Sales tax deferral benefits require an eligibility certificate, and unauthorised transfer of assets breaches scheme conditions.

Sales tax deferral benefits under the governing scheme depended on a valid eligibility certificate, and an agreement executed without that foundational certificate was beyond authority and ineffective against the Revenue. The transferee's reliance on a no objection certificate did not satisfy the scheme, as the department had insisted on the prescribed certificate. The undertaking's transfer also breached the original conditions prohibiting alienation of fixed assets without prior written permission, and later intimation could not cure that violation. On that basis, the claim to continue the deferral benefit through the transferee failed, and recovery proceedings were treated as valid.

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Issues: (i) whether the Assistant Commissioner had jurisdiction to execute an agreement extending sales tax deferral benefits to the transferee company in the absence of an eligibility certificate; (ii) whether the transfer of the undertaking and the consequent claim to deferment were defeated by breach of the original conditions requiring prior permission for alienation of fixed assets.

Issue (i): whether the Assistant Commissioner had jurisdiction to execute an agreement extending sales tax deferral benefits to the transferee company in the absence of an eligibility certificate.

Analysis: The deferral scheme under the governing Government Order made the issue of an eligibility certificate a basic precondition for grant of deferral benefit, and the agreement with the tax authority could be executed only on that foundation. The materials showed that the transferee company did not obtain an eligibility certificate in the prescribed form, and what was relied on was only a no objection certificate. The correspondence also showed repeated insistence by the department on production of the proper certificate. In that situation, the later agreement purportedly executed in favour of the transferee could not confer a benefit which the statutory scheme did not permit, and the officer acted beyond authority.

Conclusion: The agreement dated 31 August 1994 was without jurisdiction and ineffective against the Revenue.

Issue (ii): whether the transfer of the undertaking and the consequent claim to deferment were defeated by breach of the original conditions requiring prior permission for alienation of fixed assets.

Analysis: The original sanction, eligibility terms and agreement in favour of the original unit prohibited alienation, disposal or encumbrance of fixed assets, and required prior written permission before any sale or transfer. The undertaking was transferred as a going concern without seeking such prior permission. Subsequent intimation or request for ratification could not cure the breach of the express condition. The scheme conditions were therefore violated, and the Revenue was justified in insisting on recovery of the arrears before any further claim to transfer of benefit could be considered.

Conclusion: The transfer contravened the conditions of the deferral scheme, and the recovery proceedings were valid.

Final Conclusion: The claim to continue the deferral benefit through the transferee failed on both jurisdictional and substantive grounds, and the petitions were liable to be rejected.

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