2022 Supreme(SC) 1059

SUPREME COURT OF INDIA
B.R. GAVAI, B.V. NAGARATHNA, JJ.
M/S Hero Motocorp Ltd. – Appellants
VERSUS
Union of India & Ors. – Respondent
CIVIL APPEAL NO. 7405 OF 2022 [Arising out of SLP (Civil) No. 12397 of 2020] WITH CIVIL APPEAL NO. 7406 OF 2022 [Arising out of SLP (Civil) No. 11978 of 2021]
Decided On : 17-10-2022

IMPORTANT POINTS
(1) Estoppel – There cannot be any estoppel against Government in exercise of its sovereign, legislative and executive functions.
(2) Court cannot interfere in policy matters of Government unless such policy is found to be palpably arbitrary and irrational.
(3) Tax exemption – Where change of policy is in larger public interest, State cannot be prevented from withdrawing an incentive which it had granted through an earlier notification.

Headnote:

(A) Indian Evidence Act, 1872 – Section 115 – Estoppel – There cannot be any estoppel against Government in exercise of its sovereign, legislative and executive functions – Equally, it cannot be invoked for preventing government from discharging its functions under law – Only exception with regard to applicability of doctrine of estoppel is where it is necessary to prevent fraud or manifest injustice. (Paras 42, 45 and 54)

(B) Central Goods and Services Tax Act, 2017 – Section 174 – Tax exemptions – Whether Union of India can be directed to adhere to representation as made by it in Office Memorandum dated 7th January 2003 even after enactment of Central Goods and Services Tax Act, 2017 – Notification dated 18th July 2017 withdrawing exemption notifications was issued in pursuance of statutory mandate as provided under Section 174(2)(c) of CGST Act – Any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if said notification is rescinded – Where change of policy is in larger public interest, State cannot be prevented from withdrawing an incentive which it had granted through an earlier notification – Even on the ground of change of policy, which is in public interest or in view of change in statutory regime itself on account of GST Act being introduced as in instant case, it will not be correct to hold Union bound by O.M. of 2003 – This would be contrary to statutory provisions as enacted under Section 174(2)(c) of CGST Act – Unless appellants show any statutory duty cast upon respondent-Union of India to grant them 100% refund, a writ of mandamus as sought could not be issued – Though appellants may not have a claim in law, they do have a legitimate expectation that their claim deserves due consideration – Appellants permitted to make representations to respective State Governments as well as to GST Council. (Paras 55, 56, 58, 61, 73 and 80)

(C) Constitution of India – Article 226 – Central Goods and Services Tax Act, 2017 – Section 11 – Writ of Mandamus – Writ of mandamus can be issued where Authority has failed to exercise discretion vested in it or has exercised such discretion malafidely or on an irrelevant consideration – Writ of mandamus cannot be issued to Central Government to exercise power under Section 11 of CGST Act in a particular manner – In any case, it is a matter of policy which has to be determined by Union/State while taking a decision as to whether it should grant exemption from payment of CGST or make a budgetary allocation for refund of tax paid – In any case, such power can be exercised by Central Government only on recommendations of GST Council. (Paras 62 and 71)

Facts of the case:

Question that would fall for consideration is, as to whether, despite a subsequent statute specifically providing for rescinding the benefits granted under an earlier statute, Union Government can be compelled to stand by the representation made by it through the earlier notification. Question that will have to be considered is whether doctrine of promissory estoppel could operate against a statute.

Findings of Court:

GST Council has noticed that the Central and State Governments had given various incentives of Central Excise and Value Added Tax (VAT) and Central Sales Tax (CST) so as to encourage investment in those States. It also took notice of the fact that such incentives could not be continued as supplies would need to be made on payment of tax to permit flow of tax to destination state. The solution that was suggested was to provide for budgetary apportionment in the State and Central budgets for reimbursing the tax paid to those units which enjoyed tax exemption up to a specified period.

Result : Appeals dismissed.