Case Note & Summary
The dispute arose from the imposition of sales tax on a public limited company engaged in manufacturing electrical motors and fans, which had been granted a sales tax exemption under the Haryana General Sales Tax Act, 1973. The company received an Eligibility Certificate for sales tax exemption for the period from April 20, 1991, to April 19, 1996, subject to certain conditions, including a prohibition on making sales outside the State of Haryana for five years. The assessing authority issued a show cause notice alleging that the company had violated these conditions by making sales outside the state. The company contested this in a writ petition before the High Court, which ruled in favor of the company, stating that the imposition of tax on inter-State sales was impermissible. The Supreme Court, however, found that the High Court had erred in its reasoning, as the assessing authority had acted in accordance with the law by cancelling the exemption certificate due to the company's contraventions. The Supreme Court allowed the appeal, set aside the High Court's order, and directed the assessing authority to issue a fresh assessment order after providing the company an opportunity to be heard. The decision emphasized the importance of adhering to the conditions set forth in the exemption scheme and the authority of the assessing body to enforce compliance.
Headnote
A) Sales Tax - Exemption Scheme - Validity of Tax Imposition - Haryana General Sales Tax Act, 1973, Section 13-B - The High Court incorrectly assumed that tax was levied on inter-State sales and branch transfers, which led to the quashing of the assessment order. The Supreme Court found that the assessing authority acted within its rights to cancel the exemption certificate due to violations of the conditions stipulated in the Eligibility Certificate and Rule 28-A of the Rules. Held that the High Court's judgment could not be sustained (Paras 15-16).
Issue of Consideration
Whether the assessing authority correctly imposed tax on inter-State sales and branch transfers under the Haryana General Sales Tax Act, 1973.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's order, and directed the assessing authority to issue a fresh assessment order after providing the respondent an opportunity to be heard.
Law Points
- Sales Tax Exemption
- Eligibility Certificate
- Rule 28-A
- Notional Sales Tax Liability
- Inter-State Sales Tax
- Constitutional Prohibition
