Sudhir Power LTD Th Arvind Samnotra vs. Ut Of J And K Th Financial Commissioner Finance Deptt And Others

Held

The Court held that neither the doctrine of promissory estoppel nor the doctrine of legitimate expectation were attracted in this case. Regarding promissory estoppel, the Court noted that the Budgetary Support Scheme was introduced immediately after the adoption of the GST regime, replacing the abolished CST. The scheme itself, under clause 7 of SRO 431, explicitly stated that its viability would be reviewed annually for continuance in the next financial year. This provision indicated that the scheme was not an absolute promise. The Court found that the government had not acted arbitrarily. The Budgetary Support Scheme was replaced by the Turnover Incentive Scheme 2021, which provided benefits to existing industrial units based on a fixed percentage of their gross turnover. This new scheme subsumed the old one, continuing the incentive for industrial units, albeit in a different form. The Court reasoned that the change in the mode and manner of providing incentives did not prejudice the petitioners. The issuance of S.O. 239 was necessary to align with the commencement of the Turnover Incentive Scheme 2021 from April 1, 2021. Therefore, the Court concluded that the action of the respondents was not irrational, unreasonable, or arbitrary, and did not violate Article 14 of the Constitution of India. The writ petitions were found to be without merit.

Facts

The petitioners, various industrial units in Jammu and Kashmir, challenged S.O. 239 dated July 16, 2021, which withdrew the Budgetary Support Scheme notified earlier 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 following the adoption of the GST regime, providing reimbursement of IGST at 2% of taxable turnover for interstate supplies, in lieu of previous exemptions like Central Sales Tax (CST). The respondents, the Union Territory of Jammu and Kashmir and its finance and industries departments, contended that the scheme was reviewed and replaced by a new Turnover Incentive Scheme 2021, which provided benefits in a different form.

Key Issues

1. Whether the withdrawal of the Budgetary Support Scheme, 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 scheme (Section 115 of the Constitution of India, principles of natural justice)? 2. Whether the withdrawal of the Budgetary Support Scheme, 2018, is in violation of the legitimate expectations of the petitioners, given the State's consistent policy to encourage industrialization and the terms of SRO 431 of 2018, which suggested review but not arbitrary withdrawal (Article 14 of the Constitution of India)? Petitioner's Arguments: The petitioners contended that the withdrawal of the Budgetary Support Scheme, which was introduced as a replacement for earlier tax exemptions like CST, constituted a breach of promise and legitimate expectation. They argued that the scheme was intended to provide continued support to industries and its abrupt withdrawal was arbitrary and unfair. They relied on the principles of promissory estoppel and legitimate expectation to assert their right to continue receiving the benefits. Respondent's Arguments: The respondents argued that the Budgetary Support Scheme was introduced in lieu of the CST exemption, which was abolished with the advent of GST. They stated that the scheme itself, under clause 7 of SRO 431, allowed for review of its viability annually. Furthermore, they contended that the scheme was subsumed by the new Turnover Incentive Scheme 2021, which provided similar incentives in a different format, thus not depriving the petitioners of benefits but changing the mode of delivery. They asserted that the government's actions were not arbitrary or in breach of any legitimate expectation.