Promissory estoppel and accrued tax exemption rights survive later policy changes and cannot be defeated by retrospective rule amendments.

Promissory estoppel may bind the State even in fiscal incentive schemes where industries have altered their position in reliance on a statutory representation of exemption, so a later policy change cannot defeat accrued claims absent overriding public interest. Subordinate legislation also cannot be given retrospective effect to extinguish vested benefits unless the parent statute clearly authorises such operation. Applying these principles, the text states that units which acted on the existing sales tax exemption policy retained their entitlement, and later amendments deleting the relevant note could not retrospectively take away rights already accrued before express retrospective rule-making power was conferred.

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Issues: (i) Whether the State could withdraw or alter the sales tax exemption scheme so as to defeat the appellants' claim when they had altered their position on the basis of the existing policy and rules. (ii) Whether the amendment deleting Note 2 and the other changes to Rule 28A could operate retrospectively so as to deprive the appellants of benefits already accrued before the enabling amendment to Section 64(2A) came into force.

Issue (i): Whether the State could withdraw or alter the sales tax exemption scheme so as to defeat the appellants' claim when they had altered their position on the basis of the existing policy and rules.

Analysis: The industrial policy and Rule 28A held out a statutory representation of incentive by way of sales tax exemption to industries setting up in backward areas. The appellants acted upon that representation by investing substantial amounts, obtaining permissions and commencing the steps necessary to establish the units. The doctrine of promissory estoppel applies even in the legislative field, subject to equity and public interest, and a later change in policy cannot be used to deny benefits where the entrepreneurs had already altered their position on the faith of the promise. The record also showed that the State itself acknowledged the equity in favour of such units by inserting Note 2 in the 16.12.1996 notification.

Conclusion: The appellants were entitled to invoke promissory estoppel, and the State could not defeat their claim by the subsequent change in the exemption regime.

Issue (ii): Whether the amendment deleting Note 2 and the other changes to Rule 28A could operate retrospectively so as to deprive the appellants of benefits already accrued before the enabling amendment to Section 64(2A) came into force.

Analysis: A delegate can make retrospective rules only if the parent statute clearly authorises such effect. The retrospective operation of subordinate legislation could not be assumed before Section 64(2A) expressly empowered such retrospective rule-making, which came into force only in 2001. Since Note 2 had conferred rights in favour of eligible units, later amendments made prior to that enabling provision could not retrospectively take away those accrued rights. The omission of Note 2 therefore could not be applied to extinguish the appellants' entitlement.

Conclusion: The retrospective deletion and related amendments were ineffective to the extent they purported to extinguish the appellants' accrued rights.

Final Conclusion: The impugned judgment was unsustainable, the appellants' entitlement under the incentive scheme survived the subsequent amendments, and the matter required fresh consideration by the departmental authority.

Ratio Decidendi: Promissory estoppel can bind the State even in fiscal policy matters, and subordinate legislation cannot retrospectively extinguish accrued rights unless the parent statute clearly authorises such retrospective operation.

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