Industrial tax exemption under Haryana sales tax rules cannot be retrospectively curtailed once eligibility is accepted.

Under Rule 28A of the Haryana General Sales Tax Rules, once an industrial unit is treated as eligible for exemption and the authorities act on that basis, the benefit cannot be curtailed merely because the unit's product is later placed in the negative list by notification, unless the rule clearly authorises such restriction. Rule 28A(2)(f) links eligibility to the scheme conditions, while Rule 28A(4)(a) governs the period of exemption or deferment from commercial production or from the entitlement certificate. The commentary states that limiting the exemption only to investments made up to the notification date was unsustainable and that the restriction was quashed, with fresh determination directed according to law.

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Issues: Whether, after the assessee was treated as eligible under Rule 28A of the Haryana General Sales Tax Rules, 1975, the benefit of tax exemption could still be restricted only up to the date on which the product was placed in the negative list by the notification dated 16 December 1996.

Analysis: Rule 28A(2)(f) defines an eligible industrial unit with reference to, among other conditions, exclusion from Schedule III, while Rule 28A(4)(a) provides that the benefit of exemption or deferment is to run from the date of commercial production or from the date of issue of the entitlement or exemption certificate. On the facts, the authorities had themselves extended the benefit to the assessee and had not treated the notification dated 16 December 1996 as defeating eligibility altogether. Once eligibility was accepted, there was no rational basis to confine the benefit only to investments made up to the notification date and to deny its effect thereafter.

Conclusion: The restriction of the exemption benefit to the date of the notification was unsustainable, and the impugned orders were quashed to that extent. Fresh determination was directed in accordance with law.

Ratio Decidendi: Where an incentive scheme treats an industrial unit as eligible and the authorities themselves act on that basis, the benefit cannot be curtailed retrospectively by limiting it to investment made only up to the date on which the unit's product was later placed in the negative list, unless the applicable rule clearly authorises such curtailment.

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