Tax exemption conditions must be strictly followed; breach can justify cancellation of the certificate and recovery with interest.

Under the Haryana General Sales Tax exemption scheme, breach of a substantive condition barring inter-State sales by transfer or consignment for five years justified withdrawal of the benefit. Section 13-B and Rule 28-A made the exemption conditional, and Rule 28-A(11)(b) authorised repayment of the tax benefit with interest after hearing the beneficiary. As the industrial unit violated that condition, cancellation of the eligibility certificate and the consequential demand were valid, and the assessee's challenge failed. The High Court's interference was therefore unsustainable, and the revenue authorities were entitled to proceed under the scheme after due opportunity of hearing.

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Issues: Whether the exemption certificate issued under the Haryana General Sales Tax exemption scheme could be cancelled and the exemption amount recovered with interest when the beneficiary industrial unit made consignment sales or branch transfers outside the State in breach of the conditions attached to the exemption.

Analysis: Section 13-B of the Haryana General Sales Tax Act, 1973 empowered the State to grant exemption subject to specified conditions, and Rule 28-A of the Haryana General Sales Tax Rules, 1975 regulated the scheme by incorporating the concept of notional sales tax liability. Rule 28-A(11)(a)(ii) expressly required the beneficiary unit not to make sales outside the State for five years by way of transfer or consignment of manufactured goods, and Rule 28-A(11)(b) made violation of that condition liable to repayment of the tax benefit with interest after due opportunity of hearing. The record showed breach of that condition, and the cancellation of the eligibility certificate and consequential demand were therefore within the scheme.

Conclusion: The cancellation of the exemption benefit and the consequential demand were valid, and the challenge by the assessee failed.

Final Conclusion: The High Court's interference was unsustainable, the revenue authorities were entitled to act under the exemption conditions, and fresh assessment was directed after giving the assessee an opportunity of hearing.

Ratio Decidendi: A tax exemption granted under a statutory scheme is strictly governed by its conditions, and breach of a substantive condition permitting the State to withdraw the benefit authorises cancellation of the certificate and recovery of the exempted amount with interest after hearing the beneficiary.

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