Administrative Law

M.R.F. Ltd. v. Assistant Commissioner Sales Tax

(2006) 8 SCC 702

Facts

Kerala Government announced an industrial incentive scheme granting tax exemption to new industries/expanded units.
MRF invested heavily and expanded its unit relying on this scheme.
It received eligibility/sanction for exemption.
Later, the State amended the scheme and tried to deny/withdraw the exemption benefit.

Whether the Government could withdraw the promised tax exemption after MRF had already acted on the promise.

Promissory estoppel applies when:
Government makes a clear promise/representation;
the party relies on it;
the party alters its position;
it would be unfair to allow Government to go back.
Government can escape the promise only by showing overriding public interest or statutory prohibition.

The Court focused on reliance.
MRF did not merely hope for a benefit; it actually changed its position by investing and expanding its industrial unit.
The Government’s incentive policy was meant to attract industries.
Therefore, once an industry acted on that policy, the State could not casually withdraw the promised benefit.
The eligibility certificate/sanction strengthened MRF’s claim because it showed that the Government had accepted MRF as eligible under the scheme.
The later amendment could not be used to defeat accrued or promised benefits unless the Government proved a strong public interest.
The State did not show any such overriding public interest.
The Court treated the withdrawal as unfair because MRF had already made financial commitments on the basis of the Government’s representation.
This is exactly where promissory estoppel controls administrative power: the Government cannot invite people to act in one way and then change its position after they have acted.

The Supreme Court held in favour of MRF.
The State was bound by its promise and could not deny the exemption after MRF had relied on the incentive scheme.
The withdrawal/amendment could not defeat MRF’s accrued benefit.
The case is important because it confirms that Government is also bound by fairness in its promises, especially industrial incentive promises.
Use this case for: promissory estoppel against the Government when an industry invests relying on tax exemption/incentive policy.
Also use it with Motilal Padampat: both cases say Government promises can be enforced if the party has altered its position.