Promissory estoppel bars retrospective withdrawal of duty exemptions for projects commissioned under specific policy assurances.

The State of Rajasthan notified the Solar Policy, 2019, which explicitly assured an exemption from the payment of electricity duty for a period of seven years from the Commercial Operation Date (COD) for captive solar power plants

Relying on this sovereign representation, Petitioner No. 1 (UltraTech) altered its position by investing approximately ₹89 crores to establish captive solar power generation facilities in Rajasthan

On 10.05.2022, the State issued an amendment to Clause 16.4 of the Policy, effectively withdrawing the blanket seven-year exemption and making such benefits subject to separate government notifications issued under the Rajasthan Electricity (Duty) Act, 1962

Consequently, the respondents began raising electricity duty bills on the petitioners' plants

The petitioners challenged the amendment, seeking the enforcement of the original exemption on the grounds of promissory estoppel and legitimate expectation

1. Whether the policy assurances made by the State in the Solar Policy, 2019 regarding electricity duty exemptions are enforceable under the doctrines of promissory estoppel and legitimate expectation?

2. Whether the State can retrospectively withdraw fiscal incentives to the detriment of investors who have already commissioned projects based on those incentives?

The court primarily applied Section 3(3) of the Rajasthan Electricity (Duty) Act, 1962, which grants the State the power to exempt consumers from electricity duty in the public interest

It relied on the equitable doctrine of Promissory Estoppel derived from Motilal Padampat Sugar Mills v. State of U.P., which holds the State accountable to promises that induce a party to act to their detriment

The court further applied the principle of Legitimate Expectation and the test of Non-arbitrariness under Article 14 of the Constitution, as discussed in State of Jharkhand v. Brahmputra Metallics Ltd. and State of Punjab v. Nestle India Ltd., asserting that executive policy changes must be fair and supported by overriding public interest if they negate prior assurances

The State argued that the Solar Policy was a non-statutory executive guideline and that exemptions could only be granted via formal notification under the 1962 Act

The Court rejected this, reasoning that the State cannot rely on its own failure to issue a statutory notification to defeat a concrete promise made in a formal policy intended to attract investment

The petitioners fulfilled all ingredients of promissory estoppel: a clear representation, intent to induce action, and substantial capital expenditure

Regarding the State's claim of "public interest" based on financial constraints, the Court found this to be a "bald assertion" unsupported by evidence, especially given that the State's solar capacity targets had not yet been reached

The Court held that while the State has the flexibility to change economic policy, it cannot do so retrospectively to divest "accrued or vested rights"

Such an abrupt withdrawal without a transitional mechanism was deemed "manifestly arbitrary"

The Court held that petitioners whose solar projects were commissioned prior to the amendment (10.05.2022) are entitled to the promised seven-year electricity duty exemption from their respective COD

The Court directed the competent authorities to verify the exact COD of each project and pass independent orders granting the exemption for the limited seven-year period

Relief was similarly extended to individual members of petitioner associations and rooftop solar owners, subject to verification of their commissioning dates