SEZ octroi exemption and promissory estoppel bound the State to refund tax, despite unamended municipal rules.

An approved SEZ developer was entitled to exemption from octroi under the State SEZ policy and the SEZ Act, 2005 read with the SEZ Rules, 2006, which together contemplated exemption from local levies and gave the statutory framework overriding effect. The State's affidavit accepted that entitlement, and promissory estoppel bound the State to honour its policy promise because no overriding public interest justified departure. However, the municipal corporation could not be made liable to refund octroi already collected since its octroi rules were never amended to create a direct refund mechanism. The refund liability therefore lay with the State Government, while relief seeking amendment of the octroi rules was not granted.

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Issues: Whether the petitioner, as an approved SEZ developer, was entitled to exemption from octroi under the State SEZ policy and the SEZ statutory framework, and if so, whether the refund of octroi already paid could be directed against the State Government despite the absence of corresponding amendments in the municipal octroi rules.

Analysis: The State policy on SEZs expressly promised exemption from State and local levies, including octroi, to SEZ developers. The SEZ Act, 2005 and the SEZ Rules, 2006 reinforced that framework by requiring the State to endeavour to make available exemptions from local taxes and levies and by giving the Act overriding effect. The State's own affidavit admitted that the petitioner was entitled to octroi exemption. At the same time, the municipal corporation's octroi rules were never amended to provide a direct statutory mechanism for refund by the municipal body, and in the absence of such amendment the corporation could not be fastened with liability to refund the tax already collected. The State, however, remained bound by its policy promise and could not avoid responsibility merely because the implementing municipal rules were not modified. The doctrine of promissory estoppel applied, and no overriding public interest justified departure from the promise.

Conclusion: The petitioner was held entitled to refund of octroi, but the liability to refund was placed on the State Government, not on the municipal corporation. The claim for other reliefs relating to amendment of octroi rules was not granted.

Ratio Decidendi: When a State policy and the governing SEZ framework expressly promise exemption from local levies to an approved SEZ developer, the State is bound to honour that promise and cannot defeat it by inaction in implementing subordinate municipal rules; promissory estoppel operates unless displaced by overriding public interest.

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