Promissory estoppel cannot extend GST-linked incentives beyond a revised scheme, but arbitrary differential treatment breaches Article 14.
After a GST-linked restructuring of an industrial reimbursement scheme, promissory estoppel could not be invoked to compel continuation of the earlier incentive beyond the revised legal and fiscal framework. The withdrawal of the power to extend the eligibility period was therefore not invalid on that ground. However, where pending extension applications had been filed before the amendment and similarly situated units had already received extensions, the State was required to show a rational basis for the differential treatment. In the absence of such justification, the non-consideration of the petitioners' applications was arbitrary and offended Article 14, entitling them to fresh consideration on the same yardstick as comparable units.
Issues: (i) Whether the withdrawal of the power to extend the period of eligibility under the reimbursement scheme was invalid as being contrary to promissory estoppel after the change to the GST regime; (ii) Whether the non-consideration of the petitioners' pending applications for extension, while similarly placed units had received extension, offended Article 14 of the Constitution of India.
Issue (i): Whether the withdrawal of the power to extend the period of eligibility under the reimbursement scheme was invalid as being contrary to promissory estoppel after the change to the GST regime.
Analysis: The incentives originally promised under the industrial policy operated in the VAT/CST regime and were later restructured after the GST regime through a reimbursement-based scheme confined to the State's share of GST. The earlier exemption framework was tied to the then prevailing tax structure, and the State's post-GST continuation of benefits under the new scheme was treated as a continuation of the incentive in altered statutory conditions. A change in the taxation regime and corresponding policy modification was held to be a matter of public policy, and the doctrine of promissory estoppel could not be used to compel reimbursement beyond the legally and fiscally altered framework.
Conclusion: The challenge based on promissory estoppel failed.
Issue (ii): Whether the non-consideration of the petitioners' pending applications for extension, while similarly placed units had received extension, offended Article 14 of the Constitution of India.
Analysis: The petitioners had submitted extension requests before the amendment that withdrew the extension power, and the record showed that some similarly situated units had been granted extension while the petitioners' applications remained undecided. The State did not place material before the Court showing a rational basis or intelligible differentia justifying this differential treatment. In the absence of demonstrated grounds for treating the petitioners differently from other comparable units, the non-consideration of their applications was held to be arbitrary and inconsistent with the requirement of equal treatment in State action.
Conclusion: The Article 14 challenge succeeded to the extent that the respondents were directed to consider the petitioners' applications on the same yardstick applied to similarly situated units.
Final Conclusion: The amendment itself was not struck down, but the petitioners were held entitled to a fresh consideration of their pending extension requests in accordance with the same standards applied to comparable industrial units.
Ratio Decidendi: Where a fiscal incentive scheme is altered after a statutory change in the tax regime, promissory estoppel cannot compel continuation of the earlier benefit beyond the revised legal framework; however, differential treatment of pending applications for extension, without a demonstrated rational basis, is arbitrary and violates Article 14.
TaxTMI 
AI Drafter ✕
TaxTMI 
