2008 (7) TMI 904 - HC - VAT and Sales Tax

High Court sets aside assessment order & demand notices under Sales Tax Exemption Scheme 1987, citing retrospective deletion of production condition.

The High Court allowed the writ petition, setting aside the impugned orders, assessment order, and related demand notices concerning the production clause ... Recovery of the amount of sales tax - Held that:- The indisputable position is that the impugned order dated March 8, 2004 and any proceedings taken in pursuance thereof and thereafter, particularly in creating demand against the petitioner for violation of clause 4(e)(i) of the Scheme, have become redundant. However, for clarification, such impugned orders and notices deserve to be quashed and set aside. Writ petition is allowed, the impugned order dated March 8, 2004 (annexure 6) and the subsequent order dated July 21, 2004 (annexure 16) and the assessment order dated April 20, 2005 (annexure 18) and the related demand notices insofar they relate to recovery of the amount of sales tax with reference to clause 4(e)(i) of the Scheme are quashed and set aside Issues:1. Withdrawal of benefits under the Sales Tax Exemption Scheme, 1987 due to alleged non-compliance with production requirements.2. Legality of the notice and order issued without jurisdiction and opportunity of hearing.3. Challenge to the retrospective withdrawal of exemption benefits.4. Quashing of demand raised and striking down of proviso under clause 9(b) of the Scheme.5. Impact of subsequent notifications and circulars on the case.6. Comparison with a similar judgment in Tripura Cement Limited's case.Analysis:1. The petitioner, engaged in manufacturing digital and electronic clocks, applied for benefits under the Sales Tax Exemption Scheme, 1987. Alleged inability to meet production targets due to market recession led to the Bank of Baroda taking over the unit.2. Respondent No. 3 issued a notice for withdrawal of benefits without jurisdiction, followed by an order by respondent No. 2 under clause 9(b) for retrospective withdrawal. The petitioner challenged the lack of notice and hearing, with coercive recovery proceedings initiated.3. The High Court noted that the State Government deleted the production condition under the Scheme with retrospective effect from the commencement date. Circulars also wrote off demands related to the alleged violation of production requirements.4. The petitioner sought quashing of the demand and striking down of the proviso under clause 9(b) of the Scheme. The court referred to a similar judgment in Tripura Cement Limited's case.5. Notifications and circulars rendered the impugned orders and notices redundant. The court quashed the orders and notices, following the decision in Tripura Cement Limited's case.6. Consequently, the High Court allowed the writ petition, setting aside the impugned orders, assessment order, and related demand notices concerning the production clause under the Scheme. No costs were awarded in this case.