SEZ octroi exemption and refund liability turned on a State policy promise, not on unamended municipal rules.

A State policy for Special Economic Zones expressly promised exemption from octroi and other local levies to approved SEZ developers, and the SEZ framework supported that promise, so the developer was entitled to exemption. Because the municipal octroi rules had not been amended, refund could not be fastened on the Municipal Corporation in the absence of a statutory basis. The State, however, had undertaken to secure the exemption and could not rely on the unamended local rules to avoid liability; refund with interest was therefore directed against the State Government, subject to verification and quantification on representation.

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Issues: (i) whether the developer of an approved Special Economic Zone was entitled to exemption from octroi under the State policy and the SEZ regime; (ii) whether, in the absence of an amendment to the municipal octroi rules, refund of octroi already paid could be directed against the Municipal Corporation or the State Government.

Issue (i): whether the developer of an approved Special Economic Zone was entitled to exemption from octroi under the State policy and the SEZ regime.

Analysis: The State policy for Special Economic Zones expressly promised exemption from all State and local taxes and levies, including octroi, to SEZ developers. The SEZ Act and the SEZ Rules supported that policy framework by requiring the State to endeavour to make such exemptions available. The Petitioner was an approved SEZ developer, and the State's own affidavit admitted entitlement to octroi exemption. The State could not avoid the consequence of its policy promise merely because the implementing steps were not completed.

Conclusion: The Petitioner was entitled to octroi exemption, and the claim succeeded on that issue.

Issue (ii): whether, in the absence of an amendment to the municipal octroi rules, refund of octroi already paid could be directed against the Municipal Corporation or the State Government.

Analysis: The municipal octroi regime had not been amended to provide an express exemption for the Petitioner's SEZ, so the Municipal Corporation could not be compelled to refund the collected octroi in the absence of a statutory basis. However, the State had undertaken to secure exemption under its policy and had sufficient enabling power under the municipal law to ensure implementation. Since the Petitioner had acted on the State's promise, the State could not escape liability on the ground that the municipal rules were not amended. The Court also found no reason to deny relief on delay or alternate remedy grounds.

Conclusion: Refund could not be fastened on the Municipal Corporation, but the State Government was liable to refund the octroi with interest.

Final Conclusion: The Petitioner obtained partial substantive relief: the right to refund of octroi was recognized, but the liability was shifted to the State Government, and the quantum was left to be worked out on representation and verification.

Ratio Decidendi: Where a State policy expressly promises tax exemption to an approved SEZ developer and the statutory framework supports that promise, the State can be compelled to honour the exemption or its monetary equivalent, even if the local body's rules were not amended, though refund cannot be directed against the local body absent a statutory provision.

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