IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN THURSDAY, THE 22ND OCTOBER 2009 / 30TH ASWINA 1931 WA.No. 2210 of 2009() --------------------- AGAINST THE JUDGEMENT/ORDER IN OP.33330/2002 Dated 27/11/2008 .................... APPELLANT(S): -------------- M/S.K.P.ISSAC & SONS PVT. LTD., 41/52, KUREETHADAM BUILDING, ST.ALBERT'S COLLEGE ROAD, COCHIN-18, REP. BY ITS MANAGING DIRECTOR SRI.ISSAC FRANCIS. BY ADV. SRI.GEORGE THOMAS (MEVADA) RESPONDENT(S): --------------- 1. THE TAHSILDAR, DEVIKULAM. 2. STATE OF KERALA, REP. BY THE CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM. 3. THE SECRETARY TO GOVERNMENT, GENERAL ADMN. (TOURISM-B) DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. 4. THE SECRETARY, LOCAL SELF GOVERNMENT, (N) DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. BY G.P. SRI.MOHAMMED RAFIQ THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 22/10/2009, ALONG WITH WA NO.361 OF 2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. .................................................................... Writ Appeal Nos.2210 & 361 of 2009 .................................................................... 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 2 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 3 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 4 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 5 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 6 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 7 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 8 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