State is bound by promissory estoppel to refund local taxes promised in SEZ policy despite unamended municipal rules.

The Petitioner, an approved developer of an IT/ITES Special Economic Zone (SEZ) in Kharadi, Pune, sought a refund of octroi duty amounting to ₹6,69,91,584/- paid to the Pune Municipal Corporation (PMC) between 2005 and 2011

The State Government’s SEZ Policy dated 12.10.2001 explicitly promised that SEZ developers would be exempted from all State and local taxes, including octroi, or reimbursed if direct exemption was not feasible

Despite the State directing the PMC to amend its Octroi Rules to align with this policy in 2007, the PMC’s General Body deleted the proposal in 2009, resulting in no statutory amendment

Consequently, the PMC informed the Petitioner in 2012 that no exemption would be granted

The Petitioner challenged this denial, invoking the doctrine of promissory estoppel

1. Whether the Petitioner is entitled to the refund of octroi based on the State SEZ Policy and the doctrine of promissory estoppel.

2. Whether the State Government or the Municipal Corporation is liable to fulfill the promise of exemption/refund in the absence of statutory amendments to the Octroi Rules under the Maharashtra Municipal Corporation (MMC) Act.

The court primarily applied the doctrine of Promissory Estoppel, as elucidated in Manuelsons Hotels Private Limited v. State of Kerala, which holds that the Government must make good on a promise if a party has altered its position in reliance on that promise, provided no overriding public interest dictates otherwise

It further relied on Section 50 of the SEZ Act, 2005, and Rule 5(5)(a) of the SEZ Rules, 2006, which mandate that State Governments endeavor to provide exemptions from local taxes and duties to SEZ developers

Finally, the court considered Sections 450A, 456, and 456A of the MMC Act, which empower the State Government to issue policy directions and make rules if a Municipal Corporation fails to comply with state requisitions

The court found that the 2001 State Policy created a "definite promise" of octroi exemption intended to stimulate industrial growth and employment

The State Government expressly admitted in its affidavit that the Petitioner was entitled to this exemption

While the PMC argued it could not refund the money because the Octroi Rules were never formally amended—a position the court accepted as legally sound regarding the PMC's independent liability—the court held that the State Government could not be absolved

The court reasoned that the State possessed ample legislative and supervisory powers under the MMC Act to ensure the implementation of its policy but failed to exercise them

Applying Manuelsons Hotels, the court determined that since the Petitioner acted upon the State's promise by developing the SEZ, and since fulfilling the promise aligned with public interest, the State was bound to reimburse the Petitioner for the taxes paid

It ruled that while the PMC is not liable due to the lack of statutory amendments, the State Government is directed to refund the amount

The court ordered the State to determine the exact refundable amount upon the Petitioner's representation and to pay the refund with interest at 6% per annum from the date of payment until realization

The exercise must be completed within six months

Rule was made absolute