Haryana Vanaspati and General Mills vs The State of Haryana and Others

Ashok Bhan and H.S. Brar, JJ.—Petitioner- company was granted exemption certificate u/s 13-B of the Haryana General Sales Tax Act, 1973 (hereinafter referred to as the HGST Act), read with Rules 28-A of the Haryana General Sales Tax Rules 1975 (hereinafter referred to as the HSST Rules) from payment of sales tax under the Act and the rules w.e.f. 25.10.1989 to 24.10.1996 for a period of seven years, petitioner''s business as per averments set out in the writ petition had closed down in September 1992 as the petitioner - company had suffered loss totalling Rs. 1,89,69,511/-. Assessing Authority - respondent No. 4 in view of the closure of the business of the petitioner - company in the year 1992 cancelled the exemption certificate and imposed tax amounting to Rs. 7,94,848/- and interest amounting to Rs. 236,987/- i.e. total of Rs. 1031,835/-. Assessing Authority cancelled the exemption certificate and levied the tax in view of Rule 28-A(9) (i) and 28-A(10) (V) of the Rules, which reads as under:-

"28-A(9); The exemption/entitlement certificate granted to an eligible industrial unit shall be liable to be cancelled by the Deputy Excise and Taxation Commissioner concerned in the following circumstances, after affording an opportunity of being heard to the unit:-

(i) discontinuance of its business by the unit at any time for a period exceeding six months or closing down of its business during the period of exemption/deferment.

28-A(10)(V); On cancellation of eligibility certificate or exemption/entitlement certificate before it is due for expiry, the entire amount of tax exempted/deferred shall become payable immediately is lump-sum, and the provisions relating to recovery of tax, interest and imposition of penalty shall be applicable in such cases."

A perusal of these rules would show that the exemption/entitlement certificate granted to eligible industrial unit is liable to be cancelled after affording an opportunity of being heard to the unit in case of the discontinuance of its business at any time for a period exceeding six months or closing down of its business during the period of exemption/deferment.

Against the order of the appellate authority petitioner filed an appeal alongwith an application to dispose with the condition of payment of tax before the appeal is heard on merits. Appellate Authority - respondent No. 3 directed the petitioner company to pay the amount of tax imposed in instalments of Rs. 2,00,000/- per month payable by 10th of every month beginning from February, 1994. This order was passed on 14.1.1994. Since the petitioner failed to deposit the amount of instalments due on 10.2.1994, vide order dated 28.2.1994 the appellate authority dismissed the appeal as not maintainable.

No appeal was filed against the order dated 14.1.1994 as the appeal had been dismissed on merit on 28.2.1994. Petitioner- company filed an appeal against the order dated 28.2.1994 before the Tribunal. The Tribunal keeping in view the financial difficulties being faced by the petitioner- company ordered that the amount be recovered in monthly instalments of Rs. 1,00,000/- first starting within a period of one month from the date of issuance of order and the remaining monthly instalments thereafter. Joint Excise and Taxation Commissioner (First Appellate Court) was directed to hear the appeal on merits after notice to the parties-petitioner has filed the present writ petition challenging the orders of the authorities below on merits as well as for issuance of a writ of mandamus declaring Rules 28-A (9)(i) and 28-A(10)(V) of the Rule as ultra vires, unconstitutional and illegal in-so-far as its application is. made retrospective in respect of past transactions. Other averments made in the writ petition are that Appellate Authority had attached certain; property of the petitioner-company to the tune of Rs. 15 lacs and by way of auction it obtained a sum of Rs. 5,11,000/- and adjusted the same towards the arrears of tax due. During the course of arguments a photo-copy of a draft was produced showing a deposit of Rs. 1,00,000/-with the appellate authority towards the arrears of tax.

We find no force in the contention of the petitioner that Rule 28-A(9)(i) and 28-A(10)(V) of the Rules are ultra vires the Articles 14 and 19 of the Constitution of India. Exemption from payment of sales-tax for a period spread over seven years is a concession granted to certain eligible units. It has been provided that if the unit discontinued its business for a period exceeding six months or closing down of its business during the period of exemption/deferment then the exemption entitlement certificate granted to it is liable to be cancelled. This has been done to ensure the continuation and smooth functioning of the company during the course of exemption from payment of tax otherwise such a relaxation is liable to be misused where a unit may play fraud and close its business after availing the exemption from payment of tax for sometimes. It was a concession with certain conditions which in our view are reasonable.

The next contention of the counsel for the petitioner is that the provisions of the rules under challenge are retrospective in its operation and it is a bad law, that the operation of these rules is retrospective and it relates to past transactions and, therefore, liable to be struck down. For this he has placed reliance upon two judgments reported as Rai Ramkrishna and Others Vs. The State of Bihar, and Jawaharmal Vs. State of Rajasthan and Others, . Both these judgments have no relevance to the point in issue. In these judgments, the point considered was totally different and not relateable to the point in issue. It has been held by various Courts including the Supreme Court of India that legislature can pass a law and make its provisions retrospective. Such retrospectivity can be challenged by a party where the retrospective operation completely alters the character of the tax imposed or as to make it outside the limits of the entry which gives the Legislature competence to enact the law or that the alteration made is so unreasonable making it arbitrary. In the present case while granting exemption from payment of tax a condition is imposed that the unit must function during the period of exemption granted to the unit otherwise its liability to refund the amount of tax for which exemption was granted. The restriction imposed is neither arbitrary nor retrospective.

Counsel for the petitioner then contended that his appeal be ordered to be heard on merits as the respondent- authorities have already recovered nearly 60% of the tax due i.e. Rs. 5,11,000/- by auction and a sale of the property and Rs. 1,00,000/- deposited through a bank draft. We find force in this submission. Petitioner- company has suffered a loss of nearly Rs. Two crores and keeping in view this aspect and that nearly 60% of the tax has already been recovered, we direct the First Appellate Authority i.e. Joint Excise and Taxation Commissioner (Appeals), Rohtak to hear the appeal on merits and dispose of the same after affording due opportunity on hearing to the petitioner. The condition of deposit of the remaining tax as a pre-condition for hearing the appeal is dispensed with. Parties; are directed to appear before the Appellate Authourity on August 3, 1994.