2002 (1) TMI 1267 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to order dated May 31, 1994 by State Level Committee regarding exemption conditions.

Detailed Analysis:
The petitioner, a limited company manufacturing two-wheeler scooters, was granted sales tax exemption initially for five years, extended later to nine years. An amendment in exemption notification was issued by the State on March 3, 1989, allowing the petitioner to apply for exemption under the newly added clause XII(a). The State Level Committee approved the application, amending the eligibility certificate on July 17, 1990, enabling the petitioner to claim exemption under State and Central laws. However, after four years, on May 31, 1994, the State Level Committee imposed new conditions on the previously granted exemption, requiring the petitioner to fulfill certain conditions to claim the exemption, which led to the petitioner being asked to deposit unpaid taxes. The legality of this decision was challenged by the petitioner under Article 226/227 of the Constitution of India.

The petitioner argued that once an exemption is granted and availed, it cannot be retrospectively withdrawn or made conditional. The petitioner contended that the original grant and subsequent amendments were valid and legally compliant, and should be upheld. The petitioner relied on the Supreme Court decision in Birla Jute and Industries Ltd. v. State of M.P. [2000] 119 STC 14 to support their case. On the other hand, the State defended its decision as being in the interest of the State and not requiring any change or interference.

The High Court, after hearing arguments from both sides and examining the case record, found in favor of the petitioner. The Court noted that the issue was similar to the Birla Jute case where the State attempted to review the exemption after the expiration of the term, which was not justified. The Court emphasized that no show cause notice was given to the petitioner before withdrawing the exemption, and there was no element of fraud or forgery involved. Therefore, the impugned order dated May 31, 1994, along with two consequential orders, was quashed by a writ of certiorari. The Court held that the State's attempt to review the exemptions after several years without valid reasons was impermissible, leading to the petition being allowed with no costs awarded.