Case: State of Jammu &amp; Kashmir Vs. M/s. Trikuta Roller Flour Mills Pvt. Ltd. &amp; Others

2. The State government issued a notification bearing G.O. No.of 1990, dated 30.11.1990, granting hundred per cent refund of central sales tax (CST), paid by small scale industrial units (SSI units) in the State, on raw materials purchased from outside the State, for a period of five years. It was superseded by G.O. No.of 1993 dated 01.10.1993, restricting the refund to the maximum annual purchase turnover of Rs. 50 lacs to a unit holder. In monetary terms, Rs. 2 lacs per annum per unit (taking the maximum rebate of CST at 4%).3. As part of an executive policy to encourage entrepreneur investment in the State by SSI units, the appellant by G.O. No.of 1972 dated 21.06.1972, provided for refund of CST paid on purchase of raw materials from outside the State, for a period of 3 years from the date of the order, and 5 years from the date of production. It was superseded by G.O. No.of 1983 dated 26.02.1983, providing for refund of CST for a period of 5 years from the date of production.4. A fresh G.O. No.of 1990, dated 30.11.1990, was issued in supersession, providing for such refund in full up to 31.03.1995, after which it was to be provided on a sliding scale of (a) 50 per cent of the tax paid up to end of 31.03.1998 and (b) 25 per cent of the tax paid up to end of 31.03.2000. Option was also given to those entitled to avail the earlier package of incentives, to continue availing the benefit for the remaining period of their entitlement. It was again superseded by G.O. No.of 1993, dated 01.10.1993, leading to institution of writ petitions assailing it.5. The challenge to the notification dated 01.10.1993, by the respondents was on principles of promissory estoppel, contending that having held forth a promise for grant of exemption from CST on raw materials purchased from outside the State for five years from the date of production, the appellant could not have withdrawn or modified the benefit before that time period.6. The Division Bench of the High Court rejected the plea of promissory estoppel. But, regarding the plea of the State change in policy on account of refunds availed fraudulently, it was held that administrative apathy, could not be a justification for putting a ceiling on the quantum of refund. The restriction sought to be introduced, had no nexus with the object sought to be achieved. If the government bonafide deemed it against public interest, it could have withdrawn the policy. The appellant was required to provide refund for a period of 5 years from the date of production.

Reasoning: The High Court unfortunately dealt with it very cursorily, as a simple issue of administrative apathy without further discussion. The reasonableness in action on part of the State, in not having withdrawn the benefit completely, balancing competing interests, was considered negatively holding that it could have been completely withdrawn but not curtailed.It is the contention of the appellants that in or about 1992, genuine doubts were entertained about the veracity of the refund claims of CST made by SSI units. A specific reference has been made by illustration to the case of the respondent in Civil Appeal No. 9844 of 2011. Enquiries were also made from the Excise and Taxation Officer II, Amritsar, as dealers at Amritsar were suspected of being in connivance with the dealers in the appellants State. It was observed on the basis of information furnished by the authorities at Amritsar that the original payee receipts produced by the SSI units in the appellant State, did not tally with that given by the sales tax authorities of Punjab, and who had also confirmed that the suppliers did not deposit any CST. Enquiries from the authorities at Punjab further revealed that M/s. Sewak Traders, one of the dealers of Punjab, from whom purchase was said to have been made, was found to be atrader in Amritsar district, never registered with the authorities at Punjab, and had never filed any return or deposited any taxes. Consequently, FIRs had been lodged, as also vigilance inquiries setup, as it was causing great amount of revenue loss to the State Exchequer. It was the further case of the appellants, that even otherwise, serious reservations were expressed time and again regarding the incentives, observing that they were regular eroding theresources of the State and that curtailment was becoming unavoidable. These were all relevant considerations, the State being the guardian of State finances.13. There has been much passage of time since the issue originated and the litigation that followed. The mere fact that ample documentary evidence may not be available with the State today, for valid reasons as mentioned in the additional affidavit, it cannot be held that what was valid when done, must be pronounced as illegal today, merely because the evidence may have been lost with passage of time for unavoidable reasons. Undoubtedly, fraudulent refund claims obtained, would be contrary to the financial interests of the State, thereby affecting the larger public interest. The policy wisdom of the State that the grant of refund was erodingresources is a matter exclusively in the executive domain.