Vj Jindal Cocoa PVT LTD Th Rajesh Dogra vs. Ut Of J And K Th Chief Secretary And Others

Held

The Court held that the doctrine of promissory estoppel was not attracted in this case. The Budgetary Support Scheme, introduced vide SRO 431 of 2018, was a response to the GST regime and the abolition of the CST Act. Clause 7 of SRO 431 explicitly stated that the scheme would be reviewed annually for its continuance. The Court found that the Government did not act arbitrarily or in breach of legitimate expectations. The introduction of the Turnover Incentive Scheme 2021, effective from April 1, 2021, which replaced the Budgetary Support Scheme, was a rational and reasonable step. The new scheme provided benefits based on a fixed percentage of gross turnover, including taxable turnover for interstate supplies, thereby continuing the incentive structure in a modified form. The Court reasoned that the two schemes could not operate simultaneously, and the replacement was a necessary consequence of the new policy. Therefore, the withdrawal of the old scheme and the introduction of the new one did not amount to arbitrary action or a violation of Article 14 of the Constitution. The Court found the writ petitions 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 to provide 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 various finance and industry departments, contended that the scheme was reviewed annually and was replaced by a new Turnover Incentive Scheme 2021, which provided benefits in a different form but with the same objective.

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 by the Government of Jammu and Kashmir to set up industrial units. The petitioners argued that the Government's consistent policy to encourage industrialization created a legitimate expectation, and the withdrawal of the scheme without adequate justification amounted to a breach of this expectation and a violation of Article 14 of the Constitution. The respondents contended that the Budgetary Support Scheme was a temporary measure introduced in lieu of CST exemption post-GST, and its review clause allowed for its modification or withdrawal. They further argued that the scheme was subsumed by the new Turnover Incentive Scheme 2021, which continued to provide incentives in a different format, thus not causing prejudice to the petitioners. The respondents also highlighted that the CST Act was abolished with the advent of GST, making the continuation of CST exemption benefits impossible.