2022 (10) TMI 677 - SC - GST

Doctrine of promissory estoppel could operate against a statute or not? - 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? HELD THAT - 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 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as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded.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 - the claim of the appellants on estoppel is without merit and deserves to be rejected. It is further to be noted that this Court has also consistently held that when an exemption granted earlier is withdrawn by a subsequent notification based on a change in policy, even in such cases, the doctrine of promissory estoppel could not be invoked.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. 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 - 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. The appellants are permitted to make representations to the respective State Governments as well as to the GST Council - appeal dismissed.

Issues Involved:
1. Whether the Union of India can be directed to adhere to the representation made in the Office Memorandum dated 7th January 2003 after the enactment of the Central Goods and Services Tax Act, 2017.
2. Whether the doctrine of promissory estoppel applies against the Union of India in this context.
3. Whether a writ of mandamus can be issued to the Union of India to provide 100% reimbursement of CGST for the remainder of the period.

Issue-wise Detailed Analysis:

1. Adherence to Representation in Office Memorandum of 2003 Post-CGST Act, 2017:
The appellants argued that the Union of India should adhere to the representation made in the Office Memorandum dated 7th January 2003, which promised 100% tax exemption for ten years. However, the enactment of the CGST Act, 2017, and the subsequent Notification No.21/2017-CE dated 18th July 2017 rescinded the earlier tax exemptions. The court noted that the legislative change brought about by the 101st Amendment Act and the CGST Act introduced a uniform tax structure across the country, which superseded the earlier tax exemption schemes. The court emphasized that the proviso to Section 174(2)(c) of the CGST Act specifically states 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.

2. Doctrine of Promissory Estoppel:
The appellants contended that the Union of India is estopped from resiling from the representation made in the Office Memorandum of 2003. The court, however, held that promissory estoppel cannot operate against a statute. It cited various precedents, including Constitution Bench judgments, which consistently held that there can be no promissory estoppel against the exercise of legislative functions. The court concluded that the claim of the appellants on the basis of promissory estoppel is without merit, as accepting such a claim would render the proviso to Section 174(2)(c) of the CGST Act redundant and otiose.

3. Issuance of Writ of Mandamus:
The appellants sought a writ of mandamus directing the Union of India to provide 100% reimbursement of CGST for the remainder of the period. The court reiterated that a writ of mandamus can only be issued where there is a statutory duty imposed upon the officer concerned, and there is a failure to discharge that duty. In this case, there was no statutory duty cast on the Union of India to grant 100% refund of CGST. The court also noted that the discretion to grant exemptions under Section 11 of the CGST Act lies with the Central Government, which must act on the recommendations of the GST Council. The court found that the relief sought by the appellants could not be granted as there was no statutory duty or obligation on the Union to provide the claimed reimbursement.

Conclusion and Observations:
The court dismissed the appeals, holding that the appellants' claims based on promissory estoppel and the request for a writ of mandamus were without substance. However, the court acknowledged the legitimate expectation of the appellants, given their reliance on the 2003 policy to establish their industrial units. The court suggested that the respective State Governments and the GST Council consider providing corresponding reimbursements from the share of revenue received through devolution. The court permitted the appellants to make representations to the State Governments and the GST Council and requested these bodies to consider such representations expeditiously.

Final Disposition:
The appeals were dismissed, with the court making specific observations regarding the legitimate expectations of the appellants and suggesting that the State Governments and the GST Council consider the appellants' representations for reimbursement. Pending applications were disposed of, and no order as to costs was made.

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