Summary
The Supreme Court held that the 2002 amendment to Section 8(5) of the Central Sales Tax Act, 1956, which made State exemptions on inter-State sales subject to production of Forms C and D under Section 8(4), is prospective. It does not take away the accrued right of a unit holding unconditional exemption under eligibility and entitlement certificates issued in 1998, so the revision notices and trade circulars demanding the exempted tax were rightly quashed.
Issues
- Whether an unconditional exemption from inter-State sales tax granted under the Package Scheme of Incentives, 1993 through eligibility and entitlement certificates issued under the unamended Section 8(5) of the Central Sales Tax Act could be curtailed by the amendment to Section 8(5) by the Finance Act, 2002 for failure to furnish Forms C or D.
- Whether the amended Section 8(5) operates retrospectively so as to take away benefits accrued before 11.05.2002.
- Whether the State could revise assessments and demand the exempted tax without revoking the certificates or giving the assessee notice and a hearing.
Provisions considered
- Section 8(5) (before and after amendment by the Finance Act, 2002), Central Sales Tax Act, 1956Unamended Section 8(5), a non obstante provision overriding Sections 8(1) and 8(4), allowed the State to grant total or partial exemption without insisting on Forms C or D, as held in Shree Digvijay Cement. The amendment from 11.05.2002, made to overcome that decision, confines the exemption power to sales to registered dealers or the Government and so ties it to Section 8(4); the Court held this restriction prospective only. (¶¶ 9, 13, 14, 15, 16, 17, 19, 21)
- Section 8(4), Central Sales Tax Act, 1956Read as requiring sales at the concessional rate under Section 8(1) to be supported by the prescribed declaration (Form C) or Government certificate (Form D); the Court held that this condition could not be applied to defeat an unconditional exemption that had accrued before the amendment. (¶¶ 12, 16, 17, 30)
- Section 6(c), General Clauses Act, 1897Applied, following S.L. Srinivasa Jute Twine Mills, on the footing that an amendment operates like a repeal, so that unless a different intention appears it does not affect rights acquired or accrued under the earlier law for the period for which they accrued. (¶ 25)
- Section 38, Bombay Sales Tax Act, 1959Notices under this section revising the assessments for 2002-2003 to 2004-2005 for non-submission of Forms C and D were held to have been issued without competence and were rightly quashed. (¶¶ 2, 7, 30)
Held
- Every statute is presumed prospective unless made retrospective expressly or by necessary implication; a law that impairs vested rights or attaches new obligations to past transactions is presumed not to operate retrospectively. (¶¶ 23, 24)
- The amendment of Section 8(5) by the Finance Act, 2002 restricted the State's earlier absolute power to exempt inter-State sales by making it subject to Section 8(4), but only with effect from 11.05.2002; it does not apply to cases where unconditional exemption had been granted earlier, and nothing in it nullifies accrued rights or revokes earlier exemptions. (¶¶ 16, 17, 21)
- The 1998 eligibility and entitlement certificates granted the assessee exemption up to a monetary ceiling or a terminal year without any condition about Forms C and D, giving it a substantive accrued right that the prospective amendment did not take away. Following MRF Ltd. and Southern Petrochemical Industries, an exemption granted for a fixed period cannot be withdrawn prematurely so as to affect accrued rights unless the statute so provides. (¶¶ 18, 21, 22, 25, 26, 27)
- An accrued substantive right cannot be taken away unilaterally without notice and a hearing. Since the certificates were never revoked and no notice was given, the right continued to subsist, and the State could not revise the assessments and demand the exempted tax merely because Forms C and D had not been furnished. (¶¶ 28, 29, 30)
Result
State's appeal dismissed, upholding the High Court's quashing of the trade circulars and revision notices; the connected appeals were dismissed in the same terms without costs.