Exemption condition for continued production upheld as valid, with writ interference in tax recovery declined after due hearing and remedies.

Rule 28A(11)(a)(i) of the Haryana General Sales Tax Rules was upheld as a valid exemption condition because continued production for five years and maintenance of average production had a direct nexus with industrial development, and the rule included safeguards for loss beyond the unit's control and a hearing requirement. The Court also declined writ interference with the sales tax demand and recovery arising from cancellation of the exemption certificate, noting that notice, consideration of the explanation and oral hearing had been given, statutory appeal and revision remedies were available, and the section 446 Companies Act plea had not been raised before the authority and lacked a prima facie foundation.

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Issues: (i) Whether rule 28A(11)(a)(i) of the Haryana General Sales Tax Rules, 1975 was ultra vires the Constitution, particularly Article 14. (ii) Whether the demand of sales tax and recovery pursuant to cancellation of exemption certificate were liable to be interfered with, including on the plea based on section 446 of the Companies Act, 1956.

Issue (i): Whether rule 28A(11)(a)(i) of the Haryana General Sales Tax Rules, 1975 was ultra vires the Constitution, particularly Article 14.

Analysis: Section 13B of the Haryana General Sales Tax Act, 1973 authorises grant of exemption for industrial development subject to prescribed conditions. Rule 28A regulates exemption and its cancellation, and sub-rule (11) requires the beneficiary unit to continue production for five years and maintain average production. The provision also contains safeguards, including relaxation where loss of production is due to reasons beyond the control of the unit and a requirement of hearing. The condition was held to have a direct nexus with the object of industrial development and was not arbitrary or unfair.

Conclusion: The rule was held to be valid and not violative of Article 14.

Issue (ii): Whether the demand of sales tax and recovery pursuant to cancellation of exemption certificate were liable to be interfered with, including on the plea based on section 446 of the Companies Act, 1956.

Analysis: The record showed that the petitioner was issued notice, its explanation was considered, and oral hearing was granted before the impugned cancellation and recovery order. The petitioner also had statutory appellate and revisional remedies under the Act. The plea under section 446 of the Companies Act, 1956 was not raised before the competent authority, and no prima facie basis was shown for absence of the requisite permission. In these circumstances, no ground was made out for writ interference with the recovery action.

Conclusion: The demand and recovery were upheld and no interference was warranted.

Final Conclusion: The petitions failed on all substantial grounds and the impugned orders were sustained, leaving the revenue authorities entitled to recover the tax dues and costs.

Ratio Decidendi: A tax exemption condition requiring continued production is valid where it advances the statutory objective, contains safeguards for loss beyond the unit's control, and is neither arbitrary nor unreasonable; writ interference with a cancellation and recovery order is not warranted where statutory remedies exist and due opportunity has been afforded.

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