STATE OF JAMMU.AND KASHMIRversusM/S. TRIKUTA ROLLER FLOUR MILLS PVT. LTD.

                           [2017] 9 S.C.R. 642


A                  STATE OF JAMMU.AND KASHMIR
                                       v.
           Mis. TRIKUTA ROLLER FLOUR MILLS PVT. LTD.
                              AND ANOTHER

B                       (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    five"years - G.O. of 1990 superseded by G.O. of 1993 which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    withdrawn or modified the benefit before the time period mentioned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    financial benefit availed, shall not be reopened or withdrawn, and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.
          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
H
                                      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
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644             SUPREME COURT REPORTS                       [2017] 9 S.C.R.


A            Commissioner of Commercial Taxes (Asstt.) v.
             Dharmendra Trading Co. (1988) 3 SCC 570 - relled
             on.
                              Case Law Reference
             [2001J 2 SCR 630           relied on           Para 9
B
             (1988) 3 sec 510           relied on           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.
                                                                             c
      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.                                        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
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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
  were sufficient justification for change in policy. The decision to put a
B
  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.
          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
 E 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
 F          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
 G          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
 H          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 E
 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 F
 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
        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 ...... "
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648            SUPREME COURT REPORTS                         [2017] 9 S.C.R.


A         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
B
  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
  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
E 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.

            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,
 H
  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.