Orissa High Court Invalidates Retrospective Withdrawal of SGST Reimbursement for Cement Units Under IPR 2015: JSW Cement Limited vs State of Odisha

1. Background and Context

The Orissa High Court, in W.P.(C) No.36871 of 2020, examined a significant constitutional and policy challenge brought by M/S JSW Cement Limited, Jajpur, against the State of Odisha. The core grievance related to an amendment introduced through a Government Resolution dated 18.8.2020, which retrospectively withdrew net SGST reimbursement benefits that had been available to cement manufacturing and grinding units under Clause 5.4.5(a) of the Industrial Policy Resolution, 2015 (IPR 2015). The retrospective exclusion was made operative from 1.7.2017 — a date more than three years before the Resolution itself was issued — and the Court was called upon to determine whether such withdrawal could withstand constitutional scrutiny.

The judgment, delivered on 16.10.2026, ultimately sided with the assessee on all principal grounds, setting aside the retrospective exclusion, treating the assessee's application for provisional Priority Sector status as having obtained deemed approval, and directing determination and release of SGST reimbursement along with applicable interest within four weeks.

2. Chronology of the Assessee's Project Under IPR 2015

Understanding the timeline of the assessee's actions is essential to appreciating the Court's reasoning. The Government of Odisha had introduced IPR 2015 on 24.8.2015 to promote industrial growth through a structured incentive and facilitation framework. Priority Sector industries satisfying prescribed conditions were made eligible for tax reimbursement benefits.

Acting upon this policy, the JSW group pursued establishment of a cement manufacturing unit in Odisha. Key milestones in the project's progression were as follows:

In-principle approval was granted by the State Level Single Window Clearance Authority (SLSWCA) on 2.12.2015.
Land was allotted by the Industrial Infrastructure Development Corporation of Odisha (IDCO) on 22.1.2016.
The first fixed capital investment was made on 31.7.2017.
An application for provisional Priority Sector status was submitted to the Regional Industries Centre (RIC) on 16.8.2017.
The RIC acknowledged the application on 21.8.2017 and inspected the unit on 22.8.2017.
On 22.9.2017, the RIC forwarded the application to the Director of Industries along with its inspection report and certificate of verification, recommending provisional Priority Sector status.
Commercial production commenced on 1.5.2020 — before the impugned amendment was issued.
IPICOL conveyed in-principle approval for an additional expansion investment on 7.9.2020.

The total capital investment in the new unit was approximately ₹350 crore, with fixed capital investment of ₹167.78 crore. These investments were undertaken by the assessee in the expectation that IPR 2015's incentive framework would govern the project throughout, subject to fulfilment of policy conditions.

The impugned Resolution dated 18.8.2020 then amended Clause 5.4.5(a) of IPR 2015, substituting the earlier tax reimbursement provision with SGST reimbursement but simultaneously excluding cement manufacturing and grinding units, blast furnace slag-based units, and other specified categories from the benefit — and doing so with retrospective effect from 1.7.2017.

3. Issues Framed by the Court

The High Court identified three distinct issues for adjudication:

(i) Validity of Retrospective Exclusion

Whether the amendment effected through the Resolution dated 18.8.2020, to the extent it retrospectively excluded cement manufacturing and grinding units from net SGST reimbursement under IPR 2015 with effect from 1.7.2017, could be sustained given the circumstances of the assessee's case.

(ii) Deemed Approval Under the Facilitation Act

Whether the assessee's application dated 16.8.2017 for provisional Priority Sector status attracted the statutory consequence of deemed approval under Section 11 of the Orissa Industries (Facilitation) Act, 2004, read with Clause 4.2 of IPR 2015 and the Operational Guidelines for Grant of Priority Sector Status, owing to the failure of the competent authority to decide it within the prescribed period.

(iii) Negative List and Consequential Entitlement

Whether the assessee's unit was correctly classifiable within the Negative List so as to disentitle it from the benefit, and whether the assessee was consequently entitled to reimbursement of net SGST under IPR 2015.

4. The State's Defence

The State of Odisha resisted the writ petition on multiple fronts. It contended that the impugned amendment represented a legitimate fiscal policy decision, necessitated by the changed economic context brought about by the transition to the GST regime. The State relied on paragraph 14(f) of IPR 2015, which permits the Government to review or modify the policy, arguing that the assessee could claim no indefeasible right to continuation of a fiscal incentive merely because the project was undertaken while the policy was in force.

On the question of Priority Sector status, the State argued that the RIC's forwarding of the application to the Director of Industries was merely an intermediate administrative step and that no status could crystallise without a final certificate issued by the competent authority. It relied on the communication dated 27.5.2020, in which additional documents were sought from the assessee, as evidence that eligibility had not been finally determined.

The State also maintained that the assessee's unit fell within the Negative List, and accordingly disputed any entitlement to the reimbursement benefit.

5. Court's Analysis: Retrospective Withdrawal and Promissory Estoppel

(i) Distinction Between Prospective Amendment and Retrospective Withdrawal

The Court at the outset acknowledged that the State's competence to frame industrial policy and modify incentives is beyond dispute. However, it drew a firm distinction between the power to alter an incentive scheme for the future and the power to withdraw an accrued benefit for a period that had already elapsed at the time of the amendment. The Resolution dated 18.8.2020 did not merely prescribe new eligibility conditions for prospective periods; it reached back to 1.7.2017 — more than three years prior — to strip benefits from units that had already acted under the existing policy.

Orissa High Court Strikes Down Retrospective Exclusion of Cement Units from SGST Reimbursement Under IPR 2015