In Brief
The State of Jammu and Kashmir had granted a policy benefit of 100% refund of central sales tax (CST) paid by small-scale industrial units on raw materials purchased outside the State. The State later capped the refund citing fraudulent claims and revenue erosion. The respondents challenged this cap, invoking promissory estoppel. The Supreme Court held that policy-based tax concessions are not indefeasible rights and can be withdrawn or modified on just grounds. Judicial review is limited to checking arbitrariness, not the sufficiency of reasons. The State's detection of false claims and concerns about fiscal impact justified the policy modification. The Court allowed the appeals and set aside the High Court's order requiring full refunds.
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