SEZ Act amendments upheld: Legislative competency confirmed, no violation of Article 14.

The court dismissed the writ petitions, upholding the legislative competency of the Parliament to amend the SEZ Act. It found that the amendments did not violate Article 14 of the Constitution, were not contrary to the Doctrine of Promissory Estoppel, and did not infringe on the principles of Legitimate Expectancy. The court emphasized the importance of flexibility in fiscal legislation and granting the state broad discretion in economic and social policy matters.

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Issues Involved:

1. Legislative Competency of Ministry of Finance to Amend SEZ Act
2. Violation of Article 14 of the Constitution of India
3. Doctrine of Promissory Estoppel
4. Principles of Legitimate Expectancy

Issue-wise Detailed Analysis:

1. Legislative Competency of Ministry of Finance to Amend SEZ Act:

The petitioners contended that the Ministry of Finance lacked the legislative competency to amend the SEZ Act, which falls under the exclusive domain of the Ministry of Commerce. However, the court rejected this argument, stating that the Government of India (Allocation of Business) Rules are not applicable to the proceedings and business of Parliament. The Rules of Procedure and Conduct of Business in the Lok Sabha do not bar the Finance Minister from moving a bill for amendment to the SEZ Act. The court referred to the Supreme Court's decision in Madurai District Central Cooperative Bank Ltd. vs. Third ITO, which held that Parliament has the legislative competence to introduce a new charge of tax either by incorporating it in the Income-tax Act or through any other statute. Therefore, the impugned amendment was within the legislative competency of the Parliament.

2. Violation of Article 14 of the Constitution of India:

The petitioners argued that the impugned amendments were capricious, arbitrary, unfair, and violative of Article 14 of the Constitution. The court disagreed, noting that every tax exemption and incentive must have a sunset clause, and there can be no permanent tax exemption or incentive in fiscal legislation. The impugned amendments introduced a sunset clause, making the exemptions prospective in nature. The court emphasized that the amendments were intended to remove discrimination between SEZ establishments/units and other companies, thereby aligning with Article 14 of the Constitution. The court also highlighted that decisions in economic and social spheres are essentially ad hoc and experimental, and the state must be left with wide latitude in devising fiscal measures.

3. Doctrine of Promissory Estoppel:

The petitioners claimed that the impugned amendments were opposed to the Doctrine of Promissory Estoppel, as they had made investments based on the government's promise of exemptions. The court referred to several Supreme Court decisions, including Motilal Padampat Sugar Mills Co. Limited vs. State Of Uttar Pradesh and Union of India vs. Godfrey Philips India Ltd., which established that promissory estoppel cannot be applied against legislative functions or to compel the government to act contrary to law. The court noted that the exemptions lacked a sunset clause, and the impugned amendments corrected this flaw. The court also pointed out that the exemptions led to erosion of the tax base and discrimination among companies. Therefore, the Doctrine of Promissory Estoppel could not be applied to nullify the impugned amendments.

4. Principles of Legitimate Expectancy:

The petitioners argued that the impugned amendments were opposed to the principles of Legitimate Expectancy. The court explained that the Doctrine of Legitimate Expectation is not based on any legal right but on reasonable expectation from a representation or past practice. However, since the petitioners were seeking relief based on the Doctrine of Promissory Estoppel, which is a superior relief based on statutory promise, the court found it unnecessary to consider the doctrine of legitimate expectation separately. The court reiterated that the Doctrine of Promissory Estoppel must yield when equity so requires, especially in matters of fiscal policy and public interest.

Conclusion:

The court dismissed the writ petitions, holding that the impugned amendments were within the legislative competency of the Parliament, did not violate Article 14 of the Constitution, and were not opposed to the Doctrine of Promissory Estoppel or the principles of Legitimate Expectancy. The court emphasized the need for flexibility in fiscal legislation and the importance of allowing the state wide latitude in economic and social policy decisions.

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