MRF LTD., KOTTAYAM versus ASSISTANT COMMISSIONER (ASSESSMENTS) SALES TAX AND ORS.

Citation: [2006] SUPP. 6 S.C.R. 417 · Decided: 21-09-2006 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Appeal(s) allowed

Judgment (excerpt)

MRF LTD., KOTTAYAM 
v. 
ASSISTANT COMMISSIONER (ASSESSMENTS) 
SALES TAX AND ORS. 
SEPTEMBER 21, 2006 
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. [ASHOK BHAN .AND MARKANDEY KA TJU, JJ.] 
. Kera/a General Sales. Tax Act, 1963-Seciion .io: 
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Large ·amounts iiivested by assessees on substantial expansion/ C 
diversification oi its indusirial unit on the. basis of a Memorandum ·of 
Understanding with Government and exemption notificationc Certificdte for '·· 
exemption granted by Board of Revenue to assessee for a specified period of 
seven years and in aggregate of a specified amount-Thereafter, State 
Gove~nment. amending ex~mption notification to the effect' that processes D 
!tndertaken by assessee beca,;,e ineligible for its' benefit and subsequently 
(withdrew the exemptio~Demand of tax from assessee upheld by"High Court-
'correctness Of-Held: Assessee had made. hz;ge investment under promise that 
it 'would be granted ·exemption for a period of seven years.,-lt. ·was not . 
permissible for State to depriv~ aSsessee. benefit of exemption .1vhen it had 
enjoyed benefit of investment in' industrial development of State, contribution E 
to labour; e,;,ployment 'and also a huge benefit by way of Central Excise 
du~Denial of benefit of exemption U:as highly unfair, unreasonable, arbitrary 
and th~refore, violative of Article. 14 of the Constitution of India-Doctrine of 
· p~omi~sory estoppel ,;,as 'applicable especially as State did not ·plead any 
overridini public 'interest «>r equity-It was more so as State did not have F 
. po11Y.r lo wiihdraw /Jn exemption with retros{lectfre effect. 
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&emption. in respect' of products ·manufactured upon substanl{al 
expansion/di;ersificatio1i.o/industrial unit~'icope of-Hel"'-C;,..joint reading 
of notifications SRO No. 1729/93 dated 3.11.1993, SRO 38198 dated 15.1.1998 
and SRO No. 1092199 dated Jl.12.1999 does not show that Government G. 
intended to take m••ay benefits of exemption after 15./: 1998 where commercial 
production had commenced prior to that date-'-C/ause' (2) of SRO 1092199 
· stated ihat industrial unit which haicommenced production before the /st 
. day of January, 2000 shall conlinu~ to enjay the concession for the full period 
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417 
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418 
SlJPREl'vlE COURT REPORTS [2006] SUPP. 6 S.C.R. 
A covered by order of exemption-Notification SRO 38198 was prospective in 
operation and it could not take away assessee 's accrued righl lo exemplion. 
Section 10(3)-Scvpe o/-Held: It does no/ confer power lo 1rithdraw 
an exemplion with retrospectil•e effect. 
B 
Appellant is a manufacturer of automotive tyres, tubes, compound 
rubber, traced rubber, flaps, pre-cured tread rubber etc. Acting on the 
incentives, concessions and benefits held out by the respondent State 
(Government, it approached latter with its proposal to make substantial 
expansion and diversification. A Memorandum of Understanding (MOU) 
was entered between the two expressly providing that appellant shall be 
C entitled to tax exemptions. In exercise of its powers under Section 10 of 
Kerala General Sales Tax Act, 1963, respondent issued a Notification, SRO 
No. 1729/93 dated 3.11.1993 providing for exemption from tax payable 
on sale or purchase, as the case may, to industrial units in the State going 
in for expansion/ diversification/modernization; emption being available 
D for a period of seven years from the date of completion of diversification 
etc. Pursuant to this, appellant invested large amounts and carried out 
substantial expansion of its existing industrial unit and set up new unit 
for manufacture of diversified products. Thereupon, they obtained the 
necessary eligibility certificate for exemption, which in/er alia set out the 
details of fixed capital invested by them. On the basis of this certificate, 
E Board of Revenue issued certificate granting them tax exemption for a 
specified period of seven years and in the aggregate of a specified amount. 
However, thereafter, on 15.1.1998, respondent amended the exemption 
notification whereby certain processes were deemed not to be manufacture 
for the purpose of the exemption notification. These processes inter alia 
F included conversion of rubber latex into centrifugal latex, raw rubber 
sheet, ammoniated latex, crepe rubber, crumb rubber, or any other item 
falling under entry 110 of the First Schedule to the Act or treating th

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