Strict compliance with exemption conditions defeats tax relief where the mandatory initial deposit is deficient.

Tax exemption under Rule 20-B depended on strict and timely compliance with the prescribed initial deposit, including filing the application with proof of one-fourth deposit calculated on the previous year's turnover. A deficient initial deposit did not satisfy the condition for provisional exemption for the full assessment year, so the exemption application was liable to rejection. The rules also did not empower the assessing authority to demand the shortfall in the first instalment; Rules 20-B(h) and 20-B(i) operated only on later adjustment after a valid initial deposit. In the absence of a valid exemption certificate, liability to tax under Rule 23 arose without any prior demand as a precondition.

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Issues: (i) Whether an exemption application accompanied by only a deficient initial deposit under Rule 20-B(a) was liable to rejection. (ii) Whether the assessing authority had jurisdiction to demand the deficiency in the first instalment or to wait until expiry of the assessment year and act under Rules 20-B(h) and 20-B(i). (iii) Whether a dealer could be assessed to tax under Rule 23 only after demand and failure to make good the deficiency.

Issue (i): Whether an exemption application accompanied by only a deficient initial deposit under Rule 20-B(a) was liable to rejection.

Analysis: Exemption from tax was available only on fulfilment of the notified conditions and strict compliance with the Rules. Rule 20-B(a) required the application to be filed within the prescribed period with a treasury challan showing deposit of one-fourth of the exemption fee calculated on the previous year's turnover. The provisional exemption certificate under Rule 20-B(e) could issue only if the application was in order and the fee had been correctly calculated. The statutory form also showed that payment of the instalments on the prescribed dates was integral to the scheme. The initial deposit was therefore a mandatory requirement for exemption for the full assessment year.

Conclusion: The deficient application was rightly rejected, and the answer was against the dealers.

Issue (ii): Whether the assessing authority had jurisdiction to demand the deficiency in the first instalment or to wait until expiry of the assessment year and act under Rules 20-B(h) and 20-B(i).

Analysis: The assessing authority, being a creature of the statute, could act only within powers expressly conferred or necessarily implied. No provision in the Act or Rules authorised a demand for short deposit of the first instalment. Rules 20-B(h) and 20-B(i) operated on the assumption that the prescribed initial deposit had been made and the fee was later to be finally adjusted at the end of the assessment year. They did not authorise curing a default in the first mandatory deposit for the purpose of obtaining exemption for the whole year.

Conclusion: The authority had no such jurisdiction, and the answer was against the dealers.

Issue (iii): Whether a dealer could be assessed to tax under Rule 23 only after demand and failure to make good the deficiency.

Analysis: In the absence of a valid exemption certificate, the dealer was liable to tax under Rule 23. The Rules did not contemplate a prior demand as a condition precedent to assessment where the dealer had failed to comply with the mandatory initial deposit requirement and had not secured exemption for the assessment year.

Conclusion: Assessment under Rule 23 was not dependent on a prior demand, and the answer was against the dealers.

Final Conclusion: The statutory exemption scheme required strict and timely compliance with the initial deposit condition, and failure to satisfy that condition disentitled the dealers to exemption for the relevant assessment year.

Ratio Decidendi: Where exemption from tax is granted subject to prescribed conditions, the conditions precedent to provisional exemption must be strictly complied with, and absence of the mandatory initial deposit defeats the claim to exemption for the full period.

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