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270 GST LAW TIMES [ Vol. 35
38. The principle underlying legitimate expectation which is based on Ar-
ticle 14 and the rule of fairness has been re-stated by this Court in Bannari
Amman Sugars Ltd. v. Commercial Tax Officer, 2005 (1) SCC 625. It was ob-
served in paras 8 & 9 :
“8. A person may have a ‘legitimate expectation’ of being treated in
a certain way by an administrative authority even though he has no
legal right in private law to receive such treatment. The expectation
may arise either from a representation or promise made by the au-
thority, including an implied representation, or from consistent past
practice. The doctrine of legitimate expectation has an important
place in the developing law of judicial review. It is, however, not nec-
essary to explore the doctrine in this case, it is enough merely to note
that a legitimate expectation can provide a sufficient interest to enable
one who cannot point to the existence of a substantive right to obtain
the leave of the court to apply for judicial review. It is generally
agreed that ‘legitimate expectation’ gives the applicant sufficient locus
standi for judicial review and that the doctrine of legitimate expecta-
tion to be confined mostly to right of a fair hearing before a decision
which results in negativing a promise or withdrawing an undertaking
is taken. The doctrine does not give scope to claim relief straightway
from the administrative authorities as no crystallized right as such is
involved. The protection of such legitimate expectation does not re-
quire the fulfilment of the expectation where an overriding public in-
terest requires otherwise. In other words, where a person’s legitimate
expectation is not fulfilled by taking a particular decision then the de-
cision maker should justify the denial of such expectation by showing
some overriding public interest. (See Union of India v. Hindustan De-
velopment Corporation, AIR 1994 SC 988).
9. While the discretion to change the policy in exercise of the execu-
tive power, when not trammelled by any statute or rule is wide
enough, what is imperative and implicit in terms of Article 14 is that a
change in policy must be made fairly and should not give the impres-
sion that it was so done arbitrarily or by any ulterior criteria. The
wide sweep of Article 14 and the requirement of every State action
qualifying for its validity on this touchstone irrespective of the field
of activity of the State is an accepted tenet. The basic requirement of
Article 14 is fairness in action by the State, and non-arbitrariness in
essence and substance is the heart beat of fair play. Actions are ame-
nable, in the panorama of judicial review only to the extent that the
State must act validly for discernible reasons, not whimsically for any
ulterior purpose. The meaning and true import and concept of arbi-
trariness is more easily visualized than precisely defined. A question
whether the impugned action is arbitrary or not is to be ultimately
answered on the facts and circumstances of a given case. A basic and
obvious test to apply in such cases is to see whether there is any dis-
cernible principle emerging from the impugned action and if so, does
it really satisfy the test of reasonableness.”
[Emphasis supplied]
39. MRF made a huge investment in the State of Kerala under a promise
held to it that it would be granted exemption from payment of sales tax for
a period of seven years. It was granted the eligibility certificate. The exemp-
tion order had also been passed. It is not open to or permissible for the State
Government to seek to deprive MRF of the benefit of tax exemption in re-
spect of its substantial investment in expansion in respect of compound
rubber when the State Government had enjoyed the benefit from the in-
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