The Supreme Court has upheld the power of the State Government to withdraw or modify tax exemptions granted under statutory provisions, holding that such exemptions are in the nature of concessions and do not create an enforceable right.
The Court ruled that exemptions granted under fiscal statutes, such as electricity duty exemptions, are defeasible in nature and can be withdrawn in public interest, including for reasons such as revenue augmentation and fiscal stability. It rejected the application of doctrines like promissory estoppel and legitimate expectation in the present case, noting that beneficiaries are aware that such concessions can be altered.
At the same time, the Court emphasised that withdrawal of such exemptions must satisfy standards of fairness and reasonableness under Article 14, and should not operate in a manner that causes undue hardship.
Balancing these considerations, the Court held that while the State was justified in withdrawing the exemption, it ought to have provided a reasonable transition period. Accordingly, it directed that the impugned notifications would take effect only after one year, allowing industries time to reorganise their affairs.
Setting aside the High Court’s judgment, the Court affirmed that policy decisions in fiscal matters are entitled to judicial deference, unless shown to be manifestly arbitrary.
Appearances
Appellants- Mr. Shyam Mehta, Sr. Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR Mr. Shrirang B. Varma, Adv. Mr. Varad Kilor, Adv.
Respondents- Mr. C. S. Vaidyanathan, Sr. Adv. Mr. K. R. Sasiprabhu, AOR Mr. Gaurav Thakur, Adv. Mr. Mahesh Sahasranaman, Adv. Mr. Vishnu Sharma A S, Adv. Mr. Vinayak Goel, Adv. Mr. Yasharth Misra, Adv. Mr. Ronak Shankar Agarwal, Adv. Mr. Vijay Valsan, Adv. Ms. Vidhatri, Adv. Mr. Parmanand Pandey, AOR Mr. Sandeep Sudhakar Deshmukh, Adv. Mr. Rakesh K. Sharma, AOR Ms. Adviteeya, Adv. Ms. D. Tejaswi Reddy, Adv. Mr. Sanjeev K. Kapoor, Adv. Ms. Divya Chaturvedi, Adv. Ms. Srishti Rai, Adv. Mr. Jai Dhanani, Adv. M/s Khaitan & Co., AOR M/S. Parekh & Co., AOR Mr. Sumit Goel, Adv. Mr. Ishan Nagar, Adv. Ms. Swati Bhardwaj, Adv. Ms. Apurba Pattanayak, Adv. Mr. Akhil Shresth, Adv. Ms. Suvasita Chopra, Adv. Mr. Harish M Jagtiani, Sr. Adv. Mr. Bhargava V. Desai, AOR Ms. Jahnavi Vohra, Adv. Mr. Yash Jain, Adv. Mr. Shivam Sharma, Adv. M/S. Karanjawala & Co., AOR Ms. Ruby Singh Ahuja, Adv. Ms. Megha Dugar, Adv. Mr. Jappanpreet Hora, Adv. Mr. Basava S Prabu Patil, Sr. Adv. Ms. Praveena Gautam, AOR Mr. Brijendra Chahar, Adv. Mr. K K Gupta, Adv. Mr. Pawan Shukla, Adv. Ms. Tissy Annie Thomas, Adv. Mr. Rohan Bansla, Adv. Mr. Arijit, Adv. Mr. Pranaya Goyal, AOR Mr. Omm Mitra, Adv. Mr. Harish M Jagtiani, Sr. Adv. Mr. Bhargava V. Desai, AOR Ms. Jahnavi Vohra, Adv. Mr. Yash Jain, Adv. Mr. Shivam Sharma, Adv.
