1998 (11) TMI 639 - AT - VAT and Sales Tax

Erratas do not alter concessions: Vested rights protected under original notification

Citadel Fine Pharmaceuticals Versus State of Tamil Nadu and Others

Citadel Fine Pharmaceuticals Versus State of Tamil Nadu and Others - [2000] 119 STC 315 (TNTST) Issues:Challenging validity of publication of two erratas and rate of tax reduction.Analysis:1. The two transferred petitions challenged the validity of the publication of two erratas and the reduction of tax rate. The petitioner, a manufacturer of drugs, especially penicillin derivatives, filed returns and paid tax at a concessional rate of 4 per cent under a notification issued by the Government of Tamil Nadu. However, subsequent erratas restricted the concessional rate to penicillin and streptomycin alone, excluding derivatives of penicillin. The petitioner contested the withdrawal of the concession for penicillin derivatives through the transferred petitions.2. The petitioner's counsel argued that the concessions granted under section 17(1) of the Act could only be withdrawn through another notification under section 17(3) and not through erratas. They contended that erratas could not nullify the benefits conferred under the original notification. The counsel relied on a decision by the Madras High Court to support their argument regarding the proper exercise of power by the State in granting and withdrawing exemptions and deductions under the Act.3. The Tribunal observed that the erratas published did not have the statutory effect of withdrawing the concessions granted in the original notification. The Government's failure to issue a new notification under section 17(3) to withdraw the concession for penicillin derivatives rendered the erratas ineffective in altering the petitioner's vested rights. Subsequently, a notification dated September 4, 1991, was issued to cancel the concession for penicillin derivatives, which the petitioner could not claim post that date.4. The second argument raised by the petitioner's counsel pertained to the retrospective effect of the erratas issued after the assessment year 1989-90. The assessing authorities contended that the erratas had a retrospective effect from May 9, 1988, leading to the petitioner being liable to pay tax at 8 per cent. The counsel argued that while section 17(1) allowed for notifications with retrospective effect for concessions, section 17(3) did not provide for the retrospective cancellation of concessions. Various court decisions were cited to support the argument that cancellation of vested rights could only have prospective effects.5. Considering the legal provisions and precedents, the Tribunal concluded that erratas issued after April 1, 1990, could not affect the vested rights of the assessee for the assessment year 1989-90. Therefore, both transferred petitions were allowed, declaring that the benefits conferred under the original notification were not impacted by the subsequent erratas. No costs were awarded, and the Tribunal's order was to be punctually observed and executed by all concerned.