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2022 (10) TMI 677
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....e to the representation as made by it in the Office Memorandum dated 7th January 2003 (hereinafter referred to as "the said O.M. of 2003") even after the enactment of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as "the CGST Act"). 3. Civil Appeal arising out of Special Leave Petition (Civil) No. 12397 of 2020 arises out of judgment and order dated 2nd March, 2020, passed by the High Court of Delhi, dismissing the Writ Petition (Civil) No. 505 of 2022 filed by the appellant - Hero Motocorp Ltd., thereby rejecting the appellants claim of 100% budgetary support in lieu of the pre-existing 100% outright excise duty exemption for ten years from the date of the commencement of commercial production, as provided for by the said O.M. of 2003 issued by the Government of India. 4. Civil Appeal arising out of Special Leave Petition (Civil) No. 11978 of 2021, arises out of judgment and order dated 5th February, 2021 passed by the High Court of Sikkim, dismissing the Writ Petition (C) No. 47 of 2018, filed by the appellant - Sun Pharma Laboratories Ltd. assailing the reduction of the benefit of 100% exemption from excise duty granted to it vide office memorandum ....
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...., 2017, whereafter the Goods and Service Tax regime came into existence and the benefit being enjoyed by the appellant - Hero Motocorp Ltd. was reduced to 58% through the Budgetary Support Policy. 6.4 The appellant - Sun Pharma Laboratories Ltd. setup its first industrial unit which commenced its commercial production from 20th April, 2009. A second unit was also set up later which commenced commercial production from 14th April, 2014. Before the advent of the new GST regime, both of the appellant's units were enjoying a full refund of the central excise duties paid by them as provided for in the exemption notification dated 25th June, 2003, pursuant to the Office Memorandum dated 17th February, 2003. After the commencement of the new GST regime, here too, the benefit being enjoyed by the appellant - Sun Pharma Laboratories was reduced to 58% through the implementation of the Budgetary Support Policy. 6.5 Subsequently, by the Constitution (One Hundred and First Amendment) Act, 2016 (hereinafter referred to as "the 101st Amendment Act"), the Constitution of India came to be amended by the Parliament to introduce the goods and services tax system pan India. By the 101st Amendme....
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....e GST Council, the Central Government notified the Budgetary Support Scheme vide Notification dated 5th October 2017, thereby providing to refund/reimburse the Central share of CGST and IGST to the affected eligible industrial units for the residual period in the North Eastern and the Himalayan States. The Central share was determined at 58% of CGST and 29% of IGST. 6.10 Being aggrieved by the decision of the Central Government in restricting the refund only to 58% of CGST and 29% of IGST and not providing 100% refund of CGST, the appellant-Hero Motocorp Ltd. approached the Delhi High Court by way of writ petition being Writ Petition (Civil) No. 505 of 2020 and the appellant-Sun Pharma Laboratories Limited approached the Sikkim High Court by way of writ petition being Writ Petition (Civil) No.47 of 2018. The Delhi High Court, vide its judgment and order dated 2nd March 2020, and the Sikkim High Court, vide its judgment and order dated 5th February 2021, have dismissed the said writ petitions. 6.11 Being aggrieved by the dismissal of the writ petitions, the appellants (the original writ petitioners) have approached this Court. 6.12 Hence the present appeals. SUBMISSIONS ....
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.... Ganesh further submits that the policy as is reflected in the said O.M. of 2003 would stand on a higher pedestal than the statutory provision or a notification under a statute and the Union would be bound to adhere to the same. He submitted that even in January 2003 when the exemption notifications were issued, the same sharing pattern was in existence between the States and the Central Government. 11. Shri Ganesh further submits that under Section 11 of the CGST Act, the Government has the power to grant exemption from tax and there is no reason as to why the Union Government should not have exercised such a power in the peculiar facts and circumstances of the case. 12. Learned Senior Counsel, therefore, submits that the view taken by the Delhi High Court is not sustainable in law. He submits that the appeals deserve to be allowed and a direction be issued to the Central Government to provide 100% reimbursement of CGST for the remainder of the period. 13. Shri Ganesh relied on the judgments of this Court in the cases of State of Bihar and others vs. Suprabhat Steel Ltd. and others (1999) 1 SCC 31, State of Jharkhand and others vs. Tata Cummins Ltd. and another (2006) 4 S....
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....of pooled sovereignty where States and Centre share equal responsibilities. Learned ASG submits that Article 279A of the Constitution provides for the establishment of the GST Council. It is submitted that the GST Council consists of (a) the Union Finance Minister; (b) the Union Minister of State in charge of Revenue or Finance; and (c) the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government. He submits that the GST Council has been empowered to make recommendations to the Union and the States on the taxes, cesses and surcharges levied by the Union, the States and the local bodies which are to be subsumed in the GST. It is submitted that clause (6) of Article 279A of the Constitution of India directs the GST Council to be guided by the need for a harmonized structure of GST and the development of a harmonized national market for goods and services, while discharging its functions. He submits that under clause (1) of Article 246A of the Constitution, both the Parliament as well as the State Legislatures have been empowered to make laws with respect to GST to be imposed by the Union or by such States, whereas clause (2) of the said Artic....
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....oneously filed seeking a relief against the Union. He submits that if the appellants have any claim, then that would be against the State Governments wherein the industries are situated. It is submitted that, as a matter of fact, the Government of Jammu & Kashmir, vide Notification dated 21st December 2017 has already resolved to reimburse the remaining 42% of the GST to the units located in the State till the period the Union Scheme is valid. It is submitted that the appellants ought to have sought similar relief against the State Governments. Thus, in his submission, a writ against the Union of India is untenable. 22. Learned ASG further submits that the writ of mandamus could only be issued against a statutory body when it is established that there is a duty cast upon a statutory authority and that the said authority has neglected to perform such duty. It is submitted that the appellants have not been in a position to point out that any such duty is cast upon the Union to reimburse 100% GST and as such, the present appeals would not be tenable. 23. Learned ASG, relying on various judgments of this Court submitted that in view of the overwhelming public interest, the Union ....
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....xpansion of their existing industrial units in the States of Uttarakhand and Himachal Pradesh, they would be entitled to 100% tax exemption. 27. It is to be noted that, subsequently, an important development took place. By the 101st Amendment Act, a sea change in the earlier taxation regime occurred. A uniform tax structure throughout the country has been adopted. The GST Council has been constituted, which is empowered to make recommendations to the Union and the States with regard to GST. The Union and all the States have become common partners in levy of various taxes. To give effect to the 101st Amendment Act, the CGST Act has been enacted. 28. The relevant part of Section 174 of the CGST Act reads thus: "174. Repeal and saving.-(1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955), the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Additional Duties of Excise ....
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....fically providing for rescinding the benefits granted under an earlier statute, the Union Government can be compelled to stand by the representation made by it through the earlier notification. In other words, the question that will have to be considered is whether doctrine of promissory estoppel could operate against a statute. JUDICIAL PRECEDENTS 32. For considering the rival submissions, it would also be necessary to refer to various earlier authoritative pronouncements of this Court on the issue. 33. Heavy reliance is placed on the judgment of this Court in the case of Union of India & Ors. vs. M/s Indo-Afghan Agencies Ltd. 1968 2 SCR 366, which is one of the earlier judgments of this Court considering the issue of promissory estoppel. In the said case, the Textile Commissioner published a scheme on 10th October 1962, called the Export Promotion Scheme providing incentives to exporters of woolen goods. The scheme was extended by a Trade Notice dated 1st January 1963, to export of woolen goods to Afghanistan. In pursuance of the said scheme, the exporters were entitled to import raw materials of a total amount equal to 100% of the F.O.B. (freight on board) value of thei....
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.... Manufacturing Company Ltd. and another vs. The Ulhasnagar Municipal Council and another (1970) 1 SCC 582 considered the issue wherein the Municipality had agreed to exempt the appellant therein from payment of octroi duty for 7 years from the date of levy of octroi. However, thereafter, the Municipality sought to levy octroi duty from the appellant therein. This Court observed thus: "12. If our nascent democracy is to thrive different standards of conduct for the people and the public bodies cannot ordinarily be permitted. A public body is, in our judgment, not exempt from liability to carry out its obligation arising out of representations made by it relying upon which a citizen has altered his position to his prejudice." 36. A Constitution Bench of this Court in the case of M. Ramanatha Pillai vs. The State of Kerala and another (1973) 2 SCC 650 considered the question as to whether estoppel could arise against a State in regard to abolition of posts. The Constitution Bench observed thus: "37. The High Court was correct in holding that no estoppel could arise against the State in regard to abolition of post. The appellant Ramanatha Pillai knew that the post ....
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....cond, whether the Act is constitutional in the sense that it is protected by Section 31- A(1). So far as the competence of the legislature is concerned, no objection is made before us. As to its constitutionality we have shown that the Act purports to vast the janman rights to the forests in the Government as a step in the implementation of agrarian reform. If this could be constitutionally done by the legislature, the fact that at an earlier stage the Government was toying with the idea of paying compensation to owners of private forests is of little consequence. The dominant purpose of the impugned Act, as already pointed out, is to distribute forest lands for agricultural purposes after making reservations of portions of the forests for the benefit of the agricultural community. The fear is expressed that such a course if, genuinely implemented, may lead to deforestation on a large scale leading to soil erosion and silting of rivers and streams and will actually turn out to be detrimental to the interests of the agricultural community in the long run. It is undoubtedly true that rackless deforestation might lead to very unhappy results. But we have no material before us for expr....
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....utionally enacted by the legislature, then the fact that, at an earlier stage, the Government was toying with the idea of paying compensation to owners of private forests would be of no consequence. Undisputedly, the GST enactment is an enactment validly enacted by the Parliament. It was also sought to be urged that the petitioner Company, on the basis of the agreement by the State Government that it would not legislate to acquire the forest land for 60 years, had purchased 30,000 acres of private land. It was submitted therein that, applying the doctrine of equitable estoppel, the Government was estopped from enacting a legislation contrary to the agreement. Negating the said contention, it was held that when the legislature exercises its powers for the public good, the earlier representation would not operate against the Government as equitable estoppel. 40. A four judge Bench of this Court in the case of Excise Commissioner, U.P. Allahabad and others vs. Ram Kumar and others (1976) 3 SCC 540 had considered the issue wherein, at the time of the auction, licenses sold by the Government to vend country liquor exempted the levy of sales tax. However, by a subsequent notification,....
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.... is clearly distinguishable. In that case, unlike the present one, the respondents were not seeking to enforce any contractual right. They were merely seeking to enforce compliance with the obligation which was laid upon the Textile Commissioner by the terms of the Export Promotion Scheme providing for grant (by way of incentives to exporters of woollen textiles and goods) of Entitlement Certificate to import raw materials of a total amount equal to 100% of the f.o.b. value of their exports. Their claim was founded upon the equity which arose in their favour as a result of the representation made on behalf of the Government in the aforesaid Scheme, the exports of woollen goods made by them to Afghanistan acting upon the representation and curtailment of the import entitlement by the Textile Commissioner without notice to them." [emphasis supplied] 43. Subsequently, a two Judge Bench of this Court in the case of Motilal Padampat Sugar Mills Co. Ltd. vs. State of Uttar Pradesh and others (1979) 2 SCC 409 again considered the issue of estoppel. In the said case, the State Government had represented that an exemption from sales tax would be granted to new industrial units. Based ....
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.... agreement and makes a representation and a person acting on that representation puts himself in a disadvantageous position, the Court is entitled to require the officer to act according to the scheme and the agreement or representation. The officer cannot arbitrarily act on his mere whim and ignore his promise on some undefined and undisclosed grounds of necessity or change the conditions to the prejudice of the person who had acted upon such representation and put himself in a disadvantageous position. (5) The officer would be justified in changing the terms of the agreement to the prejudice of the other party on special considerations such as difficult foreign exchange position or other matters which have a bearing on general interest of the State." [emphasis supplied] 45. It can thus clearly be seen that this Court held that the plea of promissory estoppel would not be available against the exercise of the legislative functions of the State. Equally, it cannot be invoked for preventing the government from discharging its functions under the law. The learned judges of this Court in the case of M/s Jit Ram Shiv Kumar and others (supra), holding that some of t....
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....tified. (emphasis supplied)" 46. This Court in the said case reiterated the legal position thus: "51. On a consideration of the decisions of this Court it is clear that there can be no promissory estoppel against the exercise of legislative power of the State. So also the doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The Government would not be bound by the act of its officers and agents who act beyond the scope of their authority and a person dealing with the agent of the Government must be held to have notice of the limitations of his authority. the Court can enforce compliance by a public authority of the obligation laid on him if he arbitrarily or on his mere whim ignores the promises made by him on behalf of the Government. It would be open to the authority to plead and prove that there were special considerations which necessitated his not being able to comply with his obligations in public interest." [emphasis supplied] 47. A three Judge Bench of this Court in the case of Union of India and others vs. Godfrey Philips India Ltd. (1985) 4 SCC 369 commented on the correctness of the ....
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....nnot be invoked for preventing the Government from discharging its functions under law. It is also not applicable when the officer and the Government act outside the scope of their authority. The doctrine of ultra vires will in that event come into operation and the Government cannot be held bound by the unauthorised acts of its officers. 183. It is not necessary for purposes of this judgment to resolve the apparent conflict between the decision of Bhagwati, J. in Motilal Padampat Sugar Mills case [(1979) 2 SCR 641 : (1979) 2 SCC 409 : 1979 SCC (Tax) 144] as to the applicability of the doctrine of estoppel for preventing the Government from discharging its functions under the law. In public law, the most obvious limitation and doctrine of estoppel is that it cannot be evoked so as to give an overriding power which it does not in law possess. In other words, no estoppel can legitimate action which is ultra vires. Another limitation is that the principle of estoppel does not operate at the level of Government policy. Estoppels have however been allowed to operate against public authority in minor matters of formality where no question of ultra vires arises: Wade: Administrat....
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....e by a government, an entity changes its legal position to its detriment, the State could not be permitted to resile from the said promise. It is to be noted that the said judgment is authored by Bhagwati, J. and the Bench strength is of two learned judges. 52. Within a period of two years, Kailasam, J. in the case of M/s Jit Ram Shiv Kumar and others (supra) found fault with some of the observations made in the case of Motilal Padampat Sugar Mills Co. Ltd. (supra) and held that the observations made in Motilal Padampat Sugar Mills Co. Ltd. (supra) were not in tune with the judgments of Constitution Benches in the cases M. Ramanatha Pillai (supra) and The Gwalior Rayon Silk Manufacturing (WVG). Co. Ltd. Etc. (supra); and the judgment of a four- Judge Bench of this Court in the case of Ram Kumar and others (supra). 53. The judgment of this Court in the case of M/s Jit Ram Shiv Kumar and others (supra) again fell for consideration before a three-judge Bench of this Court in the case of Godfrey Philips India Ltd. (supra), which is again authored by Bhagwati, J. In the case of Godfrey Philips India Ltd. (supra), the judgment of the learned three-Judge Bench delivered through Bhag....
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....ption notifications was issued in pursuance of the statutory mandate as provided under Section 174(2)(c) of the CGST Act. If the contention as raised by the appellants is to be accepted, it would make the provisions under the proviso to Section 174(2)(c) of the CGST Act redundant and otiose. The legislature in its wisdom has specifically incorporated the proviso to Section 174(2)(c) providing therein that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded. If the contention is accepted, it will amount to enforcing a representation made in the said O.M. of 2003 and 2003 Notification contrary to the legislative incorporation in the proviso to Section 174(2)(c) of the CGST Act. In other words, it will permit an estoppel to be operated against the legislative functions of the Parliament. We are, therefore, of the considered view that the claim of the appellants on estoppel is without merit and deserves to be rejected. 56. It is further to be noted that this Court has also consistently held that when an exemption granted earlier is withdrawn by a subsequent notification based on a c....
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....occasion to consider when a writ of mandamus could be issued. This Court held that: "15. .....There is abundant authority in favour of the proposition that a writ of mandamus can be granted only in a case where there is a statutory duty imposed upon the officer concerned and there is a failure on the part of that officer to discharge the statutory obligation. The chief function of a writ is to compel performance of public duties prescribed by statute and to keep subordinate tribunals and officers exercising public functions within the limit of their jurisdiction. It follows, therefore, that in order that mandamus may issue to compel the authorities to do something, it must be shown that there is a statute which imposes a legal duty and the aggrieved party has a legal right under the statute to enforce its performance. (See Lekhraj Satramdas Lalvani v. Deputy Custodiancum- Managing Officer [AIR 1966 SC 334 : (1966) 1 SCR 120 : (1966) 1 SCJ 24] , Rai Shivendra Bahadur Dr v. Governing Body of the Nalanda College [AIR 1962 SC 1210 : 1962 Supp 2 SCR 144 : (1962) 1 LLJ 247] and Umakant Saran Dr v. State of Bihar [(1973) 1 SCC 485 : AIR 1973 SC 964] ). In the instant case, it has....
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.... consideration. 63. This position was again reiterated by this Court recently in the case of Bharat Forge Ltd. (supra) as follows: "18. Therefore, it is clear that a Writ of Mandamus or a direction, in the nature of a Writ of Mandamus, is not to be withheld, in the exercise of powers of Article 226 on any technicalities. This is subject only to the indispensable requirements being fulfilled. There must be a public duty. While the duty may, indeed, arise form a Statute ordinarily, the duty can be imposed by common charter, common law, custom or even contract. The fact that a duty may have to be unravelled and the mist around it cleared before its shape is unfolded may not relieve the Court of its duty to cull out a public 25 duty in a Statute or otherwise, if in substance, it exists. Equally, Mandamus would lie if the Authority, which had a discretion, fails to exercise it and prefers to act under dictation of another Authority. A Writ of Mandamus or a direction in the nature thereof had been given a very wide scope in the conditions prevailing in this country and it is to be issued wherever there is a public duty and there is a failure to perform and the courts will not....
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....is Court, therefore, clearly rejected the claim of benefit from the date on which the statutory provision was deleted from the statute book. 68. In the case of Nestle India Ltd. (supra), the respondent milk producers did not pay the purchase tax for the period between 1st April 1996 and 4th June 1997 since the Government had decided to abolish purchase tax for the said period. For the rest of the period, the tax was paid. The State had attempted to recover the purchase tax retrospectively for the aforesaid period. In this background, the claim of the respondents therein before this Court was found to be meritorious. 69. Insofar as the reliance placed by Shri V. Sridharan, learned Senior Counsel, on the judgment of this Court in the case of Video Electronics Pvt. Ltd. (supra) is concerned, the question was as to whether the State was empowered to grant sales tax exemption to a class of goods. It was held that the classification was permissible, provided that it was not vitiated by colourable exercise of power or abuse. As such, the said judgment would not be applicable to the facts of the present case. 70. It could thus be seen that in none of the aforesaid cases, the issue....
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....The policy of the year 2003, in question, was based on the statement made by the Hon'ble Prime Minister during his visit to Uttarakhand. As such, the policy was framed to bring into effect the statement made by the highest executive functionary of the country. Relying on the said policy, the appellants have established their units. Though the appellants may not have a claim in law, we find that they do have a legitimate expectation that their claim deserves due consideration. 74. It will be relevant to refer to the minutes of the meeting of the GST Council dated 30th September 2016, which read thus: "25. The Secretary to the Council explained that the Central and State governments had given various incentives of Central Excise and Value Added Tax (VAT) and Central Sales Tax (CST). He pointed out that in the GST regime, such incentives could not be continued as supplies would need to be made on payment of tax in order to permit flow of tax to the destination state. Therefore, a decision would need to be arrived at regarding the treatment of such tax incentive schemes under the GST regime. He observed that one option could be to 'grandfather' such schemes and provide for ....
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....d for in the Consolidated Fund of India and 42% of the amount would be devolved to the States. The Centre, therefore, could be expected to only reimburse the units out of the remaining 58% of the fund which was not part of the devolution and the States would also need to correspondingly reimburse such units out of the share of revenue received through devolution." 77. It can thus be seen that the Hon'ble Minister from Uttarakhand had stated that the Government of India had given an area-based exemption for 10 years and that such exemptions were to continue up to 2020. She was of the view that the Centre must reimburse such units for the Central taxes as jobs of more than one lakh workers were at stake. The Hon'ble Minister from Jammu & Kashmir had also supported the view of the Hon'ble Minister from Uttarakhand. However, the Chairperson of the GST Council, i.e. the Hon'ble Finance Minister of the Union of India, stated that the Centre would only reimburse the units to the extent of 58%. He also expressed that the State would also need to correspondingly reimburse such units out of the share of revenue received through devolution. Accordingly, the following resolution was passed ....