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2025 (2) TMI 475 - SC - VAT / Sales TaxRevision of assessments of the assessee-respondent made for the assessment years 2002-2003 to 2004-2005 - refund the exempted portion of the tax as per the provision of Package Scheme of Incentives 1993 on the sale of goods effected in the course of inter-State trade or commerce - HELD THAT - The State Government though continues to have the power in public interest to grant exemption/partial exemption of tax on inter- State sale trade or commerce but the same is subject to fulfilment of the requirements laid down under Sub-Section (4) of Section 8 of the CST Act which means that henceforth the exemption so granted would be admissible only if Form C and D are supplied by the dealer in context with the aforesaid interstate sale trade and commerce. The absolute power initially conferred under Section 8(5) upon the State Government to grant exemption/partial exemption of tax in connection with inter-State sale trade or commerce with the amendment was circumscribed and restricted to the fulfilment of the requirement of Section 8(4) of the CST Act which prescribes for the submission of Form C and D only w.e.f. 11.05.2002. However such restrictions are prospective in nature and would not apply retrospectively to cases where absolute exemption was permitted much prior to the amendment. In the instant case the assessee-respondent was granted tax benefits under the PSI 1993 issued in exercise of power under Section 8(5) of the CST Act as per the eligibility and entitlement certificates dated 20.02.1998 and 24.03.1998 respectively and that said benefit was available to the assessee-respondent up to the period of 2012 or to the extent of Rs.273.54 crore whichever was earlier. The said benefit granted to the assessee-respondent was not with any restriction much less the condition of submission of Form C and D . Thus on the basis of such exemption granted by the petitioner vide Eligibility Certificate dated 20.02.1998 and Entitlement Certificate dated 24.03.1998 a substantive right had accrued to the respondent to claim the said benefit up to the year 2012 or to the extent of Rs.273.54 crore - in view of the amendment of Section 8(5) by the Finance Act 2002 the State Government ceases to have power to grant exemption in respect of sale of goods covered under Section 8(2) but that is not the issue herein. The precise issue in the present case is whether the aforesaid amendment would take away the right which had accrued to the assessee-respondent under the Eligibility/Entitlement certificates wherein absolute exemptions were granted without any condition of submission of Form C and D . In the case at hand the assessee-respondent was held eligible for absolute exemption under the PSI 1993 issued in exercise of power under Section 8(5) of the CST Act as per Eligibility certificate dated 20.02.1998 and Entitlement certificate dated 24.03.1998 granting exemption to it from payment of tax under the BST Act and CST Act to the extent of Rs. 273.54 crore or up till 2012 whichever is earlier. The said exemption granted to the assessee-respondent was much prior to the enforcement of the Finance Act 2002 with effect from 11.05.2002. Therefore by virtue of the unamended Section 8(5) and the Notification issued thereunder as well as under the aforesaid Eligibility and Entitlement certificates a substantive right of exemption from payment of tax had accrued to the assessee-respondent - The requirement for fulfilling the condition of Section 8(4) of the CST Act for getting the benefit of tax exemption came subsequently after the amendment of Section 8(5) with effect from 11.05.2002 and would apply prospectively to transactions in respect of which eligibility and entitlement certificates are issued subsequently. Conclusion - The State Government was not competent to issue the impugned notices for revising the assessment of the assessee-respondent and to demand the exempted tax only for the reason that the assessee-respondent has not submitted Form C and D in support of inter-State sale trade commerce. The requirement of submission of Form C and D would apply prospectively after 11.05.2002 i.e. after the Finance Act of 2002. The appeal lacks merit and hence dismissed.
1. **ISSUES PRESENTED and CONSIDERED**
The core legal issues considered in this judgment are:
2. **ISSUE-WISE DETAILED ANALYSIS** Legal Framework and Precedents: The CST Act governs the taxation of inter-State sales, with Section 8(1) prescribing tax rates for sales to registered dealers or the Government, and Section 8(2) dealing with other inter-State sales. Section 8(4) mandates that sales under Section 8(1) must be supported by declarations in Form 'C' or 'D'. Section 8(5), before its amendment, allowed State Governments to grant tax exemptions on inter-State sales in the public interest, without the requirement of these forms. The amendment to Section 8(5) by the Finance Act, 2002, introduced a condition that such exemptions are subject to the fulfilment of requirements under Section 8(4), i.e., submission of Form 'C' or 'D'. Court's Interpretation and Reasoning: The Court examined the pre-amendment and post-amendment provisions of Section 8(5). It noted that the amendment was intended to overcome the precedent set in Shree Digvijay Cement Co. Ltd. vs. State of Rajasthan, where it was held that the State could dispense with the requirement of Forms 'C' and 'D'. The Court emphasized that amendments to statutes are generally prospective unless explicitly stated otherwise. It cited precedents such as Darshan Singh v. Ram Pal Singh and S.L. Srinivasa Jute Twine Mills (P) Ltd. vs. Union of India, which support the principle that substantive rights accrued under a statute cannot be retrospectively impaired by amendments unless expressly provided. Key Evidence and Findings: The assessee-respondent had been granted tax exemption benefits under the PSI 1993, with eligibility and entitlement certificates issued in 1998, allowing exemption until 2012 or up to Rs. 273.54 crore. These certificates did not stipulate the requirement of Forms 'C' and 'D'. Application of Law to Facts: The Court found that the exemption granted to the assessee-respondent was a substantive right that accrued before the amendment and was not subject to the new requirement of Forms 'C' and 'D'. The amendment to Section 8(5) did not have retrospective effect, and thus, could not affect rights that had already accrued under the pre-amendment provision. Treatment of Competing Arguments: The State argued that the amendment should apply retrospectively, thereby nullifying the exemptions granted without the requirement of Forms 'C' and 'D'. The Court rejected this argument, holding that the amendment was prospective and did not affect previously accrued rights. Conclusions: The Court concluded that the State Government was not justified in revising the assessments of the assessee-respondent based on the failure to submit Forms 'C' and 'D', as the requirement was not applicable to exemptions granted prior to the amendment. 3. **SIGNIFICANT HOLDINGS** Verbatim Quotes of Crucial Legal Reasoning: "The requirement for fulfilling the condition of Section 8(4) of the CST Act for getting the benefit of tax exemption came subsequently after the amendment of Section 8(5) with effect from 11.05.2002 and would apply prospectively to transactions in respect of which eligibility and entitlement certificates are issued subsequently." Core Principles Established:
Final Determinations on Each Issue: The Court dismissed the appeal, affirming that the State Government's actions to revise the assessments and demand exempted taxes based on the non-submission of Forms 'C' and 'D' were unjustified. The requirement for these forms was applicable only prospectively, post-amendment.
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