Purposive reading of exemption rules permits substitution of surety bond for bank guarantee on renewal, subject to verification.

Rule 28A was construed purposively to protect the exemption incentive scheme while preserving revenue security, so the absence of an express bar on changing the mode of security at renewal meant a surety bond could be accepted instead of a bank guarantee, subject to verification of genuineness and adequacy. On that interpretation, cancellation of the exemption certificate solely because the bank guarantee was not renewed was treated as too technical and unsustainable, and the appellate orders based on the same reasoning could not stand. The competent authority was left to examine the surety bond on its merits and in accordance with law.

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Issues: (i) Whether, on renewal of an exemption certificate under rule 28A, the applicant could substitute a surety bond for a bank guarantee prescribed for security under rule 28A(6)(a)(ii). (ii) Whether the cancellation of the exemption certificate and the consequent dismissal of the appeals were sustainable in law.

Issue (i): Whether, on renewal of an exemption certificate under rule 28A, the applicant could substitute a surety bond for a bank guarantee prescribed for security under rule 28A(6)(a)(ii).

Analysis: The scheme of section 13-B of the Haryana General Sales Tax Act, 1973 and rule 28A was to grant industrial incentive by way of tax exemption while protecting public revenue through adequate security. A conjoint reading of the relevant provisions showed that the rule did not impose an express bar against changing the mode of security at the stage of renewal. The restriction against change of option found in rule 28A(3) was not imported into rule 28A(6)(a)(ii). The provision, therefore, had to be construed purposively and not in a manner that would defeat the object of industrial promotion.

Conclusion: The applicant was entitled to seek acceptance of a surety bond in place of a bank guarantee at the renewal stage, subject to the authority being satisfied about its genuineness and adequacy.

Issue (ii): Whether the cancellation of the exemption certificate and the consequent dismissal of the appeals were sustainable in law.

Analysis: Since rule 28A(6)(a)(ii) did not prohibit substitution of the security mode on renewal, cancellation of the exemption certificate solely on the ground that the bank guarantee had not been renewed was based on an unduly technical construction of the rule. The appellate orders affirming that view proceeded on the same erroneous interpretation and could not stand. The matter of security, however, remained open to verification by the competent authority on the question of genuineness and sufficiency.

Conclusion: The cancellation order and the appellate orders were unsustainable and were liable to be set aside.

Final Conclusion: The writ petition succeeded, the impugned orders were quashed, and the competent authority was directed to consider the surety bond on its own merits and in accordance with law.

Ratio Decidendi: Incentive provisions granting tax exemption must receive a purposive and liberal construction, and where the rule does not expressly prohibit a change in the mode of security on renewal, the competent authority cannot reject the renewal merely on a technical insistence upon the original form of security.

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