Chetan Alloys Th Joginder Raj Sharma vs. U T Of J And K Th Financial Commissioner Finance Deptt And Others

Held

The Court held that the doctrine of promissory estoppel was not attracted. The Budgetary Support Scheme under SRO 431 of 2018 was introduced immediately upon the adoption of the GST regime, replacing the CST exemption which was no longer applicable. The scheme explicitly stated in clause 7 that its continuance would be reviewed annually. The introduction of the Turnover Incentive Scheme 2021, which subsumed the Budgetary Support Scheme, was a rational and reasonable policy decision aimed at providing continued incentives to industrial units. The change in the mode of providing incentives, from IGST reimbursement to a percentage of gross turnover, did not prejudice the petitioners. The Court found no arbitrary or unfair action by the government, and therefore, the doctrine of legitimate expectation was also not attracted. The issuance of the impugned S.O. was not in violation of Article 14 of the Constitution. Consequently, the writ petitions were found to be without merit.

Facts

The petitioners, industrial units established in Jammu and Kashmir, challenged S.O. 239 dated July 16, 2021, which withdrew the Budgetary Support Scheme notified by SRO 431 dated September 25, 2018, effective from April 1, 2021. The petitioners argued that this withdrawal violated the doctrines of promissory estoppel and legitimate expectation. The Budgetary Support Scheme was introduced in lieu of Central Sales Tax (CST) exemptions under the Industrial Policy 2016, following the adoption of the GST regime. The scheme provided budgetary support by way of reimbursement of IGST at 2% of taxable turnover for inter-state supplies. The impugned S.O. was issued to align with the new Turnover Incentive Scheme 2021, which came into effect from April 1, 2021.

Key Issues

1. Whether the withdrawal of the Budgetary Support Scheme, notified vide SRO 431 of 2018, by S.O. 239 dated July 16, 2021, is hit by the doctrine of promissory estoppel, considering the petitioners' reliance on the incentives offered under the Industrial Policy 2016 and subsequent schemes. The petitioners contended that the government's action was arbitrary and breached the assurances given, leading to a legitimate expectation of continued benefits. They argued that the withdrawal was retrospective in effect from April 1, 2021, causing prejudice. The respondents argued that the Budgetary Support Scheme was introduced as a replacement for the CST exemption due to the abolition of CST under the GST regime and that the scheme itself had a review clause. They further contended that the new Turnover Incentive Scheme 2021 replaced the old scheme, offering benefits in a different form but not depriving the petitioners of incentives, thus not violating any legitimate expectation or constitutional provisions. The respondents also highlighted that the CST Act stood abolished with the IGST Act, 2017.