Retrospective withdrawal of sales tax exemption cannot fasten liability where dealers could not comply with new conditions during the intervening period.

Policy-based sales tax exemptions issued under section 8(5) of the Central Sales Tax Act, 1956 are not vulnerable to promissory estoppel, so the withdrawal notification could not be invalidated on that ground. However, a later notification could not retrospectively withdraw an existing khadi and village industry exemption and impose tax liability for a prior period when the dealer had no practical opportunity to comply with the newly introduced declaration requirement. The revised assessment was therefore set aside and the matter remanded for fresh assessment excluding the protected period.

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Issues: (i) Whether the notification withdrawing the earlier sales tax exemption for khadi and village industry units could be invalidated on the ground of promissory estoppel. (ii) Whether the subsequent notification could operate retrospectively so as to deny exemption and impose tax liability for the period before its actual publication.

Issue (i): Whether the notification withdrawing the earlier sales tax exemption for khadi and village industry units could be invalidated on the ground of promissory estoppel.

Analysis: Exemptions and concessions granted under section 8(5) of the Central Sales Tax Act, 1956 are policy-based notifications issued by the Government in public interest. A challenge founded on promissory estoppel is not maintainable against such policy concessions, and the later notification replacing the earlier exemption was issued in exercise of that statutory power.

Conclusion: The notification was upheld and the challenge based on promissory estoppel failed.

Issue (ii): Whether the subsequent notification could operate retrospectively so as to deny exemption and impose tax liability for the period before its actual publication.

Analysis: The dealer had enjoyed total exemption under the earlier notification without any requirement to collect C forms. The later notification introducing a concessional rate and a condition requiring declaration forms was published only after the relevant period, though it purported to take effect from an earlier date. The dealer could not have collected tax or obtained declarations during the intervening period, and the retrospective clause created an unjust burden. The later governmental amendment relieving retrospectivity for certain goods also showed that the earlier retrospective operation was anomalous and unsustainable for similarly situated dealers.

Conclusion: The retrospective operation was invalid, and exemption for the disputed period was held to be available to the petitioner.

Final Conclusion: The petitioner succeeded on the retrospectivity issue, the revised assessment was set aside, and the matter was sent back for fresh assessment after excluding the tax liability for the protected period.

Ratio Decidendi: A policy-based sales tax exemption notification issued under section 8(5) of the Central Sales Tax Act, 1956 is not vulnerable to promissory estoppel, but a later notification cannot retrospectively withdraw an existing exemption to fasten tax liability where the dealer was disabled from complying with the newly introduced conditions during the intervening period.

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