SECRETARY TO GOVERNMENT AND ORS. versus M/S PEEKA Y RE-ROLLING MILLS (P) LTD.

Citation: [2007] 4 S.C.R. 723 · Decided: 03-04-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Appeal(s) allowed
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Judgment (excerpt)

! 
_,, 
SECRETARY TO GOVERNMENT AND ORS. 
A 
v. 
MIS PEEKA Y RE-ROLLING MILLS (P) LTD. 
APRIL 3, 2007 
[S.H. KAPADIA AND P. K. BALASUBRAMANYAN, JJ.] 
B 
Kera/a General Sales Tax Act, 1963-s.10- Tax exemption-Granted 
by a Notification-Withdrawal thereof in respect of certain industries specified 
in a negative list, by a Government Order-By a clarificatory Government c 
Order negative list modified by including certain more industries in the 
negative list-Denial of tax exemption-Propriety of-Operation of the 
clarificatory G.O. whether prospective-Held: State Government had the 
authority under Article 162 of the Constitution to issue a G. 0. withdrawing 
tax exemption on account of acute power shortage-There is no infirmity in 
issuance of the G.O. withdrawing exemption-The subsequent G.O. being D 
clarificatory to the previous G. 0., will operate retrospectively-Certain 
questions not considered by High Court, remitted back-Constitution of 
India, 1950-Article 162-Retrospective Operative-Taxation-Sales Tax. 
Under a Notification dated 4.11.1993, tax exemption was given under s~ 
10 of Kerala General Sales Tax Act, 1963 to medium Scale units for seven E 
I 
years from the commencement of commercial_ production. Thereafter, due to. 
acute power shortage in the State, Government in a G.O. dated 26127-11-1993 
stated that certain industries included in the negative list would not be eligible 
for State Investment Subsidy. One of the items in the negative list was "power 
intensive unit" whose total power requirement exceeded 2500 KV A and where. F 
.) 
the cost of power exceeded 25% of the cost of production. The G.O. denied 
the subsidy to the units provisionally registered on or after 31.12.1993. The 
Government order dated 26/27-11-1993 was clarified by a clarificatory G.O. 
dated 19.4.1994 that tax exemption would continue to be available to all the 
Industries which were provisionally registered before 31.12.1993. By a further 
clarificatory G.O. NO. 169198/ID dated 24.11.1998 State Government modified G 
the negative list by including all types of steel re-rolling mills, units 
manufacturing iron ingots. 
Respondent - Company (in appeal No. 8031/2004) started an industrial 
723 
H 
724 
SUPREME COURT REPORTS 
[2007] 4 S.C.R. 
A unit on account of the tax exemption by Notification dated 4.11.1993. It 
commenced its commercial production on 31.3.1995. Thereafter, it made 
additional investment and sought tax exemption therefore and the same was 
granted for seven years from 31.3.1995 to 30.3.2002. During the pendency 
of the exemption application before Director of Industries additional capital 
investment was made which led to increase in the contract load. Claim of 
B respondent in respect of the additional capital investment was rejected by 
placing reliance on G.O. dated 26/27-11-1993 and on the ground that the unit 
was having a load factor of more than 2500 KV A. 
The rejection was challenged. Single Judge of High Court dismissed 
the Petitions. Division Bench allowed the writ appeals. Hence the present 
C appeal 
D 
The question for consideration in the case of the respondent - Company 
(in Civil Appeal NO. 803412004) was whether it was entitled to tax exemption 
on additional investments made after 24.11.1998. Contention of the respondent 
was that the G.O. dated 24.11.1998 operated prospectively. 
Allowing the appeals and remitting the matter to High Court, the Court 
HELD : 1.1. The State Government had the authority under Article 162 
of the Constitution oflndia to issue G.O. dated 26/27.11.1993 withdrawing 
the tax exemption on account of acute power shortage in the State. 
E 
(Para 7] (728-G] 
1.2. The comprehensive G.O. dated 26/27.11.1993 issued by the State 
Government on account of acute power shortage is applicable to the facts of 
the present case. It is undisputed that on 4.11.1993 the State Government 
had issued a statutory Notification u/s 10(1) inter alia granting exemption to 
F medium scale units from payment of sales tax for seven years. Similarly, the 
State had given concessions under Electricity Act. It had promised subsidies. 
All these exemptions/concessions were withdrawn by G.O. dated 26/ 
27.11.1993 by the Ministry oflndustries on account of acute power shortage. 
There is no infirmity in the issuance of the said G.O. dated 26/27.11.1993. 
G 
H 
(Para 8] [729-A~B] 
2.1. G.O. dated 26./27.11.1993 got modified by G.O. d~ted 24.11.1998. 
Therefore, if the said G.O. dated 26/27.11.19
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