Transitional VAT exemption continues for the unexpired period when savings provisions preserve earlier eligibility-based tax benefits.

Under the Uttarakhand VAT transition scheme, pre-existing sales tax exemptions linked to eligibility certificates under section 4A of the Uttar Pradesh Trade Tax Act were treated as continuing for the unexpired period, unless inconsistent with the new Act. The earlier exemption notification remained operative until superseded by the later notification, and the statutory savings provisions supported continuation of the benefit during the interim period. In the absence of an exercised option to the contrary, continuation under the relevant clause was presumed. On that reasoning, denial of tax benefit for the interregnum and the demand raised for that period were unsustainable.

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Issues: Whether the petitioners were entitled to continue exemption or rebate on sales of goods after the commencement of the Value Added Tax regime, and whether the impugned circulars and notices could deny that benefit for the interregnum period before the later notification.

Analysis: The petitioners had been granted eligibility certificates under section 4A of the Uttar Pradesh Trade Tax Act, 1948 and were enjoying exemption or rebate under the earlier statutory regime. The transitional scheme in section 80(3) of the Uttarakhand Value Added Tax Act, 2005 saved pre-existing notifications and directions so long as they were not inconsistent with the new Act. The Court found that section 5 of the repealed Act and section 4(6) of the VAT Act were analogous, and that the notification issued on 26 December 2000 continued to operate until it was superseded by the notification dated 12 October 2006. The Court also relied on section 80(15) and section 76(6)(b) of the VAT Act to hold that the exemption available under an eligibility certificate granted under section 4A continued for the remaining unexpired period, and that in the absence of an exercised option, continuation under clause (i) was presumed.

Conclusion: The petitioners were entitled to continue the tax benefit for the relevant interim period, and the respondents could not deny it merely on the basis of section 80(13) of the VAT Act. The impugned action directing payment of tax for that period was unsustainable in favour of the petitioners.

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