Exemption under trade tax law cannot be curtailed on vague misuse allegations; reasons must appear in the order itself.

An exemption granted under section 4-A of the U.P. Trade Tax Act could not be curtailed on vague allegations of misuse or tax evasion unless the order itself recorded specific material and reasons. The court treated later explanations in the counter-affidavit as incapable of curing defects in the impugned order, because a statutory order must stand on the reasons stated in it. It also applied the prior view that alleged tax evasion is to be dealt with in regular assessment proceedings, not by refusing exemption. The rejection of review was set aside, and the petitioner was entitled to the eligibility certificate for the full five-year period.

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Issues: Whether the curtailment and rejection of exemption under section 4-A of the U.P. Trade Tax Act, 1948 on the basis of alleged misuse or tax evasion, without recording specific reasons or material, was valid, and whether the petitioner was entitled to the exemption for the full period of five years.

Analysis: The eligibility certificate initially granted exemption for five years from the date of first sale. The subsequent restriction was founded only on a bare allegation of misuse, but neither the order nor the record disclosed what the misuse was. Fresh explanations introduced in the counter-affidavit could not be used to support the impugned order, because the validity of a statutory order must be judged only by the reasons stated in it. The earlier Division Bench view that an attempt to evade tax is not a ground to refuse exemption under section 4-A, and that any tax evasion must be dealt with in the regular assessment process, governed the matter.

Conclusion: The rejection of the review application was invalid and was set aside. The petitioner was held entitled to the eligibility certificate for the entire five-year period.

Ratio Decidendi: An exemption order under section 4-A cannot be curtailed or refused on vague allegations of misuse or tax evasion unless the order itself discloses the material and reasons; later affidavits cannot cure the defect, and any alleged evasion must be addressed in assessment proceedings.

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