2001 (9) TMI 1084 - HC - VAT and Sales Tax

Summary

Issues involved:
1. Retrospective cancellation of eligibility certificate for tax exemption.

Analysis:
The judgment addresses the issue of retrospective cancellation of an eligibility certificate for tax exemption. The petitioner, a limited company engaged in manufacturing steel tubes, was granted an eligibility certificate in 1979 exempting them from entry tax for the period from 1976 to 1981. The certificate was fully implemented during this period. However, after five years of issuance and four years of expiry, the State abruptly cancelled the certificate in 1984, leading to a writ petition. The High Court previously quashed the cancellation in 1993, citing lack of a show cause notice. Subsequently, in 1995, the State issued a show cause notice and then cancelled the certificate, prompting the petitioner to file another writ seeking to quash the cancellation.

The court observed that the cancellation of the eligibility certificate after its expiry and without issuing a show cause notice was not legally sustainable. Referring to previous judgments, the court emphasized that once an eligibility period ends, the State cannot retrospectively cancel the certificate. The court noted that the facts of this case were similar to previous decisions where it was held that the State lacks authority to cancel certificates retrospectively. The court highlighted that even if the State had cancelled the certificate during its validity period, the cancellation would only apply prospectively, not retrospectively.

Based on the legal principles established in previous cases, the court concluded that the State's retrospective cancellation of the eligibility certificate was unlawful. Therefore, the court allowed the petition, quashed the impugned order of cancellation, and ruled in favor of the petitioner. The judgment reaffirms the principle that once an eligibility certificate for tax exemption is granted, it cannot be retrospectively cancelled by the State authorities, especially after the expiration of the eligibility period.