2008 (12) TMI 697 - HC - VAT and Sales Tax

Whether the petitioner having been treated to be eligible could be denied the benefit of investment after the date of unit having been put in the negative list? Held that - Admittedly on the date of commercial production and also on the date of issue of entitlement/exemption certificate the petitioner was in the negative list and could not be considered to be eligible unless applicability of notification dated December 16 1996 was confined to units which started investment after the said date. Once the petitioner has been treated to be eligible there was no valid reason to further classify the benefit of investment up to the date of amendment putting the unit in the negative list. Appeal allowed.

Summary

Issues:
Quashing of order by Screening Committees under Haryana General Sales Tax Rules, 1975.

Detailed Analysis:
The petitioner, a company under the Companies Act, 1956, sought to quash orders passed by Screening Committees under the Haryana General Sales Tax Rules, 1975. The petitioner claimed eligibility for sales tax exemption under rule 28A of the Rules, which provided for exemption subject to certain conditions. The petitioner invested prior to 1996, and a key condition was that the product to be manufactured should not be in the negative list. However, a notification in December 1996 included the petitioner's product in the negative list, affecting its eligibility. The matter went to the Supreme Court, which emphasized that the petitioner acted based on the representations made by the State through rule 28A, and the State's subsequent actions were in line with the original rule's intent.

The Supreme Court held that a right conferred by subordinate legislation cannot be taken away retrospectively unless explicitly provided for. The Court remanded the matter for reconsideration by the Director of Industries. The subsequent order recommended granting an eligibility certificate based on the investments made by the petitioner. However, the appellate authority restricted the benefit based on the negative list inclusion date, citing that tax concessions are defeasible and not indefeasible rights, and withdrawals are prospective.

The High Court analyzed the eligibility criteria under rule 28A, which specified that eligibility is determined from the date of commercial production or issuance of the certificate. The petitioner was in the negative list on both these dates, impacting its eligibility. The Court noted that the authorities themselves had previously extended benefits to the petitioner despite the negative list inclusion. Consequently, the Court ruled in favor of the petitioner, quashing the orders restricting benefits to the negative list inclusion date.

The High Court directed the appellate authority to issue a fresh order within four months in accordance with the law. The judgment emphasized the importance of upholding eligibility based on the representations and actions of the State, ensuring fairness and adherence to legal principles in granting tax exemptions under the Rules.