Tax default defeats fiscal incentive eligibility where substantive compliance remains a continuing despite timely application.

Eligibility for deferment of sales tax under Rule 28B depended on more than a timely application; the applicant had to satisfy the substantive conditions of an eligible industrial unit, including not being a defaulter in payment of voluntary tax. Failure to file returns and pay tax for later quarters, existing before grant of the eligibility certificate, made the unit ineligible. The prescribed time-limit for applying under Rule 28B(6)(a) operated separately and did not cure non-compliance with Rule 28B(3)(f). The retrospective introduction of the deferment scheme did not excuse the default. The eligibility certificate was therefore not available on the facts stated.

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Issues: (i) Whether an industrial unit that had not filed returns and had not paid tax for subsequent quarters could still be treated as an eligible industrial unit entitled to an eligibility certificate for deferment of sales tax under Rule 28B. (ii) Whether filing the application within the prescribed period under Rule 28B(6)(a) could override the requirement that the applicant must not be a defaulter in payment of voluntary tax under Rule 28B(3)(f).

Issue (i): Whether an industrial unit that had not filed returns and had not paid tax for subsequent quarters could still be treated as an eligible industrial unit entitled to an eligibility certificate for deferment of sales tax under Rule 28B.

Analysis: Eligibility for the incentive depended not merely on filing the application in time but on satisfying the definition of an eligible industrial unit. Rule 28B(3)(f) required that the unit should not be a defaulter in payment of voluntary tax at the relevant stage. The unit had failed to file returns and pay tax for later quarters, and the default existed before the eligibility certificate was issued. The fact that the deferment scheme had been introduced with retrospective effect did not excuse the non-filing or non-payment for the relevant quarter.

Conclusion: The unit was not an eligible industrial unit and was not entitled to the eligibility certificate.

Issue (ii): Whether filing the application within the prescribed period under Rule 28B(6)(a) could override the requirement that the applicant must not be a defaulter in payment of voluntary tax under Rule 28B(3)(f).

Analysis: The time-limit for making the application and the substantive eligibility conditions operated in different fields. Timely filing of the application did not dispense with the obligation to remain compliant with tax and return requirements. The rule expressly permitted the benefit only to an eligible industrial unit, and the absence of default was a continuing condition. Since the applicant was already in default when the certificate was to be granted, the application could not succeed on the basis of timeliness alone.

Conclusion: Timely application did not cure the statutory ineligibility arising from tax default.

Final Conclusion: The challenge to the rejection of the eligibility certificate failed because statutory eligibility under the incentive rule was conditional on continued tax compliance, which the petitioner had not satisfied.

Ratio Decidendi: A time-bound application for fiscal incentive cannot succeed unless the applicant independently satisfies the substantive eligibility conditions, including the condition of not being in default of tax payment when the benefit is claimed.

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