1987 (11) TMI 359 - HC - VAT and Sales Tax

Summary

Issues: Validity of notification canceling exemption with retrospective effect

The judgment of the High Court of Madhya Pradesh dealt with the validity of a notification issued by the State Government canceling an exemption with retrospective effect. The State Government had initially exempted a class of goods from purchase tax under the M.P. General Sales Tax Act, 1958, through a notification dated 7th April, 1967. However, a subsequent notification issued on 7th January, 1981, canceled the earlier exemption with retrospective effect from 1st October, 1978. The main issue in this case was whether the cancellation of the exemption with retrospective effect was valid under the law.

Analysis:

1. The petitioners challenged the validity of the notification dated 7th January, 1981, on the grounds that the rescission of the earlier notification with retrospective effect was not permissible under section 12(2) of the Act. They argued that the language of section 12(2) and a previous decision of the High Court supported their contention that a notification rescinding an earlier notification should only have prospective effect. The Court referred to the decision in Vijay Dal Mill v. State of M.P., where it was held that an exemption granted by a notification could not be withdrawn retrospectively.

2. After hearing arguments from both parties, the Court analyzed the provisions of section 12(2) and the precedent set by the Vijay Dal Mill case. The Court agreed with the petitioners' interpretation and held that the notification canceling the earlier exemption with retrospective effect was not valid. The Court emphasized that while an exemption could be withdrawn prospectively, retrospective cancellation was not permissible. The Court ruled that the notification dated 7th January, 1981, canceling the exemption with effect from 1st October, 1978, was to be quashed.

3. The Court concluded that the impugned notification canceling the earlier exemption with retrospective effect was not legally sustainable. However, it clarified that the cancellation of the exemption with effect from the date of the new notification, 7th January, 1981, was valid. The Court allowed the writ petition, quashed the notification canceling the exemption with retrospective effect, and directed the petitioners to seek consequential relief from the Sales Tax Officer. The Court also ordered the refund of any security deposit made by the petitioners.