Order date – 17 October 2022

 Facts –

• The Appellant, M/s Hero Motocorp Ltd, had established a new industry unit for manufacture of motorcycles at Haridwar, Uttarakhand, which commenced commercial production from 7th April, 2008.
• The appellant had established a new industry unit for manufacture of motorcycle at Haridwar Uttarakhand which commenced commercial production from 7th April, 2008. The appellant availed exemption under Office Memorandum dated 07.01.2003 by the Government of India.
• According to the said memorandum for the States of Uttaranchal and Himachal Pradesh, new industrial units and existing industrial units on their substantial expansion would be entitled to exemption of 100% outright excise duty for 10 years from the date of commencement of commercial production. It also provided that there shall be 100% income tax Exemption for such units initially for five years and thereafter 30% for companies and 25%for other companies for a further period of five years from the date of commencement of commercial production.
• The appellant availed the exemption until 1st July, 2017,whereafter the Goods and Service Tax regime came into existence and the benefit being enjoyed by the appellant was reduced to 58% through the implementation of the Budgetary Support Policy. 
• Aggrieve appellant had filed an appeal. 

Issue – 

• Whether the exemption can be availed as per Office Memorandum dated 7th January 2003 even after the enactment of the Central Goods and Services Tax Act, 2017? 

Order –

• The Hon’ble Court states that by the 101st Amendment Act, a sea change in the earlier taxation regime occurred. A uniform tax structure throughout the country has been adopted. The GST Council has been constituted, which is empowered to make recommendations to the Union and the States with regard to GST. The Union and all the States have become common partners in levy of various taxes. To give effect to the 101st Amendment Act, the CGST Act has been enacted. 
• According to Section 174(2)(c) it would protect any right, privilege, obligation, etc. under the amended Act or repealed Acts, the proviso thereto provides that any tax exemption granted as an incentive against investment shall not continue as a privilege if the said notification is rescinded on or after the appointed day. Admittedly, vide Notification No.21/2017 dated 18th July 2017; various earlier area based exemption notifications have been rescinded.
• In the view of the Court, there is another reason which could disentitle the relief as was claimed by the appellants before the High Courts. The appellants, in effect, are seeking a writ of mandamus against the Union of India to reimburse 100% of CGST for the remainder of the period instead of only 58%. 
• The Court observed many cases and found that the common thread in all those judgments could be noticed is that all these judgments consistently hold that there can be no estoppel against the legislature in the exercise of its legislative functions. 
• It also suggested providing for budgetary apportionment in the State and the Central budgets for reimbursing the tax paid to those units which enjoyed tax exemption up to a specified period.
• The deliberations of the GST Council itself, it was observed that the States also need to correspondingly reimburse the industrial units which were entitled to exemption under any existing incentive scheme, out of the share of revenue received through devolution, which, as per the Finance Commission, stands at 42%. This is limited until the period the Union Scheme is valid. 
• The Court is of the view that it will be appropriate that such States should also consider to correspondingly reimbursing such units out of the share of revenue received by them through devolution from the Central Government. The Court further found that it will also be appropriate that the GST Council considers making appropriate recommendations to the States in that regard. It permits the appellants to make representations to the respective State Governments as well as to the GST Council.
• Hence the appeal is dismissed.