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TMI Blog2022 (10) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 It is further to be noted that this Court has also consistently held that when an exemption granted earlier is withdrawn by a subsequent notification based on a change in policy, even in such cases, the doctrine of promissory estoppel could not be invoked.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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kim, 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed the said writ petitions. 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 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% exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 13. Shri Ganesh relied on the judgments of this Court in the cases of State of Bihar and others vs. Suprabhat Steel Ltd. and others (1999) 1 SCC 31 , State of Jharkhand and others vs. Tata Cummins Ltd. and another (2006) 4 SCC 57 , Lloyd Electric and Engineering Limited vs. State of Himachal Pradesh and others (2016) 1 SCC 560 , MRF Ltd., Kottayam vs. Asstt. Commissioner (Assessment) Sales Tax and others (2006) 8 SCC 702 , The State of Jharkhand and ors. vs. Brahmputra Metallics Ltd. and ors. MANU/SC/0906/2020 [Civil Appeal Nos. 3860-3862 of 2020, decided on 1.12.2020] , Manuelsons Hotels Private Limited vs. State of Kerala and others (2016) 6 SCC 766 and State of Punjab vs. Nestle India Ltd. and another (2004) 6 SCC 465. 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that under clause (1) 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 279A of the Constitution and become common partners for taxing together. Under the new regime, both State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 Limited (2022) 2 SCC 603, Union of India and another vs. Mohit Minerals Pvt. Ltd. through Director 2022 SCC OnLine SC 657 , Union of India and others vs. Unicorn Industries (2019) 10 SCC 575 , Augustan Textile Colours Limited (Now Augustan Textile Colours Private Limited) vs. Director of Industries and another (2022) 6 SCC 626 , Kuldeep Singh vs. Govt. of NCT of Delhi (2006) 5 SCC 702 , Union of India and another vs. International Trading Co. and another (2003) 5 SCC 437 , Comptroller and Auditor General of India, Gian Prakash, New Delhi and another vs. K.S. Jagannathan and another (1986) 2 SCC 679 and Union of India others vs. Bharat Forge Ltd. another Civil Appeal No.5294 of 2022 (@ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84 of the Union List of the Seventh Schedule to 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 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 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. [emphas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in the long run the legislation instead of turning out to be a boon will turn out to be a curse. 39. Mr Menon w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Ram Kumar and others (1976) 3 SCC 540 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 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 others (1977) 4 SCC 145, 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 Fish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Uttar Pradesh and others (1979) 2 SCC 409 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voked 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: 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s supplied] 47. A three Judge Bench of this Court in the case of Union of India and others vs. Godfrey Philips India Ltd. (1985) 4 SCC 369 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 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 ineq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Respondent 1 the Union of India is precluded by the doctrine of promissory estoppel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra), 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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. 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 another (1995) 1 SCC 274 , Shrijee Sales Corpn. vs. Union of India (1997) 3 SCC 398 , State of Rajasthan vs. Mahaveer Oil Industries (1999) 4 SCC 357 , Shree Sidhbali Steels Ltd. vs. State of U.P. (2011) 3 SCC 193 , and Director General of Foreign Trade vs. Kanak Exports (2016) 2 SCC 226. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1962 SC 1210 : 1962 Supp 2 SCR 144 : (1962) 1 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, 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, 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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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