Deemed C-form treatment protects exempted industrial units from adverse tax redetermination and unsupported refusal of renewal.

Rule 28-A(2)(n)(ii) deems inter-State sales of an exempted industrial unit to be sales against form C, so notional sales tax liability could not be recomputed by treating the sales as unsupported by C forms or by applying a higher rate on an adverse presumption. The authority's redetermination was unjustified. Rule 28-A(7)(b) also permits refusal of renewal only on specified grounds and after hearing the applicant; because the alleged lapse was not among those grounds and no hearing was shown, refusal of renewal was invalid. The impugned orders were quashed and reconsideration was directed.

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Issues: (i) Whether, under rule 28-A(2)(n)(ii), the notional sales tax liability of an exempted industrial unit could be redetermined by treating inter-State sales as if they were not supported by 'C' forms and by applying the higher rate of tax; (ii) Whether refusal of renewal of the exemption certificate was sustainable when the assessee was not given an opportunity of hearing and the alleged lapse did not fall within the grounds specified in rule 28-A(7)(b).

Issue (i): Whether, under rule 28-A(2)(n)(ii), the notional sales tax liability of an exempted industrial unit could be redetermined by treating inter-State sales as if they were not supported by 'C' forms and by applying the higher rate of tax.

Analysis: Rule 28-A(2)(n)(ii) defines notional sales tax liability for inter-State sales of an eligible industrial unit by requiring computation at the rate applicable as if the sales were made against form 'C'. The provision creates a deeming fiction that the exempted unit's inter-State sales are to be treated as sales against 'C' forms. In that setting, the fact that the unit was not required to collect 'C' forms could not justify an inference that the sales were made to unregistered dealers. Reopening earlier assessments on that assumption was therefore unwarranted.

Conclusion: The redetermination of notional tax liability by applying 10% instead of the concessional rate was unsustainable and was held to be unjustified.

Issue (ii): Whether refusal of renewal of the exemption certificate was sustainable when the assessee was not given an opportunity of hearing and the alleged lapse did not fall within the grounds specified in rule 28-A(7)(b).

Analysis: Rule 28-A(7)(b) permits rejection of renewal only on specified grounds and requires that the applicant be heard before rejection. The assessee was not charged with any of the enumerated defaults, and non-production of 'C' forms was not a condition of the exemption certificate. The order also did not show that any hearing was afforded before refusal. The rejection therefore failed both on the statutory grounds and on the requirement of fair hearing.

Conclusion: Refusal of renewal was held to be unjustified and invalid for breach of the statutory conditions and denial of opportunity of hearing.

Final Conclusion: The impugned orders were quashed and the renewal application was directed to be reconsidered afresh in accordance with law.

Ratio Decidendi: Where a statutory rule deems inter-State sales of an exempted industrial unit to be sales against form 'C', the authority cannot deny the concessional rate by drawing an adverse presumption from the absence of 'C' forms, and renewal of exemption cannot be refused except on the specific grounds prescribed by the rule and after giving the applicant a hearing.

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