M/S. Hero Motocorp Ltd. vs. Union of India
Background
In 2003, acting on an announcement by the Prime Minister during a visit to Uttarakhand, the Government of India issued an Office Memorandum promising new industrial units in Uttarakhand and Himachal Pradesh (and similar hill/border states) a 100% excise duty exemption for ten years from the start of commercial production. Hero Motocorp (in Uttarakhand) and Sun Pharma Laboratories (in Sikkim) set up manufacturing units relying on this promise. After the 2017 rollout of GST replaced excise duty, the government replaced the full exemption with only 58% budgetary reimbursement of the new CGST liability. Both companies sued in their respective High Courts (Delhi and Sikkim) to enforce the original 100% promise, lost, and appealed to the Supreme Court.
Decision Breakdown
The Supreme Court held that the doctrine of promissory estoppel cannot bind the government to honour an old executive promise once a subsequent change in law (here, the CGST Act replacing the excise regime) makes it impossible or inconsistent to do so: Section 174(2)(c) of the CGST Act itself did not preserve the old exemption. It also held a writ of mandamus could not be issued to compel 100% reimbursement because no statute imposed any such duty on the Union; the GST Council (a constitutional body) had itself resolved in 2017 that any pre-existing incentive would only be honoured via reimbursement, and the government had already chosen to partially honour its earlier promise by reimbursing 58% (the Centre's own non-devolved share of GST revenue). Although the Court dismissed the appeals on the strict legal claim, it went further and recorded that the companies still had a "legitimate expectation" given the Prime Minister's original public commitment, noting that the states benefiting from these units (Uttarakhand, Himachal Pradesh, Jammu & Kashmir etc.) also receive 42% of GST revenue through devolution and could reasonably be asked to reimburse the remaining shortfall. It permitted the appellant companies to make representations to their respective state governments and to the GST Council for supplementary relief, and asked the GST Council to consider such representations expeditiously.
Lesson Learnt
A government's policy promise, even one made at the highest level, does not create an enforceable legal right once a later law changes the underlying framework, but courts can still nudge the government toward equitable outcomes by recognizing a "legitimate expectation" and opening a path (here, via state governments and the GST Council) for citizens to pursue fairness even where strict legal remedies fail.