Temporary eligibility certificate entitles sales tax exemption, making coercive recovery illegal and supporting refund with interest.

Temporary eligibility certificates under the incentive scheme entitled the industry to sales tax exemption, and the Commercial Tax Officer was required to grant the exemption and reflect it in the final eligibility certificate. Coercive recovery of tax despite that certificate was therefore treated as illegal, arbitrary, and high-handed. The later explanations advanced for retaining the collections, including alleged non-utilisation for industrial development and closure of the unit, were regarded as irrelevant to the validity of the earlier recovery and the refusal to refund. Refund of the recovered tax with interest at 12% per annum from the dates of recovery until repayment was directed.

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Issues: Whether the Commercial Tax Officer was justified in initiating coercive recovery proceedings and retaining tax collections despite the petitioner's temporary eligibility certificate for sales tax exemption, and whether refund with interest was warranted.

Analysis: The guidelines governing implementation of the incentive scheme provided that, on issuance of a temporary eligibility certificate, the concerned industry was entitled to sales tax exemption and the Commercial Tax Officer was required to allow the exemption and adjust the amount in the final eligibility certificate. The officer ignored the temporary eligibility certificate, recovered the tax coercively, and did not correct the mistake when refund was sought. The reasons later advanced to justify the recovery, namely alleged non-utilisation of the amount for industrial development and alleged closure of the unit, were treated as irrelevant to the legality of the earlier recovery and refund refusal.

Conclusion: The recovery was held to be illegal, arbitrary, and high-handed, and the petitioner was entitled to refund of the recovered tax with interest at 12% per annum from the dates of recovery until repayment.

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