The appellants, Hero Motocorp Ltd. and Sun Pharma Laboratories Ltd., had set up industrial units in Uttarakhand and Himachal Pradesh under the Office Memorandum (O.M.) dated 7 January 2003, which granted 100% excise duty exemption for ten years to new and substantially expanded industrial units in specified regions. These benefits were notified under Notification No. 50/2003-CE dated 10 June 2003. Following the introduction of the Goods and Services Tax (GST) regime through the Constitution (101st Amendment) Act, 2016 and enactment of the Central Goods and Services Tax Act, 2017 (CGST Act), the previous area-based exemptions were rescinded by Notification No. 21/2017-CE dated 18 July 2017. The Government introduced a Budgetary Support Scheme granting partial reimbursement (58% of CGST and 29% of IGST) to industrial units. The appellants challenged the reduction of benefits before the Delhi and Sikkim High Courts, contending that the Government was bound by the 2003 representation promising 100% exemption. Both High Courts dismissed the petitions.

The Supreme Court dismissed the appeals and upheld the High Courts’ decisions. It held that the withdrawal of excise exemptions and introduction of partial reimbursement under the GST regime were valid and in accordance with the proviso to Section 174(2)(c) of the CGST Act, 2017, which specifically provides that any tax exemption granted as an investment incentive shall not continue if rescinded after the appointed day. The Court ruled that the doctrine of promissory estoppel cannot override statutory provisions or apply against legislative action. The change from the excise to GST regime constituted a major constitutional and statutory shift, and the earlier industrial incentives could not be enforced under the new law.

The Court further held that no writ of mandamus could lie against the Union of India to compel payment of full refund since no statutory duty existed to grant 100% reimbursement. The Budgetary Support Scheme was a policy decision implemented in accordance with the recommendations of the GST Council and the Finance Commission.

Accordingly, the Court upheld the validity of the 58% budgetary support and rejected the claim for continuation of full exemption under the earlier scheme.