Strict construction of tax exemption notifications upheld where collected tax defeats the claimed industrial policy benefit.

A sales tax exemption notification issued to implement an industrial policy was held to validly deny exemption where the eligible unit had collected tax. Clause (iv) of Explanation II was treated as consistent with the policy because the policy contemplated non-collection of tax, and the notification clarified that collected tax would exclude the relevant turnover from exemption. The challenge that the clause was inconsistent with the policy was rejected, and the exemption condition was upheld. The petitioner's collection of tax defeated the exemption claim, as exemption notifications must be construed strictly according to their terms. The related assessment grievances were left to be pursued in appeal.

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Issues: Whether clause (iv) of Explanation II to the sales tax exemption notification dated June 7, 1989 was inconsistent with the industrial policy and liable to be struck down, and whether the petitioner could avoid its effect after having collected tax.

Analysis: The industrial policy contemplated sales tax exemption, which meant that tax was not to be collected. The notification, issued in implementation of the policy, clarified that where an eligible unit collected tax, the exemption would not apply to that turnover. That clarification was treated as consistent with and supportive of the policy rather than repugnant to it. Since exemptions operate as special benefits and must be understood strictly according to the notification, the petitioner's collection of tax defeated the claim to exemption. The challenge based on the understanding said to have been reached by the petitioner and the departmental authority was not accepted.

Conclusion: Clause (iv) of Explanation II was upheld, and the challenge to the exemption condition failed.

Final Conclusion: The petition failed on the validity of the exemption condition, and the assessment-related grievances were left to be pursued in appeal.

Ratio Decidendi: A tax exemption notification implementing an industrial policy may validly deny exemption where the eligible unit has collected tax, because such a clarification is in aid of the policy and exemptions must be construed strictly in accordance with the notification.

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