1. Tax exemption granted under a state incentive scheme via eligibility certificates — subsequent legislative amendment restricting exemptions to specific form submissions — dispute over retrospective application. (Para 2 , 5 , 6 , 7 , 18 )
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2025 Supreme(SC) 323
SUPREME COURT OF INDIA
PAMIDIGHANTAM SRI NARASIMHA, PANKAJ MITHAL, JJ.
The State of Maharashtra and Others – Appellants
Versus
Prism Cement Limited and Another – Respondents
Civil Appeal Nos. 13522, 13523, 13524, 13525, 13526, 13527, 13928 of 2015, Civil Appeal No........of 2025 [S.L.P. (C) Nos. 11314-11320 of 2018]
Decided On : 12-02-2025
Important Points
The amendment to Section 8(5) of the CST Act does not retrospectively affect previously granted tax exemptions, which remain valid unless revoked with notice.
Subject
Taxation Law - Sales Tax
Act Referred
Headnote
(A) Bombay Sales Tax Act, 1959 - Section 38 - Central Sales Tax Act - Section 8(1), 8(2), 8(4), 8(5) - Writ petition allowed by High Court quashing trade circulars and notices for tax revision on grounds of exemption under Package Scheme of Incentives 1993 - State Government retains power to grant exemptions but must comply with conditions post-amendment - Exemption granted prior to amendment remains valid. (Paras 3, 18, 30)
(B) Tax Exemption - The amendment to Section 8(5) of the CST Act does not retrospectively affect rights accrued under prior exemptions - The requirement for submission of Forms ‘C’ and ‘D’ applies only prospectively. (Paras 17, 30)
Facts of the case:
The assessee-respondent, Prism Cement Limited, challenged trade circulars and notices regarding tax assessments for 2002-2005, asserting entitlement to tax exemptions under the PSI 1993, which were granted prior to the 2002 amendment of the CST Act. (Paras 2, 6)
Findings of Court:
The court found that the State Government could not unilaterally revoke previously granted exemptions without notice, and the requirements for Forms ‘C’ and ‘D’ apply only to future transactions post-amendment. (Paras 28, 30)
Issues: Whether the amendment to Section 8(5) of the CST Act could retrospectively affect previously granted tax exemptions and the validity of the notices issued for tax revision. (Paras 8, 30)
Ratio Decidendi: The court held that the amendment to Section 8(5) does not nullify previously accrued rights to tax exemptions, and the State Government must provide notice before altering such rights. (Paras 17, 28)
Result: Appeal dismissed.
(B) Tax Exemption - The amendment to Section 8(5) of the CST Act does not retrospectively affect rights accrued under prior exemptions - The requirement for submission of Forms ‘C’ and ‘D’ applies only prospectively. (Paras 17, 30)
Facts of the case:
The assessee-respondent, Prism Cement Limited, challenged trade circulars and notices regarding tax assessments for 2002-2005, asserting entitlement to tax exemptions under the PSI 1993, which were granted prior to the 2002 amendment of the CST Act. (Paras 2, 6)
Findings of Court:
The court found that the State Government could not unilaterally revoke previously granted exemptions without notice, and the requirements for Forms ‘C’ and ‘D’ apply only to future transactions post-amendment. (Paras 28, 30)
Issues: Whether the amendment to Section 8(5) of the CST Act could retrospectively affect previously granted tax exemptions and the validity of the notices issued for tax revision. (Paras 8, 30)
Ratio Decidendi: The court held that the amendment to Section 8(5) does not nullify previously accrued rights to tax exemptions, and the State Government must provide notice before altering such rights. (Paras 17, 28)
Result: Appeal dismissed.
Judgement Key Points
Key Points: - The State Government cannot unilaterally revoke previously granted exemptions without notice. (!) - The amendment to Section 8(5) of the CST Act is prospective and does not nullify rights accrued under pre-amendment exemptions; Form ‘C’ and ‘D’ requirements apply prospectively. (!) (!) - Exemptions granted under PSI 1993 in existence before 11.05.2002 created substantive rights up to the earlier of 2012 or Rs. 273.54 crore. (!) (!) - After the 2002 amendment, compliance with Section 8(4) (Forms ‘C’/‘D’) became a condition for exemptions, but this applies to transactions post-amendment. (!) (!) - The appeals related to Maharashtra’s revision notices, based on Form ‘C’ and ‘D’ compliance, were dismissed for lack of retrospective application of the amendment to pre-existing rights. (!) - The decision relies on general principle that repeal or amendment does not affect accrued rights unless explicitly stated or revocation is effected with due process. (!) (!) - Prior judgments reaffirm the principle that substantive rights accrued cannot be taken away unilaterally without notice/hearing. (!)
What is... How to determine whether the amendment to Section 8(5) of the CST Act retrospectively affects previously granted tax exemptions?
What is... What are the rights accrued under absolute exemptions granted prior to the 2002 amendment to Section 8(5) of the CST Act?
What is... What are the conditions under which Form ‘C’ and ‘D’ declarations are required for inter-State sales post-amendment?
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. Aaditya Aniruddha Pande, AOR Mrs. Anil Katiyar, AOR Mr. Tushar Mehta, Solicitor General Ms. Deepanwita Priyanka, AOR
For the Respondent(s): Mr. Punit Dutt Tyagi, AOR Mr. Zoheb Hossain, AOR Mr. Amarjit Singh Bedi, Adv. Ms. Surekha Raman, Adv. Mr. Shreyash Kumar, Adv. Mr. Yashwant Sanjenbam, Adv. Mr. Imlikaba Jamir, Adv. M/S. K J John And Co, AOR Mr. V Sridharan, Sr. Adv. Mr. Sahil Parghi, Adv. Mr. S Sriram, Adv. Ms. Neha Choudhary, Adv. Ms. Umang Motiyani, Adv. Mr. Aayush Agarwal, Adv. Ms. Falguni Gupta, Adv. Mr. Ayush Agarwal, Adv. Ms. Charanya Lakshmikumaran, AOR Mr. S. Ravi Shankar, AOR Ms. Yamunah Nachiar, Adv. Ms. Meghna Mukherjee, Adv. M/S. Gagrat And Co, AOR Mr. Ujjwal A Rana, Adv. Mr. Himanshu Mehta, Adv. Mr. K. Paari Vendhan, AOR Mr. Rishabh Sancheti, Adv. Ms. Padma Priya, Adv. Mr. Paarivendhan, Adv. Ms. Anushree Prashit Kapadia, AOR Mr. M. P. Devanath, AOR
For the Appellant(s) : Mr. Aaditya Aniruddha Pande, AOR Mrs. Anil Katiyar, AOR Mr. Tushar Mehta, Solicitor General Ms. Deepanwita Priyanka, AOR
For the Respondent(s): Mr. Punit Dutt Tyagi, AOR Mr. Zoheb Hossain, AOR Mr. Amarjit Singh Bedi, Adv. Ms. Surekha Raman, Adv. Mr. Shreyash Kumar, Adv. Mr. Yashwant Sanjenbam, Adv. Mr. Imlikaba Jamir, Adv. M/S. K J John And Co, AOR Mr. V Sridharan, Sr. Adv. Mr. Sahil Parghi, Adv. Mr. S Sriram, Adv. Ms. Neha Choudhary, Adv. Ms. Umang Motiyani, Adv. Mr. Aayush Agarwal, Adv. Ms. Falguni Gupta, Adv. Mr. Ayush Agarwal, Adv. Ms. Charanya Lakshmikumaran, AOR Mr. S. Ravi Shankar, AOR Ms. Yamunah Nachiar, Adv. Ms. Meghna Mukherjee, Adv. M/S. Gagrat And Co, AOR Mr. Ujjwal A Rana, Adv. Mr. Himanshu Mehta, Adv. Mr. K. Paari Vendhan, AOR Mr. Rishabh Sancheti, Adv. Ms. Padma Priya, Adv. Mr. Paarivendhan, Adv. Ms. Anushree Prashit Kapadia, AOR Mr. M. P. Devanath, AOR
Table of Contents
2. Whether subsequent amendments to the Central Sales Tax Act can retrospectively withdraw tax exemptions accrued under prior certificates due to non-submission of prescribed declarations. (Para 8 , 19 , 20 )
3. The 2002 amendment to Section 8(5) of the CST Act is prospective and cannot impair substantive rights to exemption accrued under certificates issued prior to the amendment. (Para 14 , 15 , 16 , 17 , 21 , 28 , 29 )
4. Statutes are prima facie prospective; vested rights acquired under existing laws cannot be impaired by subsequent amendments unless the legislature expressly provides for retrospective operation. (Para 23 , 24 , 25 , 26 , 27 )
5. Appeal dismissed — High Court order quashing the trade circulars and notices for revising tax assessments upheld. (Para 30 , 32 )
6. Whether a legislative amendment that restricts a previously absolute power to grant tax exemptions applies retrospectively to rights already accrued?
No. Statutes are prima facie prospective unless expressly stated otherwise. An amendment restricting the power to grant exemptions does not nullify or revoke substantive rights already accrued under certificates issued prior to the amendment. (Para 17 , 21 , 23 )
7. Can the State Government unilaterally withdraw tax exemptions granted for a fixed period through eligibility certificates via a subsequent notification or amendment?
No. Once a substantive right to exemption for a fixed period has accrued and conditions are fulfilled, it cannot be taken away unilaterally or through subsequent notifications unless the statute specifically provides for such withdrawal. (Para 26 , 27 , 28 )
8. Does the power of the State Government to grant tax exemptions under Section 8(5) of the CST Act override the requirement of submitting Form 'C' or 'D' under Section 8(4)?
Prior to the 2002 amendment, Section 8(5) was an overriding provision that allowed the State to dispense with Form 'C' and 'D'. Post-amendment, such exemptions are subject to the requirements of Section 8(4). (Para 13 , 14 , 15 , 16 )
JUDGMENT :
PANKAJ MITHAL, J.
Civil Appeal No. 13928 of 2015:
1. Heard learned counsel for the parties at length.
2. The assessee-respondent Prism Cement Limited, a public limited company, invoked the extraordinary writ jurisdiction of the High Court, challenging the three trade circulars issued by the Commissioner of Sales Tax, Mumbai1 [In short ‘Commissioner’] on 27.05.2002, 20.07.2002 and 08.02.2007 respectively and various notices issued by the Deputy Commissioner of Sales Tax under Section 38 of the Bombay Sales Tax Act, 19592 [In short ‘BST Act’] for revising the assessments of the assessee-respondent made for the assessment years 2002-2003 to 2004-2005. Consequentially, calling upon the assessee-respondent to pay/refund the exempted portion of the tax as per the provision of Package Scheme of Incentives 19933 [Hereinafter referred to as ‘PSI 1993’] on the sale of goods effected in the course of inter-State trade or commerce.
3. The above writ petition has been allowed by the Division Bench of the High Court by the impugned judgment and order dated 30.08.2012 and it has been held that even after the amendment of Section 8(5) of the Central Sales Tax Act4 [In short ‘CST Act’] by the Finance Act, 2002 with effect from 11.05.2002, the State Governments are empowered to grant total or partial exemption from tax payable on inter-State sales covered under Section 8(1) as also under Section 8(2) of the CST Act in public interest, subject to the fulfilment of requirements of Section 8(4) of the CST Act. Accordingly, the trade circulars and the notices impugned were quashed holding that the State of Maharashtra incorrectly proceeded to issue the same on the premise that the State Government had no power to grant total or partial exemption in respect of transactions covered under Section 8(2) of the CST Act after the 2002 amendment.
4. Under challenge in this appeal is the aforesaid judgment and order dated 30.08.2012 passed by the High Court allowing the above writ petition.
5. The State of Maharashtra introduced the PSI in 1993 so as to encourage the establishment of industrial units in backward areas and for that purpose envisaged to provide tax incentives, inter alia, including partial/total exemption from payment of sales tax under the BST Act as well as CST Act. This scheme was announced in exercise of powers under Section 8(5) of the CST Act vide notification dated 05.07.1980. The scheme provided a specified time period and the maximum amount up to which units were entitled to avail such incentives.
6. Undisputedly, the assessee-respondent was eligible for tax exemption under the said scheme and was duly issued the Eligibility Certificate dated 20.02.1998 and the Entitlement Certificate dated 24.03.1998 granting exemption from payment of tax under the BST Act and CST Act to the extent of Rs. 273.54 crores or up till 2012 whichever is earlier.
7. The assessee-respondent in the three assessment years 2002-2003, 2003-2004 and 2004-2005 availed the tax exemption benefits under the above scheme but after the CST Act was amended by the Finance Act, 2002 with effect from 11.05.2002, the State of Maharashtra, on the basis of the impugned trade circulars and the notices issued in the month of February, 2009 under Section 38 of the BST Act, sought to revise the tax demand of the assessee-respondent on the pretext that the assessee-respondent has failed to comply with the conditions of Section 8(4) of the CST Act with regard to submission of declarations in Form ‘C’ or ‘D’.
8. In the above backdrop, the issue which arises for consideration is whether the exemption from tax granted under the PSI 1993 issued under Section 8(5) of the CST Act as it existed at the relevant time read with eligibility & entitlement certificate could be withdrawn by the subsequent amendment to Section 8(5) of the CST Act by the Finance Act of 2002 with effect from 11.05.2002 as the assessee-respondent failed to fulfil the requirements of Section 8(4) of the CST Act
