Retrospective withdrawal of tax set-off struck down, but statutory registration condition for a concession was upheld.

A retrospective fiscal amendment withdrawing set-off for a defined past period was held unconstitutional because the withdrawal of an accrued tax benefit needed a rational and non-arbitrary basis, which was absent. The Court found the restriction could not be treated as merely clarificatory and struck it down to the stated extent. By contrast, the condition requiring registration under the Central Sales Tax Act at the place of dispatch was upheld because a dealer seeking a tax concession must strictly satisfy the attached statutory conditions; impossibility of performance did not excuse compliance. The result was partial relief: the retrospective withdrawal failed, while the registration condition remained operative.

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Issues: (i) Whether the retrospective amendment withdrawing the benefit of set-off under rule 41E for the specified period was constitutionally valid; (ii) whether the condition in rule 41D requiring registration under the Central Sales Tax Act at the place of dispatch could be ignored on the ground of impossibility of performance.

Issue (i): Whether the retrospective amendment withdrawing the benefit of set-off under rule 41E for the specified period was constitutionally valid.

Analysis: Rule 41E originally allowed set-off to manufacturers in respect of purchases used in manufacture of goods falling within Schedule B. The later amendment by sections 26 and 27 of the Maharashtra Tax Laws (Levy, Amendment and Repeal) Act, 1989 denied that benefit retrospectively for a defined period and then restored the general position for the future. The Court held that although the Legislature may enact retrospective fiscal laws, withdrawal of a statutory benefit only for a limited past period must rest on a tangible and rational basis. No satisfactory reason was shown for selecting the period from 1 July 1981 to 31 March 1988 for withdrawal of the benefit, and the amendment could not be treated as merely clarificatory.

Conclusion: The retrospective exclusion inserted by section 26 was unconstitutional and was struck down to the extent of the words "not being waste goods or scrap goods or by-products".

Issue (ii): Whether the condition in rule 41D requiring registration under the Central Sales Tax Act at the place of dispatch could be ignored on the ground of impossibility of performance.

Analysis: The benefit under rule 41D was subject to the statutory condition that the claimant-dealer be registered under the Central Sales Tax Act in respect of the place to which the goods were dispatched. The Court held that a dealer seeking a tax concession must satisfy the conditions attached to it, and the condition could not be disregarded merely because the assessee had chosen to carry on business in a place where the Central Sales Tax Act was not extended.

Conclusion: The challenge to the rule 41D condition failed and the contention was rejected.

Final Conclusion: The assessee succeeded on the constitutional challenge to the retrospective withdrawal of set-off, but failed on the objection to the statutory registration condition, resulting in a partial allowance with consequential reworking of the assessments.

Ratio Decidendi: A retrospective fiscal amendment that withdraws an accrued statutory tax benefit for a limited past period must be supported by a rational and non-arbitrary basis; absent such justification, the withdrawal is liable to be struck down, while statutory conditions attached to a tax concession must be strictly fulfilled.

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