Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2017 Supreme(SC) 757

SUPREME COURT OF INDIA
Ranjan Gogoi, Prafulla C. Pant, Navin Sinha, JJ.
STATE OF JAMMU AND KASHMIR – APPELLANT(S)
VERSUS
M/s. TRIKUTA ROLLER FLOUR MILLS PVT. LTD. AND ANOTHER – RESPONDENT(S)
CIVIL APPEAL NO.9844 OF 2011
WITH
STATE OF JAMMU AND KASHMIR AND ANOTHER – APPELLANT(S)
VERSUS
SANSAR OIL MILLS AND ANOTHER – RESPONDENT(S)
CIVIL APPEAL NO.9845 OF 2011
STATE OF JAMMU AND KASHMIR AND ANOTHER – APPELLANT(S) VERSUS
R.C. FLOUR MILLS AND ANOTHER – RESPONDENT(S)
CIVIL APPEAL NO.9846 OF 2011
STATE OF JAMMU AND KASHMIR AND ANOTHER – APPELLANT(S)
VERSUS
SUDERSHAN STEEL (P) LTD. – RESPONDENT(S)
CIVIL APPEAL NO.9847 OF 2011
STATE OF JAMMU AND KASHMIR AND ANOTHER – APPELLANT(S)
VERSUS
JAMMU STEEL INDUSTRIES AND ANOTHER – RESPONDENT(S)
CIVIL APPEAL NO.9848 OF 2011
STATE OF JAMMU AND KASHMIR AND ANOTHER – APPELLANT(S)
VERSUS
M/s. TRIKUTA ROLLER FLOUR MILLS PVT. LTD. AND ANOTHER – RESPONDENT(S)
CIVIL APPEAL NO.9849 OF 2011
STATE OF JAMMU AND KASHMIR AND ANOTHER – PETITIONER(S)
VERSUS
BARI BRAHMA INDUSTRIAL ASSOCIATION AND OTHERS – RESPONDENT(S)
CIVIL APPEAL NO. 10616 OF 2017 (Arising out of SLP(C) NO.5803 of 2006)
STATE OF JAMMU AND KASHMIR AND OTHERS – PETITIONER(S)
VERSUS
K.B. ROLLER FLOUR MILLS – RESPONDENT(S)
CIVIL APPEAL NO. 10615 OF 2017 (Arising out of SLP(C) NO.5835 of 2006)
Decided On : 18-08-2017

Advocates Appeared:
For Appellant(s) : Mr. R. Venkataramani, Mr. M. Shoeb Alam, Ms. Fauzia Shakil, Mr. Ujjwal Singh, Mr. Mojahid Karim Khan, Advs.
For Respondent(s): Mr. Abhinav Mukerji, Mr. V. Lakshmi Kumaran, Mr. L. Badri Narayanan, Ms. L. Charanya, Mr. Aditya Bhattacharya, Mr. Victor Das, Ms. Apeksha Mehta, Mr. M. P. Devanath, Mr. D. Mahesh Babu, Advs.

IMPORTANT POINTS
Executive economic policy decision can be interfered only if arbitrary and unreasonable.
State has the power to review and withdraw or modify its policy decision at any time for just and valid reasons.

Headnote:(a) Administration of justice – Judicial review – Executive economic policy decision – Can be interfered only if arbitrary and unreasonable. (Para 9)
       (2001) 3 SCC 635 – Relied upon
       (b) Administrative law – Policy decision by State – State has power to review – Could be withdrawn or modified at any time – Just and valid reasons – Not open to court to examine sufficiency or adequacy of the reasons or materials. (Para 10)
       (c) Administrative law – Policy decision by State – Benefit of refund of CST to SSI units – Units misusing the benefit draining public exchequer – Valid reason to restrict or withdraw the benefit. (Para 11, 13)
       (1988) 3 SCC 570 – Relied upon
       Facts of the case:
       The State government issued a notification bearing G.O. No. 318-GR of 1990, dated 30.11.1990, granting hundred per cent refund of central sales tax (CST), paid by small scale industrial units (SSI units) in the State, on raw materials purchased from outside the State, for a period of five years. This GO was superseded many times and thus a fresh G.O. No. 318-GR of 1990, dated 30.11.1990, was issued in super-session, providing for such refund in full up to 31.03.1995, after which it was to be provided on a sliding scale of (a) 50 per cent of the tax paid up to end of 31.03.1998 and (b) 25 per cent of the tax paid up to end of 31.03.2000. Option was also given to those entitled to avail the earlier package of incentives, to continue availing the benefit for the remaining period of their entitlement. It was again superseded by G.O. No. 253-Ind/DIC of 1993, dated 01.10.1993.
       The High Court held that administrative apathy could not be a justification for putting a ceiling on the quantum of refund. The restriction sought to be introduced, had no nexus with the object sought to be achieved. If the government bona fide deemed it against public interest, it could have withdrawn the policy. The appellant was required to provide refund for a period of 5 years from the date of production.
       Finding of the Court:
       Impugned judgment is not sustainable.
       Result: Appeals allowed.

JUDGMENT

NAVIN SINHA, J.

Leave granted in Special Leave Petition (Civil) Nos.5803 and 5835 of 2006.

2. The State government issued a notification bearing G.O. No. 318-GR of 1990, dated 30.11.1990, granting hundred per cent refund of central sales tax (CST), paid by small scale industrial units (SSI units) in the State, on raw materials purchased from outside the State, for a period of five years. It was superseded by G.O. No. 253-Ind/DIC of 1993 dated 01.10.1993, restricting the refund to the maximum annual purchase turnover of Rs.50 lacs to a unit holder. In monetary terms, Rs.2 lacs per annum per unit (taking the maximum rebate of CST at 4%).

3. As part of an executive policy to encourage entrepreneur investment in the State by SSI units, the appellant by G.O. No. 391-Ind of 1972 dated 21.06.1972, provided for refund of CST paid on purchase of raw materials from outside the State, for a period of 3 years from the date of the order, and 5 years from the date of production. It was superseded by G.O. No. 54-IND of 1983 dated 26.02.1983, providing for refund of CST for a period of 5 years from the date of production.

4. A fresh G.O. No. 318-GR of 1990, dated 30.11.1990, was issued in supersession, providing for such refund in full up to 31.03.1995, after which it was to be provided on a sliding scale of (a) 50 per cent of the tax paid up to end of 31.03.1998 and (b) 25 per cent of the tax paid up to end of 31.03.2000. Option was also given to those entitled to avail the earlier package of incentives, to continue availing the benefit for the remaining period of their entitlement. It was again superseded by G.O. No. 253-Ind/DIC of 1993, dated 01.10.1993, leading to institution of writ petitions assailing it.

5. The challenge to the notification dated 01.10.1993, by the respondents was on principles of promissory estoppel, contending that having held forth a promise for grant of exemption from CST on raw materials purchased from outside the State for five years from the date of production, the appellant could not have withdrawn or modified the benefit before that time period.

6. The Division Bench of the High Court rejected the plea of promissory estoppel. But, regarding the plea of the State change in policy on account of refunds availed fraudulently, it was held that administrative apathy, could not be a justification for putting a ceiling on the quantum of refund. The restriction sought to be introduced, had no nexus with the object sought to be achieved. If the government bonafide deemed it against public interest, it could have withdrawn the policy. The appellant was required to provide refund for a period of 5 years from the date of production.

7. Shri R. Venkataramani, learned Senior Counsel appearing on behalf of the appellant, submitted that the respondents had no legal or indefeasible right to claim refund of CST paid, except in terms of the benefit as may have been granted under the executive policy decision, and as modified from time to time. The benefit being in the nature of a concession, could be withdrawn at any time, for just and valid reasons in the larger public interest. The detection of false claims for refund of CST, leading to institution of FIRs, enquiries and vigilance cases, affecting the State exchequer, led to a conscious policy decision to put a cap on the earlier policy. Judicial review of the policy decision dated 01.10.1993, will have to be circumscribed within limits of relevancy of materials considered only. If the policy decision was found to be completely arbitrary, based on no materials, or took into consideration irrelevant materials, then only the Court could have interfered. A reasonable conclusion based on satisfaction culled out from relevant materials regarding misuse of the concession, and protection of the State exchequer were sufficient justification for change in policy. The decision to put a cap on reimbursement was, therefore, not arbitrary.

8. Learned Counsel for the respondents, su

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2017 Supreme(SC) 757

IMPORTANT POINTSExecutive economic policy decision can be interfered only if arbitrary and unreasonable.State has the power to review and withdraw or modify its policy decision at any time for just and valid reasons.

Cases Referred (2)

IMPORTANT POINTS
Executive economic policy decision can be interfered only if arbitrary and unreasonable.
State has the power to review and withdraw or modify its policy decision at any time for just and valid reasons.