The Uttarakhand High Court has issued a notice to the Union government on a petition filed by Ashok Leyland over the reduction in area-based duty incentives under the goods and services tax (GST) regime.

Ashok Leyland in the petition said that as against 100 per cent upfront exemption available under the promised area-based exemptions under the excise regime, reduced benefit has been extended through refund of only 58 per cent of the Central GST and 29 per cent of the Integrated GST paid through cash ledger.

The petitioner challenged the scheme on grounds of promissory estoppel and legitimate expectation. Promissory estoppel is a doctrine in contract law that stops a person from going back on a promise even if a legal contract does not exist.

The high court directed the Union government to file a counter affidavit and rejoinder while listing the matter after five weeks for hearing.

Many petitions have been filed in courts in this regard earlier as well.

For instance, the Delhi high court had earlier ruled in favour of the government in a similar appeal filed by Hero MotoCorp, pointed out Sandeep Sehgal, director at AKM Global, a consulting firm.

In Uttarakhand and Himachal Pradesh, exemption from payment of central excise duty was extended to new industrial units for a period of ten years from the commencement of production.

Ashok Leyland had set up its unit to avail this exemption, but before completion of ten years, the government introduced GST subsuming central excise duty therein from July 1, 2017.