Sales tax deferral benefit survives transfer when competent authority accepts the transferee and waives the technical breach.

A transferee of an industrial unit retained sales tax deferral benefits where the competent Territorial Assistant Commissioner executed a fresh agreement recognising the transfer and the transferee's continued entitlement. The condition restricting alienation of fixed assets without prior permission was treated as a protective term for the State's benefit, capable of waiver by the competent authority. Because the Government had accepted the transfer, continued the incentive arrangement, and no revenue prejudice was shown, the State could not later rely on the predecessor's technical breach to demand repayment or withdraw the benefit. The demand was therefore unsustainable, and the deferral scheme remained available to the transferee.

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Issues: Whether the State could deny the sales tax deferral benefit and demand repayment on the ground that the industrial unit had been sold before obtaining prior permission, despite the later execution of an agreement by the competent authority recognising the transfer and continuing the deferral benefit.

Analysis: The incentive scheme was framed to encourage industries in backward areas and the agreement executed by the competent Territorial Assistant Commissioner expressly recognised the purchaser's entitlement to continue the deferral benefit. The condition restricting alienation of fixed assets without prior permission was a protective condition meant for the State's benefit and could be waived by the competent authority. Once the Government, through the authorised officer, entered into the fresh agreement and allowed the purchaser to continue enjoying the benefit, the State could not later ignore that binding arrangement and rely on a technical breach by the predecessor unit, especially when the revenue was not prejudiced and the scheme's object was being served.

Conclusion: The demand made by the State was unsustainable, and the assessee was entitled to continue the deferral benefit.

Final Conclusion: The challenge succeeded because the competent authority's agreement bound the State and the technical breach could not be used to defeat the incentive scheme after the transfer had been accepted.

Ratio Decidendi: Where the competent authority, acting within its powers under an incentive scheme, executes an agreement recognising the transferee's entitlement to continue the benefit, the State is bound by that agreement and cannot withdraw the benefit later on the basis of a technical breach that was waived or not shown to prejudice the revenue.

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