Exemption benefit recovery after production breach upheld where the statutory scheme required continued production to retain tax relief.

Under the Haryana sales tax exemption scheme, continued production during the stipulated post-benefit period was a condition for retaining the exemption. The rules allowed cancellation of the exemption certificate on discontinuance of business and made the entire exempted amount recoverable with interest if the production condition was breached before expiry. Where the unit stopped production during the relevant period, the consequent recovery of the full tax benefit was treated as statutory recovery, not a fresh assessment, and was not barred by limitation or by an earlier appellate order.

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Issues: (i) Whether the tax benefit availed under the exemption scheme could be recovered in full after cancellation of the exemption certificate and closure of production during the currency of the benefit; (ii) whether the subsequent demand and recovery were barred by limitation or by the earlier appellate order.

Analysis: The scheme under Section 13B of the Haryana General Sales Tax Act, 1973 and Rule 28A of the Haryana General Sales Tax Rules, 1975 required issuance and yearly renewal of exemption certificates, and also imposed a continuing obligation that the beneficiary unit remain in production for the stipulated post-benefit period. Rule 28A(9) permitted cancellation of the exemption certificate on specified grounds, including discontinuance of business, while Rule 28A(10)(v) made the entire exempted amount immediately recoverable on cancellation before expiry. Rule 28A(11) further provided that breach of the production condition attracted liability to repay the full benefit with interest. The unit had discontinued production during the relevant period, so the statutory consequences under the rules were attracted. The later demand was treated as a consequential recovery of the tax benefit and not as a fresh assessment barred by limitation. The earlier appellate order did not defeat the statutory recovery merely because the cancellation was made effective from a prior date.

Conclusion: The recovery of the full tax benefit with interest was upheld, and the plea of limitation and finality failed.

Final Conclusion: The appeals were not maintainable on the questions urged and the tax demand arising from breach of the exemption conditions stood sustained.

Ratio Decidendi: Where a tax exemption scheme makes continued production a condition of retaining the benefit, breach of that condition during the currency of the exemption authorises recovery of the entire benefit with interest under the statutory cancellation and recovery provisions, and such recovery is not defeated by treating it as a barred assessment.

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