Nahar Exports Ltd. vs State of Punjab and Others

Rajive Bhalla, J.—The petitioner prays for issuance of a writ of certiorari quashing order dated August 25, 1992 (annexure P-6A), whereby the Assistant Excise and Taxation Commissioner, Ludhiana-3, has rejected the petitioner''s application for exemption from payment of sales/purchase tax. The counsel for the petitioner submits that on the date of filing of application for exemption, the Industrial Policy, dated March 30, 1989, did not place any prohibition on the petitioner''s right to claim exemption. By way of a subsequent amendment to the relevant rules, notified on December 27, 1993, a negative list was enacted, which disentitled the petitioner to exemption from sales tax. As the petitioner had already purchased land, commenced process of setting up of a unit and applied for grant of exemption from sales tax on July 27, 1991, the application has been wrongly rejected, by reference to the amendment, i.e., entry 43 of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 (hereinafter referred to as "the Rules"). It is further submitted that as during pendency of the writ petition, entry 43 has been deleted pursuant to an amendment of the rules, dated December 27, 1993, with retrospective effect, the impugned order may be set aside and the writ petition may be allowed.

The counsel for the State of Punjab submits that on the date of consideration, entry 43 in Schedule III of the Rules, disentitled the petitioner to exemption from sales tax. The order dismissing the application was, therefore, rightly passed. The mere fact that by way of a retrospective amendment, applicable from April 1, 1989, entry No. 43 has been deleted does not entitle the petitioner to any relief much less to pray that the impugned order may be set aside. It is further submitted that if it is held that retrospective amendment of the rules has to be considered in favour of the petitioner, the petitioner can only be granted exemption after he satisfies the authority concerned that he has not charged sales tax and if has charged sales tax would be required to remit the tax, so collected to the State.

We have heard counsel for the parties and perused the impugned order.

Admittedly, on the date of consideration of the petitioner''s application, his business activity fell within the negative list as provided by entry 43 of Schedule III, appended to the rules. The writ petition was admitted as the entry was notified later. It is, however, not denied that during pendency of the writ petition, the State of Punjab, has in its wisdom and in the exercise of powers conferred by section 27 read with sections 10A and 30A of the Punjab General Sales Tax Act, 1948 (hereinafter referred to as "the Act") amended the Rules by deleting entry 43 with retrospective effect from April 1, 1989. A relevant extract from the notification reads as follows:

In the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991, in annexure II, serial No. 43, and the entry relating thereto, shall be deemed to have been omitted with effect from the 1st day of April, 1989.

The necessary affect of this notification is that entry No. 43 shall be deemed to have been deleted from April 1, 1989, in essence, removing any obstacle in the petitioner''s entitlement to exemption. The application has to, therefore, be reconsidered, subject however to the petitioner satisfying the respondents that it has not charged sales tax from its customers. In view of what has been recorded hereinabove, we allow the writ petition, set aside the impugned order and remit the matter to the Assistant Excise and Taxation Commissioner, Ludhiana, to decide the application afresh and in accordance with law, after taking into consideration the amendment, whereby serial/entry No. 43 has been deleted. While doing so, the Assistant Excise and Taxation Commissioner, Ludhiana, shall require the petitioner to prove that it has not charged the relevant tax, from its customers, during the period in dispute, and in case it is held that the petitioner has charged tax during the relevant period, the petitioner shall be required to deposit the tax, so collected, with the State. No order as to costs.