STATE OF JAMMU.AND KASHMIR versus M/S. TRIKUTA ROLLER FLOUR MILLS PVT. LTD.
[2017] 9 S.C.R. 642, Supreme Court of India, 2017
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
A 
B 
[2017] 9 S.C.R. 642 
STATE OF JAMMU.AND KASHMIR 
v. 
Mis. TRIKUTA ROLLER FLOUR MILLS PVT. LTD. 
AND ANOTHER 
(Civil Appeal No. 9844 of201 l) 
AUGUST 18, 2017 
[RANJAN GOGOi, PRAFULLA C. PANT AND 
NAVIN SINHA, JJ.I 
C 
Judicial review - Of policy decision - Scope - G.O. issued by 
appellant-State in 1990 granting 100% refund of Central Sales Tax 
(CST). paid by small scale industrial units (SSl units) in the State, 
on raw materials purchased from outside the State, for a period of 
five"years - G.O. of 1990 superseded by G.O. of 1993 which 
restricted the said refund - Writ petitions by respondents assailing 
D the said GO. of 1993 contending that the State could not have 
withdrawn or modified the benefit before the time period mentioned 
in the notification - High Court allowed the writ petitions holding 
that the State was bound to provide refund for a period of 5 years -
Held: Scope fo.r judicial scrutiny and interference with economic 
E 
p_~licy decision has to pe restricted to arbitrariness and 
unreasonableness - Grant of refund on CST paid to boost 
entrepreneur investment was primarily an executive economic policy 
decision and it included the power of the State to review the. policy 
from time to time - Policy was modified by the State on account of 
refunds being availedfraudulently which was causing revenue loss 
F 
to the State, thereby affecting the larger public interest - Respondents 
had no legal or ind~feasible right to claim r~fund of CST paid by
them - Order of High Court is unsustainable and is set aside -
However, such claims which have already been granted and the 
financial benefit availed, shall not be reopened or withdrawn, and 
G no refund shall be made by any unit to the State - Sales Tax -
Administrative law. 
H 
Administrative law - Administrative policy - Economic policy 
decision - Judicial review - Scope of- Restrictions on - Held: 
Judicial review of a policy decision, especially on economic policy, 
shall have to be restricted to the presence o,fjust and valid reasons 
642
STATE OF JAMMU AND KASHMIR v. M/s. TRIKUTA ROLLER 
643 
FLOUR MILI:S PVT. LTD. 
eschewing arbitrariness, so as not to fall foul of Art.14 -
A 
Constitution of India - Art. 14. 
Allowing the appeals with directions, the Court 
HELD: 1.1 The grant of refund on CST paid to boost 
entrepreneur investment was primarily an executive economic 
policy decision. The scope for judicial scrutiny and interference B 
with the same, is to be restricted to arbitrariness and 
unreasonableness. (Para 9) [646-E] 
Ugar Sugar Works Ltd. v. DelhiAdmn. (2001) 3 SCC 
635 : 12001) 2 SCR 630 - relied on. 
c 
1.2 The respondents had no legal or indefeasible right to 
claim refund of CST paid by them. The policy rested on an 
executive decision to. encourage e.ntrepreneur investment. It 
naturally included the power of th.e State to review the policy 
from time to time, including on considerations for the manner in 
which the policy was proving beneficial or detrimental to the larger D 
public intere~t, and the State exchequer. The policy could 
therefore well be withdrawn or modified at any time for just, valid 
and cogent reasons. Judicial review of a policy decision, especially 
an economic policy decision, shall have to be restricted to the 
presence of just and valid reasons eschewing arbitrariness, so as 
E 
not to fall foul of Article 14 of the Constitution. But, in the garb 
. of judicial review, the Court will not examine the sufficiency or 
adequacy of the reasons or materials, in the manner
of an appellate 
authority, to substitute its own wisdom for that of the government. 
That would tantamount to taking over of the eirncutive decision 
making process. The appellant contended before the High Court F 
that based on verification of complaints regarding refunds ·having 
been obtained without any payment of CST, causing revenue loss 
to the State, the decision was taken in larger public interest. The 
High Court unfortunately dealt with it very cursorily. Misuse of 
exemption, fraudulent claims for refund, affecti,ng the financial · G 
health and coffers of the State can certainly be valid and germane 
reasons in the larger public interest, to restrict or revoke the 
benefit. The policy wisdom of the State that the grant of refund 
was eroding non- plan resources is a matter exclusively in the 
executive domain. [Paras 10, 11 and 13) [647-A-F; 648-GJ 
H
644 
SUPREME COURT REPORTS 
[2017] 9 S.C.R. 
A 
Commissioner of Commercial Taxes (Asstt.) v. 
B 
Dharmendra Trading Co. (1988) 3 SCC 570 - relled 
on. 
Case Law Reference 
[2001J 2 SCR 630 
(1988) 3 sec 510 
relied on 
relied on 
Para 9 
Para 11 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9844 
of201 l. 
From the impugned Order dated 23.09.2005 of the High Court of 
C Jammu and Kashmir at Jammu in LPA (W) No.92/1994 
WITH 
C.A. Nos.9845, 9846, 9847, 9848, 9849 of 2011 and C.A 
Nos.10615 and 10616 of2017. 
D 
R. Venkataramani, Sr. Adv, M. Shoeb Alam, Ms. Fauzia Shakil, 
Yashraj Singh Bundela, Praveen Vignesh, Ujjwal Singh, Mojahid Karim 
Khan, Abhinav Mukerji, Ms. L. Charanya, Aditya Bhattacharya, Victor 
Das, Ms. Apeksha Mehta, M.P. Devanath, D. Mahesh Babu, Sunil 
. Fernandes, Ashok Mathur, Advs. for the appearing parties. 
E 
The Judgment of the Court was delivered by 
NAVIN-SINHA, J. 1. Leave granted in Special Leave Petition 
(Civil) Nos.5803 and 5835 of2006. 
2. The State government issued a notification bearing GO. No. 
318-GR of 1990, dated 30 .11.1990, granting hundred per cent refund of 
F central sales tax (CST), paid by small scale industrial units (SS! units) in 
the State, on raw materials purchased from outside the State, for a period 
of five years. It was superseded by GO. No. 253-Ind/DIC of 1993 
dated 01.10.1993, restricting the refund to the maximmn annual purchase 
turnover ofRs.50 lacs to a unit holder. In monetary terms, Rs.2 lacs per 
G 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 GO. No. 391-Ind 
of 1972 dated 21.06.1972, provided for refm1d of CST paid on purchase 
of raw materials from outside the State, for a period of 3 years from the 
H date of the order, and 5 years from the date of production. It was
STATE OF JAMMlJ AND KASHMIR v. Mis. TRIKlJTA ROLLER 
645 
FLOUR MILLS PVT. LTD. [NAVIN SINHA;-ff.] 
superseded by G.O. No. 54-IND of 1983 dated 26.02.1983, providing A 
for refund of CST for a period of S years from the date of production. 
4.Afresh G.O. No. 318-GRofl990, 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) so per cent of the 
tax paid up to end of3 l.93.1998 and (b) 25 percent of the tax paid up to 
B 
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. 253-Ind/DIC 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 
c 
of production, the appellant could not have withdrawn or modified the )/ 
benefit before that time period. 
D 
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 
E 
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. 
7. Shri R. Venkataramani, learned Senior Counsel appearing on 
F 
behalf of the appellant, submitted that the respondents had no legal or 
indefeasible right to claim refund of CST paid, except in terms of the 
benefit as may have been granted under the executive policy decision, 
and as modified from time to time. The benefit being in the nature of a 
concession, could be withdrawn at any time, for just and valid reasons in 
G 
the larger public interest. The detection of false claims for refund of 
CST, leading to institution ofFlRs, enquiries and vigilance cases, affecting 
the State exchequer, led tp a.conscious policy decision to put a cap on 
the earlier policy. Judibal review of the policy decision dated 01.10.1993, 
will have to be circumscribed within limits of relevancy of materials 
H
646 
SUPREME COURT REPORTS 
[2017] 9 S.C.R. 
A c.onsidered only. If the policy decision was found to be completely 
arbitrary, based on no materials, or took into consideration irrelevant 
materials, then only the Court could have interfered. A reasonable 
conclusion based on satisfaction culled out from relevant materials 
regarding misuse of the concession, and protection of the State exchequer 
B were sufficient justification for change in policy. The decision to put a 
cap on reimbursement was, therefore, not arbitrary. 
8. Learned Counsel for the respondents, supporting the impugned 
order of the High Court, submitted that no material had been brought on 
record, in support of the contention regarding raising of false claims by 
SSI units in the State. If CST had not been paid by the dealers in the 
C other State from whom the raw materials had been purchased, the 
respondents could not be visited with the consequences by denial of 
refund. The Division Bench had aptly observed that administrative apathy 
in detecting false claims could not be a justification for an across the 
board decision to curtail the benefit. Moreover, if false and bogus claims 
D were an issue, and the intention was to curb it, capping the limit for 
exemption had no nexus with the object sought to be achieved. 
E 
F 
G 
H 
9. The lespective submissions have received our thoughtful 
consideration. The grant of refund on CST paid, to boost entrepreneur 
investment was primarily an executive
economic policy decision. The 
scope for judicial scrutiny and interference with the same, has to be 
restricted to arbitrariness and unreasonableness as observed in Ugar 
Sugar Works Ltd. vs. Delhi Admn., (2001) 3 SCC 635, as follows:-
"18 .... .It is well settled that the courts, in exercise of their power 
of judicial review, do not ordinarily interfere with the policy 
decisions of the executive unless the policy can be faulted on 
grounds of mala fide, unreasonableness, arbitrariness or unfairness 
etc. Indeed, arbitrariness, irrationality, perversity and mala fide 
will render the policy unconstitutional. However, ifthe policy cannot 
be faulted on any of these grounds, the mere fact that it would 
hurt business interests of a party, does not justify invalidating the 
policy. In tax and economic regulation cases, there are good 
reasons for judicial restraint, ifnot judicial deference, to judgment 
of the executive. The courts are not expected to express their 
opinion as to whether at a particular point of time or in a pa11icular 
situation any such policy should have been adopted or not. It is 
best left to the discretion of the State."
STATE OF JAMMU AND KASHMIR v. M/s. TRIKUTA ROLLER 
647 
FLOUR MILLS PVT. LTD. [NAVIN SINHA, J.] 
.10. The respondents had no legal or indefeasible right to claim A 
refund of CST paid by them. The policy rested on an executive decision 
to encourage entrepreneur investment. It naturally includes the power 
of the State to review the policy from time to time, including on 
considerations for the manner in which the policy was proving beneficial 
or detrimental to the larger public interest, and the State exchequer. The 
B 
policy could therefore well be withdrawn or modified at any time for 
just, valid and cogent reasons. Judicial review of a policy decision, 
especially an economic policy decision, shall have-to be restricted to the 
presence of just and valid reasons eschewing arbitrariness, so as not to 
fall foul of Article 14 of the Constitution. But, in the garb of judicial 
review, the Court will not examine the sufficiency otadequacy of the 
C 
reasons or materials, in the maJ)1ler of an appellate authority, to substitute 
its own wisdom for that of the government. That would tantamount to 
taking over of the executive decision making process. 
11. The appellant had specifically contended before the High Court 
that based on verification of complaints regarding refunds having been 
D 
obtained without any payment of CST, causing revenue loss to the State, 
_ the decision had been taken in larger public interest. 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. Misuse of exemption, 
fraudulent claims for refund, affecting the financial health and coffers 
of the State can certainly be valid and germane reasons in the larger 
public interest, to restrict or revoke the benefitc--as observed in 
Commissioner of Commercial Taxes (Asstt.) vs. Dliarmendra 
Trading Co., (1988) 3 SCC 570, as follows:-
"4 ..... .It is well~ settled that if the government wants to 1'esile 
from a promise or an assurance given by it on the ground that 
undue advantage was being taken or'misuse was being made of 
E 
F 
the concessions granted the court may permit the government to 
G 
do so but before allowing the government to resile from the promise 
· or go back on the assurance the court would have to be satisfied 
that allegations by the government about misuse being made or 
undue advantage being taken of the concessions.given by it were 
reasonably well established ...... " 
H
648 
A 
B 
SUPREME COURT REPORTS 
[2017] 9 S.C.R. 
12. 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 
Il, 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 
rt~ceipts 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 
confinned that the suppliers did not deposit any CST. Enquiries from the 
C authorities at Punjab further revealed that Mis. Sewak Traders, one of 
the dealers of Punjab,Jrom whom purchase was said to have been made, 
was found to be a non-existent trader 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 
D 
E 
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 the
non-plan 
resources ofthe 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 
F 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 
G refund was eroding non-plan resources is a matter exclusively in the 
executive domain. 
H 
14. The order of the High Court is, therefore, held to be 
unsustainable and is set aside. It is however clarified that only such 
claims which have already been granted and the financial benefit availed,

STATE OF JAMMU AND KASHMIR v. Mis. TRIKUTA 
649 
ROLLER FLOUR MILLS PVT. LTD. [NAVIN SINHA, J.] 
shall not be reopened or withdrawn, and no refund shall be required to 
A 
be made by any such unit to the State. 
15. The appeals are allowed with directions. 
Divya Pandey 
Appeals allowed.