M/S Manuelsons Hotels Private Limited vs State Of Kerala & Ors

1. On 11th July, 1986, the State Government, by a Government Order (G.O.), accepted the recommendations of the Government of India suggesting that tourism be declared an “industry”. The fallout of this G.O. was that this would enable those engaged in tourism promotional activities to become automatically eligible for concessions / incentives as applicable to the industrial sector from time to time. Apart from various other concessions that were granted, exemption from Building Tax levied by the Revenue Department was one such concession. It was stated in the said G.O. that action to amend the Kerala Building Tax Act, 1975 will be taken separately. The G.O. went on to state that persons eligible for such concessions will, among others, be classified hotels i.e. from 1 to 5 stars. A Committee was set up consisting of three government officers to oversee the aforesaid scheme.

2. Vide a letter dated 25th March, 1987, the Government of India approved the hotel project of the appellants, being a 55 double room 3 star hotel project to be set up in the city of Calicut.

3. Pursuant to the aforesaid G.O. dated 11th July, 1986 and the aforesaid approval, the appellants began constructing the hotel building, which was completed in the year 1991. Notice for filing returns under the Kerala Buildings Tax Act was issued to the appellants on 5th September, 1988. The appellants replied that they relied upon the G.O. dated 11th July, 1986 and stated that they were under no obligation to furnish any return under the said Act as they were exempt from payment of building tax.

9. Vide an order dated 4th February, 1999, the authorities once again rejected the appellant’s application for exemption from property tax. This order was challenged in Writ Petition No. 9820 of 1999 which has led to the impugned judgment dated 5th December, 2006. The High Court essentially rejected the aforesaid Writ Petition on two grounds. First, it stated that as no exemption Notification had, in fact, been issued under Section 3A when it was in existence in the statute book, no claim for exemption from payment of building tax would be allowed. It further held that the mere promise to amend the law does not hold out a promise of exemption from payment of building tax. And finally, the High Court held that the question of now exempting the appellants from building tax would not arise as Section 3A itself had been omitted w.e.f. 1st March, 1993.

13. In the M/S Motilal Padampat Sugar Mills case, the appellant before this Court was primarily engaged in the business of manufacture and sale of sugar. An assurance was given by the State Government in that case that new Vanaspati units in the State which go into commercial production by 30th September,1970 would be given partial concession in sales tax for a period of three years. The appellant having set up such Vanaspati unit thereafter went into the production of Vanaspati on 2nd July, 1970 and sought exemption. The Government apparently turned around and rescinded its earlier decision of January, 1970 in August 1970, by which time the factory of the appellant had gone into commercial production. A Writ Petition was filed in the High Court of Allahabad asking for a writ directing the State Government to exempt the sales of Vanaspati manufacturer from sales tax for a period of three years commencing 2nd July, 1970 as per the promise held out. This plea fell upon deaf ears in the High Court, as a result of which the petitioner in that case appealed to the Supreme Court. After discussing the authorities in detail, this Court held:

23. In the circumstances, the High Court judgment when it holds that no notification was, in fact, issued under Section 3A of the Kerala Buildings Tax Act, 1975, (which would be sufficient to deny the appellants relief) is, therefore, clearly incorrect in law.

May 11, 2016.