Supreme Court rules promissory estoppel cannot override statutory provisions when government withdraws tax exemptions under Section 174(2)(c)

The SC held that promissory estoppel cannot operate against statutory provisions. The Union Government withdrew tax exemption notifications under Section 174(2)(c) of the CGST Act, which specifically provides that exemptions granted as investment incentives shall not continue if the notification is rescinded. The Court rejected appellants' estoppel claims, ruling that accepting such contentions would make statutory provisions redundant and permit estoppel to operate against Parliament's legislative functions. The Court emphasized that when policy changes serve larger public interest or result from statutory regime changes like GST Act introduction, the State cannot be bound by earlier representations. The appeal was dismissed, though appellants were permitted to make representations to State Governments and GST Council.

---

---

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 However, the enactment of the CGST Act, 2017, and the subsequent Notification No.21/2017-CE dated 18th July 2017 rescinded the earlier tax exemptions.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brought about by the 101st Amendment Act and the CGST Act introduced a uniform tax structure across the country, which superseded the earlier tax exemption schemes.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as an incentive against investment through a notification shall not continue as a privilege if the said notification is rescinded.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.

---