TaxTMI 
TaxTMI 
2024 (10) TMI 970
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....jesh Sekhri, Judge For the Petitioners : M/S B. L. Narsimhan, Ankit Awal, J. A. Hamal, Advocates. Mr. Surjit Singh Andotra, Advocate Vice Mr. Jatin Mahajan, Advocate. For the Respondents : Mr. D. C. Raina, Advocate General with Mr. K. D. S. Kotwal, Dy.AG. JUDGMENT SANJEEV KUMAR J 1. In these petitions the petitioners are Small/ Medium/ Large scale Industries set up in the State of Jammu and Kashmir on different dates in the year 2011 and before. They are aggrieved of and have assailed S.O. 239 dated 16-07-2021 issued by the Government of Jammu and Kashmir, whereby the Budgetary Support Scheme notified earlier vide SRO 431 dated 25-09-2018 has been withdrawn with effect from 01-04-2021. The impugned SO is challenged by the petitioners primarily on the ground that it is hit by the doctrines of promissory estoppel and legitimate expectation. 2. Before we advert to the grounds of challenge urged by the petitioners in these petitions, we deem it appropriate to set out facts germane to the disposal of the controversy raised in these petitions. 3. In the year 2004, the Government of Jammu and Kashmir came up with Industrial Policy-2004 offering certain incentives to t....
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....166 dated 30-05-2016 up to 31-03-2017. 6. Vide SRO 177 dated 01-06-2016, apart from other SROs, SRO 166 of 2016 was kept in abeyance but was later restored vide SRO 215 dated 29-06-2016 and all eligible units, including the petitioners were allowed to take the benefit of exemption of CST and other benefits till 31st of March, 2017. 7. Vide SRO 36 dated 01-02-2017 the benefit was further extended up to 31-03-2018 or till the same is superseded by any other notification whichever is earlier. In the meanwhile, the Integrated Goods and Service Tax Act 2017 came to be implemented in the State of Jammu and Kashmir and the Government notified a new scheme for providing budgetary support to the manufacturing units in the shape of reimbursement of Integrated Goods and Service Tax ["IGST"] paid under the IGST Act, 2017. This scheme was promulgated vide SRO 431 dated 25th September, 2018. The scheme was stated to remain in force till last date of Industrial Policy 2016 i.e. 31-03-2026. However, in terms of para 7 of SRO 431, a right was reserved in the Finance Department to review the viability of the policy at the end of every financial year with special reference to its continuance in....
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....sums. The respondents, therefore, could not have withdrawn SRO 431 of 2018 thereby putting the petitioners to serious detriment. Alternatively the petitioners would argue that, even if the doctrine of promissory estoppels may not be technically attracted, yet the consistent representation made by the respondents through their Industrial Policies issued from time to time, the petitioners entertained legitimate expectation that the Government would act on its promise. The impugned SO issued by the Government violates such promise and is, therefore, hit by doctrine of legitimate expectation, more particularly when issuance of impugned SO has not been issued in public interest. Strong reliance was placed by learned counsel appearing for the petitioners on the judgment of The State of Jharkhand and ors v. Brahmputra Metallics Ltd. and another, (2023) 10 SCC 634, and couple of other judgments on the question of doctrines of promissory estoppel and legitimate expectation. 10. The stand of the respondents is that, at no point of time any promise was extended to the petitioners with respect to grant of incentives, in particular, exemption from payment of CST for a definite period nor is ....
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....iple of the doctrine is that the law will not permit an unconscionable or, more accurately, unconscientious departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment, if the assumption be not adhered to for the purposes of the litigation. The doctrine of promissory estoppel would be attracted where one party, by clear and unequivocal representation invites the other party to act upon such promise and that other party, acting bona fide on such representation acts to his detriment or changes his course of conduct by some act or omission, in such eventuality the party making representation shall be held by the representation or the promise made. It is further held that it is not the law that there can be no promissory estoppel against the Government in the exercise of its sovereign or executive functions. It is true that taxation is a sovereign or governmental function, but no distinction can be made between the exercise of a sovereign or governmental function and a trading or business activity of the Government, ....
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....se. The persons who may be bound by or who may take the benefit of such an estoppel extend beyond the immediate parties to it, to their privies, whether by blood, by estate or by contract. That being so, an estoppel by conduct can be the origin of primary rights of property and of contract. 2. The central principle of the doctrine is that the law will not permit an unconscionable - or, more accurately, unconscientious - departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption be not adhered to for the purposes of the litigation. 3. Since an estoppel will not arise unless the party claiming the benefit of it has adopted the assumption as the basis of action or inaction and thereby placed himself in a position of significant disadvantage if departure from the assumption be permitted, the resolution of an issue of estoppel by conduct will involve an examination of the relevant belief, actions and position of that party. 4. The question whether such a departure would be....
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.... seen as a separate or distinct doctrine which operates only in equity or as restricted to certain defined categories (e.g. acquiescence, encouragement, promissory estoppel or proprietary estoppel). 7. Estoppel by conduct does not of itself constitute an independent cause of action. The assumed fact or state of affairs (which one party is estopped from denying) may be relied upon defensively or it may be used aggressively as the factual foundation of an action arising under ordinary principles with the entitlement to ultimate relief being determined on the basis of the existence of that fact or state of affairs. In some cases, the estoppel may operate to fashion an assumed state of affairs which will found relief (under ordinary principles) which gives effect to the assumption itself (e.g. where the defendant in an action for a declaration of trust is estopped from denying the existence of the trust). 8. The recognition of estoppel by conduct as a doctrine operating consistently in law and equity and the prevalence of equity in a Judicature Act system combine to give the whole doctrine a degree of flexibility which it might lack if it were an exclusively common la....
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....ference is that the legitimate expectation can constitute a cause of action whereas the doctrine of promissory estoppel can only be used as a shield. The scope of legitimate expectation is wider than the promissory estoppel because it not only takes into consideration a promise made by a public body but also official promise, as well. Under the doctrine of promissory estoppel, there may be a requirement to show a detriment suffered by a party due to the reliance placed on the promise. However, under Indian Law there is often a conflation and overlapping between the two doctrines. At times, the expressions "legitimate expectation" and "promissory estoppel" are used interchangeably, but that is not a correct usage because "legitimate expectation" is a concept much broader in scope than "promissory estoppel". 15. With a view to steer clear the confusion between the two doctrines, Hon'ble the Supreme Court in Brahmputra Mettalics case (supra) endeavored to draw distinction between the two doctrines. The discussion in para 40 and 41 of the judgment clears the mist surrounding the true import and scope of the two doctrines and is, thus, reproduced hereunder:- "40. In a concur....
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....us, the Court held that the doctrine of legitimate expectation cannot be claimed as a right in itself, but can be used only when the denial of a legitimate expectation leads to the violation of Article 14 of the Constitution." 16. From the aforesaid annunciation of law by the Hon'ble Supreme Court in its latest judgment in Brahmputra Mettalics case (supra), it is abundantly clear that for invoking the principle of promissory estoppel there has to be a clear and unequivocal promise and on that basis the party concerned must have acted to its prejudice, whereas the basis of doctrine of legitimate expectation is in reasonableness and fairness. True it is that the doctrine of legitimate expectation cannot be claimed as a matter of right and can be used when the denial of legitimate expectation leads to violation of Article 14 of the Constitution. The relationship between Article 14 and the doctrine of legitimate expectation is aptly explained by a three Judge Bench of Hon'ble the Supreme Court in Food Corporation of India vs. Kamdhenu Cattle Feed Industries, (1993) 1 SCC 71. 17. If, because of a previous practice, which is clear and consistent, a party is led to legitimately expe....
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....gime by the State Government, fresh guidelines/ orders/ notification separately relating to Tax matters and incentives in supersession of the existing notifications/orders and circulars, shall be issued by the Finance Department. Clause 3.19 reads thus:- "3.19 In the event of adoption of GST regime by the State Government, the Finance Department shall issue fresh guidelines/ orders/ notification separately relating to Tax matters and incentives in supersession of the existing notifications /orders and circulars etc in the matter." 21. From these two clauses it is abundantly clear that while the benefit of exemption, inter alia from payment of CST envisaged under Industrial Policy 2016 was promulgated for a period of 10 years i.e. up to 31-03-2026, but it was also made clear that, in the event of State Government adopting the GST Regime, the Finance Department shall issue fresh guidelines/ orders/ notification separately relating to Tax matters and incentives in supersession of the existing notifications /orders and circulars and this was rightly so as the adoption of GST regime would have changed the entire tax structure. It is because of this reason, the Government, wh....
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....x Act, 2017 provided that the maximum amount of annual reimbursement shall be limited to 2% of the interstate sales turnover reflected by the dealer in his returns for the accounting year 2016-17." 24. The other noticeable clause is clause 7, which is also produced below:- "7. The Finance Department shall review the viability of the policy at the end of every financial year with special reference to its continuance in the next financial year, the items in the Negative list, determination of the amount of reimbursement etc." 25. From reading of clause 3.1 and clause 7 it clearly transpires that SRO 431, envisaging budgetary support in the shape of reimbursement of IGST which was required to be determined at the rate of 2% of the taxable turnover with respect to interstate supplies made by the industrial unit under IGST Act, 2017 it was unequivocally and clearly made it known to the industrial units that the scheme of budgetary support is though envisaged for a period ending 31-03-2026 but same shall be reviewed by the Finance Department at the end of every financial year to find out its viability with reference to its continuance in the next financial year, the items ....
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.... disclosed. iii. The incentive shall be calculated on the basis of turnover so determined. For the purpose of determining the turnover, the highest turnover of the three preceding years up to 2020-21 shall form the turnover for calculation of the incentives. However, in no case it shall be higher than the turnover of the current financial year. Explanation: For example, for determining turnover for the current financial year 2025-26, the turnover for Financial Year 2018-19, 2019-20, 2020-21 & 2025-26 is Rs 2.00 Lakh, Rs. 1.00 Lakh, Rs. 4.00 Lakh & Rs. 3.00 Lakh respectively. The turnover for determining turnover incentive shall be Rs 3.00 Lakh." 28. It is thus clear that under the Budgetary Support Scheme envisaged under SRO 431 of 2018, the budgetary support was in the shape of reimbursement of IGST paid under IGST Act, 2017 in respect of interstate supplies, whereas under the Turnover Incentive Scheme 2021, the incentive was to be calculated on the gross turnover of the Industrial Unit subject, of course, to the maximum provided under clause 7. The incentive in terms of percentage of gross turnover of Industrial Unit would include the incentive on the taxable....
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....existing industrial units that they shall be entitled to avail all the incentives envisaged under the erstwhile Industrial Policy 2016, undoubtedly the Budgetary Support Scheme, was issued in lieu of GST exemption envisaged under the Industrial Policy 2016. It seems that after the promulgation of Industrial Policy 2021-30, the Government came up with a new scheme to support the existing industrial units located in the Union Territory of Jammu and Kashmir. This scheme was named as Turnover Incentive Scheme 2021 and was promulgated by Government Order No. 127-Ind of 2021 dated 21-05-2021. Instead of extending the refund/budgetary support in respect of IGST, the new scheme gave benefit to existing industrial units on the basis of fixed percentage of the gross turnover of a unit which would necessarily include the taxable turnover with respect to interstate supplies made under IGST Act 2017. As a matter of fact the Budgetary Support Scheme promulgated vide SRO 431 of 2018 has subsumed under the Turnover Incentive Scheme 2021. The petitioners are not deprived of the incentives but have been extended the same in different form. In the absence of any prejudice pleaded by the petitioners, ....