Retrospective withdrawal of sales tax exemption cannot impose a new tax burden for past periods.

A retrospective curtailment of a sales tax exemption from full relief to partial relief was held impermissible where the dealer had not collected tax during the period covered by the earlier notification. While an exemption may be granted with retrospective effect, an exemption already enjoyed cannot be withdrawn or reduced retrospectively so as to create a new tax burden for a past period. The later notification was therefore invalid to the extent it operated retrospectively, though its prospective operation was left intact. Assessment orders and demand notices based on the retrospective withdrawal of exemption were quashed.

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Issues: Whether an exemption from sales tax granted under section 4(2) of the Rajasthan Sales Tax Act, 1954 and section 8(5) of the Central Sales Tax Act, 1956 could be reduced with retrospective effect, and whether the consequential assessment orders and demand notices could be sustained.

Analysis: The retrospective reduction of the exemption from 100 per cent to 50 per cent was held to be harsh and unreasonable because the dealer had not collected tax from customers during the relevant period under the earlier exemption notification. A grant of exemption may operate retrospectively, but the withdrawal or curtailment of an exemption already availed of cannot operate retrospectively so as to impose a new tax burden for a past period. The Court also relied on the principle that a subsequent notification cannot take away, with retrospective effect, an exemption granted earlier.

Conclusion: The retrospective operation of the notification was invalid, while its prospective operation remained unaffected. The assessment orders and demand notices founded on the retrospective withdrawal of exemption were quashed.

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