M.P. Menon, J.
1. A question of estoppel, arising from a promise of the State Government to recognise a 'sales tax holiday', arises for consideration in these Original Petitions filed under Article 226 of the Constitution of India.
2. Based on the report of a committee appointed to examine methods for strengthening the traditional labour-intensive industries of the State, rehabilitation of sick units and growth of new industrial units, the Kerala Government came out with an order on 11th April, 1979, approving a package measure for promoting industrial development.- ' So far as small-scale industries were concerned, the package included promise of subsidies, development plots, electricity tariff concession, exemption from minimum guarantee (for supply of electrical energy) and sales tax concession. In regard to the last-mentioned concession, the proposal was to exempt small-scale industries set up after 1st April, 1979, from sales tax for a period of five years from the date of production. Mini industrial units, women's industrial units and small-scale units set up by harijans were to get the exemption for three years. The concession was also to be prospectively extended to existing units of the above three categories. Some time later, the position was further examined and another G. O. was issued, on 8th November, 1979, and in supersession of the earlier orders, providing for the following 'sales tax concession' :-
New small scale industrial units set up after 1-4-1979 will be exempted from the payment of tax for a period of 5 years from the date of production. Small scale industrial units set up after 1-4-1979 by women and harijans any where in the State, and all small scale industries set up after 1-4-1979 in the Mini Industrial Estates, will be exempted from payment of sales tax for 6 years from the date of production. This concession will be available also to industries in these three categories which have not completed six year period. However, the sales tax if any already paid by the unit will not be refunded on any account.
In order to give statutory backing to the 'holiday', Government issued the following notification, in exercise of power under Section 10 of the Kerala General Sales Tax Act, on 29th September, 1980 :--
In exercise of the powers conferred by Section 10 of the Kerala General Sales Tax Act, 1963 (15 of 1963), the Government of Kerala, having considered it is necessary in the public interest so to do, hereby make an exemption in respect of the tax payable under the said Act on the turnover the sale of goods produced and sold by the new industrial units under the small-scale industries for a period of five years from the date of commencement of sale of such goods by the said units subject to the conditions that the tax if any collected by such units by way of tax on their sales shall be paid over to Government and that sales tax, if any, already paid by such units to Government shall not be refunded.
Provided that such units shall produce proceedings of the General Manager, District Industries Centre declaring the eligibility of the units for claiming exemption from sales tax.
Provided further that the cumulative sales tax concession granted to a unit at any point of time within this period shall not exceed 90 per cent of the cumulative gross fixed capital investment of the unit.
Explanation:-For the purpose of this notification 'new industrial units under the small-scale industries' shall mean undertakings set up on or after 1st April, 1979, and registered with the Department of Industries and Commerce as' a small-scale industrial unit. 1 (but shall not include old industrial units under the small-scale industries closed down and reopened under a new banner and style of business, after 1st April, 1979).
This notification shall be deemed to have come into force with effect from 1st April, 1979.
The challenge is primarily to the second proviso to the notification, restricting exemption to 90 per cent of the fixed capital investment. It is said that relying on the promise held out in the two Government Orders dated 11th April, 1979 and 8th November, 1979, the petitioners had started new units after 1st April, 1979, and that they would not have done so, had they known that the exemption would subsequently be limited to 90 per cent as above. The State is bound to honour its promise in full, it is contended, as the petitioners had 'altered their position' on the strength of the two executive orders. There are a few subsidiary contentions also, but they will be noticed and dealt with separately.
3. Promissory estoppel is a rule of equity sometime applied by the Courts to prevent a person from asserting a legal right if he is found guilty of such inequitable conduct as requires the intervention of equity to protect the other party. The principle is that where by his words or conduct one party to a transaction makes to the other a promise which is intended to affect the legal relationship between the two, and the other party acts upon it by altering his position, the party making the promise will not be allowed to act inconsistently with it. The question is how far this principle of private law estoppel can be extended to public law, so as to compel public authorities or agencies to adhere to the representations made on their behalf. In a dispute between citizen and citizen, it is comparatively easy to find out where equity or justice lies; but in a dispute between a citizen and a public authority, elements of public interest intervene. For example, suppose a citizen is told, when land acquisition proceedings are in contemplation, that his land will not be acquired for the public purpose in view. Based on this representation, he starts building on the land. In a sense, it will be inequitable to permit the authority or officer to go back on this assurance. But if the land is really required for a public purpose, it will be against public interest to allow the citizen to enforce the promise made to him. A choice will then have to be made between the interests of the citizen and the interests of the public in general. This is because a public authority is not just some other party; it is the custodian of public interests or public good also. Dealing with the freedom of the State to enter into contracts with others, our Supreme Court has repeatedly pointed out that the State cannot be equated to a private citizen in all such matters, and that there are certain limitations on its discretion. If this is so in contractual matters, it must equally be so in the case of promises falling short of enforceable contracts. It is often said that estoppel cannot operate against a statute; all that it means is that where a law imposes a duty, a plea of estoppel cannot prevent the performance of that duty. It is trite law that statutory obligations prevail over contractual or similar obligations. The concept of public law estoppel is a developing one, and its contours are still ill-defined. Broadly stated, it may be applied in cases where the public authority is acting purely in exercise of executive or administrative discretion. Where the discretion is granted by a statute, or even by subordinate legislation, other considerations will arise. Even in the matter of executive discretion pure and simple, similar considerations may not be altogether alien. According to Lord Denning in Laker Airways v. Department of Trade (1977) 2 All ER 182.
The underlying principle is that the Crown cannot be estopped from exercising its powers, whether given by a statute or by common law, when it is doing so in the proper exercise of its duty to act for the public good, even though this may work some injustice or unfairness to a private individual.... It can however be estopped when it is not properly exercising its powers, but is misusing them; and it does misuse them if it exercises them in circumstances which work injustice or unfairness to the individual without any countervailing benefit for the public.
It will certainly be no easy task for any Court to decide whether the power exercised in a given case involves a duty 'to act for the public good'. Public good itself is an elusive concept depending upon certain philosophies or outlook. It will not also be easy to strike a balance between public benefit and fairness to the individual, even if it is possible to distinguish between proper and improper exercise of the power concerned. One of us (myself) had had the occasion to deal with problems relating to public law estoppel, in Govindan v. Cochin Shipyard 1983 KLT 1083, and to observe :
In most of its branches, law touches upon human behaviour classified as proper or improper by standards of current social consciousness. Law attempts to strike a balance, imposing certain minimum standards of conduct; and when an individual feels that the restrictions are unreasonable or unfair in the light of contemporary values, he reacts with anger and frustration, inviting sanctions the laws have imposed. Conventional morality and enlightened criticism have been influencing the development of law at all times, and in a sense, law is institutionalised ethics. The difference between moral and legal authority however survives because moral principles continue to be optional until they are elevated as legal principles when alone they become obligatory. Even in the realm of legal rules, there are undefined areas where the courts have to make a choice between conduct which is proper and conduct which is improper; and at least in regard to those areas, judges make law, in the course of administering the law, by condemning a conduct which the law does not strictly condemn, and recognising a rule which the law does not strictly recognise. Preventing a person from asserting rights which are legal, and giving binding effect to promises unsupported by consideration are only instances where Courts attempt to reach conclusions which are fair and just. And herein lies the difficulty of finding a common thread between cases where equitable estoppel is allowed full play, and cases where it is not, because the concept of what is just and fair varies from person to person. Our moral sentiments are made up of sympathies and antipathies, and in trying to hold the scales even, judges as human beings are apt to tip the scales. Where the inputs of judicial law-making are notions of the maker about what is good or bad, just or unjust, fair or unfair, the danger of divided counsels of law cannot altogether be avoided. As was pointed out by the Lord Chancellor in Woodhouse v. Nigerian Produce (1972) AC 741, the doctrine of promissory estoppel was raising 'problems of coherent exposition which have never been systematically explored'.
4. Fortunately for us, it is unnecessary to cover the whole ground again and refer to all the decisions cited at the hearing, as the question raised in the present case is closely connected with a taxing statute and a notification issued thereunder. Sales tax, like all other taxes, is a compulsory exaction for augmenting the revenues of the State, and public revenue is collected for the public benefit. Taxation is a paramount power supposed to be exercised for the welfare of the citizens. Where the legislature imposes a tax, the executive is expected to collect it and use it for public purposes. The executive cannot ordinarily refuse to collect the tax; and when it is clothed with power to grant exemptions, that power too has to be exercised for the common weal. Under Section 10 of the Kerala General Sales Tax Act, exemptions or reductions from the rates of tax prescribed by the statute can be granted by notification, only when the Government considers it necessary to do so 'in the public interest'. And when a notification granting exemption is issued under the section, the Government can decline to collect tax only to the extent recognised by the notification. For the Court to tell a Government that it should go further, ignoring the limits of the notification, will be to compel it to violate the law. And if the Court is to hold that the exemption recognised by a notification falls short of a promise held out earlier, and compels the State on that ground to honour the promise in full, the Court will be entering the realm of policy, and practically exercising the power under Section 10 by itself. Is it more important to protect private interests based on promise than public interest reflected in the taxing policy As between public interest which is in a way served by compelling the State to keep its faith with the public, and the public interest supposed to underly a legislative measure, which one is the Court to prefer As the decided cases relating to taxation laws and promises held out in their background show, the judicial choice has not been uniform.
5. The petitioners heavily rely on the decision of the Supreme Court in M. P. Sugar Mills v. State of U. P. AIR 1979 SC 621. There, the Uttar Pradesh Government had taken a decision to give exemption from sales tax under Section 4A of the U. P. Sales Tax Act to all new industrial units with a view to enable them to come on firm footing in the developing stage. A news item appeared in a newspaper on 10th October, 1968, regarding this decision, and that itself was based on a statement made by the Industries Secretary to Government. The appellant before the Court made enquiries with the Director of Industries and the Chief Secretary to Government to find out whether he could set up a hydrogeneration plant, on the strength of the above policy; and he was assured in no uncertain terms that the unit could enjoy a sales tax holiday for three years. Acting on this assurance, the appellant set up a vanaspati factory which went into production by July, 1970. But in August, 1970, the U.P. Government reversed its policy and practically withdrew the promise it had held out earlier. No notification under Section 4A was issued, and the appellant was called up to pay sales tax for all the years. The appellant wanted the Court to hold the State of U. P. to its promise, while the State contended that rules of promissory' estoppel could never be applied against a Government or a public authority. Firmly rejecting the latter plea, Bhagwati, J., indicated :
It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Every one is subject to the law as fully and completely as any other, and the Government is no exception. It is indeed the pride of constitutional domocracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned : the former is equally bound as the latter. Is it indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel Can the Government say that it is under no obligation to act in a manner that is fair and just or that it is not bound by considerations of 'honesty and good faith' Why should the Government not be held to a high 'standard of rectangular rectitude while dealing with its citizens' There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obligations, but, let it be said to the eternal glory of this Court, this doctrine was emphatically negatived in the Anglo-Afghan Agencies case AIR 1968 SC 718 and the supremacy of the rule of lawwas established.
His lordship was however free to recognise that where overriding public interest required that a Government should not be held to its word, Courts would be glad to relieve the Government from its promise, provided adequate and satisfactory reasons were advanced to justify the change in policy. It was hinted that a promise made by a person or an officer incompetent to bind the Government, could not also be enforced. Promissory estoppel was also powerless against exercise of legislative power, or in the matter of compelling a public authority to act against the law. Turning however to the facts of the case before the Court, with particular reference to the claim for exemption from tax liability, his Lordshid said :
Here, the appellant clearly altered its position by borrowing moneys from various financial institutions, purchasing plant and machinery from M/s. De Smet (India) Pvt. Ltd., Bombay and setting up a vanaspati plant, in the belief induced by the representation of the Government that sales tax exemption would be granted for a period of three years from the date of commencement of the production. The Government was, therefore, bound on the principle of promissory estoppel to make good the representation made by it. Of course, it may be pointed out that if the U. P. Sales Tax Act, 1948, did not contain a provision enabling the Government to grant exemption it would not be possible to enforce the representation against the Government, because the Government cannot be compelled to act contrary to the statute, but since Section 4 of the U. P. Sales Tax Act, 1948, confers power on the Government to grant exemption from sales tax, the Government can legitimately be held bound by its promise to exempt the appellant from payment of sales tax. It is true that taxation is a sovereign or governmental function, but, for reasons which we have already discussed, no distinction can be made between the exercise of a soverign or governmental function and a trading or business, activity of the Government, so far as the doctrine of promissory estoppel is concerned. Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it. We are, therefore, of the view that in the present case the Government was bound to exempt the appellant from payment of sales tax in respect of sales of vanaspati effected by it in the State of Uttar Pradesh for a period of three years from the date of commencement of the production and was not entitled to recover such sales tax from the appellant.
According to the petitioners, the facts of the present case are similar, The Kerala Government held out an unequivocal promise to grant a complete sales tax holiday for five years for new units established after 1st April, 1979. It had power under Section 10 of the Kerala General Sales Tax Act to give effect to the declared policy. But instead of honouring its promise, it came out with a notification, almost a year later, with severe restrictions and limitations. The 90 per cent rule itself had the effect of reducing the exemption to an insignificant level. As sales tax would include purchase tax also, and as the notification granted exemption only for tax payable for the turnover of goods sold, the problem was aggravated. The second proviso should therefore be struck down or ignored, it is contended and the Government compelled to give full exemption from sales tax and purchase tax as originally promised.
6. Had the decision in the Sugar Mills case AIR 1979 SC 621 stood alone, we would have been compelled to give serious consideration to this plea, despite noticeable differences in the fact-situation, to which reference will presently be made. In K. L. Ahuja v. State of H. P.  47 STC 135 the Himachal Pradesh High Court implicitly followed its lead and restrained the State from levying sales tax under a statutory notification, as it fell short of certain earlier commitments of the State. A Division Bench of the Delhi High Court, consisting of Prakash Narain and Kirpal, JJ., did likewise in the matter of duty payable under the Customs Act, in Modern Mills v. Union of India 1980 ELT 639. In the meanwhile, however, another Bench of the Supreme Court expressed certain reservations about the wide formulations in the Sugar Mills case AIR 1979 SC 621. In Jit Ram v. State of Haryana AIR 1980 SC 1285, Kailasam, J., observed that the view taken in the former was 'not in accordance with the view consistently taken by this Court in some respects', and that the doctrine of promissory estoppel 'cannot be invoked for preventing the Goverenment from discharging its functions under the law'. After referring to the facts of the case before their Lordships, Kailasam, J., said-
The action taken by the State Government is strictly in conformity with the powers conferred on it under Section 70(2)(c) of the Act. It exempted the petitioners from payment of octroi duty for a particular period and ultimately withdrew the exemption. The action of the Government cannot be questioned as it is in exercise of its statutory functions. The plea of estoppel is not available against the State in the exercise of its legislative or statutory functions.
And this new trend found its reflection in the Delhi High Court itself, when a Full Bench (consisting of Prakash Narain C. J., Rohatgi and Kirpal, JJ.) declined to give effect to the principles of estoppel in matters relating to taxation, in Bombay Conductors & Electricals Ltd. v. Chandramouli  1 ECC 1 (FB).
7. Without attempting to reconcile the difference in emphasis in M. P. Sugar Mills AIR 1979 SC 621 and in Jit Ram AIR 1980 SC 1285, we think the case before us can be disposed of by taking due notice of the statutory notification issued by the Kerala Government on 29th September, 1980. No such notification had intervened in the Sugar Mills case AIR 1979 SC 621. The petitioners herein were liable to pay sales tax in accordance with the provisions of Kerala General Sales Tax Act all the while because the statute continued to operate despite the executive orders issued on 11th April, 1979, and 8th November, 1979. Even assuming that they could have relied on the assurance of the executive till the exemption notification under Section 10 was issued, the position was completely altered when the notification appeared. Section 10 of the Act empowered the State Government to issue notifications both prospectively and retrospectively, and the notification in question had provided for retrospective operation from 1st April, 1979. With effect from 1st April, 1979, therefore, the law was that the petitioners could have claimed exemption only in accordance with its terms.
Even on the principles enunciated by Bhagwati, J., promissory estoppel could not be used to compel the Government or a public authority to act against the law, and short of compelling the State to act against the law, as statutorily enforced by the notification with retrospective effect from 1st April, 1979, there is no method of compelling the Kerala Government to give the petitioners the benefit of full exemption as prayed for. The petitioners could have been relieved of their liability to pay tax only in accordance with the statute; and the statutory method was to issue a notification under Section 10, When the State Government exercised this power and issued a notification, the statutory principles applicable to the petitioners, right from 1st April, 1979, became crystallised. And no rule of equity evolved by Courts could have prevailed against the rules so legislatively ordained. As pointed out by the Supreme Court in Narinder Chand v. Union Territory AIR 1971 SC 2399 :
The power to impose a tax is undoubtedly a legislative power. That power can be exercised by the legislature directly or subject to certain conditions, the legislature may delegate that power to some other authority. But the exercise of that power, whether by the legislature or by its delegate is an exercise of a legislative power. The fact that the power was delegated to the executive does not convert that power into an executive or administrative power. No Court can issue a mandate to a legislature to enact a particular law. Similarly no Court can direct a subordinate legislative body to enact or not to enact a law which it may be competent to enact. The relief as framed by the appellant in his writ petition does not bring out the real issue calling for determination. In reality he wants this Court to direct the Government to delete the entry in question from Schedule A and include the same in Schedule B. Article 265 of the Constitution lays down that no tax can be levied and collected except by authority of law. Hence the levy of a tax can only be done by the authority of law and not by any executive order. Unless the execution is specifically empowered by law to give any exemption, it cannot say that it will not enforce the law as against a particular person. No court can give a direction to a Government to refrain from enforcing a provision of law.
8. The decision of a Constitution Bench of the Supreme Court in Mathra Parshad v. State of Punjab AIR 1962 SC 745 shows that when a promise is held out to grant exemption from tax, and when it is statutorily honoured only in part, the Courts cannot be called upon to compel the Government to stick to its promise, despite a statutory notification. Section 6 of the East Punjab Sales Tax Act, 1948, empowered the State Government to modify the Schedule of exemptions after giving three months' notice of its intention to do so. On different dates before 27th September, 1954, the State Government had issued a series of press notes disclosing an intention not to collect sales tax on manufactured tobacco, from the beginning of the financial year. In fact, a proposal to amend the Schedule in exercise of power under Section 6 had been notified on 7th May, 1954. But the final notification granting exemption was issued only on 27th September, 1954. One of the contentions raised before the court was that the State was not entitled to go back on the promises held out, and that it was bound to recognise the exemption from the beginning of the financial year itself. The Court rejected this contention and held :
There can be no estoppel against a statute. If the law requires that a certain tax be collected, it cannot be given up, and any assurance that it would not be collected, would not bind the State Government, whenever it chose to collect it.
We are of the view that the facts of the present case, in so far as they are relevant are practically indistinguishable from Mathra Parshad AIR 1962 SC 745 and that the law as laid down by the Constitution Bench should be given effect to.
9. Gujarat State Financial Corporation v. Lotus Hotels AIR 1983 SC 848 was a case where a statutory duty was found, and the Court was satisfied that the Financial Corporation was acting arbitrarily; no question connected with the enforcement of a taxation law was involved. The plea based on Income-tax Officer v. Ponnoose 1969 KLT 641 that the full benefit of the Government orders could not have been taken away retrospectively overlooks the clear language of Section 10; and if the second proviso in question was beyond Government's power under Section 10 for this reason, the same could be said about the notification as a whole, and that would not be to the advantage of the petitioners. Counsel for the petitioners sought to place emphasis on the circumstances that no reasons have been advanced in the counter-affidavit for the change in policy, and the learned Government Pleader, in turn, referred to the files to show that such a change was necessary to prevent evasion of tax. As we have said, we are here concerned with exercise of legislative power, and the motive with which it is exercised is irrelevant. Another interesting contention raised by one of the counsel was that Section 10 was not intended to take away an exemption once granted; and this proceeds on the . erroneous assumption that executive orders are enough to effectuate the policies declared therein. The decision in Bakul Cashew v. Sales tax Officer (1977) 1 ILR Ker. 502 answers almost all the contentions possible in this regard.
10. The validity of the notification dated 29th September 1980, has thus to be upheld in full, and we do so. Its legal effect cannot be ignored, and the petitioners cannot be relieved of their liability to pay sales tax, except in accordance with its terms.
11. A faint plea of discrimination was suggested based on the circumstances that small-scale industrial units belonging to women and harijans, and those established in mini industrial estates are marked out for more favourable treatment under paragraph (7) of the G.O. dated 8th November, 1979, and another notification made to give effect to that policy. The three categories are prima facie capable of being separately classified, and no materials have been produced to show that that was impermissible.
12. Complaints are voiced in some of the petitions that the units in question had been set up after 1st April, 1979, but that the authorities were unwilling to recognise this fact. This dispute cannot be investigated in the present proceedings, and there is nothing but the assertion of the petitioners to support their case. Nor is it shown that the refusal of the District Industries Officers to grant the certificate applied for, was arbitrary and totally unrelated to the facts.
The Original Petitions thus fail, and are dismissed without costs. The petitioners will however be permitted to pay off the tax due from them as per the assessment orders/demand notices impugned herein, in six equal monthly instalments commencing from 15th May, 1984, if they have complied with the conditions imposed by this Court wherever conditional orders of stay have been passed.
Soon after the judgment was pronounced counsel for the petitioners made an oral request for leave to appeal to the Supreme Court. We find no substantial question of law of general importance, which requires to be decided by the Supreme Court involved in this case. Hence the request for leave to appeal is declined.