Summary
Hero MotoCorp (Uttarakhand) and Sun Pharma (Sikkim) set up units relying on 2003 central policies promising full excise exemption for ten years. When GST came in, the exemption notifications were rescinded under the proviso to Section 174(2)(c) of the CGST Act, 2017, and the Centre's budgetary support refunded only 58% of CGST. The Supreme Court rejected their claims to 100% reimbursement. Promissory estoppel does not operate against legislative power, and enforcing the 2003 promise would make the proviso otiose. Withdrawing an incentive through a public-interest change of policy is also permissible. No statutory duty supported mandamus, and the Court would not direct exemption under Section 11. Recognising the units' legitimate expectation, it allowed them to ask the States and the GST Council for reimbursement out of the States' 42% share.
Issues
- Whether the Union can be compelled by promissory estoppel to honour the 2003 policy of full excise exemption after GST, in the face of the rescission of exemption notifications under the proviso to Section 174(2)(c) of the CGST Act, 2017.
- Whether a writ of mandamus can direct the Union to reimburse 100% of CGST or to grant exemption under Section 11 of the CGST Act.
Provisions considered
- Section 174(2)(c) and proviso, Central Goods and Services Tax Act, 2017Tax exemptions granted as investment incentives by notification do not continue as privileges once rescinded on or after the appointed day; the exemption under the 2003 notifications stood withdrawn. (¶¶ 28, 29, 30, 55)
- Section 11, Central Goods and Services Tax Act, 2017Power to exempt is discretionary and exercisable on GST Council recommendation; mandamus cannot direct its exercise in a particular way. (¶ 71)
- Articles 246A, 269A and 279A, Constitution of IndiaThe 101st Amendment created a destination-based GST with the GST Council as a constitutional body, a material change in the tax regime. (¶¶ 27, 79)
- Article 226, Constitution of IndiaMandamus requires a public or statutory duty and failure to perform it; no duty to refund 100% of CGST was shown. (¶¶ 60, 61, 62, 63, 64)
Held
- Despite some discord between Motilal Padampat and Godfrey Philips on one side and Jit Ram Shiv Kumar on the other, all the decisions consistently hold that promissory estoppel cannot operate against the legislature in the exercise of its legislative functions. (¶¶ 50, 54)
- Accepting the claim would enforce the 2003 representation contrary to the proviso to Section 174(2)(c) and render it otiose; the estoppel claim fails. (¶ 55)
- An exemption, even one for a stated period, may be withdrawn by a change of policy in the public interest, and promissory estoppel cannot prevent this. (¶¶ 56, 57, 58)
- No statutory duty to refund 100% of CGST exists, so mandamus cannot issue; the decision to refund 58% is a policy matter not shown to be palpably arbitrary. (¶¶ 64, 71)
- As the appellants invested on the basis of the 2003 policy, they have a legitimate expectation of consideration; they may represent to the State Governments and the GST Council, which are requested to consider reimbursement out of the States' share of devolution. (¶¶ 72, 73, 78, 79, 80)
Result
Appeals dismissed, subject to the liberty and observations permitting representations to the State Governments and the GST Council; no costs.