M/S HERO MOTOCORP LTD. VERSUS UNION OF INDIA & ORS.

M/S HERO MOTOCORP LTD. VERSUS UNION OF INDIA & ORS.

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले



REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7405 OF 2022
[Arising out of SLP (Civil) No. 12397 of 2020]
M/S HERO MOTOCORP LTD. …APPELLANT (S)
VERSUS
UNION OF INDIA & ORS. …RESPONDENT(S)
WITH
CIVIL APPEAL NO. 7406 OF 2022
[Arising out of SLP (Civil) No. 11978 of 2021]
J U D G M E N T
B.R. GAVAI, J.
1. Leave granted.
2. These appeals raise an important question of law as to
whether the Union of India can be directed to adhere to the
representation as made by it in the Office Memorandum
dated 7th January 2003 (hereinafter referred to as “the said
O.M. of 2003”) even after the enactment of the Central
1
Goods and Services Tax Act, 2017 (hereinafter referred to as
“the CGST Act”).
3. Civil Appeal arising out of Special Leave Petition (Civil)
No. 12397 of 2020 arises out of judgment and order dated
2
nd March, 2020, passed by the High Court of Delhi,
dismissing the Writ Petition (Civil) No. 505 of 2022 filed by
the appellant – Hero Motocorp Ltd., thereby rejecting the
appellants claim of 100% budgetary support in lieu of the
pre-existing 100% outright excise duty exemption for ten
years from the date of the commencement of commercial
production, as provided for by the said O.M. of 2003 issued
by the Government of India.
4. Civil Appeal arising out of Special Leave Petition (Civil)
No. 11978 of 2021, arises out of judgment and order dated
5
th February, 2021 passed by the High Court of Sikkim,
dismissing the Writ Petition (C) No. 47 of 2018, filed by the
appellant – Sun Pharma Laboratories Ltd. assailing the
reduction of the benefit of 100% exemption from excise duty
granted to it vide office memorandum dated 17th February,
2
2003, which were to be made available for a period of ten
years from the date of commencement of commercial
production.
5. Both the appellants herein approached the respective
High Courts claiming therein that in view of the said O.M. of
2003 and Notification No.50/2003-C.E. dated 10th June
2003 (hereinafter referred to as “2003 Notification”), the
Union was bound to give 100% tax exemption till completion
of 10 years’ period from the date of commencement of their
commercial production.
FACTUAL BACKGROUND
6. The factual scenario leading to the filing of the present
appeals lies in a narrow compass, which is as under:
6.1 The Government of India had issued the said O.M. of
2003 based on the statement made by the Hon’ble Prime
Minister, during his visit to Uttranchal (now Uttarakhand)
in March 2002. The said O.M. of 2003 provided that, for
the States of Uttaranchal and Himachal Pradesh, new
industrial units and existing industrial units on their
3
substantial expansion would be entitled to exemption of
100% outright excise duty for 10 years from the date of
commencement of commercial production. The said O.M. of
2003 also provided that there shall be 100% income tax
exemption for such units initially for five years and
thereafter 30% for companies and 25% for other companies
for a further period of five years, from the date of
commencement of commercial production. Various other
incentives were also provided vide the said O.M. of 2003.
6.2 In pursuance to the said O.M. of 2003, a 2003
Notification was notified in exercise of the powers conferred
by sub-section (1) of Section 5A of the Central Excise Act,
1944 read with sub-section (3) of Section 3 of the Additional
Duties of Excise (Goods of Special Importance) Act, 1957
and sub-section (3) of Section 3 of the Additional Duties of
Excise (Textiles and Textile Articles) Act, 1978. The said
notification provided for exemption for a period not
exceeding ten years from the date of publication of the said
notification in the Official Gazette or from the date of
4
commencement of commercial production, whichever was
later.
6.3 The appellant – Hero Motocorp Ltd. had established a
new industry unit for manufacture of motorcycles at
Haridwar, Uttarakhand, which commenced commercial
production from 7th April, 2008. The appellant – Hero
Motocorp Ltd. availed the exemption until 1st July, 2017,
whereafter the Goods and Service Tax regime came into
existence and the benefit being enjoyed by the appellant –
Hero Motocorp Ltd. was reduced to 58% through the
Budgetary Support Policy.
6.4 The appellant - Sun Pharma Laboratories Ltd. setup its
first industrial unit which commenced its commercial
production from 20th April, 2009. A second unit was also set
up later which commenced commercial production from 14th
April, 2014. Before the advent of the new GST regime, both
of the appellant’s units were enjoying a full refund of the
central excise duties paid by them as provided for in the
exemption notification dated 25th June, 2003, pursuant to
5
the Office Memorandum dated 17th February, 2003. After
the commencement of the new GST regime, here too, the
benefit being enjoyed by the appellant - Sun Pharma
Laboratories was reduced to 58% through the
implementation of the Budgetary Support Policy.
6.5 Subsequently, by the Constitution (One Hundred and
First Amendment) Act, 2016 (hereinafter referred to as “the
101st Amendment Act”), the Constitution of India came to be
amended by the Parliament to introduce the goods and
services tax system pan India. By the 101st Amendment
Act, concurrent taxing power was conferred on the Union as
well as the States including the Union Territories. By the
101st Amendment Act, Article 246A was inserted, making a
special provision for levy of Goods and Service Tax (“GST”
for short), by both the Union as well as the States. Article
269A was inserted to provide for levy and collection of GST
in the course of Inter-State trade or commerce (“IGST” for
short) by the Government of India. It also provided that
such tax shall be apportioned between the Union and the
6
States in the manner as may be provided by Parliament by
law on the recommendations of the Goods and Services Tax
Council (“GST Council” for short).
6.6 In pursuance of the said amendments to the
Constitution of India, the Central Goods and Services Tax
Act, 2017 (hereinafter referred to as “the CGST Act”) and
Integrated Goods and Services Tax Act, 2017 (hereinafter
referred to as “the IGST Act”) were enacted by the
Parliament and various States Goods and Service Tax Acts
(“SGST” for short) were enacted by the State Legislatures for
their respective States for the levy of GST.
6.7 Under clause (c) of sub-section (2) of Section 174 of the
CGST Act, a Notification No.21/2017-CE dated 18th July
2017 was issued by the respondent-Union of India by which
the exemption notifications through which tax exemptions
were granted as an incentive against the investment came to
be rescinded on or after the appointed day, i.e. 1st July
2017. As a result, the tax exemption which was granted by
7
the said O.M. of 2003 ceased to continue with effect from 1st
July 2017.
6.8 The GST Council, in its meeting held on 30th
September 2016, had resolved that all entities exempted
from payment of indirect tax would pay tax in the GST
regime. It had also resolved that the decision to continue
with any incentive given to specific industries in existing
industrial policies of States or through any schemes of the
Central Government would be with the concerned State or
Central Government. It was further resolved that in the
event it was decided by the concerned State or Central
Government to continue any existing exemption/incentive,
etc., then it would be administered by way of a
reimbursement mechanism through the budgetary route.
The modalities of the same were to be worked out by the
concerned State/Centre.
6.9 In pursuance of the said recommendations of the GST
Council, the Central Government notified the Budgetary
Support Scheme vide Notification dated 5th October 2017,
8
thereby providing to refund/reimburse the Central share of
CGST and IGST to the affected eligible industrial units for
the residual period in the North Eastern and the Himalayan
States. The Central share was determined at 58% of CGST
and 29% of IGST.
6.10 Being aggrieved by the decision of the Central
Government in restricting the refund only to 58% of CGST
and 29% of IGST and not providing 100% refund of CGST,
the appellant-Hero Motocorp Ltd. approached the Delhi
High Court by way of writ petition being Writ Petition (Civil)
No. 505 of 2020 and the appellant-Sun Pharma
Laboratories Limited approached the Sikkim High Court by
way of writ petition being Writ Petition (Civil) No.47 of 2018.
The Delhi High Court, vide its judgment and order dated 2nd
March 2020, and the Sikkim High Court, vide its judgment
and order dated 5th February 2021, have dismissed the said
writ petitions.
9
6.11 Being aggrieved by the dismissal of the writ petitions,
the appellants (the original writ petitioners) have
approached this Court.
6.12 Hence the present appeals.
SUBMISSIONS
7. We have heard Shri S. Ganesh, learned Senior Counsel
appearing on behalf of the appellant-Hero Motocorp Ltd. in
Civil Appeal arising out of Special Leave Petition (Civil)
No.12397 of 2020, Shri V. Sridharan, learned Senior
Counsel appearing on behalf of the appellant-Sun Pharma
Laboratories Ltd. in Civil Appeal arising out of Special Leave
Petition (Civil) No.11978 of 2021 and Shri N. Venkatraman,
learned Additional Solicitor General appearing on behalf of
the respondent-Union of India.
8. Shri S. Ganesh, learned Senior Counsel, submits that
the perusal of the said O.M. of 2003 would reveal that an
unequivocal representation was made by the Central
Government to the commercial entities which were desirous
of setting up industrial units in the States of Uttarakhand
10
and Himachal Pradesh, that, in the event a new industry is
established or there is a substantial expansion of the
existing unit, then such industrial units would be entitled to
100% exemption from payment of excise duty for 10 years.
He submits that the Central Government is bound by such
representation. It is submitted that the industrial units like
that of the appellants, relying on the promise made by the
Central Government, have altered their position to their
detriment and as such, the Central Government is now
estopped from resiling from the representation made by it to
the appellants.
9. Shri Ganesh submits that the figure of refund only to
the extent of 58% has been achieved in an arbitrary and
irrational manner. He submits that the Union has
purportedly done so under the umbrella of the report of the
Finance Commission. He contends that, even under the
earlier regime of excise tax and all other levies collected by
the Central Government, the States were entitled to their
share therein. It is stated that the share of the Central
11
Government and the State Government in the said regime
has always been there and it is not as if it has come for the
first time after the GST regime started. Learned Senior
Counsel submits that under the old regime, though the
Central Government was sharing with the States a certain
percentage of entire taxes collected by it, still, 100%
exemption from the payment of duty was being granted to
the entities like the appellants herein. It is submitted that
there is no reason as to why the same should not have been
continued under the new regime.
10. Shri Ganesh further submits that the policy as is
reflected in the said O.M. of 2003 would stand on a higher
pedestal than the statutory provision or a notification under
a statute and the Union would be bound to adhere to the
same. He submitted that even in January 2003 when the
exemption notifications were issued, the same sharing
pattern was in existence between the States and the Central
Government.
12
11. Shri Ganesh further submits that under Section 11 of
the CGST Act, the Government has the power to grant
exemption from tax and there is no reason as to why the
Union Government should not have exercised such a power
in the peculiar facts and circumstances of the case.
12. Learned Senior Counsel, therefore, submits that the
view taken by the Delhi High Court is not sustainable in
law. He submits that the appeals deserve to be allowed and
a direction be issued to the Central Government to provide
100% reimbursement of CGST for the remainder of the
period.
13. Shri Ganesh relied on the judgments of this Court in
the cases of State of Bihar and others vs. Suprabhat
Steel Ltd. and others1
, State of Jharkhand and others
vs. Tata Cummins Ltd. and another2
, Lloyd Electric and
Engineering Limited vs. State of Himachal Pradesh and
others3
, MRF Ltd., Kottayam vs. Asstt. Commissioner
(Assessment) Sales Tax and others4
, The State of
1
(1999) 1 SCC 31
2
(2006) 4 SCC 57
3
(2016) 1 SCC 560
4
(2006) 8 SCC 702
13
Jharkhand and ors. vs. Brahmputra Metallics Ltd. and
ors.5
, Manuelsons Hotels Private Limited vs. State of
Kerala and others6
 and State of Punjab vs. Nestle India
Ltd. and another7

14. He also relied on judgments of various High Courts.
However, we do not find it necessary to refer to them
inasmuch as the law on the issue is very well crystallized in
various judgments of this Court.
15. Shri V. Sridharan, learned Senior Counsel, also
submitted that the Central Government had come out with
a policy of promoting industrial growth and employment in
the backward areas. He submits that even after the GST
regime, it should have continued the said policy. He
submits that, if the Central Government has brought down
the benefit from 100% to 58%, then it should
extend/increase the period of benefit to ensure that the
promise made in 2003 industrial policy is given effect to in
reality. He relies on the judgment of this Court in the case of
5 MANU/SC/0906/2020 [Civil Appeal Nos. 3860-3862 of 2020, decided on
1.12.2020]
6
(2016) 6 SCC 766
7
(2004) 6 SCC 465
14
Video Electronics Pvt. Ltd. and another vs. State of
Punjab and another8 and Union of India vs. Paliwal
Electricals (P) Ltd. and another9
.
16. Shri Sridharan further submitted that the Sikkim High
Court has only relied on the judgment of this Court in the
case of Union of India & Anr. vs. V.V.F. Limited & Anr.10
He submitted that the issue in the case of V.V.F. Limited &
Anr. (supra) was with regard to the withdrawal of
notification since it was found to be misused. He submits
that the factual situation in the present case is different and
as such, the High Court was in error in dismissing the writ
petition.
17. Shri N. Venkatraman, learned Additional Solicitor
General (“ASG” for short), on the contrary, submits that
promissory estoppel cannot be applied to the representation
made by the Union of India, if there is a material change in
the circumstances and the larger public interest warrants
such a withdrawal. He submits that, in view of the
8
(1990) 3 SCC 87
9
(1996) 3 SCC 407
10 2020 SCC Online SC 378
15
constitutional amendment, a new era of GST has emerged.
He submits that the new era emphasizes on the principle of
pooled sovereignty where States and Centre share equal
responsibilities. Learned ASG submits that Article 279A of
the Constitution provides for the establishment of the GST
Council. It is submitted that the GST Council consists of (a)
the Union Finance Minister; (b) the Union Minister of State
in charge of Revenue or Finance; and (c) the Minister in
charge of Finance or Taxation or any other Minister
nominated by each State Government. He submits that the
GST Council has been empowered to make
recommendations to the Union and the States on the taxes,
cesses and surcharges levied by the Union, the States and
the local bodies which are to be subsumed in the GST. It is
submitted that clause (6) of Article 279A of the Constitution
of India directs the GST Council to be guided by the need for
a harmonized structure of GST and the development of a
harmonized national market for goods and services, while
discharging its functions. He submits that under clause (1)
16
of Article 246A of the Constitution, both the Parliament as
well as the State Legislatures have been empowered to make
laws with respect to GST to be imposed by the Union or by
such States, whereas clause (2) of the said Article empowers
Parliament to make laws with respect to GST where the
supply of goods, or of services, or both takes place in the
course of inter-State trade or commerce.
18. Learned ASG would, therefore, submit that a sea
change has occurred with the advent of GST from 1st July
2017. The first change, in the submission of the learned
ASG, is that the earlier tax regime was origin based,
whereas the new tax regime is destination based. Under the
old regime, the Centre was collecting 100% excise duty,
service tax, central sales tax, etc. and the States were
collecting 100% Value Added Tax (“VAT” for short). Under
the old tax regime, there was no uniformity with regard to
State levies, whereas under the new tax regime, there is
uniformity. Under the new regime, both Union and the
States come on the same platform under Articles 246A and
17
279A of the Constitution and become common partners for
taxing together. Under the new regime, both States as well
as Union charge at the same rate. Learned ASG submits
that the only common feature in the old regime as well as in
the new regime is that the Centre continues to fund the
States.
19. Learned ASG further submitted that pursuant to the
enactment of GST, a notification, being Notification No. 21
of 2017, was issued on 18th July 2017, thereby withdrawing
the exemptions granted previously under the erstwhile
excise regime. He submits that the appellants have not
challenged the validity of the said Notification. He further
submits that, in view of the proviso to clause (c) of subsection (2) of Section 174 of the CGST Act, the exemptions
stood automatically rescinded. The validity thereof has also
not been challenged by the appellants. He, therefore,
submits that the writ petitions, without challenging the
validity thereof, are not tenable.
18
20. Learned ASG submits that, though after the enactment
of the GST the Central Government was not bound to
continue granting any relief, however, as a matter of good
gesture and on the recommendations of the GST Council, it
has decided to reimburse 58% of CGST paid by such
industrial units who were entitled to the benefit of
exemption notifications. He submits that the said has been
done based on the recommendations of the Finance
Commission, which has earmarked the share of the Union
at 58% and of the States at 42%.
21. Learned ASG submits that the writ petitions have been
erroneously filed seeking a relief against the Union. He
submits that if the appellants have any claim, then that
would be against the State Governments wherein the
industries are situated. It is submitted that, as a matter of
fact, the Government of Jammu & Kashmir, vide
Notification dated 21st December 2017 has already resolved
to reimburse the remaining 42% of the GST to the units
located in the State till the period the Union Scheme is
19
valid. It is submitted that the appellants ought to have
sought similar relief against the State Governments. Thus,
in his submission, a writ against the Union of India is
untenable.
22. Learned ASG further submits that the writ of
mandamus could only be issued against a statutory body
when it is established that there is a duty cast upon a
statutory authority and that the said authority has
neglected to perform such duty. It is submitted that the
appellants have not been in a position to point out that any
such duty is cast upon the Union to reimburse 100% GST
and as such, the present appeals would not be tenable.
23. Learned ASG, relying on various judgments of this
Court submitted that in view of the overwhelming public
interest, the Union cannot be held to comply with the
assurance given by it in the said O.M. of 2003.
24. In support of his submissions, learned ASG relies on
the judgments of this Court in the cases of Union of India
and others vs. VKC Footsteps India Private Limited11
,
11 (2022) 2 SCC 603
20
Union of India and another vs. Mohit Minerals Pvt. Ltd.
through Director12
, Union of India and others vs.
Unicorn Industries13
, Augustan Textile Colours Limited
(Now Augustan Textile Colours Private Limited) vs.
Director of Industries and another14
, Kuldeep Singh vs.
Govt. of NCT of Delhi15
, Union of India and another vs.
International Trading Co. and another16
, Comptroller
and Auditor General of India, Gian Prakash, New Delhi
and another vs. K.S. Jagannathan and another17 and
Union of India & others vs. Bharat Forge Ltd. &
another18
.
25. Shri S. Ganesh, learned Senior Counsel, in rejoinder,
submits that the submission of the learned ASG that the
remedy lies against the States and not against the Centre is
devoid of any substance. He submits that the assurance
was given by the Central Government and not by the State
12 2022 SCC OnLine SC 657
13 (2019) 10 SCC 575
14 (2022) 6 SCC 626
15 (2006) 5 SCC 702
16 (2003) 5 SCC 437
17 (1986) 2 SCC 679
18 Civil Appeal No.5294 of 2022 (@ SLP(C) No.4960 of 2021) decided on 16th
August, 2022
21
Governments. He submits that the said O.M. of 2003 has to
be understood from a viewpoint of a businessman to whom
the commercial representation was made. The words
“exemption from direct or indirect tax” is required to be
given full meaning. He submits that the proviso to Section
174(2)(c) of the CGST Act would not be applicable in the
present case if looked at from the viewpoint of the ordinary
businessman.
CONSIDERATION
26. It is not in dispute that the Union of India had framed
a policy vide the said O.M. of 2003. It is also not in dispute
that, vide the said policy, the Central Government had
provided that 100% exemption would be granted to the
industrial units from payment of outright excise duty for 10
years from the date on which such industrial units
commence their commercial production. The incentives
applied to the new industrial units as well as existing
industrial units going for substantial expansion. As such, it
is clear that, vide the said O.M. of 2003, an unequivocal
22
promise was given to the entities that, in the event they
establish a new industrial unit or go for a substantial
expansion of their existing industrial units in the States of
Uttarakhand and Himachal Pradesh, they would be entitled
to 100% tax exemption.
27. It is to be noted that, subsequently, an important
development took place. By the 101st Amendment Act, a sea
change in the earlier taxation regime occurred. A uniform
tax structure throughout the country has been adopted.
The GST Council has been constituted, which is empowered
to make recommendations to the Union and the States with
regard to GST. The Union and all the States have become
common partners in levy of various taxes. To give effect to
the 101st Amendment Act, the CGST Act has been enacted.
28. The relevant part of Section 174 of the CGST Act reads
thus:
“174. Repeal and saving.—(1) Save as
otherwise provided in this Act, on and from
the date of commencement of this Act, the
Central Excise Act, 1944 (1 of 1944) (except
as respects goods included in entry 84 of
the Union List of the Seventh Schedule to
23
the Constitution), the Medicinal and Toilet
Preparations (Excise Duties) Act, 1955 (16
of 1955), the Additional Duties of Excise
(Goods of Special Importance) Act, 1957 (58
of 1957), the Additional Duties of Excise
(Textiles and Textile Articles) Act, 1978 (40
of 1978), and the Central Excise Tariff Act,
1985 (5 of 1986) (hereafter referred to as
the repealed Acts) are hereby repealed.
(2) The repeal of the said Acts and the
amendment of the Finance Act, 1994 (32 of
1994)(hereafter referred to as “such
amendment” or “amended Act”, as the case
may be) to the extent mentioned in the
sub-section (1) or Section 173 shall not—
(a) ……..
(b) ……..
(c) affect any right, privilege,
obligation, or liability acquired,
accrued or incurred under the
amended Act or repealed Acts or
orders under such repealed or
amended Acts:
Provided that any tax exemption
granted as an incentive against
investment through a notification
shall not continue as privilege if the
said notification is rescinded on or
after the appointed day; or”
29. It could thus be seen that, under clause (1) of Section
174, various enactments, including the Central Excise Act,
1944, are repealed. Clause (c) of sub-section (2) of Section
24
174, however, provides that the repeal of the said Acts shall
not affect any right, privilege, obligation, or liability
acquired, accrued or incurred under the amended Act or
repealed Acts or orders under such repealed or amended
Acts. However, the proviso thereto is clear and specific. It
specifically provides that any tax exemption granted as an
incentive against investment through a notification shall not
continue as a privilege if the said notification is rescinded
on or after the appointed day.
30. It can thus be seen that, though the first part of clause
(c) of sub-section (2) of Section 174 would protect any right,
privilege, obligation, etc. under the amended Act or repealed
Acts, the proviso thereto provides that any tax exemption
granted as an incentive against investment shall not
continue as a privilege if the said notification is rescinded
on or after the appointed day. Admittedly, vide Notification
No.21/2017 dated 18th July 2017, various earlier areabased exemption notifications have been rescinded. It is
thus clear that the benefit which was granted under the
25
2003 Notification stands rescinded in view of the
notification issued under proviso to clause (c) of sub-section
(2) of Section 174 of the CGST Act.
31. The question, therefore, that would fall for
consideration is, as to whether, despite a subsequent
statute specifically providing for rescinding the benefits
granted under an earlier statute, the Union Government can
be compelled to stand by the representation made by it
through the earlier notification. In other words, the
question that will have to be considered is whether doctrine
of promissory estoppel could operate against a statute.
JUDICIAL PRECEDENTS
32. For considering the rival submissions, it would also be
necessary to refer to various earlier authoritative
pronouncements of this Court on the issue.
33. Heavy reliance is placed on the judgment of this Court
in the case of Union of India & Ors. vs. M/s Indo-Afghan
Agencies Ltd.19, which is one of the earlier judgments of
this Court considering the issue of promissory estoppel. In
19 1968 2 SCR 366
26
the said case, the Textile Commissioner published a scheme
on 10th October 1962, called the Export Promotion Scheme
providing incentives to exporters of woolen goods. The
scheme was extended by a Trade Notice dated 1st January
1963, to export of woolen goods to Afghanistan. In
pursuance of the said scheme, the exporters were entitled to
import raw materials of a total amount equal to 100% of the
F.O.B. (freight on board) value of their exports. However,
the competent authority issued an Import Entitlement
Certificate to Indo-Afghan Agencies Ltd. only in part. The
Indo-Afghan Agencies Ltd., therefore, made a representation
to the authorities. On failure of the authorities to respond,
a petition came to be filed in the High Court of Punjab. The
High Court held that the Export Promotion Scheme
specifically provided for granting certificates to import
materials of the “value equal to 100% of the F.O.B. value of
the goods exported”. It was, therefore, held by the High
Court that the petitioners therein were entitled to obtain
import licenses for an amount equal to 100% of the F.O.B.
27
value. The judgment of the High Court was challenged
before this Court. One of the issues before this Court was
with regard to the violation of principles of natural justice.
This Court also considered the issue of promissory estoppel.
This Court held:
“15. In these cases it was clearly ruled
that where a person has acted upon
representations made in an Export
Promotion Scheme that import
licences upto the value of the goods
exported will be issued, and had
exported goods, his claim for import
licence for the maximum value
permissible by the Scheme could not be
arbitrarily rejected. Reduction in the
amount of import certificate may be
justified on the ground of misconduct of
the exporter in relation to the goods
exported, or on special considerations
such as difficult foreign exchange
position, or other matters which have a
bearing on the general interests of the
State. In the present case, the Scheme
provides for grant of import
entitlement of the value, and not upto the
value, of the goods exported. The Textile
Commissioner was, therefore, in the
ordinary course required to grant import
certificate for the full value of the goods
exported: he could only reduce that
amount after enquiry contemplated by
clause 10 of the Scheme….”
28
34. It could thus be seen that the issue that fell for
consideration in the case of M/s Indo-Afghan Agencies
Ltd. (supra) was with regard to an arbitrary reduction of
the claim of the writ petitioner contrary to the Export
Promotion Scheme. The issue as to whether the Legislature
by a subsequent enactment was entitled to withdraw the
benefit granted under the earlier scheme did not fall for
consideration in the said case.
35. This Court in the case of Century Spinning and
Manufacturing Company Ltd. and another vs. The
Ulhasnagar Municipal Council and another20 considered
the issue wherein the Municipality had agreed to exempt the
appellant therein from payment of octroi duty for 7 years
from the date of levy of octroi. However, thereafter, the
Municipality sought to levy octroi duty from the appellant
therein. This Court observed thus:
“12. If our nascent democracy is to
thrive different standards of conduct for
the people and the public bodies cannot
ordinarily be permitted. A public body is,
in our judgment, not exempt from
20 (1970) 1 SCC 582
29
liability to carry out its obligation arising
out of representations made by it relying
upon which a citizen has altered his
position to his prejudice.”
36. A Constitution Bench of this Court in the case of M.
Ramanatha Pillai vs. The State of Kerala and another21
considered the question as to whether estoppel could arise
against a State in regard to abolition of posts. The
Constitution Bench observed thus:
“37. The High Court was correct in
holding that no estoppel could arise
against the State in regard to abolition of
post. The appellant Ramanatha Pillai
knew that the post was temporary.
In American Jurisprudence 2d at p. 783
para 123 it is stated “Generally, a state
is not subject to an estoppel to the same
extent as in an individual or a private
corporation. Otherwise, it might be
rendered helpless to assert its powers in
government. Therefore as a general
rule the doctrine of estoppel will not
be applied against the State in its
governmental, public or sovereign
capacity. An exception however arises
in the application of estoppel to the
State where it is necessary to prevent
fraud or manifest injustice”. The
estoppel alleged by the appellant
Ramanatha Pillai was on the ground that
21 (1973) 2 SCC 650
30
he entered into an agreement and
thereby changed his position to his
detriment. The High Court rightly held
that the Courts exclude the operation of
the doctrine of estoppel, when it is found
that the authority against whom estoppel
is pleaded has owed a duty to the public
against whom the estoppel cannot fairly
operate.”
[emphasis supplied]
37. It can thus clearly be seen that the Constitution Bench
has approved the statement in American Jurisprudence that
the doctrine of estoppel will not be applied against the State
in its governmental, public or sovereign capacity. An
exception to the application of the said doctrine to the State
would, however, arise where it is necessary to prevent fraud
or manifest injustice.
38. Another Constitution Bench of this Court in the case of
State of Kerala and another vs. The Gwalior Rayon
Silk Manufacturing (WVG). Co. Ltd. Etc.22 was
considering an issue as to the application of promissory
estoppel when a right to compensation for acquisition of
forest land as provided in the earlier statute was taken away
22 (1973) 2 SCC 713
31
by a subsequent statute. The Constitution Bench held
thus:
“38. In an attempt to show that the
impugned Act was a piece of colourable
legislation, reference was made to the
Karala Private Forests Acquisition Bill,
1968 LA Bill No. 33 of 1968 which
provided for the acquisition of private
forests on payment of compensation for
the acquisition. That Bill, it is
contended, was allowed to lapse and
the present Act was enacted with the
obvious intention of expropriating
vast forest lands without paying
compensation. We can hardly
countenance such an argument. The
question really is, in the first place, of
the competence of the legislature to pass
the impugned Act and, in the second,
whether the Act is constitutional in the
sense that it is protected by Section 31-
A(1). So far as the competence of the
legislature is concerned, no objection is
made before us. As to its
constitutionality we have shown that the
Act purports to vast the janman rights to
the forests in the Government as a step
in the implementation of agrarian
reform. If this could be
constitutionally done by the
legislature, the fact that at an
earlier stage the Government was
toying with the idea of paying
compensation to owners of private
forests is of little consequence. The
dominant purpose of the impugned Act,
32
as already pointed out, is to distribute
forest lands for agricultural purposes
after making reservations of portions of
the forests for the benefit of the
agricultural community. The fear is
expressed that such a course if,
genuinely implemented, may lead to
deforestation on a large scale leading to
soil erosion and silting of rivers and
streams and will actually turn out to be
detrimental to the interests of the
agricultural community in the long run.
It is undoubtedly true that rackless
deforestation might lead to very unhappy
results. But we have no material before
us for expressing opinion on such a
matter. It is for the legislature to balance
the comparative advantages of a scheme
like the one envisaged in the Act against
the possible disadvantages of resulting
deforestation. There are many
imponderables to which we have no safe
guides. It is presumed that the
legislature knows the needs of its
people and will balance the present
advantages against possible future
disadvantages. If there is pressure on
land and the legislature feels that forest
lands in some areas can be conveniently
and, without much damage to the
community as a whole, utilized for
settling a large proportion of the
agricultural population, it is perfectly
open, under the constitutional powers
vested in the legislature, to make a
suitable law, and if the law is
constitutionally valid this Court can
hardly strike it down on the ground that
33
in the long run the legislation instead of
turning out to be a boon will turn out to
be a curse.
39. Mr Menon who appeared for the
respondent in Civil Appeal No. 1398 of
1972 put forward a plea of equitable
estoppel peculiar to his client company.
It appears that the Company established
itself in Kerala for the production of
rayon cloth pulp on an understanding
that the Government would bind itself to
supply the raw-material. Later
Government was unable to supply the
material and by an agreement undertook
not to legislate for the acquisition of
private forests for a period of 60 years if
the Company purchased forest lands for
the purpose of its supply of rawmaterials. Accordingly, the Company
purchased 30,000 acres of private
forests from the Nilambhuri Kovila
Kannan estate for Rs 75 lakhs and,
therefore, it was argued that, so far
as the Company is concerned, the
agreement not to legislate should
operate as equitable estoppel against
the State. We do not see how an
agreement of the Government can
preclude legislation on the subject.
The High Court has rightly pointed
out that the surrender by the
Government of its legislative powers
to be used for public good cannot
avail the company or operate against
the Government as equitable
estoppel.”
[emphasis supplied]
34
39. It could thus be seen that this Court held that it is
presumed that the legislature knows the needs of its people
and will balance the present advantages against possible
future disadvantages. It has been held that if a new
enactment is constitutionally enacted by the legislature,
then the fact that, at an earlier stage, the Government was
toying with the idea of paying compensation to owners of
private forests would be of no consequence. Undisputedly,
the GST enactment is an enactment validly enacted by the
Parliament. It was also sought to be urged that the
petitioner Company, on the basis of the agreement by the
State Government that it would not legislate to acquire the
forest land for 60 years, had purchased 30,000 acres of
private land. It was submitted therein that, applying the
doctrine of equitable estoppel, the Government was
estopped from enacting a legislation contrary to the
agreement. Negating the said contention, it was held that
when the legislature exercises its powers for the public
35
good, the earlier representation would not operate against
the Government as equitable estoppel.
40. A four judge Bench of this Court in the case of Excise
Commissioner, U.P. Allahabad and others vs. Ram
Kumar and others23 had considered the issue wherein, at
the time of the auction, licenses sold by the Government to
vend country liquor exempted the levy of sales tax.
However, by a subsequent notification, the sale of country
liquor was subjected to the levy of sales tax. This Court
specifically rejected the contention that the State was
estopped from doing so. This Court relied on the earlier
Constitution Bench judgment in the cases of M.
Ramanatha Pillai (supra) and The Gwalior Rayon Silk
Manufacturing (WVG). Co. Ltd. Etc. (supra). It held that
an assurance given by or on behalf of the Crown by an
officer of a government, however high or low in the
hierarchy, could not bar the Crown from enforcing a
statutory prohibition. It reiterated the legal position that
23 (1976) 3 SCC 540
36
estoppel does not operate against the Government or its
assignee.
41. In the case of The Bihar Eastern Gangetic
Fishermen Co-operative Society Ltd. vs. Sipahi Singh
and others24, the State Government had directed that the
settlement of the Jalkar would continue with Sipahi Singh
for the years 1976-77 and 1977-78. However, on the
representation made by the Bihar Eastern Gangetic
Fishermen Co-operative Society Ltd., the State Government
directed that the settlement of the Jalkar would be with the
said Society for the relevant years on certain conditions.
Sipahi Singh filed a writ petition which was allowed by the
High Court relying on the doctrine of promissory estoppel.
A three-judge Bench of this Court, while reversing the
judgment of the High Court, observed thus:
“13. The doctrine of promissory
estoppel could also not be pressed into
service in the present case, as it is
well settled that there cannot be
any estoppel against the
Government in exercise of its
sovereign legislative and executive
24 (1977) 4 SCC 145
37
functions. (See Excise Commissioner,
U.P. Allahabad v. Ram Kumar [(1976) 3
SCC 540 : 1976 SCC (Tax) 360 : AIR
1976 SC 2237] ).”
[emphasis supplied]
42. It is thus clear that The Bihar Eastern Gangetic
Fishermen Co-operative Society Ltd. (supra) is also an
authority to hold that there cannot be any estoppel against
the Government in the exercise of its sovereign, legislative
and executive functions. In the said case, the judgment of
this Court in the case of M/s Indo-Afghan Agencies Ltd.
(supra) was pressed into service. Distinguishing the same,
this Court observed thus:
“14. The decision of this Court in Union
of India v. Indo-Afghan Agencies Ltd. [AIR
1968 SC 718 : (1968) 2 SCR 366 : (1968)
2 SCJ 889] on which strong reliance is
placed by Counsel for Respondent 1 is
clearly distinguishable. In that case,
unlike the present one, the respondents
were not seeking to enforce any
contractual right. They were merely
seeking to enforce compliance with the
obligation which was laid upon the
Textile Commissioner by the terms of the
Export Promotion Scheme providing for
grant (by way of incentives to exporters of
woollen textiles and goods) of Entitlement
Certificate to import raw materials of a
38
total amount equal to 100% of the f.o.b.
value of their exports. Their claim was
founded upon the equity which arose
in their favour as a result of the
representation made on behalf of the
Government in the aforesaid Scheme,
the exports of woollen goods made by
them to Afghanistan acting upon the
representation and curtailment of the
import entitlement by the Textile
Commissioner without notice to
them.”
[emphasis supplied]
43. Subsequently, a two Judge Bench of this Court in the
case of Motilal Padampat Sugar Mills Co. Ltd. vs. State
of Uttar Pradesh and others25 again considered the issue
of estoppel. In the said case, the State Government had
represented that an exemption from sales tax would be
granted to new industrial units. Based on the assurance of
the State Government, the appellant before this Court in the
said case had established its industrial unit. However,
subsequently, the Government decided to rescind the said
concession. Though this Court, in the facts of the said case,
held that the appellant therein, based on the promise made
by the respondent therein, had altered its position to its
25 (1979) 2 SCC 409
39
detriment and as such, the State could not resile from the
said promise, allowing the appeal observed thus:
“28. …… There can also be no
promissory estoppel against the
exercise of legislative power. The
Legislature can never be precluded
from exercising its legislative
function by resort to the doctrine of
promissory estoppel. Vide State of
Kerala v. Gwalior Rayon Silk
Manufacturing Co. Ltd. [(1973) 2 SCC
713, 730 (para 39) : (1974) 1 SCR 671,
688]”
[emphasis supplied]
44. Thereafter comes the judgment of this Court in the
case of M/s Jit Ram Shiv Kumar and others vs. State of
Haryana and others26. In the said case, the municipal
committee established a small mandi and decided that the
purchasers of the plots for sale in the mandi would not be
required to pay octroi duty on goods imported within the
said mandi. Subsequently, the municipal committee started
imposing octroi duty. Challenging the said act of the
municipal committee, a writ petition was filed before the
High Court. The High Court dismissed the said writ
26 (1981) 1 SCC 11
40
petition. The two-Judge Bench of this Court in the said
case, referring to judgments of courts of various other
jurisdictions as well as the judgments of this Court at an
earlier point of time, observed thus:
“40. The scope of the plea of doctrine of
promissory estoppel against the
Government may be summed up as
follows:
(1) The plea of promissory estoppel is
not available against the exercise of
the legislative functions of the State.
(2) The doctrine cannot be invoked for
preventing the Government from
discharging its functions under the law.
(3) When the officer of the Government
acts outside the scope of his authority,
the plea of promissory estoppel is not
available. The doctrine of ultra vires will
come into operation and the Government
cannot be held bound by the
unauthorised acts of its officers.
(4) When the officer acts within the scope
of his authority under a scheme and
enters into an agreement and makes a
representation and a person acting on
that representation puts himself in a
disadvantageous position, the Court is
entitled to require the officer to act
according to the scheme and the
agreement or representation. The officer
41
cannot arbitrarily act on his mere whim
and ignore his promise on some
undefined and undisclosed grounds of
necessity or change the conditions to the
prejudice of the person who had acted
upon such representation and put
himself in a disadvantageous position.
(5) The officer would be justified in
changing the terms of the agreement to
the prejudice of the other party on
special considerations such as difficult
foreign exchange position or other
matters which have a bearing on general
interest of the State.”
[emphasis supplied]
45. It can thus clearly be seen that this Court held that
the plea of promissory estoppel would not be available
against the exercise of the legislative functions of the State.
Equally, it cannot be invoked for preventing the government
from discharging its functions under the law. The learned
judges of this Court in the case of M/s Jit Ram Shiv
Kumar and others (supra), holding that some of the
observations of this Court in the case of Motilal Padampat
Sugar Mills Co. Ltd. (supra) were not in tune with the
earlier judgments of larger Benches of this Court, observed
thus:
42
“45. We find ourselves unable to ignore
the three decisions of this Court, two by
Constitution Benches in M. Ramanatha
Pillai v. State of Kerala [(1973) 2 SCC 650
: 1973 SCC (L&S) 560 : AIR 1973 SC
2641 : (1974) 1 SCR 515] and State of
Kerala v. Gwalior Rayon Silk Mfg. (Wvg.)
Co. Ltd. [(1973) 2 SCC 713 : AIR 1973 SC
2734 : (1974) 1 SCR 671] and the third
by a Bench of four Judges of this Court
in Excise Commr., U.P., Allahabad v. Ram
Kumar [(1976) 3 SCC 540 : 1976 SCC
(Tax) 360 : 1976 Supp SCR 532] on the
ground that the observations are in the
nature of obiter dicta and that it cannot
be insisted as intending to have laid
down any proposition of law different
from that enunciated in the Indo-Afghan
Agencies case [AIR 1968 SC 718 : (1968)
2 SCR 366 : (1968) 2 SCJ 889] . It was
not necessary for this Court in the cases
referred to above to refer to Union of
India v. Indo-Afghan Agencies Ltd. [AIR
1968 SC 718 : (1968) 2 SCR 366 : (1968)
2 SCJ 889] for, if properly understood, it
only held that the authority cannot go
back on the agreement arbitrarily or on
its mere whim. We feel we are bound to
follow the decisions of the three Benches
of this Court which in our respectful
opinion have correctly stated the law. We
are also unable to read the case of the
House of Lords in Howell v. Falmouth
Boat Construction Co. Ltd. [1951 AC 837 :
(1951) 2 All ER 278 : (1951) 2 TLR 151]
as not having overruled the view of
Denning, J., and as not having
expressed its disapproval of the doctrine
43
of promissory estoppel against the
Crown nor overruled the view taken by
Denning, J. in Robertson v. Minister of
Pensions [(1949) 1 KB 227 : (1948) 2 All
ER 767 : 1949 LJR 323] that “the Crown
cannot escape the obligation under the
doctrine of promissory estoppel”.
46. We find ourselves unable to share
the view of the learned Judge that the
Constitution Bench of this Court
in Ramanatha Pillai case [(1973) 2 SCC
650 : 1973 SCC (L&S) 560 : AIR 1973 SC
2641 : (1974) 1 SCR 515] heavily relied
upon the quotation from the American
jurisprudence, para 123, p. 873 of Vol.
28. Again we feel to remark that
“unfortunately this quotation was
incomplete and had overlooked perhaps
inadvertently” is unjustified.
(emphasis supplied)”
46. This Court in the said case reiterated the legal position
thus:
“51. On a consideration of the
decisions of this Court it is clear that
there can be no promissory estoppel
against the exercise of legislative
power of the State. So also the doctrine
cannot be invoked for preventing the
Government from acting in discharge of
its duty under the law. The Government
would not be bound by the act of its
officers and agents who act beyond the
scope of their authority and a person
dealing with the agent of the Government
44
must be held to have notice of the
limitations of his authority. the Court
can enforce compliance by a public
authority of the obligation laid on him if
he arbitrarily or on his mere whim
ignores the promises made by him on
behalf of the Government. It would be
open to the authority to plead and prove
that there were special considerations
which necessitated his not being able to
comply with his obligations in public
interest.”
[emphasis supplied]
47. A three Judge Bench of this Court in the case of Union
of India and others vs. Godfrey Philips India Ltd.27
commented on the correctness of the decision in the case of
M/s Jit Ram Shiv Kumar and others (supra) and
observed thus:
“13. Of course we must make it clear,
and that is also laid down in Motilal
Sugar Mills case [(1979) 2 SCC 409 :
1979 SCC (Tax) 144 : (1979) 2 SCR 641]
that there can be no promissory
estoppel against the Legislature in
the exercise of its legislative
functions nor can the Government or
public authority be debarred by
promissory estoppel from enforcing a
statutory prohibition. It is equally true
that promissory estoppel cannot be used
to compel the Government or a public
27 (1985) 4 SCC 369
45
authority to carry out a representation or
promise which is contrary to law or
which was outside the authority or,
power of the officer of the Government or
of the public authority to make. We may
also point out that the doctrine of
promissory estoppel being an equitable
doctrine, it must yield when the equity so
requires; if it can be shown by the
Government or public authority that
having regard to the facts as they have
transpired, it would be inequitable to
hold the Government or public authority
to the promise or representation made by
it, the Court would not raise an equity in
favour of the person to whom the
promise or representation is made and
enforce the promise or representation
against the Government or public
authority. The doctrine of promissory
estoppel would be displaced in such a
case, because on the facts, equity would
not require that the Government or
public authority should be held bound by
the promise or representation made by it.
This aspect has been dealt with fully
in Motilal Sugar Mills case [(1979) 2 SCC
409 : 1979 SCC (Tax) 144 : (1979) 2 SCR
641] and we find ourselves wholly in
agreement with what has been said in
that decision on this point.”
[emphasis supplied]
48. Within a short period, another three-judge Bench of
this Court in the case of Express Newspapers Pvt. Ltd.
46
and others vs. Union of India and others28 referring to
the conflict between the case of Motilal Padampat Sugar
Mills Co. Ltd. and the case of M/s Jit Ram Shiv Kumar
and others (supra), observed thus:
“182. I am not oblivious that there was a
discordant note struck by Kailasam, J.
speaking for himself and Fazal Ali, J.
in Jit Ram Shiv Kumar v. State of
Haryana [(1981) 1 SCC 11 : AIR 1980 SC
1285 : (1980) 3 SCR 689] holding that
the doctrine of promissory estoppel
cannot be invoked for preventing the
Government from discharging its
functions under law. It is also not
applicable when the officer and the
Government act outside the scope of
their authority. The doctrine of ultra
vires will in that event come into
operation and the Government cannot be
held bound by the unauthorised acts of
its officers.
183. It is not necessary for purposes of
this judgment to resolve the apparent
conflict between the decision of
Bhagwati, J. in Motilal Padampat Sugar
Mills case [(1979) 2 SCR 641 : (1979) 2
SCC 409 : 1979 SCC (Tax) 144] as to the
applicability of the doctrine of estoppel
for preventing the Government from
discharging its functions under the law.
In public law, the most obvious
28 (1986) 1 SCC 133
47
limitation and doctrine of estoppel is that
it cannot be evoked so as to give an
overriding power which it does not in law
possess. In other words, no estoppel can
legitimate action which is ultra vires.
Another limitation is that the
principle of estoppel does not operate
at the level of Government policy.
Estoppels have however been allowed to
operate against public authority in minor
matters of formality where no question of
ultra vires arises: Wade: Administrative
Law, fifth edition, pp. 233-34.
184. The principles laid down
in Maritime Elec. Co. v. General Dairies
Ltd. [1937 AC 610 (PC)] and by Lord
Parker, C.J. in Southend-on-Sea
Corporation v. Hodgson (Wickford) Ltd. [(1
962) 1 QB 416] relied upon by learned
counsel appearing for Respondent 1 the
Union of India are clearly not attracted
in the facts and circumstances of the
present case. In the present case,
admittedly, the then Minister for Works
& Housing acted within the scope of his
authority in granting permission of the
lessor i.e. the Union of India, Ministry of
Works & Housing to the Express
Newspapers Pvt. Ltd. to construct new
Express Building with an increased FAR
of 360 with a double basement for
installation of a printing press for
publication of a Hindi newspaper under
the Rules of Business framed by the
President under Article 77(3). Therefore,
the doctrine of ultra vires does not come
into operation. In view of this
48
Respondent 1 the Union of India is
precluded by the doctrine of promissory
estoppel from questioning the authority
of the Minister in granting such
permission. In that view, the successor
Government was clearly bound by the
decision taken by the Minister
particularly when it had been acted
upon.”
[emphasis supplied]
49. The three-judge Bench of this Court in the case of
Express Newspapers Pvt. Ltd. and others (supra) held
that no estoppel can legitimize action which is ultra vires. It
was further held that another limitation is that the principle
of estoppel does not operate at the level of Government
policy. In the facts of the said case, this Court held that the
doctrine of ultra vires did not come into operation in the
said case. It held that, in view of the permission granted by
the then Minister for Works & Housing, the respondentUnion of India was precluded from questioning the validity
thereof. The successor Government was bound by the
decision taken by the Minister, particularly when it had
been acted upon.
49
50. It could thus be seen that there is some discord in the
judgments of this Court in the cases of Motilal Padampat
Sugar Mills Co. Ltd. (supra) and Godfrey Philips India
Ltd. (supra) on one hand and in the case of M/s Jit Ram
Shiv Kumar and others (supra) on the other hand.
51. This Court in the case of Motilal Padampat Sugar
Mills Co. Ltd. (supra) holds that, if on the basis of a
promise made by a government, an entity changes its legal
position to its detriment, the State could not be permitted to
resile from the said promise. It is to be noted that the said
judgment is authored by Bhagwati, J. and the Bench
strength is of two learned judges.
52. Within a period of two years, Kailasam, J. in the case
of M/s Jit Ram Shiv Kumar and others (supra) found
fault with some of the observations made in the case of
Motilal Padampat Sugar Mills Co. Ltd. (supra) and held
that the observations made in Motilal Padampat Sugar
Mills Co. Ltd. (supra) were not in tune with the judgments
of Constitution Benches in the cases M. Ramanatha Pillai
50
(supra) and The Gwalior Rayon Silk Manufacturing
(WVG). Co. Ltd. Etc. (supra); and the judgment of a fourJudge Bench of this Court in the case of Ram Kumar and
others (supra).
53. The judgment of this Court in the case of M/s Jit Ram
Shiv Kumar and others (supra) again fell for consideration
before a three-judge Bench of this Court in the case of
Godfrey Philips India Ltd. (supra), which is again
authored by Bhagwati, J. In the case of Godfrey Philips
India Ltd. (supra), the judgment of the learned three-Judge
Bench delivered through Bhagwati, J. holds that what has
been held by learned two judges in the case of Motilal
Padampat Sugar Mills Co. Ltd. has been correctly held so
and endorses the said judgment. The said judgment also
criticizes the view taken in M/s Jit Ram Shiv Kumar and
others (supra). Within a short period, the issue again
comes up for consideration before another three-judge
Bench in the case of Express Newspapers Pvt. Ltd. and
others (supra). A.P. Sen, J. speaking for the three-judge
51
Bench notes the conflict between the view taken by
Bhagwati, J. in Motilal Padampat Sugar Mills Co. Ltd.
(supra) and Kailasam, J in the case of M/s Jit Ram Shiv
Kumar and others (supra). It appears that since the
judgment was delivered within a fortnight from the date on
which Godfrey Philips India Ltd. (supra) was decided, this
Court in the case of Express Newspapers Pvt. Ltd. and
others (supra) did not notice the judgment in the case of
Godfrey Philips India Ltd. (supra). However, A.P. Sen, J
in Express Newspapers Pvt. Ltd. and others (supra) held
that it was not necessary for the purposes of the said
judgment to resolve the conflict between the decision of
Bhagwati, J. in the case of Motilal Padampat Sugar Mills
Co. Ltd. (supra) and Kailasam, J. in the case of M/s Jit
Ram Shiv Kumar and others (supra). It held that one of
the limitations on the principle of estoppel is that it does not
operate at the level of Government policy.
54. However, a common thread in all these judgments that
could be noticed is that all these judgments consistently
52
hold that there can be no estoppel against the legislature in
the exercise of its legislative functions. The Constitution
Bench in the case of M. Ramanatha Pillai (supra) has
approved the view in American Jurisprudence that the
doctrine of estoppel will not be applied against the State in
its governmental, public or sovereign capacity. It further
held that the only exception with regard to applicability of
the doctrine of estoppel is where it is necessary to prevent
fraud or manifest injustice. The analysis of all the
judgments of this Court on the issue would reveal that it is
a consistent view of this Court, reiterated again in Godfrey
Philips India Ltd. (supra), that there can be no promissory
estoppel against the legislature in the exercise of its
legislative functions.
55. Undisputedly, the Notification dated 18th July 2017
withdrawing the exemption notifications was issued in
pursuance of the statutory mandate as provided under
Section 174(2)(c) of the CGST Act. If the contention as
raised by the appellants is to be accepted, it would make the
53
provisions under the proviso to Section 174(2)(c) of the
CGST Act redundant and otiose. The legislature in its
wisdom has specifically incorporated the proviso to Section
174(2)(c) providing therein that any tax exemption granted
as an incentive against investment through a notification
shall not continue as privilege if the said notification is
rescinded. If the contention is accepted, it will amount to
enforcing a representation made in the said O.M. of 2003
and 2003 Notification contrary to the legislative
incorporation in the proviso to Section 174(2)(c) of the CGST
Act. In other words, it will permit an estoppel to be
operated against the legislative functions of the Parliament.
We are, therefore, of the considered view that the claim of
the appellants on estoppel is without merit and deserves to
be rejected.
56. It is further to be noted that this Court has also
consistently held that when an exemption granted earlier is
withdrawn by a subsequent notification based on a change
in policy, even in such cases, the doctrine of promissory
54
estoppel could not be invoked. It has been consistently held
that where the change of policy is in the larger public
interest, the State cannot be prevented from withdrawing an
incentive which it had granted through an earlier
notification. Reliance in this respect could be placed on the
judgments of this Court in the cases of Kasinka Trading
and another vs. Union of India and another29
, Shrijee
Sales Corpn. vs. Union of India30, State of Rajasthan vs.
Mahaveer Oil Industries31, Shree Sidhbali Steels Ltd.
vs. State of U.P.32
, and Director General of Foreign
Trade vs. Kanak Exports33
57. Recently, this Court, in the case of Unicorn
Industries (supra), after surveying the earlier judgments of
this Court on the issue has observed thus:
“26. It could thus be seen that, it is
more than well settled that the
exemption granted, even when the
notification granting exemption
prescribes a particular period till which
it is available, can be withdrawn by the
29 (1995) 1 SCC 274
30
 (1997) 3 SCC 398
31 (1999) 4 SCC 357
32 (2011) 3 SCC 193
33 (2016) 2 SCC 226
55
State, if it is found that such a
withdrawal is in the public interest. In
such a case, the larger public interest
would outweigh the individual interest,
if any. In such a case, even the doctrine
of promissory estoppel would not come
to the rescue of the persons claiming
exemptions and compel the State not to
resile from its promise, if the act of the
State is found to be in public interest to
do so.”
58. We are, therefore, of the considered view that even on
the ground of change of policy, which is in public interest or
in view of the change in the statutory regime itself on
account of the GST Act being introduced as in the instant
case, it will not be correct to hold the Union bound by the
representation made by it, i.e. by the said O.M. of 2003.
Further, this would be contrary to the statutory provisions
as enacted under Section 174(2)(c) of the CGST Act.
59. There is another reason which, in our view, could
disentitle the relief as was claimed by the appellants before
the High Courts. The appellants, in effect, are seeking a
writ of mandamus against the Union of India to reimburse
56
100% of CGST for the remainder of the period instead of
only 58%.
60. This Court in the case of The Bihar Eastern
Gangetic Fishermen Co-operative Society Ltd. (supra)
had an occasion to consider when a writ of mandamus
could be issued. This Court held that:
“15. …..There is abundant authority in
favour of the proposition that a writ of
mandamus can be granted only in a case
where there is a statutory duty imposed
upon the officer concerned and there is a
failure on the part of that officer to
discharge the statutory obligation. The
chief function of a writ is to compel
performance of public duties prescribed
by statute and to keep subordinate
tribunals and officers exercising public
functions within the limit of their
jurisdiction. It follows, therefore, that
in order that mandamus may issue to
compel the authorities to do
something, it must be shown that
there is a statute which imposes a
legal duty and the aggrieved party
has a legal right under the statute to
enforce its performance. (See Lekhraj
Satramdas Lalvani v. Deputy Custodiancum-Managing Officer [AIR 1966 SC 334 :
(1966) 1 SCR 120 : (1966) 1 SCJ 24] , Rai
Shivendra Bahadur Dr v. Governing Body
of the Nalanda College [AIR 1962 SC
1210 : 1962 Supp 2 SCR 144 : (1962) 1
57
LLJ 247] and Umakant Saran Dr v. State
of Bihar [(1973) 1 SCC 485 : AIR 1973 SC
964] ). In the instant case, it has not
been shown by Respondent 1 that there
is any statute or rule having the force of
law which casts a duty on Respondents 2
to 4 which they failed to perform. All that
is sought to be enforced is an obligation
flowing from a contract which, as already
indicated, is also not binding and
enforceable. Accordingly, we are clearly of
the opinion that Respondent 1 was not
entitled to apply for grant of a writ of
mandamus under Article 226 of the
Constitution and the High Court was not
competent to issue the same.”
[emphasis supplied]
61. It can thus be seen that unless the appellants show
any statutory duty cast upon the respondent-Union of India
to grant them 100% refund, a writ of mandamus as sought
could not be issued. The position is reiterated by this Court
in the case of K.S. Jagannathan and another (supra) as
under:
“20. There is thus no doubt that the High
Courts in India exercising their
jurisdiction under Article 226 have the
power to issue a writ of mandamus or a
writ in the nature of mandamus or to
pass orders and give necessary directions
where the government or a public
authority has failed to exercise or has
58
wrongly exercised the discretion
conferred upon it by a statute or a rule or
a policy decision of the government or
has exercised such discretion mala fide
or on irrelevant considerations or by
ignoring the relevant considerations and
materials or in such a manner as to
frustrate the object of conferring such
discretion or the policy for implementing
which such discretion has been
conferred. In all such cases and in any
other fit and proper case a High Court
can, in the exercise of its jurisdiction
under Article 226, issue a writ of
mandamus or a writ in the nature of
mandamus or pass orders and give
directions to compel the performance in a
proper and lawful manner of the
discretion conferred upon the
government or a public authority, and in
a proper case, in order to prevent
injustice resulting to the concerned
parties, the court may itself pass an
order or give directions which the
government or the public authority
should have passed or given had it
properly and lawfully exercised its
discretion.”
62. It could thus be seen that this Court holds that a writ
of mandamus can be issued where the Authority has failed
to exercise the discretion vested in it or has exercised such
a discretion malafidely or on an irrelevant consideration.
59
63. This position was again reiterated by this Court
recently in the case of Bharat Forge Ltd. (supra) as
follows:
“18. Therefore, it is clear that a Writ of
Mandamus or a direction, in the nature
of a Writ of Mandamus, is not to be
withheld, in the exercise of powers of
Article 226 on any technicalities. This is
subject only to the indispensable
requirements being fulfilled. There
must be a public duty. While the duty
may, indeed, arise form a Statute
ordinarily, the duty can be imposed
by common charter, common law,
custom or even contract. The fact
that a duty may have to be
unravelled and the mist around it
cleared before its shape is unfolded
may not relieve the Court of its duty
to cull out a public 25 duty in a
Statute or otherwise, if in substance,
it exists. Equally, Mandamus would lie
if the Authority, which had a discretion,
fails to exercise it and prefers to act
under dictation of another Authority. A
Writ of Mandamus or a direction in the
nature thereof had been given a very
wide scope in the conditions prevailing in
this country and it is to be issued
wherever there is a public duty and there
is a failure to perform and the courts will
not be bound by technicalities and its
chief concern should be to reach justice
to the wronged. We are not dilating on or
diluting other requirements, which
60
would ordinarily include the need for
making a demand unless a demand is
found to be futile in circumstances,
which have already been catalogued in
the earlier decisions of this Court.”
[emphasis supplied]
64. Undoubtedly, in the present case, there is no duty cast
on the Union to refund 100% of CGST. As such, we find
that the relief as sought cannot be granted.
65. That leaves us with the judgments cited by Shri S.
Ganesh and Shri V. Sridharan, learned Senior Counsel.
66. Insofar as the judgment of this Court in the case of
Suprabhat Steel Ltd. (supra) is concerned, the question
that arose for consideration was whether the Notification
issued under Section 7 of the Bihar Finance Act by the
State Government to carry out the objectives and the policy
decisions taken in the industrial policy could be held to be
bad in law if it is in contravention of the industrial policy. In
the case of Tata Cummins Ltd. (supra), the question that
fell for consideration was whether a Notification that was
issued for implementation of the industrial policy of the
State could be construed strictly or liberally. In the case of
61
Lloyd Electric and Engineering Limited (supra), the
question was, as to whether the delay on the part of the
Excise and Taxation Department in issuing Notification
pursuant to the decision taken by the Council of Ministers
could deny the benefit of Notification to the entities which
were entitled thereto.
67. Insofar as the judgment of this Court in the case of
MRF Ltd., Kottayam (supra) is concerned, this Court, in
the facts of the said case, specifically came to a finding that
the decision to deprive MRF of the benefit of exemption for
more than 5 years out of a total period of 7 years was highly
arbitrary, unjust and unreasonable. In the case of
Manuelsons Hotels Private Limited (supra), perusal of the
impugned judgment therein would reveal that the provision
on which Manuelsons Hotels Private Limited was claiming
benefit under was deleted with effect from the 1st of March
1993. This Court, therefore, made it clear that the benefit
would only be available during the period when the said
statutory provision existed in the statute book, i.e., from 6th
62
November 1990 to 1st March 1993. This Court, therefore,
clearly rejected the claim of benefit from the date on which
the statutory provision was deleted from the statute book.
68. In the case of Nestle India Ltd. (supra), the
respondent milk producers did not pay the purchase tax for
the period between 1st April 1996 and 4th June 1997 since
the Government had decided to abolish purchase tax for the
said period. For the rest of the period, the tax was paid.
The State had attempted to recover the purchase tax
retrospectively for the aforesaid period. In this background,
the claim of the respondents therein before this Court was
found to be meritorious.
69. Insofar as the reliance placed by Shri V. Sridharan,
learned Senior Counsel, on the judgment of this Court in
the case of Video Electronics Pvt. Ltd. (supra) is
concerned, the question was as to whether the State was
empowered to grant sales tax exemption to a class of goods.
It was held that the classification was permissible, provided
that it was not vitiated by colourable exercise of power or
63
abuse. As such, the said judgment would not be applicable
to the facts of the present case.
70. It could thus be seen that in none of the aforesaid
cases, the issue as to whether, on account of change in the
law, the State was bound to stand by its representation
made under the earlier law even when the change in law
does not permit it to do so, fell for consideration. As against
this, this Court, in a catena of judgments, including two
Constitution Bench judgments, a four-Judge Bench
judgment and various judgments of learned three judges,
have consistently held that promissory estoppel would not
apply against the exercise of legislative powers of the State.
As such, none of the judgments cited, in our view, would be
of any assistance to the cases of the appellants.
71. Insofar as the contention of Shri S. Ganesh, learned
Senior Counsel, that the Union should have issued
exemption notification as provided under Section 11 of the
CGST Act is concerned, we find that under the said
provision, a discretion is vested in the Central Government,
64
which is to be exercised on the recommendations of the GST
Council. A writ of mandamus cannot be issued to the
Central Government to exercise power under Section 11 of
the CGST Act in a particular manner. In any case, it is a
matter of policy which has to be determined by the
Union/State while taking a decision as to whether it should
grant exemption from payment of CGST or make a
budgetary allocation for refund of the tax paid. In any case,
such power can be exercised by the Central Government
only on the recommendations of the GST Council. As
already discussed herein above, the Central Government
was not bound to continue with a representation made by it
in 2003 in view of the change of law by the enactment of the
CGST Act. However, in order to partly honour the
representation made by it, it has decided to refund 58% of
the CGST paid by the entities. It is more than settled that
this Court cannot interfere in policy matters of the
Government unless such policy is found to be palpably
arbitrary and irrational. In that view of the matter, we do
65
not find that the claim made on the basis of Section 11 of
the CGST Act is of any substance.
72. Though we have held that the appellants’ claim based
on promissory estoppel is without substance, we find that
this is not a case wherein it can be said that the appellants’
claim is wholly without any substance.
73. The appellants have established their industrial units
based on the industrial policy as reflected in the said O.M.
of 2003. The policy of the year 2003, in question, was
based on the statement made by the Hon’ble Prime Minister
during his visit to Uttarakhand. As such, the policy was
framed to bring into effect the statement made by the
highest executive functionary of the country. Relying on the
said policy, the appellants have established their units.
Though the appellants may not have a claim in law, we find
that they do have a legitimate expectation that their claim
deserves due consideration.
66
74. It will be relevant to refer to the minutes of the meeting
of the GST Council dated 30th September 2016, which read
thus:
“25. The Secretary to the Council
explained that the Central and State
governments had given various
incentives of Central Excise and Value
Added Tax (VAT) and Central Sales Tax
(CST). He pointed out that in the GST
regime, such incentives could not be
continued as supplies would need to be
made on payment of tax in order to
permit flow of tax to the destination
state. Therefore, a decision would need
to be arrived at regarding the treatment
of such tax incentive schemes under the
GST regime. He observed that one
option could be to ‘grandfather’ such
schemes and provide for a budgetary
apportionment in the State and the
Central budgets for reimbursing the tax
paid to those units which enjoyed tax
exemption up to a specified period.
However, while ‘grandfathering’ any such
scheme, it would need to be kept in mind
that unlike VAT and the CST which
were origin-based taxes, GST was a
destination-based tax and an
unconditional reimbursement scheme
could lead to double outflow for the
origin-state – one by way of transfer of
tax to the destination State and the other
by way of reimbursement to the supplier.
Therefore, the States would need to be
careful while devising any
67
reimbursement scheme and care could
be taken that such reimbursement was
limited for supplies made within the
State.
26. The Hon’ble Deputy Chief
Minister of Gujarat alluded to examine
possible legal complications. The
Secretary to the Council pointed out that
the agenda note contained certain
judgments of the Hon’ble Supreme Court
as per which the principle of promissory
estoppel would not apply in a case where
there was a supervening public equity.”
75. It could thus be seen that the GST Council has noticed
that the Central and State Governments had given various
incentives of Central Excise and Value Added Tax (VAT) and
Central Sales Tax (CST) so as to encourage investment in
those States. It also took notice of the fact that such
incentives could not be continued as supplies would need to
be made on payment of tax to permit flow of tax to the
destination state. The solution that was suggested was to
provide for budgetary apportionment in the State and the
Central budgets for reimbursing the tax paid to those units
which enjoyed tax exemption up to a specified period.
68
76. It will be further relevant to note the concerns
expressed by the State of Uttarakhand and the State of
Jammu & Kashmir in the said meeting, which are as under:
“28. The Hon’ble Minister from
Uttarakhand stated that the Government
of India had given an area-based
exemption for 10 years and that such
exemptions were to continue upto 2020.
She observed that the Centre must
reimburse such units for the Central
taxes as jobs of more than one lakh
workers were at stake. The Hon’ble
Minister from Jammu and Kashmir
stated that his State was in a similar
situation as Uttarakhand. The
Chairperson observed that once
incentive schemes were withdrawn, the
taxes paid would be accounted for in the
Consolidated Fund of India and 42% of
the amount would be devolved to the
States. The Centre, therefore, could be
expected to only reimburse the units out
of the remaining 58% of the fund which
was not part of the devolution and the
States would also need to
correspondingly reimburse such units
out of the share of revenue received
through devolution.”
77. It can thus be seen that the Hon’ble Minister from
Uttarakhand had stated that the Government of India had
given an area-based exemption for 10 years and that such
69
exemptions were to continue up to 2020. She was of the
view that the Centre must reimburse such units for the
Central taxes as jobs of more than one lakh workers were at
stake. The Hon’ble Minister from Jammu & Kashmir had
also supported the view of the Hon’ble Minister from
Uttarakhand. However, the Chairperson of the GST
Council, i.e. the Hon’ble Finance Minister of the Union of
India, stated that the Centre would only reimburse the units
to the extent of 58%. He also expressed that the State
would also need to correspondingly reimburse such units
out of the share of revenue received through devolution.
Accordingly, the following resolution was passed in the said
meeting by the GST Council:
“29. The Council approved the
following-
(i) All entities exempted from
payment of indirect tax under any
existing tax incentive scheme shall pay
tax in the GST regime.
(ii) The decision to continue with any
incentive given to specific industries in
existing industrial policies of States or
through any schemes of the Central
70
Government, shall be with the concerned
State or Central Government.
(iii) In case the State or Central
Government decides to continue any
existing exemption/incentive/deferral
scheme, then it shall be administered by
way of a reimbursement mechanism
through the budgetary route, the
modalities for which shall be worked out
by the concerned State/Centre.”
78. We, therefore, find that in the deliberations of the GST
Council itself, it was observed that the States also need to
correspondingly reimburse the industrial units which were
entitled to exemption under any existing incentive scheme,
out of the share of revenue received through devolution,
which, as per the Finance Commission, stands at 42%. As
a matter of fact, the State of Jammu & Kashmir has issued
a notification dated 21st December 2017 thereby resolving to
reimburse the remaining 42% of the CGST of the Union.
This is limited until the period the Union Scheme is valid.
79. It is further to be noted that the GST Council is a
constitutional body. It has powers to make
recommendations on wide-ranging issues concerning GST,
71
including grant of exemptions from the GST. It also has
power to make recommendations with regard to special
provisions governing North Eastern and Himalayan States.
Taking into consideration that the units like the appellants
have been established in the Himalayan and North-Eastern
States based on the said O.M. of 2003 and that lakhs of
persons are employed in such industries, we are of the view
that it will be appropriate that such States should also
consider to correspondingly reimburse such units out of the
share of revenue received by them through devolution from
the Central Government. We further find that it will also be
appropriate that the GST Council considers making
appropriate recommendations to the States in that regard.
80. We, therefore, permit the appellants to make
representations to the respective State Governments as well
as to the GST Council. We also request the State
Governments and the GST Council to consider such
representations, if made, in accordance with what has been
observed herein above in an expeditious manner.
72
81. In the result, the appeals are dismissed, save and
except the observations made in paragraphs 72 to 80
hereinabove.
82. Pending applications, if any, shall stand disposed of.
83. In the facts and circumstances of the case, there shall
be no order as to costs.
..............................J.
[B.R. GAVAI]
 .............................J.
[ B.V. NAGARATHNA]
NEW DELHI;
OCTOBER 17, 2022
73

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