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.

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 w