Prospective tax holiday restriction: later brand-name ban could not defeat existing eligibility certificates under the sales tax scheme.

The eligibility certificate scheme under section 39 of the West Bengal Sales Tax Act, 1994 was treated as fixing entitlement to tax holiday on the basis of the law prevailing when the certificate was granted. Rule 101 permitted cancellation only for breach of the conditions in rules 98(2) and 98(3) and did not allow reopening of the eligibility definition after grant of the certificate. The later insertion of clause (v) in the Explanation to rule 98, prohibiting use of another unit's brand name, trade mark or logo, operated prospectively from 1 September 1999 and was not a mere clarification. Existing five-year certificates therefore continued unaffected, and the tax holiday could not be denied on that ground.

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Issues: Whether the amendment inserting clause (v) in the Explanation to rule 98 of the West Bengal Sales Tax Rules, 1995, could be applied to newly set up small-scale industrial units that had already been granted eligibility certificates and were enjoying tax holiday under section 39 of the West Bengal Sales Tax Act, 1994.

Analysis: The scheme of section 39 and rules 98 to 101 required the dealer to satisfy the eligibility conditions as on the date of first sale and the date of application for the eligibility certificate. Rule 101 empowered cancellation only for contravention of the conditions in rules 98(2) and 98(3), and did not authorise reopening of the definition in Explanation I after the certificate had been granted. The impugned clause (v) was introduced later and expressly operated prospectively from 1 September 1999. It was not a mere clarification of an existing restriction, because the earlier rules under the 1994 Act contained no such ban on use of another unit's brand name, trade mark or logo. Once eligibility certificates had been issued for a fixed five-year period on the basis of the prevailing law, the units acquired a settled entitlement to tax holiday for that period. The State also failed to establish any supervening public interest justifying interference with the already accrued benefit. On the facts, the authorities were aware in the individual cases that the applicants were using brand names under franchise or other arrangements when the eligibility certificates were granted.

Conclusion: The amendment in clause (v) of the Explanation to rule 98 did not apply to the applicants during the currency of their existing five-year eligibility certificates, and the benefit of tax holiday could not be denied on the ground of use of another unit's brand name, trade mark or logo.

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