Vested tax incentive rights and arbitrary classification: Rajasthan HC held a later amendment could not cut down accrued rehabilitation benefits.

The Rajasthan HC treated the 30 September 1999 notification as a substantive amendment, not a corrigendum, because it altered the tax incentive scheme and operated only on publication in the official gazette. It held that benefits under the unamended scheme vested when the application was complete, with the eligibility certificate relating back to that date, so a later prospective amendment could not curtail the accrued package absent express language. The Court also held that singling out sick cement units that had not previously availed exemption, while other sick units retained the graduated scale, lacked a rational nexus with rehabilitation and offended article 14. The petitioners were entitled to the original scheme benefits.

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Issues: Whether the notification dated 30 September 1999 was a mere corrigendum or a substantive amendment; whether the amendment could operate before publication; whether the amendment could curtail the benefit already vested in sick cement units whose applications were complete before the notification was published; and whether singling out such sick cement units for a flat 25% benefit violated article 14.

Issue (i): Whether the notification dated 30 September 1999 was a mere corrigendum or a substantive amendment.

Analysis: The change did not correct a clerical or typographical error. It altered the substance of the scheme by replacing the graduated rate available to sick units not previously availing exemption with a flat 25% rate for sick cement units. The power to amend or rescind a notification under the taxing statutes had to be exercised in the same manner as issuance of the notification itself, namely by publication in the official gazette.

Conclusion: The notification was a substantive amendment and not a corrigendum, and it became effective only on publication.

Issue (ii): Whether the amendment could curtail the benefit already vested in sick cement units whose applications were complete before the notification was published.

Analysis: Under clauses 4(g) and 4(h) of the scheme, benefits became available from the date the application was complete in all respects, and the eligibility certificate related back to that date. The scheme conferred a composite benefit comprising the maximum quantum, the period for availing it, and the annual rate by which it had to be exhausted. A later prospective amendment could not truncate that accrued package absent express language to that effect. The rights were held to vest when the application was completed, not merely when the certificate was issued.

Conclusion: The amendment could not affect the benefits already accrued to the petitioners under the unamended scheme.

Issue (iii): Whether treating sick cement units that had not previously availed exemption differently from other sick units violated article 14.

Analysis: Sick industries formed one class for rehabilitation purposes, and within that class the scheme itself differentiated only on the basis of prior availing of exemption. Singling out sick cement units in the category of units that had not previously availed exemption, and forcing them to take a flat 25% benefit while other sick units in the same category retained the graduated scale, lacked any intelligible differentia having a rational nexus with the rehabilitation object. The classification produced an anomalous result even within the same genre of sick cement units.

Conclusion: The amendment was unconstitutional to the extent it subjected sick cement units not previously availing exemption to the reduced flat-rate package.

Final Conclusion: The petitioners were entitled to continue under the scheme as it stood on the dates when their applications were completed, and the impugned amendment could not diminish that entitlement; the assessee appeals succeeded and the State appeals failed.

Ratio Decidendi: A prospective amendment to a statutory exemption scheme cannot cut down a composite benefit that has already vested on completion of the application, and a classification within a rehabilitative tax scheme must have a rational nexus to the object of rehabilitation or it will offend article 14.

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