Unauthorized transfer under a tax deferral agreement justified recovery, but the amendment request had to be reconsidered on relevant grounds.

An industrial unit transferred to a subsidiary without prior permission under a sales-tax deferral agreement was held to be in breach of the restriction on transfer of fixed assets, making recovery of the deferred sales tax and interest enforceable. The fact that a substantial part of the deferred tax had already been paid did not remove the breach, though it was relevant to equities. However, the refusal to examine the request for amendment of the agreement and continuation of the benefit in favour of the subsidiary was found to rest on irrelevant considerations, and the competent Assistant Commissioner was directed to reconsider the representation afresh on proper grounds.

---

---

Issues: (i) Whether the transfer of the industrial unit to the subsidiary constituted a breach of the deferral agreement so as to justify recovery of the deferred sales tax and interest. (ii) Whether the representation seeking amendment of the agreement and continuation of the benefit in favour of the subsidiary required fresh consideration by the competent authority.

Issue (i): Whether the transfer of the industrial unit to the subsidiary constituted a breach of the deferral agreement so as to justify recovery of the deferred sales tax and interest.

Analysis: The agreement executed under the sales-tax deferral scheme restricted transfer or alienation of fixed assets without prior permission, and breach could render the deferred tax recoverable with interest. The unit was transferred without such permission, and the notices demanding recovery were therefore founded on an enforceable contractual and statutory arrangement. The fact that the deferred tax had substantially been paid did not erase the breach, though it was relevant to the overall equities.

Conclusion: The recovery notices were upheld and the challenge to them failed.

Issue (ii): Whether the representation seeking amendment of the agreement and continuation of the benefit in favour of the subsidiary required fresh consideration by the competent authority.

Analysis: The refusal to consider the representation was based largely on the new entity's separate registration and the absence of an order from SIPCOT. Those reasons were treated as irrelevant to the real question, because SIPCOT's role was limited to eligibility certification and the decision on breach and its consequences lay with the authority that was party to the agreement. The Court also noted the complete payment of the deferred tax and the common management between the transferor and transferee as relevant surrounding circumstances warranting reconsideration.

Conclusion: The competent Assistant Commissioner was directed to reconsider the representation afresh.

Final Conclusion: The challenge to the recovery action was rejected, but the request for fresh consideration of the amended arrangement was kept open and remitted to the competent authority for decision.

Ratio Decidendi: In a tax deferral arrangement governed by an agreement, unauthorized transfer of the benefited unit constitutes breach enforceable by recovery, but the competent authority must decide a subsequent request for amendment or continuance on relevant considerations and cannot reject it on extraneous grounds.

---