Ultra vires tax concession is void ab initio when granted contrary to a statutory exclusion and may be ignored in reassessment.

A composition or exemption benefit granted under a taxing statute is invalid where the dealer falls within a notified exclusion and the permission was issued without statutory authority. The Andhra Pradesh High Court held that electrical works contracts were excluded from the composition scheme under section 5G, so the Form L1 permission could not override the statutory notification. Because exemption and concession provisions in fiscal law must be strictly construed, a permission contrary to the Act and notification is void from the outset and may be ignored in reassessment; its later cancellation is not limited to prospective operation.

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Issues: Whether the permission in Form L1 issued to a dealer executing electrical works contracts under the composition scheme could be treated as void ab initio and ignored in reassessment, and whether its cancellation operated only prospectively.

Analysis: The composition scheme under section 5G of the Andhra Pradesh General Sales Tax Act, 1957 was available only to dealers whose works contracts were not notified as ineligible under section 5G(2). The notification issued by the Government excluded all types of electrical contracts from the scheme. As a result, the permission granted in Form L1 to the dealer for electrical works contracts was contrary to the statutory scheme and beyond authority. In fiscal matters, exemption or concession provisions must be strictly construed, and entitlement must be shown within the exact limits of the statute and notifications. The authorities relied on by the dealer did not concern an ultra vires benefit granted contrary to the Act and notification. A permission issued without statutory sanction is void from the outset and cannot be treated as valid until cancellation.

Conclusion: The Form L1 permission was void ab initio and the reassessment could proceed by ignoring it; the cancellation was not confined to prospective operation. The issue was decided against the assessee and in favour of the Revenue.

Ratio Decidendi: A composition or exemption benefit granted contrary to the statutory exclusion and without authority of law is void ab initio and may be ignored in assessment or revision, since exemption provisions in taxing statutes are construed strictly.

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