1997 (12) TMI 608 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to cancellation of eligibility certificate with retrospective effect by State Level Committee.

Analysis:
The petitioner filed a petition under Article 226 of the Constitution seeking to quash the order passed by the State Level Committee canceling the petitioner's eligibility certificate with retrospective effect. The eligibility certificate granted to the petitioner entitled them to exemption from sales tax for a specific period. The District Level Committee issued the certificate, and the petitioner enjoyed the benefits as per the certificate. However, the State Level Committee canceled the certificate retrospectively, leading to the petitioner challenging this decision in a previous petition. The previous petition directed the authority to hear the petitioner and pass appropriate orders, but the final order was not passed within the stipulated time. Consequently, the State Level Committee issued a final order canceling the eligibility certificate, prompting the current challenge.

The respondents argued that the State Level Committee had the authority to set aside orders of the District Level Committee in case of irregularities. They contended that the petitioner's business did not warrant the eligibility certificate as it was not engaged in manufacturing. The delay in passing the order was attributed to the petitioner's delaying tactics post the earlier court order granting a hearing. The petitioner, on the other hand, argued that the certificate was granted after due scrutiny and that they conducted business based on it without charging any tax during the exemption period.

The petitioner relied on previous judgments where cancellation of eligibility certificates with retrospective effect was deemed impermissible. The Division Bench held that withdrawal of such certificates should not have retrospective effect to avoid causing hardship to the assessee. Considering the petitioner's reliance on these judgments and the fact that they conducted business based on the eligibility certificate, the court found it unfair to demand tax payment for the exemption period. Therefore, the court quashed the order canceling the eligibility certificate and deemed the petitioner to have enjoyed the exemption as per the District Level Committee's certificate.

In conclusion, the court allowed the petition, quashed the impugned order, and directed each party to bear their own costs.