Tax exemption cancellation and recovery depend on the governing rule; post-expiry refusal to renew does not retroactively recover validly enjoyed benefits.

Rule 28A(9)(i) of the Haryana General Sales Tax Rules, 1975 permits cancellation of an exemption certificate when an industrial unit discontinues business for more than six months, and the absence of a saving clause means the dealer cannot avoid cancellation by claiming raw material shortage beyond control. However, recovery of tax exemption already availed depends on the specific rule invoked: where the exemption certificate has already expired and the authority merely refuses renewal or cancels after expiry, past exemption for the valid period cannot be recovered under rule 28A(10)(v). Recovery is confined to the extent expressly authorised by the scheme.

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Issues: (i) Whether discontinuance of the industrial unit's business for more than six months justified cancellation of the exemption certificate under rule 28A(9)(i) of the Haryana General Sales Tax Rules, 1975 despite the plea that closure was due to non-availability of raw material beyond the unit's control; (ii) whether, after cancellation or non-renewal of the exemption certificate after its expiry, the authorities could recover the sales tax exemption already availed of for the earlier period.

Issue (i): Whether discontinuance of the industrial unit's business for more than six months justified cancellation of the exemption certificate under rule 28A(9)(i) of the Haryana General Sales Tax Rules, 1975 despite the plea that closure was due to non-availability of raw material beyond the unit's control.

Analysis: Rule 28A(9)(i) permits cancellation of the exemption certificate where the unit discontinues its business for a period exceeding six months or closes down during the period of exemption. Unlike rule 28A(8), which expressly contains exceptions in cases such as fire, flood, natural calamity, strike or lockout, rule 28A(9)(i) contains no such saving clause. The Court held that once the factual position of discontinuance beyond six months is established, cancellation follows and the dealer cannot avoid the consequence by pleading that the stoppage was due to factors beyond its control.

Conclusion: The cancellation of the exemption certificate was valid and was not saved by the plea of inability to obtain raw material.

Issue (ii): Whether, after cancellation or non-renewal of the exemption certificate after its expiry, the authorities could recover the sales tax exemption already availed of for the earlier period.

Analysis: A combined reading of rule 28A(8), rule 28A(9) and rule 28A(10)(v) shows that withdrawal of the eligibility certificate has retrospective consequences because the exemption certificate is treated as withdrawn from its inception, but cancellation of an exemption certificate under rule 28A(9) attracts recovery of the exempted amount only when the cancellation occurs before expiry of the certificate. Where the exemption certificate has already expired and the subsequent order only refuses renewal or cancels after expiry, rule 28A(10)(v) does not authorise recovery of the exemption already enjoyed for the earlier valid period. The Court therefore confined recovery to the year or period covered by an operative cancellation, and declined to treat cancellation after expiry as equivalent to withdrawal of the eligibility certificate.

Conclusion: Recovery of the tax exemption already availed of up to the date of expiry was not permissible on the facts of the case.

Final Conclusion: The exemption certificate could be cancelled for discontinuance of business, but the past tax benefit earned during the period when the certificate was valid could not be recovered merely because renewal was refused after expiry. The writ petition was disposed of with modification of the recovery direction.

Ratio Decidendi: Where a tax exemption scheme separately provides for withdrawal of eligibility and cancellation of an exemption certificate, recovery of previously availed exemption follows only to the extent expressly authorised by the governing rule and cannot be expanded by equating post-expiry cancellation with retrospective withdrawal.

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