2025 (3) TMI 895 - HC - VAT / Sales Tax

Seeking clarification of notification - Retrospective application of notification dated 31-10-2006 which incorporates the amended provisions of Section 8(5) of the Central Sales Tax Act 1956 (CST Act) - HELD THAT - It is not in dispute that pursuant to the notification dated 07-11-1997 the petitioner Company was granted exemption as the petitioner Company is said to have invested more than Rs. 550 crores in Integrated Steel Plant and the benefit of exemption started from 07-11-1997 thereafter on 10- 5-2002 Section 8 (5) of the CST Act was amended making fulfillment of Section 8 (4) of the CST Act (production of C-Form) mandatory for availing the benefit of exemption under Section 8 (5) and pursuant to the notification dated 10-5-2002 making production of C-Form mandatory the State Government issued notification dated 31-10-2006 in exercise of the powers conferred by Section 15-B 72(i)(b) of the Chhattisgarh VAT Act read with sub-section (5) of Section 8 of the CST Act incorporating the amended provisions of Section 8 (5) of the CST Act by which filing / production of C-Form has been made mandatory for availing the benefit of exemption under Section 8 (5) of the CST Act which the petitioner Company has called in question in the instant writ petitions. Decision of the Bombay High Court in Prism Cement Limited 2013 (7) TMI 668 - BOMBAY HIGH COURT was assailed before the Supreme Court by the State of Maharashtra in Prism Cement Limited s case 2025 (2) TMI 475 - SUPREME COURT in which their Lordships have considered the issue with respect to Section 8 (5) of the CST Act clarifying the legal position and held that such restrictions are prospective in nature and would not apply retrospectively to cases where absolute exemption was permitted much prior to the amendment. Reverting to the facts of the case in light of the aforesaid decision of the Supreme Court it is quite vivid that the petitioner Company has been granted absolute exemption from the tax liability on fulfillment of certain conditions as per the notification dated 07-11-1997 and as per the decision of the Supreme Court the amendment made in Section 8 (5) of the CST Act making the production of C-Form mandatory for availing benefit of tax exemption would apply with effect from 10-5-2002 and the amended provision of Section 8 (5) with effect from 10-5-2002 would apply prospectively to the transactions in respect of which Eligibility Certificate are issued subsequently as held by their Lordships of the Supreme Court. It is made clear that notification dated 31-10-2006 would not apply to the petitioner Company as they had already been exempted with effect from 07-11-1997 as the exemption was available up to 17-04-2013. Conclusion - Notification dated 31-10- 2006 would not apply to the petitioner Company and exemption would be available as per the notification dated 07-11-1997 up to 17-04-2013. The petitioner Company would be entitled for the benefit of exemption without submission of C-Form. Petition allowed.

ISSUES PRESENTED and CONSIDERED

The primary legal issues considered in this judgment are:

Whether the notification dated 31-10-2006, which incorporates the amended provisions of Section 8(5) of the Central Sales Tax Act, 1956 (CST Act), applies retrospectively to the petitioner Company, thereby requiring the submission of Form C for tax exemption.
Whether the petitioner Company's right to tax exemption, granted under a prior notification, constitutes a vested right that cannot be retrospectively altered by subsequent notifications.
Whether the principle of promissory estoppel applies, preventing the State from retracting the tax exemption initially granted to the petitioner Company.

ISSUE-WISE DETAILED ANALYSIS

1. Retrospective Application of Notification Dated 31-10-2006

Relevant Legal Framework and Precedents: The case revolves around the interpretation of Section 8(5) of the CST Act and its amendment, which mandates the production of Form C for availing tax exemptions. The precedent set by the Supreme Court in the case of Prism Cement Limited was pivotal, establishing that amendments to Section 8(5) are prospective.
Court's Interpretation and Reasoning: The Court interpreted that the amended Section 8(5) of the CST Act, effective from 11-05-2002, is prospective and does not apply to exemptions granted prior to this date. The Court relied on the Supreme Court's ruling in Prism Cement Limited, which clarified that the amendment does not retroactively affect vested rights.
Key Evidence and Findings: The petitioner Company was granted tax exemption under a notification dated 07-11-1997, which was valid until 17-04-2013. The Court found that this exemption was granted unconditionally and without the requirement of Form C.
Application of Law to Facts: The Court applied the legal principle that amendments to tax laws should not retroactively affect vested rights unless explicitly stated. The petitioner's exemption, granted before the amendment, was thus unaffected by the 2006 notification.
Treatment of Competing Arguments: The State argued that the notification applied retrospectively, but the Court dismissed this, citing the Supreme Court's decision that amendments are prospective unless explicitly stated otherwise.
Conclusions: The notification dated 31-10-2006 does not apply retrospectively to the petitioner Company, and the requirement of Form C is not applicable to exemptions granted before the amendment.

2. Vested Rights and Promissory Estoppel

Relevant Legal Framework and Precedents: The concept of vested rights and the principle of promissory estoppel were considered. The Supreme Court's decision in Prism Cement Limited provided guidance on the protection of vested rights against retrospective legislative changes.
Court's Interpretation and Reasoning: The Court held that the petitioner's right to tax exemption was a vested right, established by the prior notification and could not be unilaterally revoked by subsequent amendments without due process.
Key Evidence and Findings: The petitioner invested significantly based on the granted exemption, which the Court recognized as reliance on the State's promise, invoking the principle of promissory estoppel.
Application of Law to Facts: The Court determined that the petitioner's substantial investment and reliance on the State's notification constituted a vested right, protected from retrospective changes.
Treatment of Competing Arguments: The State's argument that the notification was within its legislative power was countered by the Court's emphasis on the need for due process and protection of vested rights.
Conclusions: The petitioner's right to exemption is a vested right, protected from retrospective application of the 2006 notification, and the principle of promissory estoppel prevents the State from retracting the granted exemption.

SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "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."
Core Principles Established: Amendments to tax laws apply prospectively unless explicitly stated otherwise. Vested rights and the principle of promissory estoppel protect entities from retrospective legislative changes that affect previously granted exemptions.
Final Determinations on Each Issue: The Court concluded that the notification dated 31-10-2006 does not apply to the petitioner Company's exemption granted prior to the amendment. The petitioner is entitled to the benefit of exemption without the submission of Form C, as per the original notification.

The writ petition was allowed to the extent that the petitioner Company retains its tax exemption rights as initially granted, without the retrospective application of the 2006 notification. No costs were ordered.

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