Retrospective clarificatory tax explanation preserved new-unit concession despite partner retirement and defeated levy and penalty.

A clarificatory explanation to section 5CC of the Rajasthan Sales Tax Act was treated as retrospective because it merely removed ambiguity in a beneficial fiscal provision and did not impose a new burden; it therefore applied to pending proceedings. The benefit of the new-unit concession was also preserved where some partners retired and the business continued through the surviving partner, because the underlying factory or workshop remained the same and the concession's object of encouraging manufacturing would otherwise be defeated. On that basis, the tax levy and penalty could not be sustained, and concessional treatment under section 5CC remained available.

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Issues: (i) Whether the assessee continued to be a new unit entitled to the benefit under section 5CC of the Rajasthan Sales Tax Act, 1954 after some partners retired and the business was carried on by the surviving partner. (ii) Whether the explanation inserted in 1986 to section 5CC operated retrospectively and applied to pending proceedings.

Issue (i): Whether the assessee continued to be a new unit entitled to the benefit under section 5CC of the Rajasthan Sales Tax Act, 1954 after some partners retired and the business was carried on by the surviving partner.

Analysis: The explanation to section 5CC showed that, even on change of ownership, the unit could continue to be treated as a new unit if the underlying factory or workshop remained the same. The purpose of the concession was to encourage manufacturing activity, and that object would be defeated if the benefit were denied merely because some partners retired and the business continued through one partner. The dissolution of the firm on retirement of partners did not, by itself, destroy entitlement to the concession.

Conclusion: The assessee remained entitled to the benefit under section 5CC.

Issue (ii): Whether the explanation inserted in 1986 to section 5CC operated retrospectively and applied to pending proceedings.

Analysis: The explanation was clarificatory in nature and was intended to remove ambiguity in section 5CC. An explanatory provision becomes part of the enactment and may be read as retrospective when it merely clarifies the legislative intent rather than introducing a new burden or restriction. It therefore applied to proceedings already pending before the sales tax authorities.

Conclusion: The explanation operated retrospectively and applied to the pending matter.

Final Conclusion: The tax levy and penalty could not be sustained, and the assessee was held entitled to the concessional treatment under section 5CC.

Ratio Decidendi: A clarificatory explanation to a beneficial fiscal provision is retrospective where it merely explains the existing law, and the benefit of a new-unit concession is not lost merely because the original partnership business continues after retirement of some partners.

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