M/S Hero Motocorp LTD vs. Union Of INDIA & Ors.

Held

The Supreme Court held that while Section 174(2)(c) of the CGST Act protects existing rights, its proviso clarifies that tax exemptions granted as incentives do not continue as privileges if the notification granting them is rescinded on or after the appointed day. The Court found that the 2003 Notification was indeed rescinded by a subsequent notification issued under the proviso to Section 174(2)(c). The Court firmly rejected the plea of promissory estoppel against the legislature's functions, stating that it cannot be invoked to override statutory provisions. The Court also held that a writ of mandamus cannot be issued to compel the government to exercise its power under Section 11 of the CGST Act in a specific manner, especially when it involves policy decisions, unless such policy is palpably arbitrary or irrational. While dismissing the legal claim based on promissory estoppel, the Court acknowledged the appellants' legitimate expectation due to their investments made based on the 2003 policy. Therefore, the Court permitted the appellants to make representations to the respective State Governments and the GST Council, requesting them to consider these representations for reimbursement, particularly concerning the 58% of CGST not covered by the budgetary support, out of devolved funds.

Facts

The appellant, Hero Motocorp Ltd., established industrial units in Uttarakhand and Himachal Pradesh, availing a 100% excise duty exemption for 10 years under an Office Memorandum (OM) of 2003. Upon the introduction of the Goods and Services Tax (GST) regime, this benefit was reduced to 58% through the Budgetary Support Policy. The appellant challenged this reduction, arguing it violated the principle of promissory estoppel. The High Court dismissed the writ petitions. The Supreme Court heard the appeal, considering the interplay between the earlier exemption notification and the provisions of the Central Goods and Services Tax Act, 2017, particularly Section 174(2)(c) concerning repeal and saving.

Key Issues

1. Whether the benefit of tax exemption granted under the 2003 Office Memorandum and Notification continues as a privilege under Section 174(2)(c) of the Central Goods and Services Tax Act, 2017, despite the proviso thereto? 2. Can the doctrine of promissory estoppel be invoked against the legislature in the exercise of its legislative functions, especially when a subsequent statute provides for rescinding earlier benefits? 3. Can a writ of mandamus be issued to the Central Government to exercise its power under Section 11 of the CGST Act in a particular manner, or to compel it to stand by a representation made in an earlier notification contrary to a subsequent statutory provision? Petitioner's arguments: The appellant contended that the 2003 OM and notification created a vested right or privilege that should be protected under Section 174(2)(c) of the CGST Act. They argued that the principle of promissory estoppel should prevent the government from withdrawing the promised exemption, as they had invested based on this representation. They also sought a writ of mandamus to compel the government to grant the full exemption. Revenue's arguments: The revenue argued that the proviso to Section 174(2)(c) of the CGST Act explicitly allows for the rescission of tax exemptions granted as incentives, and the subsequent notification withdrawing these benefits was in line with this statutory provision. They contended that promissory estoppel does not apply against legislative functions and that the change in law (introduction of GST) and policy changes in the larger public interest justified the withdrawal of the full exemption.