Case Note & Summary
The case involves appeals by the State of Maharashtra against a High Court judgment that quashed trade circulars and notices issued by the Sales Tax Department seeking to revise assessments of Prism Cement Limited for the years 2002-2003 to 2004-2005. The State had introduced the Package Scheme of Incentives 1993 (PSI 1993) under Section 8(5) of the Central Sales Tax Act, 1956 (CST Act) to promote industrialisation in backward areas, granting exemption from sales tax under both the Bombay Sales Tax Act and the CST Act. The assessee-respondent was issued eligibility and entitlement certificates entitling it to exemption up to Rs.273.54 crores or until 2012. After the CST Act was amended by the Finance Act, 2002 with effect from 11.05.2002, the State issued trade circulars and notices under Section 38 of the Bombay Sales Tax Act, contending that the amendment restricted the State's power to grant exemption on inter-State sales under Section 8(2) of the CST Act and that the assessee had failed to comply with Section 8(4) requiring declarations in Form C or D. The High Court allowed the writ petition, holding that the State still had power under Section 8(5) to grant exemption even after the amendment, and that the amendment could not be applied retrospectively. The Supreme Court dismissed the appeals, affirming that the amendment did not take away the State's power to grant exemption for periods prior to the amendment, and that the assessee's vested rights under the PSI 1993 were not affected. The Court held that Section 8(5) overrides Section 8(1) and 8(4), and the State could dispense with Form C/D requirements. The trade circulars and notices were rightly quashed.
Headnote
A) Constitutional Law - Retrospective Operation of Statutes - Vested Rights - Amendment to Section 8(5) of the Central Sales Tax Act, 1956 by Finance Act, 2002 - The amendment cannot be applied retrospectively to take away exemption benefits that had already accrued to the assessee under the Package Scheme of Incentives 1993 prior to the amendment. Held that vested rights are not affected by a subsequent amendment unless expressly made retrospective (Paras 8, 16-18). B) Sales Tax - Exemption from Tax - Section 8(5) of the Central Sales Tax Act, 1956 - Power of State Government - The State Government, under Section 8(5) of the CST Act, has the power to grant total or partial exemption from tax on inter-State sales, including the power to dispense with the requirement of declarations in Form C or D under Section 8(4). This power is not affected by the 2002 amendment for periods prior to the amendment. Held that the trade circulars and notices seeking to revise assessments were invalid (Paras 13-15).
Issue of Consideration
Whether the amendment to Section 8(5) of the CST Act by the Finance Act, 2002 with effect from 11.05.2002 could withdraw the exemption granted under PSI 1993 to the assessee-respondent for inter-State sales, and whether the amendment could be applied retrospectively to take away benefits accrued prior to the amendment.
Final Decision
The Supreme Court dismissed the appeals, affirming the High Court judgment. It held that the amendment to Section 8(5) of the CST Act by the Finance Act, 2002 did not apply retrospectively and could not take away the exemption benefits that had accrued to the assessee-respondent under the PSI 1993 prior to the amendment. The trade circulars and notices were quashed.
Law Points
- Section 8(5) CST Act overrides Section 8(1) and 8(4)
- State can grant exemption without Form C/D
- amendment not retrospective
- vested rights not taken away
