Retrospective deletion of exemption condition defeated recovery proceedings under a sales tax incentive scheme.

Retrospective amendment to the Sales Tax Incentive Scheme, 1987 deleted the production-level condition in clause 4(e)(i) from 23.05.1987, so proceedings for withdrawal of tax exemption based on an alleged breach of that condition had no surviving legal foundation. The exemption had been granted under the scheme framed under the Rajasthan Sales Tax Act, 1954 and the Central Sales Tax Act, 1956. Once the condition said to have been violated was retrospectively removed, the recovery action could not be sustained and was quashed in favour of the assessee.

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Issues: Whether proceedings initiated for withdrawal of tax exemption under the Sales Tax Incentive Scheme, 1987 could survive after the scheme was retrospectively amended to delete the condition alleged to have been breached.

Analysis: The exemption had been granted under the Sales Tax Incentive Scheme, 1987 framed in exercise of powers under section 4(2) of the Rajasthan Sales Tax Act, 1954 and section 8(5) of the Central Sales Tax Act, 1956. The proceedings were founded on an alleged breach of clause 4(e)(i), which required continued production at the prescribed level for five years. The scheme was later amended by notification dated 11.04.2007 with retrospective effect from 23.05.1987, deleting clause 4(e)(i). Once the very condition on which the recovery action rested stood deleted retrospectively, the foundation of the initiated proceedings ceased to exist.

Conclusion: The proceedings for withdrawal and recovery could not be sustained and were quashed in favour of the assessee.

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