# M/S HERO MOTOCORP LTD v. UNION OF INDIA & ORS

- **Citation:** [2022] 13 S.C.R. 592
- **Court:** Supreme Court of India
- **Decided:** 2022-10-17
- **Case number:** Civil Appeal No. 7405 Of 2022
- **Bench:** B. R. Gavai, B. V. Nagarathna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-hero-motocorp-ltd-v-union-of-india-ors-35399
- **Pages:** 43

## Headnote

Central Goods And Services Tax Act, 2017: ss.. 11 , 174(2)(c)
- Repeal and saving - Tax exemption - Office Memorandum of
2003 provided 100 % exemption of excise duty for 10 years from
the date of commencement of commercial production in the State of
Uttrakhand and Himachal Pradesh to new industrial units and
existing industrial units - Appellants availed the exemption for the
said period whereafter the Goods and Service Tax regime came
into existence and the benefit being enjoyed by the appellants was
reduced to 58% through the Budgetary Support Policy - Writ
petitions challenging the same, dismissed by the High Court - On
appeal, held: Though the first part of clause (c) of sub-section (2)
of s. 174 would protect any right, privilege, obligation, etc. under
the amended Act or repealed Acts, the proviso thereto provides that
any tax exemption granted as an incentive against investment shall
not continue as a privilege if the said notification is rescinded on
or after the appointed day - Benefit which was granted under the
2003 Notification stands rescinded in view of the notification issued
under proviso to clause (c) of sub-section (2) of s. 174 - When the
legislature exercises its powers for the public good, the earlier
representation would not operate against the Government as
equitable estoppels - There can be no promissory estoppel against
the exercise of the legislative functions of the State - If the plea of
appellants is accepted, it would amount to enforcing a representation
made in the said O.M. and Notification of 2003 contrary to the
legislative incorporation in the proviso to s. 174(2)(c) - Thus, the
claim of the appellant on estoppel is rejected - However, the
appellants permitted to make representations to the respective State
Government and the GST Council.
Doctrine of promissory estoppel - Applicability of, against
the the legislature in the exercise of its legislative functions - When
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a subsequent statute specifically providing for rescinding the benefits
granted under an earlier statute, can the Union Government be
compelled to stand by the representation made by it through the
earlier notification - Explained and discussed.
Writ of Mandamus - Issuance of - When - Held: Writ of
mandamus can be issued where the Authority has failed to exercise
the discretion vested in it or has exercised such a discretion
malafidely or on an irrelevant consideration - A writ of mandamus
cannot be issued to the Central Government to exercise power under
Section 11 of the CGST Act in a particular manner -This Court
cannot interfere in policy matters of the Government unless such
policy is found to be palpably arbitrary and irrational.
Dismissing the appeals, the Court
HELD: 1.1 Though the first part of clause (c) of sub-section
(2) of Section 174 of the Central Goods And Services Tax Act,
2017 would protect any right, privilege, obligation, etc. under
the amended Act or repealed Acts, the proviso thereto provides
that any tax exemption granted as an incentive against investment
shall not continue as a privilege if the said notification is rescinded
on or after the appointed day. Admittedly, vide Notification No.21/
2017 dated 18th July 2017, various earlier area-based exemption
notifications have been rescinded. It is thus clear that the benefit
which was granted under the 2003 Notification stands rescinded
in view of the notification issued under proviso to clause (c) of
sub-section (2) of Section 174 of the CGST Act. [Para 30][610-GH; 611-A-B]
1.2 There can be no estoppel against the legislature in the
exercise of its legislative functions. The Constitution Bench in
the case of M. Ramanatha Pillai's case has approved the view in
American Jurisprudence that the doctrine of estoppel will not be
applied against the State in its governmental, public or sovereign
capacity. It further held that the only exception with regard to
applicability of the doctrine of estoppel is where it is necessary
to prevent fraud

## Text

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[2022] 13 S.C.R.
 [2022] 13 S.C.R. 592
592
M/S HERO MOTOCORP LTD.
v.
UNION OF INDIA & ORS.
(Civil Appeal No. 7405 Of 2022)
OCTOBER 17, 2022
[B. R. GAVAI AND B. V. NAGARATHNA, JJ.]
Central Goods And Services Tax Act, 2017: ss.. 11 , 174(2)(c)
- Repeal and saving - Tax exemption - Office Memorandum of
2003 provided 100 % exemption of excise duty for 10 years from
the date of commencement of commercial production in the State of
Uttrakhand and Himachal Pradesh to new industrial units and
existing industrial units - Appellants availed the exemption for the
said period whereafter the Goods and Service Tax regime came
into existence and the benefit being enjoyed by the appellants was
reduced to 58% through the Budgetary Support Policy - Writ
petitions challenging the same, dismissed by the High Court - On
appeal, held: Though the first part of clause (c) of sub-section (2)
of s. 174 would protect any right, privilege, obligation, etc. under
the amended Act or repealed Acts, the proviso thereto provides that
any tax exemption granted as an incentive against investment shall
not continue as a privilege if the said notification is rescinded on
or after the appointed day - Benefit which was granted under the
2003 Notification stands rescinded in view of the notification issued
under proviso to clause (c) of sub-section (2) of s. 174 - When the
legislature exercises its powers for the public good, the earlier
representation would not operate against the Government as
equitable estoppels - There can be no promissory estoppel against
the exercise of the legislative functions of the State - If the plea of
appellants is accepted, it would amount to enforcing a representation
made in the said O.M. and Notification of 2003 contrary to the
legislative incorporation in the proviso to s. 174(2)(c) - Thus, the
claim of the appellant on estoppel is rejected - However, the
appellants permitted to make representations to the respective State
Government and the GST Council.
Doctrine of promissory estoppel - Applicability of, against
the the legislature in the exercise of its legislative functions - When
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a subsequent statute specifically providing for rescinding the benefits
granted under an earlier statute, can the Union Government be
compelled to stand by the representation made by it through the
earlier notification - Explained and discussed.
Writ of Mandamus - Issuance of - When - Held: Writ of
mandamus can be issued where the Authority has failed to exercise
the discretion vested in it or has exercised such a discretion
malafidely or on an irrelevant consideration - A writ of mandamus
cannot be issued to the Central Government to exercise power under
Section 11 of the CGST Act in a particular manner -This Court
cannot interfere in policy matters of the Government unless such
policy is found to be palpably arbitrary and irrational.
Dismissing the appeals, the Court
HELD: 1.1 Though the first part of clause (c) of sub-section
(2) of Section 174 of the Central Goods And Services Tax Act,
2017 would protect any right, privilege, obligation, etc. under
the amended Act or repealed Acts, the proviso thereto provides
that any tax exemption granted as an incentive against investment
shall not continue as a privilege if the said notification is rescinded
on or after the appointed day. Admittedly, vide Notification No.21/
2017 dated 18th July 2017, various earlier area-based exemption
notifications have been rescinded. It is thus clear that the benefit
which was granted under the 2003 Notification stands rescinded
in view of the notification issued under proviso to clause (c) of
sub-section (2) of Section 174 of the CGST Act. [Para 30][610-GH; 611-A-B]
1.2 There can be no estoppel against the legislature in the
exercise of its legislative functions. The Constitution Bench in
the case of M. Ramanatha Pillai's case has approved the view in
American Jurisprudence that the doctrine of estoppel will not be
applied against the State in its governmental, public or sovereign
capacity. It further held that the only exception with regard to
applicability of the doctrine of estoppel is where it is necessary
to prevent fraud or manifest injustice. [Para 54][624-E-G]
1.3. Undisputedly, the Notification dated 18th July 2017
withdrawing the exemption notifications was issued in pursuance
of the statutory mandate as provided under Section 174(2)(c) of
the CGST Act. If the contention as raised by the appellants is to
M/S HERO MOTOCORP LTD. v. UNION OF INDIA & ORS.
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be accepted, it would make the provisions under the proviso to
Section 174(2)(c) of the CGST Act redundant and otiose. The
legislature in its wisdom has specifically incorporated the proviso
to Section 174(2)(c) providing therein that any tax exemption
granted as an incentive against investment through a notification
shall not continue as privilege if the said notification is rescinded.
If the contention is accepted, it will amount to enforcing a
representation made in the said O.M. of 2003 and 2003
Notification contrary to the legislative incorporation in the proviso
to Section 174(2)(c) of the CGST Act. In other words, it will permit
an estoppel to be operated against the legislative functions of
the Parliament. The claim of the appellants on estoppel is without
merit and is to be rejected. [Para 55][624-G-H; 625-A-C]
1.4 When an exemption granted earlier is withdrawn by a
subsequent notification based on a change in policy, even in such
cases, the doctrine of promissory estoppel could not be invoked.
Where the change of policy is in the larger public interest, the
State cannot be prevented from withdrawing an incentive which
it had granted through an earlier notification. [Para 56][625-C-E]
1.5 Even on the ground of change of policy, which is in public
interest or in view of the change in the statutory regime itself on
account of the GST Act being introduced as in the instant case,
itwould not be correct to hold the Union bound by the
representation made by it, i.e. by the said O.M. of 2003. Further,
this would be contrary to the statutory provisions as enacted under
Section 174(2)(c) of the CGST Act. [Para 58][626-B-C]
1.6 Unless the appellants show any statutory duty cast upon
the respondent-Union of India to grant them 100% refund, a writ
of mandamus as sought could not be issued. A writ of mandamus
can be issued where the Authority has failed to exercise the
discretion vested in it or has exercised such a discretion
malafidely or on an irrelevant consideration. In the instant case,
there is no duty cast on the Union to refund 100% of CGST. as
such, the relief as sought cannot be granted. [Para 61, 62, 64][627C-D; 627-H; 628-A; 628-F-G]
1.7. A writ of mandamus cannot be issued to the Central
Government to exercise power under Section 11 of the CGST
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Act in a particular manner. In any case, it is a matter of policy
which has to be determined by the 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 the tax
paid. In any case, such power can be exercised by the Central
Government only on the recommendations of the GST Council.
The Central Government was not bound to continue with a
representation made by it in 2003 in view of the change of law by
the enactment of the CGST Act. However, in order to partly honour
the representation made by it, it has decided to refund 58% of
the CGST paid by the entities. It is more than settled that this
Court cannot interfere in policy matters of the Government unless
such policy is found to be palpably arbitrary and irrational. In that
view of the matter, the Court does not find that the claim made
on the basis of Section 11 of the CGST Act is of any substance.
[Para 71][630-D-G]
1.8 Though the appellants' claim based on promissory
estoppel is without substance, this is not a case wherein it can be
said that the appellants' claim is wholly without any substance.
[Para 72][630-G-H]
1.9 The appellants have established their industrial units
based on the industrial policy as reflected in the said O.M. of
2003. The policy of the year 2003, in question, was based on the
statement made by the Hon'ble Prime Minister during his visit
to Uttarakhand. As such, the policy was framed to bring into effect
the statement made by the highest executive functionary of the
country. Relying on the said policy, the appellants have established
their units. Though the appellants may not have a claim in law,
they do have a legitimate expectation that their claim deserves
due consideration. [Para 73][630-H; 631-A-B]
1.10 The 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 the
M/S HERO MOTOCORP LTD. v. UNION OF INDIA & ORS.
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destination state. The solution that was suggested was to provide
for budgetary apportionment in the State and the Central budgets
for reimbursing the tax paid to those units which enjoyed tax
exemption up to a specified period. [Para 75][631-H; 632-A-B]
1.11 In the deliberations of the GST Council itself, it was
observed that the States also need to correspondingly reimburse
the industrial units which were entitled to exemption under any
existing incentive scheme, out of the share of revenue received
through devolution, which, as per the Finance Commission,
stands at 42%. [Para 78][633-C-D]
1.12 The GST Council is a constitutional body. It has powers
to make recommendations on wide-ranging issues concerning
GST, including grant of exemptions from the GST. It also has
power to make recommendations with regard to special provisions
governing North Eastern and Himalayan States. Taking into
consideration that the units like the appellants have been
established in the Himalayan and North-Eastern States based on
the said O.M. of 2003 and that lakhs of persons are employed in
such industries, it would be appropriate that such States should
also consider to correspondingly reimburse such units out of the
share of revenue received by them through devolution from the
Central Government. The Court further finds that it would also
be appropriate that the GST Council considers making
appropriate recommendations to the States in that regard. [Para
79][633-E-G]
1.13 The appellants are permitted to make representations
to the respective State Governments as well as to the GST
Council. The Court also requests the State Governments and
the GST Council to consider such representations, if made, in
accordance with what has been observed in an expeditious
manner. [Para 80][633-H; 634-A]
M. Ramanatha Pillai vs. The State of Kerala and another
(1973) 2 SCC 650 : [1974] 1 SCR 515; State of Kerala
and another vs. The Gwalior Rayon Silk Manufacturing
(WVG). Co. Ltd. Etc. (1973) 2 SCC 713 : [1974] 1 SCR
671 - followed.
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Video Electronics Pvt. Ltd. and another vs. State of
Punjab and another (1990) 3 SCC 87 : [1989] 2 Suppl.
SCR 731 -held inapplicable.
Kasinka Trading and another vs. Union of India and
another (1995) 1 SCC 274 : [1994] 4 Suppl. SCR 448;
Shrijee Sales Corpn. vs. Union of India (1997) 3 SCC
398 : [1996] 10 Suppl. SCR 888; State of Rajasthan
vs. Mahaveer Oil Industries (1999) 4 SCC 357 : [1999]
2 SCR 798; Shree Sidhbali Steels Ltd. vs. State of U.P.
(2011) 3 SCC 193 : [2011] 3 SCR 134; Director
General of Foreign Trade vs. Kanak Exports (2016) 2
SCC 226 : [2015] 15 SCR 287; Comptroller and Auditor
General of India, Gian Prakash, New Delhi and
another vs. K.S. Jagannathan and another (1986) 2
SCC 679 : [1986] 2 SCR 17; Union of India & others
vs. Bharat Forge Ltd. & another Civil Appeal No. 5294
of 2022 (@ SLP(C) No.4960 of 2021 decided on 16th
August, 2022 - relied on.
Century Spinning and Manufacturing Company Ltd.
and another vs. The Ulhasnagar Municipal Council and
another (1970) 1 SCC 582 : [1970] 3 SCR 854; The
Bihar Eastern Gangetic Fishermen Co-operative Society
Ltd. vs. Sipahi Singh and others (1977) 4 SCC 145 :
[1978] 1 SCR 375; Motilal Padampat Sugar Mills Co.
Ltd. vs. State of Uttar Pradesh and others (1979) 2 SCC
409 : [1979] 2 SCR 641; M/s Jit Ram Shiv Kumar and
others vs. State of Haryana and others (1981) 1 SCC
11 : [1980] 3 SCR 689; Union of India and others vs.
Godfrey Philips India Ltd. (1985) 4 SCC 369 : [1985]
3 Suppl. SCR 123; Express Newspapers Pvt. Ltd.and
others vs. Union of India and others (1986) 1 SCC 133
: [1985] 3 Suppl. SCR 382; Union of India & Ors. vs.
M/s Indo-Afghan Agencies Ltd. 1968 2 SCR 366; State
of Bihar and others vs. Suprabhat Steel Ltd. and others
(1999) 1 SCC 31 : [1998] 2 Suppl. SCR 699; State of
Jharkhand and others vs. Tata Cummins Ltd. and
another (2006) 4 SCC 57 : [2006] 3 SCR 443; Lloyd
Electric and Engineering Limited vs. State of Himachal
M/S HERO MOTOCORP LTD. v. UNION OF INDIA & ORS.
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SUPREME COURT REPORTS
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Pradesh and others (2016) 1 SCC 560 : [2015] 10 SCR
362; MRF Ltd., Kottayam vs. Asstt. Commissioner
(Assessment) Sales Tax and others (2006) 8 SCC 702 :
[2006] 6 Suppl. SCR 417; Manuelsons Hotels Private
Limited vs. State of Kerala and others (2016) 6 SCC
766 : [2016] 3 SCR 718; State of Punjab vs. Nestle
India Ltd. and another (2004) 6 SCC 465 : [2004] 2
Suppl. SCR 135; Excise Commissioner, U.P. Allahabad
and others vs. Ram Kumar and others (1976) 3 SCC
540 : [1976] 0 Suppl. SCR 532; The State of Jharkhand
and ors. vs. Brahmputra Metallics Ltd. and ors. MANU/
SC/0906/2020 [Civil Appeal Nos. 3860-3862 of 2020,
decided on 1.12.2020]; Union of India vs. Paliwal
Electricals (P) Ltd. and another (1996) 3 SCC 407 :
[1996] 3 SCR 845; Union of India & Anr. vs. V.V.F.
Limited & Anr. 2020 SCC Online SC 378; Union of
India and others vs. VKC Footsteps India Private Limited
(2022) 2 SCC 603; Union of India and another vs.
Mohit Minerals Pvt. Ltd. through Director 2022 SCC
OnLine SC 657; Union of India and others vs. Unicorn
Industries (2019) 10 SCC 575 : [2019] 12 SCR 270;
Augustan Textile Colours Limited (Now Augustan Textile
Colours Private Limited) vs. Director of Industries and
another (2022) 6 SCC 626; Kuldeep Singh vs. Govt. of
NCT of Delhi (2006) 5 SCC 702 : [2006] 3 Suppl. SCR
335; Union of India and another vs. International
Trading Co. and another (2003) 5 SCC 437 : [2003] 1
Suppl. SCR 55 - referred to.
Case Law Reference
[1996] 3 SCR 845
referred to
Para 15
(2022) 2 SCC 603
referred to
Para 24
[2019] 12 SCR 270
referred to
Para 24
(2022) 6 SCC 626
referred to
Para 24
[2006] 3 Suppl. SCR 335
referred to
Para 24
[2003] 1 Suppl. SCR 55
referred to
Para 24
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1968 2 SCR 366
referred to
Para 33
[1970] 3 SCR 854
referred to
 Para 35
[1974] 1 SCR 671
followed
 Para 38
[1976] 0 Suppl. SCR 532
referred to
 Para 40
[1978] 1 SCR 375
referred to
Para 41
[1979] 2 SCR 641
referred to
Para 43
[1980] 3 SCR 689
referred to
Para 44
[1985] 3 Suppl. SCR 123
referred to
Para 47
[1985] 3 Suppl. SCR 382
referred to
Para 48
[1974] 1 SCR 515
followed
Para 54
[1994] 4 Suppl. SCR 448
relied on
Para 56
[1996] 10 Suppl. SCR 888
relied on
Para 56
[1999] 2 SCR 798
relied on
Para 56
[2011] 3 SCR 134
relied on
Para 56
[2015] 15 SCR 287
relied on
Para 56
[1986] 2 SCR 17
relied on
Para 61
[1998] 2 Suppl. SCR 699
referred to
Pra 66
[2006] 3 SCR 443
referred to
Pra 66
[2015] 10 SCR 362
referred to
Para 66
[2006] 6 Suppl. SCR 417
referred to
Para 67
[2016] 3 SCR 718
referred to
Para 67
[2004] 2 Suppl. SCR 135
referred to
Para 68
[1989] 2 Suppl. SCR 731
held inapplicable
Para 69
CIVIL APPELLATE JURISDICTION : Civil Appeal No.7405
of 2022.
From the Judgment and Order dated 02.03.2020 of the High Court
of Delhi at New Delhi in W.P. (C) No.505 of 2020.
M/S HERO MOTOCORP LTD. v. UNION OF INDIA & ORS.
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With
Civil Appeal No.7406 of 2022.
S. Ganesh, V. Sridharan, Sr. Advs., Srinivas Kotni, Akshay Kumar,
Ms. Urvashi Kalra, Ms. Subhangi, Pawanshree Agrawal, Ms. Charanya
Lakshmikumaran, Karan Sachdev, Kunal Kapoor, Somesh Jain, Sahil
Parghi, Aditya Bhattacharya, Ms. Apeksha Mehta, Ms. Mounica Kasturi,
Pranav Mundra, Advs. for the Appellant.
N. Venkatraman, ASG, Akshay Amritanshu, Ms. Neela Kedar
Gokhale, Sansriti Pathak, Mukesh Kumar Maroria, Advs. for the
Respondents.
The Judgment of the Court was delivered by
B. R. GAVAI, J.
1. Leave granted.
2. These appeals raise an important question of law as to whether
the Union of India can be directed to adhere to the representation as
made by it in the Office Memorandum dated 7th January 2003
(hereinafter referred to as "the said O.M. of 2003") even after the
enactment of the Central Goods and Services Tax Act, 2017 (hereinafter
referred to as "the CGST Act").
3. Civil Appeal arising out of Special Leave Petition (Civil) No.
12397 of 2020 arises out of judgment and order dated 2nd March, 2020,
passed by the High Court of Delhi, dismissing the Writ Petition (Civil)
No. 505 of 2022 filed by the appellant - Hero Motocorp Ltd., thereby
rejecting the appellants claim of 100% budgetary support in lieu of the
pre-existing 100% outright excise duty exemption for ten years from the
date of the commencement of commercial production, as provided for
by the said O.M. of 2003 issued by the Government of India.
4. Civil Appeal arising out of Special Leave Petition (Civil) No.
11978 of 2021, arises out of judgment and order dated 5th February, 2021
passed by the High Court of Sikkim, dismissing the Writ Petition (C) No.
47 of 2018, filed by the appellant - Sun Pharma Laboratories Ltd.
assailing the reduction of the benefit of 100% exemption from excise
duty granted to it vide office memorandum dated 17th February, 2003,
which were to be made available for a period of ten years from the date
of commencement of commercial production.
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5. Both the appellants herein approached the respective High
Courts claiming therein that in view of the said O.M. of 2003 and
Notification No.50/2003-C.E. dated 10th June 2003 (hereinafter referred
to as "2003 Notification"), the Union was bound to give 100% tax
exemption till completion of 10 years' period from the date of
commencement of their commercial production.
FACTUAL BACKGROUND
6. The factual scenario leading to the filing of the present appeals
lies in a narrow compass, which is as under:
6.1 The Government of India had issued the said O.M. of 2003
based on the statement made by the Hon'ble Prime Minister, during his
visit to Uttranchal (now Uttarakhand) in March 2002. The said O.M. of
2003 provided that, for the States of Uttaranchal and Himachal Pradesh,
new industrial units and existing industrial units on their substantial
expansion would be entitled to exemption of 100% outright excise duty
for 10 years from the date of commencement of commercial production.
The said O.M. of 2003 also provided that there shall be 100% income
tax exemption for such units initially for five years and thereafter 30%
for companies and 25% for other companies for a further period of five
years, from the date of commencement of commercial production.
Various other incentives were also provided vide the said O.M. of 2003.
6.2 In pursuance to the said O.M. of 2003, a 2003 Notification
was notified in exercise of the powers conferred by sub-section (1) of
Section 5A of the Central Excise Act, 1944 read with sub-section (3) of
Section 3 of the Additional Duties of Excise (Goods of Special
Importance) Act, 1957 and sub-section (3) of Section 3 of the Additional
Duties of Excise (Textiles and Textile Articles) Act, 1978. The said
notification provided for exemption for a period not exceeding ten years
from the date of publication of the said notification in the Official Gazette
or from the date of commencement of commercial production, whichever
was later.
6.3 The appellant - Hero Motocorp Ltd. had established a new
industry unit for manufacture of motorcycles at Haridwar, Uttarakhand,
which commenced commercial production from 7th April, 2008. The
appellant - Hero Motocorp Ltd. availed the exemption until 1st July,
2017, whereafter the Goods and Service Tax regime came into existence
and the benefit being enjoyed by the appellant - Hero Motocorp Ltd.
was reduced to 58% through the Budgetary Support Policy.
M/S HERO MOTOCORP LTD. v. UNION OF INDIA & ORS.
[B. R. GAVAI, J.]
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6.4 The appellant - Sun Pharma Laboratories Ltd. setup its first
industrial unit which commenced its commercial production from 20th
April, 2009. A second unit was also set up later which commenced
commercial production from 14thApril, 2014. Before the advent of the
new GST regime, both of the appellant's units were enjoying a full refund
of the central excise duties paid by them as provided for in the exemption
notification dated 25th June, 2003, pursuant to the Office Memorandum
dated 17th February, 2003. After the commencement of the new GST
regime, here too, the benefit being enjoyed by the appellant - Sun Pharma
Laboratories was reduced to 58% through the implementation of the
Budgetary Support Policy.
6.5 Subsequently, by the Constitution (One Hundred and First
Amendment) Act, 2016 (hereinafter referred to as "the 101st Amendment
Act"), the Constitution of India came to be amended by the Parliament
to introduce the goods and services tax system pan India. By the 101st
Amendment Act, concurrent taxing power was conferred on the Union
as well as the States including the Union Territories. By the 101st
Amendment Act, Article 246A was inserted, making a special provision
for levy of Goods and Service Tax ("GST" for short), by both the Union
as well as the States. Article 269A was inserted to provide for levy and
collection of GST in the course of Inter-State trade or commerce ("IGST"
for short) by the Government of India. It also provided that such tax
shall be apportioned between the Union and the States in the manner as
may be provided by Parliament by law on the recommendations of the
Goods and Services Tax Council ("GST Council" for short).
6.6 In pursuance of the said amendments to the Constitution of
India, the Central Goods and Services Tax Act, 2017 (hereinafter referred
to as "the CGST Act") and Integrated Goods and Services Tax Act,
2017 (hereinafter referred to as "the IGST Act") were enacted by the
Parliament and various States Goods and Service Tax Acts ("SGST"
for short) were enacted by the State Legislatures for their respective
States for the levy of GST.
6.7 Under clause (c) of sub-section (2) of Section 174 of the
CGST Act, a Notification No.21/2017-CE dated 18th July 2017 was issued
by the respondent-Union of India by which the exemption notifications
through which tax exemptions were granted as an incentive against the
investment came to be rescinded on or after the appointed day, i.e. 1st
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July 2017. As a result, the tax exemption which was granted by the said
O.M. of 2003 ceased to continue with effect from 1st July 2017.
6.8 The GST Council, in its meeting held on 30th September 2016,
had resolved that all entities exempted from payment of indirect tax
would pay tax in the GST regime. It had also resolved that the decision
to continue with any incentive given to specific industries in existing
industrial policies of States or through any schemes of the Central
Government would be with the concerned State or Central Government.
It was further resolved that in the event it was decided by the concerned
State or Central Government to continue any existing exemption/incentive,
etc., then it would be administered by way of a reimbursement mechanism
through the budgetary route. The modalities of the same were to be
worked out by the concerned State/Centre.
6.9 In pursuance of the said recommendations of the GST Council,
the Central Government notified the Budgetary Support Scheme vide
Notification dated 5th October 2017, thereby providing to refund/reimburse
the Central share of CGST and IGST to the affected eligible industrial
units for the residual period in the North Eastern and the Himalayan
States. The Central share was determined at 58% of CGST and 29% of
IGST.
6.10 Being aggrieved by the decision of the Central Government
in restricting the refund only to 58% of CGST and 29% of IGST and not
providing 100% refund of CGST, the appellant-Hero Motocorp Ltd.
approached the Delhi High Court by way of writ petition being Writ
Petition (Civil) No. 505 of 2020 and the appellant-Sun Pharma
Laboratories Limited approached the Sikkim High Court by way of writ
petition being Writ Petition (Civil) No.47 of 2018. The Delhi High Court,
vide its judgment and order dated 2nd March 2020, and the Sikkim High
Court, vide its judgment and order dated 5th February 2021, have dismissed
the said writ petitions.
6.11 Being aggrieved by the dismissal of the writ petitions, the
appellants (the original writ petitioners) have approached this Court.
6.12 Hence the present appeals.
SUBMISSIONS
7. We have heard Shri S. Ganesh, learned Senior Counsel
appearing on behalf of the appellant-Hero Motocorp Ltd. in Civil Appeal
M/S HERO MOTOCORP LTD. v. UNION OF INDIA & ORS.
[B. R. GAVAI, J.]
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arising out of Special Leave Petition (Civil) No.12397 of 2020, Shri V.
Sridharan, learned Senior Counsel appearing on behalf of the appellantSun Pharma Laboratories Ltd. in Civil Appeal arising out of Special
Leave Petition (Civil) No.11978 of 2021 and Shri N. Venkatraman, learned
Additional Solicitor General appearing on behalf of the respondent-Union
of India.
8. Shri S. Ganesh, learned Senior Counsel, submits that the perusal
of the said O.M. of 2003 would reveal that an unequivocal representation
was made by the Central Government to the commercial entities which
were desirous of setting up industrial units in the States of Uttarakhand
and Himachal Pradesh, that, in the event a new industry is established or
there is a substantial expansion of the existing unit, then such industrial
units would be entitled to 100% exemption from payment of excise duty
for 10 years. He submits that the Central Government is bound by such
representation. It is submitted that the industrial units like that of the
appellants, relying on the promise made by the Central Government,
have altered their position to their detriment and as such, the Central
Government is now estopped from resiling from the representation made
by it to the appellants.
9. Shri Ganesh submits that the figure of refund only to the extent
of 58% has been achieved in an arbitrary and irrational manner. He
submits that the Union has purportedly done so under the umbrella of
the report of the Finance Commission. He contends that, even under the
earlier regime of excise tax and all other levies collected by the Central
Government, the States were entitled to their share therein. It is stated
that the share of the Central Government and the State Government in
the said regime has always been there and it is not as if it has come for
the first time after the GST regime started. Learned Senior Counsel
submits that under the old regime, though the Central Government was
sharing with the States a certain percentage of entire taxes collected by
it, still, 100% exemption from the payment of duty was being granted to
the entities like the appellants herein. It is submitted that there is no
reason as to why the same should not have been continued under the
new regime.
10. Shri Ganesh further submits that the policy as is reflected in
the said O.M. of 2003 would stand on a higher pedestal than the statutory
provision or a notification under a statute and the Union would be bound
to adhere to the same. He submitted that even in January 2003 when the
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exemption notifications were issued, the same sharing pattern was in
existence between the States and the Central Government.
11. Shri Ganesh further submits that under Section 11 of the CGST
Act, the Government has the power to grant exemption from tax and
there is no reason as to why the Union Government should not have
exercised such a power in the peculiar facts and circumstances of the
case.
12. Learned Senior Counsel, therefore, submits that the view taken
by the Delhi High Court is not sustainable in law. He submits that the
appeals deserve to be allowed and a direction be issued to the Central
Government to provide 100% reimbursement of CGST for the remainder
of the period.
13. Shri Ganesh relied on the judgments of this Court in the cases
of State of Bihar and others vs. Suprabhat Steel Ltd. and others1,
State of Jharkhand and others vs. Tata Cummins Ltd. and another2,
Lloyd Electric and Engineering Limited vs. State of Himachal
Pradesh and others3, MRF Ltd., Kottayam vs. Asstt. Commissioner
(Assessment) Sales Tax and others4, The State of Jharkhand and
ors. vs. Brahmputra Metallics Ltd. and ors.5, Manuelsons Hotels
Private Limited vs. State of Kerala and others6 and State of Punjab
vs. Nestle India Ltd. and another7
14. He also relied on judgments of various High Courts. However,
we do not find it necessary to refer to them inasmuch as the law on the
issue is very well crystallized in various judgments of this Court.
15. Shri V. Sridharan, learned Senior Counsel, also submitted that
the Central Government had come out with a policy of promoting
industrial growth and employment in the backward areas. He submits
that even after the GST regime, it should have continued the said policy.
He submits that, if the Central Government has brought down the benefit
from 100% to 58%, then it should extend/increase the period of benefit
to ensure that the promise made in 2003 industrial policy is given effect
1 (1999) 1 SCC 31
2 (2006) 4 SCC 57
3 (2016) 1 SCC 560
4 (2006) 8 SCC 702
5 MANU/SC/0906/2020 [Civil Appeal Nos. 3860-3862 of 2020, decided on 1.12.2020]
6 (2016) 6 SCC 766
7 (2004) 6 SCC 465
M/S HERO MOTOCORP LTD. v. UNION OF INDIA & ORS.
[B. R. GAVAI, J.]
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to in reality. He relies on the judgment of this Court in the case of Video
Electronics Pvt. Ltd. and another vs. State of Punjab and another8
and Union of India vs. Paliwal Electricals (P) Ltd. and another9.
16. Shri Sridharan further submitted that the Sikkim High Court
has only relied on the judgment of this Court in the case of Union of
India & Anr. vs. V.V.F. Limited & Anr.10 He submitted that the issue in
the case of V.V.F. Limited & Anr. (supra) was with regard to the
withdrawal of notification since it was found to be misused. He submits
that the factual situation in the present case is different and as such, the
High Court was in error in dismissing the writ petition.
17. Shri N. Venkatraman, learned Additional Solicitor General
("ASG" for short), on the contrary, submits that promissory estoppel
cannot be applied to the representation made by the Union of India, if
there is a material change in the circumstances and the larger public
interest warrants such a withdrawal. He submits that, in view of the
constitutional amendment, a new era of GST has emerged. He submits
that the new era emphasizes on the principle of pooled sovereignty
where States and Centre share equal responsibilities. Learned ASG
submits that Article 279A of the Constitution provides for the
establishment of the GST Council. It is submitted that the GST Council
consists of (a) the Union Finance Minister; (b) the Union Minister of
State in charge of Revenue or Finance; and (c) the Minister in charge of
Finance or Taxation or any other Minister nominated by each State
Government. He submits that the GST Council has been empowered to
make recommendations to the Union and the States on the taxes, cesses
and surcharges levied by the Union, the States and the local bodies which
are to be subsumed in the GST. It is submitted that clause (6) of Article
279A of the Constitution of India directs the GST Council to be guided
by the need for a harmonized structure of GST and the development of
a harmonized national market for goods and services, while discharging
its functions. He submits that under clause (1) of Article 246A of the
Constitution, both the Parliament as well as the State Legislatures have
been empowered to make laws with respect to GST to be imposed by
the Union or by such States, whereas clause (2) of the said Article
empowers Parliament to make laws with respect to GST where the
8 (1990) 3 SCC 87
9 (1996) 3 SCC 407
10 2020 SCC Online SC 378
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supply of goods, or of services, or both takes place in the course of interState trade or commerce.
18. Learned ASG would, therefore, submit that a sea change has
occurred with the advent of GST from 1st July 2017. The first change, in
the submission of the learned ASG, is that the earlier tax regime was
origin based, whereas the new tax regime is destination based. Under
the old regime, the Centre was collecting 100% excise duty, service tax,
central sales tax, etc. and the States were collecting 100% Value Added
Tax ("VAT" for short). Under the old tax regime, there was no uniformity
with regard to State levies, whereas under the new tax regime, there is
uniformity. Under the new regime, both Union and the States come on
the same platform under Articles 246A and 279A of the Constitution and
become common partners for taxing together. Under the new regime,
both States as well as Union charge at the same rate. Learned ASG
submits that the only common feature in the old regime as well as in the
new regime is that the Centre continues to fund the States.
19. Learned ASG further submitted that pursuant to the enactment
of GST, a notification, being Notification No. 21 of 2017, was issued on
18th July 2017, thereby withdrawing the exemptions granted previously
under the erstwhile excise regime. He submits that the appellants have
not challenged the validity of the said Notification. He further submits
that, in view of the proviso to clause (c) of sub- section (2) of Section
174 of the CGST Act, the exemptions stood automatically rescinded.
The validity thereof has also not been challenged by the appellants. He,
therefore, submits that the writ petitions, without challenging the validity
thereof, are not tenable.
20. Learned ASG submits that, though after the enactment of the
GST the Central Government was not bound to continue granting any
relief, however, as a matter of good gesture and on the recommendations
of the GST Council, it has decided to reimburse 58% of CGST paid by
such industrial units who were entitled to the benefit of exemption
notifications. He submits that the said has been done based on the
recommendations of the Finance Commission, which has earmarked
the share of the Union at 58% and of the States at 42%.
21. Learned ASG submits that the writ petitions have been
erroneously filed seeking a relief against the Union. He submits that if
the appellants have any claim, then that would be against the State
M/S HERO MOTOCORP LTD. v. UNION OF INDIA & ORS.
[B. R. GAVAI, J.]
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Governments wherein the industries are situated. It is submitted that, as
a matter of fact, the Government of Jammu & Kashmir, vide Notification
dated 21st December 2017 has already resolved to reimburse the
remaining 42% of the GST to the units located in the State till the period
the Union Scheme is valid. It is submitted that the appellants ought to
have sought similar relief against the State Governments. Thus, in his
submission, a writ against the Union of India is untenable.
22. Learned ASG further submits that the writ of mandamus could
only be issued against a statutory body when it is established that there
is a duty cast upon a statutory authority and that the said authority has
neglected to perform such duty. It is submitted that the appellants have
not been in a position to point out that any such duty is cast upon the
Union to reimburse 100% GST and as such, the present appeals would
not be tenable.
23. Learned ASG, relying on various judgments of this Court
submitted that in view of the overwhelming public interest, the Union
cannot be held to comply with the assurance given by it in the said O.M.
of 2003.
24. In support of his submissions, learned ASG relies on the
judgments of this Court in the cases of Union of India and others vs.
VKC Footsteps India Private Limited11, Union of India and another
vs. Mohit Minerals Pvt. Ltd. through Director12, Union of India and
others vs. Unicorn Industries13, Augustan Textile Colours Limited
(Now Augustan Textile Colours Private Limited) vs. Director of
Industries and another14, Kuldeep Singh vs. Govt. of NCT of Delhi15,
Union of India and another vs. International Trading Co. and
another16, Comptroller and Auditor General of India, Gian Prakash,
New Delhi and another vs. K.S. Jagannathan and another17 and
Union of India & others vs. Bharat Forge Ltd. & another18.
11 (2022) 2 SCC 603
12 2022 SCC OnLine SC 657
13 (2019) 10 SCC 575
14 (2022) 6 SCC 626
15 (2006) 5 SCC 702
16 (2003) 5 SCC 437
17 (1986) 2 SCC 679
18 Civil Appeal No.5294 of 2022 (@ SLP(C) No.4960 of 2021) decided on 16th August,
2022
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25. Shri S. Ganesh, learned Senior Counsel, in rejoinder, submits
that the submission of the learned ASG that the remedy lies against the
States and not against the Centre is devoid of any substance. He submits
that the assurance was given by the Central Government and not by the
State Governments. He submits that the said O.M. of 2003 has to be
understood from a viewpoint of a businessman to whom the commercial
representation was made. The words "exemption from direct or indirect
tax" is required to be given full meaning. He submits that the proviso to
Section 174(2)(c) of the CGST Act would not be applicable in the present
case if looked at from the viewpoint of the ordinary businessman.
CONSIDERATION
26. It is not in dispute that the Union of India had framed a policy
vide the said O.M. of 2003. It is also not in dispute that, vide the said
policy, the Central Government had provided that 100% exemption would
be granted to the industrial units from payment of outright excise duty
for 10 years from the date on which such industrial units commence
their commercial production. The incentives applied to the new industrial
units as well as existing industrial units going for substantial expansion.
As such, it is clear that, vide the said O.M. of 2003, an unequivocal
promise was given to the entities that, in the event they establish a new
industrial unit or go for a substantial expansion of their existing industrial
units in the States of Uttarakhand and Himachal Pradesh, they would be
entitled to 100% tax exemption.
27. It is to be noted that, subsequently, an important development
took place. By the 101st Amendment Act, a sea change in the earlier
taxation regime occurred. A uniform tax structure throughout the country
has been adopted. The GST Council has been constituted, which is
empowered to make recommendations to the Union and the States with
regard to GST. The Union and all the States have become common
partners in levy of various taxes. To give effect to the 101st Amendment
Act, the CGST Act has been enacted.
28. The relevant part of Section 174 of the CGST Act reads thus:
"174.