IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC MONDAY, THE 24TH DAY OF SEPTEMBER 2012/2ND ASWINA 1934 WP(C).No. 29919 of 2008 (J) --------------------------- PETITIONER: ----------------- THE CARDAMOM PROCESSING AND MARKETING CO-OPERATIVE SOCIETY LIMITED., VANDANMEDU P.O. IDUKKI DISTRICT, HAVING ADMINISTRATIVE OFFICE AT SPICE HOUSE,THEKKADY P.O.,IDUKKI, KERALA 685536, REPRESENTED BY ITS SECRETARY P.C.PUNNOSE BY ADVS.DR.K.B.MUHAMED KUTTY (SR.) SRI.K.M.FIROZ RESPONDENTS: ---------------------- 1. THE INSPECTING ASST.COMMISSIONER, COMMERCIAL TAXES DEPARTMENT, IDUKKI AT KATTAPPANA, KERALA. 2. THE STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. 3. THE UNION OF INDIA, REPRESENTED BY THE SECRETARY TO GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE CENTRAL SECRETARIAT, NEW DELHI. R1-R2 BY ADV. GOVERNMENT PLEADER, SRI.SHAIJ RAJ T.K. R3 BY ADV. SHRI.C.K.JAYAKUMAR, CGC R BY SRI.P.PARAMESWARAN NAIR,ASG OF INDIA THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 24-09-2012, ALONG WITH WPC. 29920/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: BP WP(C).No. 29919 of 2008 (J) APPENDIX PETITIONER'S EXHIBITS: WP(C).No. 29920 of 2008 (J) APPENDIX PETITIONER'S EXHIBITS: EXT.P1: TRUE COPY OF THE RELEVANT EXTRACT OF THE BUDGET SPEECH MADE BY THE FINANCE MINISTER, GOVERNMENT OF INDIA EXT.P2: TRUE COPY OF THE NOTICE DT 15/5/2008 PERTAINING TO APRIL 2008. EXT.P3: A TRUE COPY OF THE SAID NOTICE DT 17/6/1998 PERTAINING TO MAY 2008. EXT.P4: A TRUE COPY OF THE NOTIFICATION NO.1/2008-CST-F NO. 28/11/2007-ST DT 30TH MAY 2008(S.O.1277(E) EXT.P5: A STATEMENT SHOWING THE SALE OF THECOMMODITY FOR APRIL AND MAY, 2008. EXT.P6: A TRUE COPY OF THE RELEVANT PORTION OF THE HIGHLIGHTS OF UNION BILL 2008, AS PUBLISHED IN 16 KTR (STATUTES) 51 TO 63. EXT.P7: TRUE COPIES OF THE LIST OF THE NOTIFICATION DT 29/3/07 AND THE PRESS RELEASE ISSUED BY THE GOVERNMENT EXT.P8: A TRUE COPY OF THE SAID CIRCULAR NO.18/07, DT. 16/4/2007. EXT.P9: A TRUE COPY OF THE NOTICE DT 27/9/2008 ISSUED BY THE FIRST RESPONDENT. RESPONDENT'S EXHIBITS: NIL. //TRUE COPY // P.A. TO JUDGE BP ANTONY DOMINIC, J. ================ W.P.(C) NOs. 29919 & 29920 OF 2008 =========================== Dated this the 24th day of September, 2012 J U D G M E N T The issues raised in the writ petitions being common, these writ petitions were heard together and are disposed of by this common judgment treating WP(C) No. 29920/08 as the leading case. 2. Petitioner in WP(C) No. 29919/08 is a Co-operative Society and the petitioner in WP(C) No. 29920/08 is a company incorporated under the Companies Act. Both the petitioners are engaged in the business of cardamom auction for which they have obtained necessary licence from the Spices Board, Kochi. They are also assessees under the Central Sales Tax Act on the file of the 1st respondent in these cases. 3. For the financial year 2007-08, the tax payable under the Central Sales Tax Act was @3%. While so, in the budget speech for the year 2008-09, the Union Minister for Finance made a proposal in Parliament that following the agreement between the Central Government and the State Government, the Central Sales tax was reduced from 4% to 3% for the financial year 2007- WPC.Nos.29919 & 29920/08 :2 : 08 and that it was proposed to reduce the rate to 2% from 01/04/2008. It was also stated that consultations are under way and that once the agreement is reached between the Central Government and the States, the new rate will be notified. The relevant portion of the budget speech, produced as Ext.P1, reads thus; “CST and a Roadmap towards GST 183. Following an agreement between the Central Government and the State Governments, the rate of Central Sales Tax was reduced from 4 per cent to 3 per cent in this financial year. It is now proposed to reduce the rate to 2 per cent from April 1, 2008. Consultations are underway on the compensation for losses, if any, and once agreement is reached the new rate will be notified. I am also happy to report that there is considerable progress in preparing a roadmap for introducing the Goods and Services Tax with effect from April 1, 2010.” 4. According to the petitioner, acting upon the budget speech, during April and May 2008, they effected sales collecting 2% as tax. However, the notification as contemplated in the budget speech was issued only on 30th of May 2008 and a copy of which is Ext.P4. By this notification, issued under Section 8(1) of the CST Act, the Central Government reduced the rate of tax from WPC.Nos.29919 & 29920/08 :3 : 3% to 2% w.e.f. 1st June 2008. In the meantime, as the petitioner paid tax only @2% for the period prior to 1/6/2008, they were issued Exts.P2 and P3 notices under Section 8 of the CST Act directing them to remit the balance 1% CST and interest for April and May 2008 and were informed that on failure thereof, penalty will be imposed and provisional assessment will also be completed. 5. Subsequently, they were also issued Ext.P9 notice under Section 8 on 27/9/08 informing them that on account of paying tax at 2% instead of 3%, there occurred evasion of tax and that they should pay the tax evaded with interest within 7 days. They were also threatened with penalty for offence under Section 9(2) of the Act. It is in this background WP(C) No. 29920/08 has been filed with a prayer to quash Exts.P2, P3 and P9 mentioned above and to declare that the petitioner is liable to pay central sales tax under the Act @2% during the period from 01/04/2008 to 31/5/2008. 6. In the counter affidavit filed on behalf of respondents 1 WPC.Nos.29919 & 29920/08 :4 : and 2, the stand taken by them is that tax payable was 3% and that the same was reduced as provided under Section 8(1) of the Act to 2% only w.e.f. 1/6/2008. It is stated that, therefore for the period prior to 1/6/2008, petitioners have the liability to pay tax at 3% and that therefore they are bound to pay the evaded tax also. 7. When the matter was taken up for hearing, the argument advanced by the learned senior counsel for the petitioner is that for the previous year viz., 2007-08 also, tax was reduced from 4% to 3% and that notification dated 29/3/2007 was issued reducing tax w.e.f. 01/04/2007. It is also stated that following the notification, circular was issued implementing the reduction of tax. Having regard to the above and also the definite statement made by the Minister in Parliament that it has been decided to reduce tax from 3% to 2% w.e.f. 01/04/2008, petitioner acted upon the same and collected tax only @2% and paid the same to the Department. According to them, the statements in Ext.P1 budget speech amounts to a promise, which was acted upon and therefore, on account of the principles of WPC.Nos.29919 & 29920/08 :5 : promissory estoppal, respondents are estopped from contending that the revision will be only w.e.f. 01/6/2008. On this basis, the petitioners contend that they are liable to pay tax at 2% only for the period from 01/04/2008. In support of his contentions, learned senior counsel for the petitioner relied on the Apex Court judgment in State of Punjab v. Nestle India Ltd. {(2004) 136 STC 35} and Mahabir Vegetable Oils P. Ltd. v. State of Haryana {(2006) 145 STC 350}. 8. On the other hand, learned Government Pleader contended that Ext.P1 budget speech only contained a proposal which may be accepted or may not be accepted by the Parliament. Therefore, it being only a proposal, there was no promise made by the Government to be acted upon by anyone. Therefore, according to him, there is no substance in the plea of promissory estoppal and according to him, the budget speech cannot be relied on for any purpose. In support of this contention, learned Government Pleader relied on the Apex Court judgment in B.K.Industries v. Union of India {(1993) 91 STC 548}. WPC.Nos.29919 & 29920/08 :6 : 9. I have considered the submissions made. 10. Admittedly, the tax payable by the petitioners was 3% in the year 2007-08. Such rate of tax is prescribed under Section 8 of the CST Act by the Central Government as per notification published in the official gazette. Therefore, reduction of the tax due under the Act can also be only by yet another notification issued under Section 8 of the Act. Admittedly, notification was issued only on 30/5/2008 and the notification specifically stated that the reduction of tax is effective from 01/06/2008. In such a situation, the only question that arises to be answered is whether the budget speech (Ext.P1) contained a promise entitling the petitioners to act upon the same and also estopping the respondents from contending that the rate of tax payable by them for the period prior to 01/6/2008 is at 3%. 11. A reading of the relevant portion of Ext.P1, which has been extracted in the earlier portion of this judgment shows that all that was stated in the Parliament was that as in the previous financial year, subject to an agreement between the Central WPC.Nos.29919 & 29920/08 :7 : Government and the State Governments, it was “proposed” to reduce the rate of tax to 2% from 01/04/2008 and that consultations are under way and that once the agreement is reached, the reduced rate will be notified. Therefore, obviously it was only a proposal and such proposal can materialise into law only upon the execution of the agreement and the issuance of notification under Section 8 of the CST Act. Therefore, Ext.P1 by itself did not contain any promise or affirmation that the rate is reduced or that it will be reduced from 01/04/2008 as contended by the petitioners. 12. In the judgment in B.K.Industries v. Union of India {(1993) 91 STC 548}, the Apex Court considered the validity of the collection of cess payable under the Vegetable Oils Cess Act, 1983, which was repealed w.e.f 01/04/1987. The contention was that in the budget speech delivered on 28th of February, 1986, Union Finance Minister stated that, it had been decided to dispense with the cess on vegetable oils and that this speech disclosed a decision already taken by the Government and was WPC.Nos.29919 & 29920/08 :8 : enforceable and effective from the said date. On this basis, it was contended that the levy of cess for the period from March 1, 1986 to March 31, 1987 was invalid. Dealing with this contention, the Apex Court held that the Finance Minister's budget speech is not a law and that the Parliament may or may not accept his proposal. Thereafter, the Apex Court upheld the levy relying on Section 13 of the repealed Act. Therefore, the speech rendered by the Finance Minister in Parliament by itself, would not create any right in favour of the petitioners to pay tax at the reduced rate. In any case, in so far as this case is concerned, even the budget speech contained only a proposal and was conditional viz., (1) execution of the agreement between the Central and State Governments and (2) the issuance of the notification under Section 8 of the CST Act. 13. Learned Senior counsel for the petitioner relied on the judgment in State of Punjab v. Nestle India Ltd. {(2004) 136 STC 35} and contended that the announcement made by the Finance Minister can be relied on to set up a case of promissory WPC.Nos.29919 & 29920/08 :9 : estoppal. The facts of this case are that an announcement was made by the Chief Minister of Punjab on 26/2/96 that the State Government had abolished purchase tax on milk and milk products in the State. In the speech made by the Finance Minister of the State, while presenting the budget for the year 1996-97, the Minister also stated that the Chief Minister had abolished the purchase tax on milk. It appears that based on the announcements thus made, a memo was issued by the Financial Commissioner on 26/4/96 clearly stating that it has been decided to abolish the purchase tax w.e.f. 01/04/96 and invited proposals along with the financial implication and also requested to issue necessary instructions to the field officers. In pursuance to the above, circular dated 26/4/96 was issued by the Excise and Taxation Commissioner, Punjab stating that the Government have decided to abolish purchase tax on milk and that the same will be effective from 01/04/96. The circular also said that necessary notifications are under process and that matter may be brought to the notice of all the officials for information and necessary action. WPC.Nos.29919 & 29920/08 :10 : Inspite of all these, on 04/6/97, the council of Ministers held a meeting and recorded that the earlier decision to abolish purchase tax on milk was not accepted. It is in this background that writ petitions were filed and the High Court and the Supreme Court upheld the contention of the petitioners invoking the doctrine of promissory estoppal. In my view, the facts of the case considered by the Apex Court are totally incomparable with the facts of this case before me and therefore the principles laid down by the Apex Court in the Nestle's case cannot have any application to support the case of the petitioner. Similar is the judgment of the Apex Court in (2006 Mahabir Vegetable Oils P. Ltd. v. State of Haryana {(2006) 145 STC 350}. 14. When principles of promissory estoppal are urged, it is essential that the petitioner should satisfy the court that there is a clear and unequivocal promise from the Government knowing and intending that it would be acted upon by the promisee. It should also be established that acting upon such a promise made by the Government, the petitioner had altered its decision and therefore WPC.Nos.29919 & 29920/08 :11 : it would be inequitable to allow the promiser to go back on the promise. As already found, even the budget speech relied on by the petitioner contains only a proposal and nothing more or nothing less. Since it was only a proposal, such a proposal cannot be said to be a promise as known to law to set up a case of promissory estoppal. Therefore, I cannot agree with the counsel that this is a case in which the principles of promissory estoppal can be invoked to sustain payment of tax payable under the Central Sales Tax Act at 2% for April and May 2008. 15. For all these reasons, I do not find any substance in the contentions raised in both the writ petitions. Writ petitions fail and are dismissed. ANTONY DOMINIC, JUDGE Rp