Retrospective cancellation of tax exemption exceeded statutory power and was struck down as ultra vires.

A tax exemption notification issued under section 10(1) of the Kerala General Sales Tax Act, 1963 could be granted retrospectively because the statute expressly permitted that form of exemption. Section 10(3), however, authorised only cancellation or variation of an exemption notification and did not confer power to withdraw or cancel the exemption retrospectively so as to create tax liability for an earlier period. As a statutory authority cannot act beyond the limits of the enactment, the retrospective cancellation was ultra vires section 10(3) and the challenge to it succeeded.

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Issues: Whether the Government could, under section 10(3) of the Kerala General Sales Tax Act, 1963, cancel a tax exemption notification retrospectively so as to fasten tax liability for an earlier period.

Analysis: The exemption notification had been issued under section 10(1), which permitted retrospective exemption. The cancelling notification was issued under section 10(3), which empowered the Government only to cancel or vary an exemption notification. The power to grant retrospective exemption was conferred expressly by the statute, but no corresponding power to withdraw or cancel such exemption retrospectively was conferred under section 10(3). A statutory authority cannot exercise power beyond the limits set by the enactment.

Conclusion: The retrospective cancellation was held to be ultra vires section 10(3) and the challenge to the cancellation succeeded.

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