Retrospective removal of a disqualifying tax rule required fresh consideration of an exemption claim under the amended position.

Retrospective deletion of a disqualifying entry from Schedule III meant the exemption application could not be ed solely on the basis of the deleted negative-list provision. The assessee's claim had to be reconsidered from the effective date of the amendment, because the legal disqualification stood removed retrospectively. The amended position nevertheless preserved the condition that the assessee must show it had not collected sales tax from customers, or else the amount collected had to be deposited with the State. The rejection was therefore set aside and the matter remitted for fresh decision under the revised rules.

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Issues: Whether the retrospective deletion of entry 43 from Schedule III to the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 required reconsideration of the assessee's application for exemption from sales tax.

Analysis: On the date when the application was considered, the assessee's activity fell within the negative list under entry 43. During the pendency of the writ petition, however, the State amended the Rules in exercise of powers under section 27 read with sections 10A and 30A of the Punjab General Sales Tax Act, 1948, and deleted entry 43 with retrospective effect from 1 April 1989. The effect of the amendment was that the disqualification stood removed from the relevant date, so the exemption claim could not be rejected merely on the basis of the earlier entry. The matter, therefore, had to be reconsidered, while preserving the requirement that the assessee must establish that it had not collected sales tax from customers, and if tax had been collected, it had to be deposited with the State.

Conclusion: The issue was answered in favour of the assessee to the extent that the rejection order could not stand and the application had to be reconsidered afresh.

Final Conclusion: The writ petition was allowed, the impugned rejection was set aside, and the application for exemption was remitted for fresh decision in accordance with the retrospective amendment and the condition regarding tax collection.

Ratio Decidendi: Where a disqualifying rule is retrospectively omitted from the relevant date, an exemption claim rejected solely on the basis of that rule must be reconsidered in light of the amended legal position.

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