Retrospective withdrawal of sales tax exemption cannot defeat accrued benefits under the enabling provision.

A sales tax exemption notification could be cancelled or varied under the enabling provision, but not in a retrospective manner that was arbitrary, unreasonable, or destructive of accrued exemption benefits. Where the assessee had acted on the footing of a stated exemption period, later withdrawal with retrospective effect could not unsettle that settled position without sufficient justification. The retrospective cancellation was therefore impermissible, and the tax demand founded on it could not be sustained. The exemption notification was confined to prospective effect.

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Issues: Whether the Government could withdraw a sales tax exemption notification retrospectively under section 17(3) of the Tamil Nadu General Sales Tax Act and thereby fasten tax liability for an earlier period.

Analysis: Section 17(1) expressly empowered the Government to grant exemptions or reductions prospectively or retrospectively, and section 17(3) conferred power to cancel or vary such notifications. That power, however, could not be exercised in an arbitrary or unreasonable manner so as to defeat accrued benefits under an existing exemption notification. The exemption had been granted for a stated period, the assessee had acted on that footing, and the later withdrawal with retrospective effect would unsettle the position without any acceptable justification. In such circumstances, the retrospective cancellation was held to be impermissible.

Conclusion: The retrospective operation of the withdrawal notification was invalid, and the tax demand founded on such retrospective withdrawal could not be sustained; the assessee succeeded.

Final Conclusion: Retrospective cancellation of an exemption notification was not upheld where it impaired the assessee's settled position without sufficient cause, and the notification was confined to prospective effect.

Ratio Decidendi: A subordinate legislative authority may cancel or vary an exemption notification only within the scope of the enabling provision, and a retrospective withdrawal that is arbitrary, unreasonable, or destructive of accrued exemption benefits cannot be sustained.

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