Judgment:
J.B. Koshy, J.
1. Subject-matter of these writ appeals and writ petition is the validity and scope of Notification S.R.O. No. 291 of 2000 and S.R.O. No. 292 of 2000 granting or restricting exemptions and concessions from payment of sales tax to khadi and village industries (KV industries). Arguments were based on the doctrine of promissory estoppel and hostile discrimination.
2. The Khadi and Village Industries Commission Act, 1956 (hereinafter referred to as 'the Act') was enacted by the Indian Parliament for establishment of a commission for the development of KV industries and for matters connected therewith. 'Khadi' is defined under Section 2(d) as follows:
(d) 'Khadi' means any cloth woven on handlooms in India from cotton, silk or woollen yarn handspun in India or from a mixture of any two or all of such yarns ;
'Village industry' is defined under Section 2(h) of the above Act as follows:
(h) Village industry means,--
(i) any industry located in a rural area which produces any goods or renders any service with or without the use of power and in which the fixed capital investment per head of an artisan or a worker does not exceed fifteen thousand rupees or such other sum as may, by notification in the Official Gazette, be specified from time to time by the Central Government.
Provided....
In the Schedule, khadi and village industries are specified. Kerala State enacted Kerala Khadi and Village Industries Board Act, 1957. Under Section 2(v), 'village industries' are defined as follows:Village Industries' means all or any of the industries specified in the Schedule to the Khadi and Village Industries Commission Act, 1956 (61 of 1956), and includes any other industry declared by the Government under Section 3 to be a village industry.
On getting representations and on considering various conditions, so far, about 115 industries, including the one covered under the Central Act Schedule, were declared by the State Government, under Section 3, by notification, to be village industries. All declared village industries were granted several concessions like margin money, liberalised loan, grants and other benefits. All such industries were exempted from payment of sales tax in view of S.R.O. No. 1727 of 1993 from July 1, 1963 from the date when the Kerala General Sales Tax Act, 1963 was brought into force in exercise of the powers vested under Section 10 of that Act. Government, by S.R.O. No. 293 of 1998 restricted exemption to the units whose annual sales turnover exceed (sic) Rs. 25 lakhs with effect from April 1, 1998. That restriction of Rs. 25 lakhs of sales turnover for getting the benefits was withdrawn by PI Notification S.R.O. No. 644 of 1998 dated August 1, 1998 as it adversely affected the industrial units in the KV sector. Therefore, within four months, total exemption from payment of sales tax to all KV industries were re-introduced by the above notification irrespective of turnover. Thereafter, S.R.O. No. 1090 of 1999 was published by notification dated December 31, 1999 in supersession of all the notifications in this regard by which the total exemption was restricted to industrial units whose sales turnover does not exceed Rs. 10 lakhs with effect from January 1, 2000. According to the Revenue, S.R.O. No. 644 of 1999 was corrected by issuing S.R.O. No. 1090 of 1999 as former was mistakenly introduced. By S.R.O. No. 291 of 2000 published in the Official Gazette dated March 13, 2000 the above notification was amended and full exemption was granted to 21 industries specified in Table II, Column No. 3, SI. No. 12 KV industries with effect from April 1, 2000. Therefore, all KV industries other than 21 KV industries mentioned in the notification were made liable to pay sales tax like other dealers, if their turnover is Rs. two lakhs and above as prescribed under Section 5(1) of the KGST Act. But, Government, simultaneously issued Notification No. 292 of 2000 dated March 31, 2000 effective from April 1, 2000 granting concessional rate of tax at the rate of four per cent on KV industries products except the product of 21 industries which were granted full exemption under S.R.O. No. 291 of 2000.
3. The petitioners contended that all KV industries should be exempted from payment of sales tax. It was contended that withdrawal of exemption is against the principles of promissory estoppel and it was further contended that there is no justification for discriminating 21 KV industries with other industries. All industries under KV sector should also be given exemption which was given to 21 KV industries and classification and distinction made between those industries are illegal. The learned single Judge, after considering the matter, found that there is clear discrimination in giving different treatment to 21 industries to 'nil' rate of sales tax and four per cent sales tax to other KV industries. The learned single Judge based on the decision of the apex Court in Khadi and Village Soap Industries Association v. State of Haryana [1994] 95 STC 355 and of this Court in Hotel Elite v. State of Kerala [1988] 69 STC 119, held that levying of tax based on annual turnover is valid, it should not be enforced as it remained only for a short period and it was modified by Notification No. 291 of 2000 and even if Notification No. 291 of 2000 is set aside, Notification No. 1090 of 1999 should not be enforced and held as follows:.Since S.R.O. No. 1090 of 1999 providing for levy of tax on KV industries with turnover of rupees ten lakhs and above survived for only three months, and in view of the stay granted by this Court, no collection of tax also would have been made by those industries. By the time the departmental officers could start enforcing the notification, the notification itself was withdrawn leaving the liability for only three months, and that too for a limited number of dealers. I do not think the respondents should be permitted to enforce S.R.O. No. 1090 of 1999 for a short period of three months that is for the last three months of assessment year 1999-2000 even though I find nothing illegal or arbitrary about both the notifications providing for tax based on annual turnover. Therefore I declare that no KV industries should be subjected to sales tax up to March 31, 2000. However, the assessing officers are entitled to forfeit the tax if any collected and remitted or retained by any KV industry during the period of three months from January 1, 2000 to March 31, 2000.
The writ petitions were disposed of with the following directions by judgment dated April 9, 2003 :
1. All the KV industries are entitled to enjoy sales tax exemption granted under S.R.O. No. 1727 of 1993 and S.R.O. No. 1090 of 1999 irrespective of their turnover up to March 31, 2000.
2. All KV industries other than 21 industries referred to in S.R.O. No. 291 of 2000 are liable to pay tax at the concessional rate of four per cent on the sale of their products from April 1, 2000 onwards.
3. Even though Notification S.R.O. No. 291 of 2000 is struck down as invalid, 21 KV industries referred to in S.R.O. No. 291 of 2000 will enjoy sales tax exemption from April 1, 2000 till date and for a further period of three months say up to July 31, 2003 and thereafter if the Government does not issue fresh notification will be liable to pay tax at four per cent on their products like other KV industries. Even though the 21 industries which were granted exemption may also be members of the associations which filed some of these writ petitions, as all of them adversely affected by this judgment are not parties, the Government is directed to notify in the Gazette the decision of this Court declaring S.R.O. No. 291 of 2000 as invalid before July 31, 2003 to enable them to collect and remit tax from August 1, 2003 onwards.
4. It is open to the Government to reconsider the matter providing for exemption prospectively or retrospectively to such categories of KV industries on any proper and reasonable basis.
In view of the fact that tax involved is from April 1, 2000 onwards, the petitioners are granted time till August 31, 2003 to file returns and remit tax. I make it clear that in view of the pendency of the original petitions, and stay granted by this Court, there will be no liability for the petitioners to pay penal interest under Section 23(3) of the K.G.S.T. Act, if the tax is paid along with the returns before August 31, 2003. However, if tax is not paid before August 31, 2003 then waiver of penal interest will not be applicable to the defaulters and tax and interest will be recovered from them in accordance with law.
4. Aggrieved by the above judgment, State filed Writ Appeal Nos. 1724 and 1740 of 2003 contending that there was no reason for setting aside the Notification S.R.O. No. 291 of 2000 and setting aside the benefit granted to 21 industries. It was also pointed out that in other States also, the abovementioned 21 industries are getting full exemption from sales tax. Petitioner and similarly placed assessees filed Writ Appeal Nos. 1485 of 2003 and 746 of 2004 contending that even though notification was set aside as discriminatory, the learned single Judge ought to have held that they are not liable to pay sales tax and are entitled to get full exemption and the finding of the learned single Judge that promissory estoppel is not applicable as erroneous. Writ Appeal Nos. 746 and 747 of 2004 and 215 of 2006 were filed by parties coming under 21 industries who are entitled to get exemption as per the impugned notification. They contended that even if there is mistake in the notification, there is no reason to set aside the notification. At the maximum, the notification withdrawing full exemption to other industries could have been set aside, but, now, they are denied all the exemption given by the Government without hearing them. They were not made parties in the writ petition. Therefore, those writ appeals were filed by getting leave. Writ Petition (C) No. 37056 of 2003-J is filed stating that the words 'other than furnitures' mentioned in item Nos. 12 and 13, Table II of Notification S.R.O. No. 291 of 2000 should be set aside and the units manufacturing furnitures also should be given exemption.
5. First, we may deal with the contention of the petitioner regarding promissory estoppel. The learned single Judge correctly held that by application of the theory of 'promissory estoppel', the notification withdrawing exemption and imposing concessional rate of four per cent tax cannot be set aside. Section 10 of the Kerala General Sales Tax Act, 1963, empowers the Government to make an exemption or reduction in the rate of tax, either prospectively or retrospectively, in respect of any tax payable under the Act. Under Sub-section (3) of Section 10, Government has power to cancel or vary any notification issued under the above section by notification. Section 10 of the KGST Act reads as follows:
10. Power of Government to grant exemption and reduction in rate of tax.--(1) The Government may, if they consider it necessary in the public interest, by notification in the Gazette, make an exemption or reduction in rate, either prospectively or retrospectively in respect of any tax payable under this Act,
(i) on the sale or purchase of any specified goods or class of goods, at all points or at a specified point or points in the series of sales or purchases by successive dealers, or
(ii) by any specified class of persons in regard to the whole or any part of their turnover.
(2) Any exemption from tax, or reduction in the rate of tax, notified under Sub-section (1),--
(a) may extend to the whole State or to any specified area or areas therein,
(b) may be subject to such restrictions and conditions as may be specified in the notification.
(3) The Government may by notification in the Gazette, cancel or vary any notification issued under Sub-section (1).
Because of the mandates of the above statutory provision, Government is vested with power to exempt or reduce tax liability or withdraw all the notifications issued by it granting exemption or reducing of any tax payable under the Act. Therefore, the Government has the power by statute to withdraw or restrict the exemption granted to KV industries. The counsel for the petitioner argued based on the decision in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh : [1979]118ITR326(SC) , that the doctrine of promissory estoppel is not really based on the principle of estoppel, but, it is a doctrine evolved by equity in order to prevent injustice. For attracting the doctrine of promissory estoppel, there should be a promise which was altered to its position, but, it was also held in the above case that once the Government makes a promise, Government cannot withdraw from it provided injustice can be avoided only by enforcement of the promise. The above principle of promissory estoppel was formulated in the present form in the celebrated judgment of Justice Lord Denning in Central London Property Trust Ltd. v. High Trees House Ltd. [1956] 1 A B.R. 256 (commonly called as 'High Trees' case) taking a clue from the observations of Lord Cairns in Hughes v. Metropolitan Railway Co. (1877) 2 A . c. 439. The principle formulated by Mr. Justice Denning was, to quote his own words, 'that a promise intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply'. The principles were very clearly mentioned in Crabb v. Arun District Council [1975] 3 ALL E.R. 865 and held as follows:
The true principle of promissory estoppel, therefore, seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre-existing relationship between the parties or not.
The above principle was further explained by Lord Denning in Combe v. Combe [1951] 2 KB 215 as follows:
The principle is that where one party has, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualification which he himself has so introducted, even though it is not supported in point of law by any consideration, but only by his word.
The principle enunciated in High Tree's case [1956] 1 ALL ER 256 ; [1947] 1 KB 130, was recognised by the House of Lords in Tool Metal Mfg. Co. Ltd. v. Tungsten Electric Co. Ltd. [1955] 2 ALL ER 657. The principle was adopted by U.S. also. The U.S. Restatement (Second) on Contracts, states :
a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
6. The above principle of promissory estoppel was accepted by the courts in India. This principle was adopted by the Supreme Court in Union of India v. Indo-Afghan Agencies AIR 1968 SC 718. The apex Court dealt with the doctrine of promissory estoppel at great length in Motilal Padampat Sugar Mills' case : [1979]118ITR326(SC) , and held that the promissory estoppel need not be restricted as a defence, but, it can be as a cause of action also. In the above case, based on the promise of the Government that State of Uttar Pradesh has decided to give exemption from sales tax for a period of three years under Section 4-A of the U.P. Sales Tax Act, 1948 to all industrial units in the State to set up a hydro-generation plant, the plant was set up. The apex Court held that the Government is bound by the promise and bound to exempt the payment from sales tax for a period of three years. Here, in this case, Government did not give any promise to any of the KV industries that if they set up a new unit in the State of Kerala they will be given eternal exemption or exemption for a certain period of years. The exemption was given under Section 10. Section 10 itself authorises the Government to withdraw the exemption or reduce the rate of tax, etc. If the contention of the petitioner is accepted, exemption once granted cannot be withdrawn as every assessee can say that the exemption granted is eternal.
7. The doctrine of promissory estoppel has been evolved by the court on the principles of equity to avoid injustice. In order to attract the applicability of the doctrine, it is not necessary that the promisee, acting in reliance on the promise should have suffered any detriment. But, the promisee should have altered his position in reliance of the promise. Altering position means such alteration in the position of the promisee as it makes it appear to the court that holding the promisor to his representation is necessary to do justice between the parties as held in State of Himachal Pradesh v. Ganesh Wood Products : AIR1996SC149 . 'Promissory estoppel' is defined in Black's Law Dictionary as 'an estoppel which arises when there is a promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of promisee, and which does induce such action or forbearance, and such promise is binding if injustice can be avoided only by enforcement of promise'. But, no vested right as to tax holding is acquired by a person who is granted concession. If any concession has been given, it can be withdrawn at any time and no time-limit should be insisted upon before it was withdrawn unless there is a promise to the contrary. The doctrine of promissory estoppel was elaborately considered by the apex Court in Bannari Amman Sugars Ltd. v. Commercial Tax Officer [2005] 139 STC 86 : (2005) 1 KLT 601 . The apex Court observed as follows:
7. No vested right as to tax holding is acquired by a person who is granted concession. If any concession has been given it can be withdrawn at any time and no time-limit should be insisted upon before it was withdrawn. The rule of promissory estoppel can be invoked only if on the basis of the representation made by the Government, the industry was established to avail of the benefit of exemption.
In Punjab Communications Ltd. v. Union of India : [1999]2SCR1033 , the court held that the change in policy which can be justified on 'Wednesbury reasonableness' can defeat the claim based on promissory estoppel. Based upon the above observation, in Bannari Amman Sugars case : (2004)192CTR(SC)492 , it was further observed as follows:.It is, therefore, clear that the choice of policy is for the decision-maker and not the court. The legitimate substantive expectation merely permits the court to find out if the change of policy which is the cause for defeating the legitimate expectation is irrational or perverse or one which no reasonable person could have made. A claim based on merely legitimate expectation without anything more cannot ipso facto give a right. Its uniqueness lies in the fact that it covers the entire span of time; present, past and future. How significant is the statement that today is tomorrows' yesterday. The present is as we experience it, the past is a present memory and future is a present expectation. For legal purposes, expectation is not same as anticipation. Legitimacy of an expectation can be inferred only if it is founded on the sanction of law.
8. In Pine Chemicals Ltd. v. Assessing Authority : 1993(67)ELT25(SC) , State of Rajasthan v. Mahaveer Oil Industries : [1999]2SCR798 , Pournami Oil Mills v. State of Kerala : [1987]165ITR57(SC) and Video Electronics Pvt. Ltd. v. State of Punjab : AIR1990SC820 , though the principle of promissory estoppel was applied, in all such cases, the notification granting exemption was for a definite period and what was challenged was full or partial withdrawal of the exemption prior to the full period by parties who invested money and acted on the promise to the disadvantage by investment of money. In Sales Tax Officer v. Shree Durga Oil Mills : 1998(97)ELT202(SC) , apex Court held that even in such cases, Government is competent to change its policy in public interest on the basis of resource crunch, etc., unless it is established that such industry was set up only on the basis of the above promise. The assessee must be presumed to be aware of the statutory provision of law that exemption granted under that section can be withdrawn at any time as mentioned in the statute itself. As pointed out by the learned single Judge, there is not even a single case where the apex Court held that there can be a perpetual exemption from sales tax because Government granted full exemption by a notification as was done in this case. In this case, there is no promise by the Government that eternal exemption from payment of tax would be given to all KV industries. We fully agree with the view of the learned single Judge that no interference is possible in the withdrawal of exemption based on the theory of promissory estoppel.
9. Second point urged was that there is hostile discrimination between the industries declared as KV industries and impugned Notification S.R.O. No. 291 of 2000 is violative of article 14 of the Constitution of India. All khadi and village industries products were exempted originally in view of notification issued under Section 10 of the KGST Act. By Notification S.R.O. No. 1090 of 1999 dated December 31, 1999 Government restricted the benefit of exemption to those industrial units whose sales turnover does not exceed Rs. 10 lakhs. But, by S.R.O. No. 291 of 2000, this notification was further amended and total exemption was introduced in respect of products of KV industries listed in the notification. In other words, all other industrial units except those 21 units mentioned in the list were liable to pay sales tax like other dealers. S.R.O. No. 292 of 2000 provided concessional rate of tax at four per cent on the products of all types of KV industrial units. Therefore, 21 listed KV industries in S.R.O. No. 291 of 2000 were not liable to pay sales tax, but, other KV industries are liable to pay tax at the concessional rate of four per cent. According to the petitioner, this was clear discrimination without any reasonable basis and violative of article 14 of the Constitution. The learned single Judge accepted the above contention and found as follows:
On going through the above list, I do not find anything common to bring these industries under one class. While some industries are only engaged in processing of goods some others are engaged in manufacture of products and yet another category are handling farm products. Apart from the fact that these industries were first declared as KV industries by including them in the Schedule to the KV Industries Act as originally enacted, there is nothing very common about 21 industries. There are no distinguishing factors or features between these industries and the other remaining industries left out which are 94 numbers presently in the Schedule to the KV Industries Act. Therefore, the basis of classification adopted by the Government for providing for sales tax exemption to one class while providing tax to others is only the relevant date of declaration of the industries as 'KV industries'. This difference does not satisfy the test of reasonable classification for upholding levy of tax on one class while providing for exemption to the class left out. It is well-settled that in order to sustain a levy applicable to one class while exempting others there should be rational difference between the two classes and such difference should have nexus to the object of the legislation. When KV industries are treated as one class by the Government for various incentives such as margin money loan, industry subsidy, etc., I do not know how a classification can be made based on the date of declaration of industry as a KV industry for the purpose of levy of tax. Section 10 of the KGST Act gives power to the Government to grant exemption to any class of dealers or to any class of products. However, this does not mean within the same class the Government cannot make further classification into different groups. In fact, it is clear from the earlier notifications that among the same class of dealers, namely, KV industries, the Government grouped industries based on their annual turnover though the quantum of turnover adopted for classification was different for different periods. Similarly it could be possible to classify industries based on products or other reasonable basis. Such an attempt is also not seen made by the Government. Therefore I do not find the classification based on the date of declaration of industry as KV industry has any relevance for the purpose of levy of tax and such a classification cannot be said to be a reasonable classification to satisfy the test of article 14 of the Constitution of India. As I see no basis for the classification of 21 KV industries for the purpose of exemption while providing for tax for the rest of the KV industries I do not go into the decisions cited by both sides. Therefore I hold that S.R.O. No. 291 of 2000 is arbitrary and discriminatory and is therefore violative of article 14 of the Constitution of India.
10. It is contended by the State that all 115 industries declared as KV industries under the State Act are doing separate and distinct basis. Different industries produced different products by different materials and all 115 industries are separate classes by themselves though all KV industries are situated in rural areas. The 21 industries mentioned therein were industries mentioned in the Schedule to the Khadi and Village Industries Commission Act, 1956 (Central Act No. 61 of 1956) whereas the other industries are declared in terms of the Kerala Khadi and Village Industries Board Act, 1957. Further, it was submitted that the Government decided to restrict the benefit only to 21 industries which were originally included in the Schedule of Central Act as in other States also such industries were getting full exemption and total exemption from sales tax was granted to those 21 industries on a consensus arrived at by other State Governments. It was noticed by the various State Governments that there was unhealthy competition among the States in view of different yardsticks in the above KV industries and a decision was taken to evolve a uniform policy. In that circumstances, the above 21 units were given exemption whereas the 94 industries which were added to the Schedule by the State Government were given concessional rate of tax. It is true that all these KV industries established in rural area which generate employment are entitled to concessions. All KV industries which generate employment are entitled to get a preferential treatment in view of article 43 of the Constitution of India which is as follows:
Living wage, etc., for workers.--The State shall endeavour to secure, by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities and, in particular, the State shall endeavour to promote cottage industries on an individual or co-operative basis in rural areas.
In fact, various concessions like subsidy, margin money scheme, liberalised loan scheme, etc., are given to all KV industries including the 94 industries which were left out in getting full exemption of sales tax are continuing to get other benefits. Even under S.R.O. No. 292 of 2000, they are given a concessional rate of four per cent tax by the State. That itself is a concession granted by the State and it is the contention of the State that the Government has considered the matter and as a policy decision they have decided only 21 industries need be given full benefits and other 94 industries are not entitled to get the full exemption, but, they are entitled to concessional rate of four per cent tax. It is a matter of policy. There are separate problems raised by each industries and after studying the matter, the Government came to the conclusion that only the 21 industries need be given full tax exemption to avoid competition as neighbouring States are giving full tax exemption to them. But, four per cent concession was granted to other industries taking into account uniform policy to be adopted by the States and also considering the factual position. In other words, the Government first thought to withdraw the full exemption to KV industries as a policy, but, then to avoid competition and taking into the fact that 21 industries are getting full exemption in the other States very same exemption was given in the State also. With regard to the other 94 industries, concessional rate was granted. It cannot be stated that except that all are village industries, these 94 industries have anything common with the other 21 industries. Each industry is a class by itself producing different products and there is no material to show that there is unreasonable classification. For example, the fact that no tax is levied for manufacture of matches carried out by a khadi and village industry covered by 21 industries in S.R.O. No. 291 of 2000 will not affect an industry engaged in the manufacture of candle covered by 94 industries which were not given total exemption though it is also manufacturing in KV sector. In taxation matters, power of classification by the State is very wide and article 14 of the Constitution of India has to be applied in an elaborate manner giving State wide discretion.
11. The American Supreme Court in Madden v, Kentucky (1940) 309 US 83, observed as follows:
In taxation even more than in other fields, legislatures possess the greatest freedom in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it.
The above observation was approved by the Supreme Court of India in East India Tobacco Company v. State of Andhra Pradesh : [1963]1SCR404 . The Supreme Court in that case was considering a case whether taxing only virgin tobacco exempting country tobacco was a valid classification. The Supreme Court observed as follows:
But in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. It is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of article 14. The following statement of the law in Willis on 'Constitutional Law', page 587, would correctly represent the position with reference to taxing statutes under our Constitution :
'A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably.... The Supreme Court has been practical and has permitted a very wide latitude in classification for taxation'.
and held that virgin tobacco is a class by itself and classification was correct. The apex Court in Khandige Sham Bhat v. Agricultural Income-tax Officer : [1963]48ITR21(SC) , held that in taxation also doctrine of equality is applicable, but, at the same time, the court held that the power of the Legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways, A Constitution Bench of the Supreme Court considered the matter in detail in Twyford Tea Co. Ltd. v. State of Kerala : [1970]3SCR383 , and held that burden of proving discrimination is always heavy and heavier and when a taxing provision is under attack on the ground of discrimination, it is on the person complaining of the discrimination to discharge the above burden of proving that it is not possible in equality. The apex Court further held that :.the burden for proving discrimination is always heavy on the person who alleges discrimination and heavier still when a taxing statute is under attack. That the State can validly pick and choose one commodity for taxation and the same is not open to attack under article 14 on the ground that the same result must follow when the State picks out one category of goods and subjects it to the taxation.
12. In Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh : [1980]1SCR769 , a Constitution Bench of the Supreme Court observed as follows:
Even so, taxing statutes have enjoyed more judicial indulgence. This Court has uniformly held that classification for taxation and the application of article 14, in that context, must be viewed liberally, not meticulously.
It was held in Murthy Match Works v. Assistant Collector of Central Excise : 1978(2)ELT429(SC) that classification of match box industry into mechanised and non-mechanised sector and a further classification was held to be valid. The apex Court held as follows:
Of course, in the last analysis courts possess the power to pronounce on the constitutionality of the acts of the other branches whether a classification is based upon substantial differences or is arbitrary, fanciful and consequently illegal. At the same time, the question of classification is primarily for legislative judgment and ordinarily does not become a judicial question. A power to classify being extremely broad and based on diverse considerations of executive pragmatism, the judicature cannot rush in where even the Legislature warily treads. All these operational restraints on judicial power must weigh more emphatically where the subject is taxation.
In Khadi & Village Soap Industries Association v. State of Haryana : AIR1994SC2479 , total exemption was granted from payment of sales tax to khadi ashram and its centralised units functioning within the State of Haryana, but, limited the exemption to the other co-operative societies and persons to their turnover not exceeding rupees five lakhs in a year. The Supreme Court held that the above classification is not discriminatory and violative of article 14 of the Constitution of India. The test applicable for striking down a taxing provision on the ground of discrimination is one of palpable arbitrariness. In Associated Cement Companies Ltd. v. Government of Andhra Pradesh [2006] 144 STC 342 : 2006 AIR SCW 323, the apex Court was considering the question whether validity of entry 18 in the Andhra Pradesh General Sales Tax Act providing higher rate of sales tax on cement sold along with separate sale of packing material. After analysing various decisions, the apex Court held that the above classification was valid. In this case, 21 industries mentioned in the notification are entirely different from the other 94 industries though all the industries are KV industries. The 21 industries mentioned therein were given exemption in other States and to avoid competition full exemption was given to it and concessional rate was given to the other 94 industries. We are unable to find any palpable hostile discrimination in this case.
13. It is also submitted that under the new statutory provision (The Kerala Value Added Tax Act, 2003) also, these 21 industries are given complete exemption whereas four per cent tax has been levied from other KV industries. It was pointed out to us that the judgment in appeal was affirmed in W.A. No. 1436 of 2003*, filed from one of the original petitions. The learned Special Government Pleader submitted that a review petition is pending. We have gone through the judgment in W.A. No. 1436 of 2003. It is seen that in that appeal without challenging the finding of discrimination by the learned single Judge, the contention raised was that in the circumstances of the case, full exemption should have been given to all small-scale industries. The above writ appeal was also filed by a petitioner who was granted only concessional rate of four per cent. While setting aside the notification, the learned single Judge directed that four per cent tax should be paid by all industries in KV sector. The contention of the appellant in the above case was that since 21 KV industries were given full exemption, other KV industries also shall be granted exemption as the learned single Judge found that there is discrimination. But, that contention was rejected in the writ appeal and the division Bench did not consider the question of discrimination and appellant has to pay four per cent tax. In fact, none of the persons who are engaged in the 21 industries and affected parties were parties in the writ petition or in that writ appeal.
14. When the learned single Judge set aside the impugned notification on the ground of discrimination it was also directed that even the 21 industries mentioned in the notification to be exempted also should pay tax prospectively at the rate of four per cent, but, they were not heard before passing such order. On that ground also, the direction of the learned single Judge that four per cent tax should be paid prospectively by the above 21 industries is liable to be set aside. We are of the view that there is no discrimination in between similarly placed industries and classification of different kinds of industries among the KV sector was valid as far as taxation aspects are concerned. State has power to tax or not to tax any type of goods. There is no hostile discrimination or palpable arbitrariness in the Government notifications and no ground is made out to set aside the above notification. Therefore, we set aside the judgment of the learned single Judge and hold that S.R.O. No. 291 of 2000 and 292 of 2000 are validly issued as per the powers given under Section 10 of the KGST Act.
15. In W.P. (C) No. 37056 of 2003, it was contended that exempted category included as carpentry work other than manufacture of furniture. According to them, furniture industry also should be included in the category. In the Schedule to the Central Act also, furniture was not included. If the petitioner wants an exemption, it is for him to make representation as it is for the taxing authority to consider whether exemption should be given or not. He filed exhibit P3 before the Government. It may be considered and disposed of by the Government within three months from the date of receipt of a copy of this judgment. It is submitted by the Standing Counsel appearing for the Kerala Khadi and Village Industries Board that all the KV industries in the State are running at loss, but, they have no say in the imposition of sales tax. If all the industries or any of the industries which were not given the benefit of full exemption are experiencing financial difficulties, it is for them to make representation to the Government and this Court is not empowered to make a direction to the State to give exemption from tax to any particular class of industry. All the writ appeals and writ petition are disposed of accordingly.