT. 16-12-1991 EXT.P4 APPLICATION DT. 28-12-1991. EXT.P5 ORDER DT. 2-4-1992. EXT.P6 JUDGMENT IN O.P.NO. 4946/92 DT. 28-8-1997. EXT.P7 LETTER DT. 22-1-2001. EXT.P8 NOTICE DT. 13-7-2001. EXT.P9 ARGUMENT NOTES DT. 22-8-2001. EXT.P10 ORDER DT. 30-9-2002. EXT.P11 NOTICE DT. 19-10-2002. [TRUE COPY] P.S TO JUDGE. S. Siri Jagan, J. =-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= O.P. No. 33330 of 2002 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-= Dated this, the 27[th] November, 2008. ## J U D G M E N T Realising the potential of tourism sector as a foreign exchange earner, the Government of Kerala decided to declare tourism as an industry and to offer concessions to entrepreneurs who are engaged in tourism promotion activities. Pursuant thereto, the Government issued Ext. P1 Government Order dated 11-7-1986 by which, several concessions were declared for the tourism sector. One of the concessions so offered was exemption from building tax levied by the Revenue Department. Since, for the same, it was necessary to incorporate a provision for exemption in the Kerala Building Tax Act, 1975, it was also stated in Ext. P1 that action to amend the Act would be taken separately. Stated to be attracted by the concessions offered by Ext. P1, the petitioner decided to start a Two Star Hotel at Munnar. He completed construction of the hotel on 15-9-1990. The 1[st] respondent, by Ext. P2 assessment order dated 16-11-1991, assessed the building constructed by the petitioner to building tax under the Kerala Building Tax Act at Rs. 1,98,000/- and issued Ext. P3 demand notice also. Against the same, the petitioner filed Ext. P4 representation before the Government . Therein, it was specifically pointed out that in the Kerala Building Tax Act in accordance with Ext. P1 Government Order, Section 3A has been introduced giving power to the Government to grant building tax exemption to constructions made for the purpose of promoting tourism. However, the Government by Ext. P5 order, held that Section 3A was brought into force with effect from 16-11-1990 only and therefore the petitioner's building completed on 15-9-1990 cannot be granted exemption by resort to Section 3A of the Act. Against the same, the petitioner filed O.P.No. 4946/1992 before this Court in which a learned Judge of this Court passed Ext. P6 judgment, whereby this O.P. No. 33330/02 -: 2 :- Court was disapproved of the conduct of the Government in first issuing Ext. P1 order offering concessions and then denying those concessions to persons on the ground that the building was completed before Section 3A was introduced in the Act. This Court held that reckoning the representations given to the Government, Section 3A should relate back to the date of Ext. P1 and it is not correct to restrict the concession applicable to buildings which are constructed subsequent 6-11-1990. In that view, this Court set aside Ext. P5 order and directed the Government to consider Ext. P4 application in the light of Ext. P1. It was also directed that the application may be considered by the committee constituted for the purpose of granting concessions as per Ext. P1. Recovery of the building tax in the meanwhile was also stayed. 2. Pursuant thereto, by Ext. P7 order, the Government informed the petitioner that the committee as per Ext. P1 is not empowered to consider the question of exemption from building tax under the Act on account of the enactment in the Finance Act, 1993 and therefore the matter was referred to the Local Self Government Department for further action. The petitioner was thereafter called by the Secretary to the Government, Local Self Government Department for a hearing, pursuant to which the petitioner attended the hearing and filed Ext. P9 argument notes. However, by Ext. P10 order, the petitioner's claim for exemption was again rejected on the ground that in view of the enactment of Finance Act, 1993, wherein, with effect from 1-3-1993, Section 3A was deleted from the Act, no concession for exemption from payment of building tax to tourism sector can be given. The petitioner is challenging Ext. P10 order and seeking the following reliefs: “1. Call for the records leading to the issue of Exts.P 2, P7, P10 and P11 and quash the same by the issue of a writ of certiorari or O.P. No. 33330/02 -: 3 :- such other writ, order or direction. 2. Issue a writ in the nature of mandamus or such other writ, order or direction, compelling the 2[nd] respondent to dispose of Ext. P4 representation in the light of the express directions contained in Ext. P6 judgment. 3. Issue an order staying all proceedings for recovery building tax from the petitioner pursuant to Exts.P 2 and P11.” 3. I have heard the learned Government Pleader also who argues in support of the impugned order with the help of a counter affidavit filed on behalf of the 2[nd] respondent. 4. According to me, there are two aspects to be considered in this case. One is legal and the other is moral. The legal question is as to whether the petitioner is entitled to exemption from building tax in accordance with the Kerala Building Tax Act. The moral question is as to whether the Government can, after offering concessions and getting entrepreneurs to act on the basis of such offers retract from the offer given. I shall first consider the legal aspect. 5. In Ext. P1, prospective entrepreneurs of the tourism industry were offered exemption from building tax levied by the Revenue Department and it was also stated that action to amend the Kerala Building Tax Act , 1975 would be taken separately. That would go to show that such concession cannot be given unless Kerala Building Tax Act is suitably amended. Amendment of Kerala Building Tax Act is a legislative function. Only recovery is an executive function. Under the scheme of our Constitution, the Executive and the Legislature are separate and distinct, in so far as the Constitution is governed by the cardinal Principle of Separation of powers among the three pillars of democracy, namely, the Executive, the Legislature and the Judiciary. Legally, the Executive cannot encroach into Legislative function. Although in Parliamentary democracy, the ruling political party, by virtue of their majority in the legislature would be able to get a O.P. No. 33330/02 -: 4 :- legislation of their choice enacted, legally it is for the Legislature to decide. The two are separate entities. The Executive can only initiate a legislation and the Legislature may in its wisdom either pass the legislation or reject it. Again, legally passing of a legislation is not within the control of the Executive but falls exclusively within the domain of the Legislature. That being so, legally, the Executive cannot pass a Government Order offering an incentive to prospective entrepreneurs to the effect that a legislation would be passed granting exemption from the provisions of a legislation. Therefore, I am of opinion that the Executive cannot be pinned down to a promise of passing a legislation on principles of promissory estoppel. Therefore, I am not satisfied that the promise in Ext. P1 for granting exemption from building tax, which can only be granted by the Legislature, can be enforced on the basis of principles of promissory estoppel. 6. Apart from that, admittedly, Section 3A of the Kerala Building Tax Act was brought into force with effect from 6-11-1990 and the building of the petitioner was completed on 15-9-1990. Even otherwise, Section 3A was only a power granted to the Government to issue notification granting exemption from payment of building tax in respect of buildings, the construction of which is completed during such period and in such orders as may be specified in the notification and such specifications as may be prescribed in the Rules in this behalf. That section was deleted with effect from 1-3-1993. The Government has not chosen to issue any notification granting such exemptions. The question as to whether without such a notification issued under Section 3A benefits under Ext. P1 can be enforced was considered by a Division Bench of this Court in **May Flower Hotels Ltd.** v. **State of Kerala** , 2007(2) KLT 41. The Division Bench in the O.P. No. 33330/02 -: 5 :- case of a similarly placed entrepreneur after considering the question of law, came to the conclusion that in the absence of any notification exempting buildings in the tourism sector from building tax,nobody can claim such exemption. In view of the above legal position, I am afraid that the petitioner cannot legally enforce the offer made in Ext. P1 in respect of exemption from building tax. 7. Now, I shall come to the moral aspect of the issue. The Government has issued Ext. P1 Government Order for the purpose of development of tourism in the State declaring tourism as an industry. In Ext. P1, the Government themselves accepted that declaration of tourism as an industry will enable those engaged in tourism promotional activities in the State to become automatically eligible for the concessions/incentives as applicable to the industrial sector from time to time. It is on that basis that the concessions provided in Ext. P1 has been offered to prospective entrepreneurs engaged in the tourism industry. Although, legally, the Government cannot force the Legislature to pass a legislation for the purpose of exemption from building tax in respect of the tourism industry, in a parliamentary democracy it is beyond the capability of the Executive to get appropriate legislation for this purpose passed by the Legislature, in practice. After having induced prospective entrepreneurs to embark on construction of a hotel in the tourism industry by offering exemption from building tax, with the promise that action to amend the Kerala Building Tax Act, 1975 appropriately would be taken separately, it is totally unbecoming of a Government to go back from their promise. One could have understood if the Government had initiated a legislation for that purpose and the Legislature rejected it. But, it remains a fact in this case that the Government did not take any action pursuant to the above promise O.P. No. 33330/02 -: 6 :- held out in Ext. P1. They made a make believe amendment introducing Section 3A in the Kerala Building Tax Act without issuing any notification in exercise of that power and later Section 3A was deleted with effect from 1-3-1993. Section 3A was never implemented by issuing an appropriate notification and the Section 3A was deleted without anybody getting the benefit of the exemption. If industrialists are taken for a ride in such a way, by the Government, the Government would lose its credibility before prospective industrialists who want to invest money in this State. As such, it is in the best interest of the Government itself that before offering promises as in Ext. P1, the Government thinks twice and offer only those concessions which are in their capacity to offer legally and practically. Althougoh much more can be said about such unhealthy practice, I leave it at that. Although, I have rejected the claim of the petitioner for exemption from payment of building tax, in view of the conduct of the Government in the matter, I am of opinion that the petitioner cannot be mulcted with the liability to pay interest also. Further I am also of the opinion that the petitioner should be given an opportunity to pay off the amounts in instalments. Accordingly, the petitioner shall be permitted to pay the said amount of Rs. 1,98,000/- in 20 equal monthly instalments starting from 1-1-2009. Every subsequent instalment shall be paid on the first working day of every succeeding month till the entire amount is paid off. However, if the the petitioner commits default in payment of any one instalment, it would be open to O.P. No. 33330/02 -: 7 :- the 1[st] respondent to recover the entire amounts in a lump sum with interest. The original petition is disposed of as above. Sd/- S. Siri Jagan, Judge. Tds/