Retrospective tax exemption applies where the dealer challenges the levy itself, and consequential interest cannot survive.

A registered dealer may claim the benefit of section 16(4) of the Maharashtra Tax Laws (Levy, Amendment and Validation) (Amendment) Act, 1997 where, before the amendment, purchases from a non-dealer had been made and the dealer had objected to the levy or asserted that tax was not payable, with an appeal or reference filed after assessment. On the facts discussed, a challenge to the entire demand was treated as a challenge to the purchase tax levy itself, so a narrow reading of the appeal memo was rejected and the statutory exemption applied. Once the principal tax demand failed, the consequential interest under section 36(3)(b) of the Bombay Sales Tax Act, 1959 also could not survive.

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Issues: (i) Whether the dealer was entitled to the benefit of section 16(4) of the Maharashtra Tax Laws (Levy, Amendment and Validation) (Amendment) Act, 1997 in respect of the purchase tax demand; (ii) Whether the interest charged under section 36(3)(b) of the Bombay Sales Tax Act, 1959 could be sustained as consequential.

Issue (i): Whether the dealer was entitled to the benefit of section 16(4) of the Maharashtra Tax Laws (Levy, Amendment and Validation) (Amendment) Act, 1997 in respect of the purchase tax demand.

Analysis: The amended provision exempted a registered dealer from liability where, before commencement of the amendment, purchases from a non-dealer had been made and the dealer had objected to the levy or had not paid tax on the ground that it was not payable, provided an appeal or reference had been filed where assessment had already been made. The dealer's appeal challenged the entire demand and sought deletion of the whole amount, not merely the interest and penalty components. The grounds of appeal and the record showed that the levy of purchase tax itself was disputed. A narrow reading of the appeal memo was rejected, and the provision was held to apply on the facts.

Conclusion: The dealer was entitled to the statutory benefit under section 16(4), and the purchase tax demand could not be sustained.

Issue (ii): Whether the interest charged under section 36(3)(b) of the Bombay Sales Tax Act, 1959 could be sustained as consequential.

Analysis: Since the underlying tax demand was held not recoverable under the amended exemption provision, the foundation for the consequential levy of interest failed. The challenge to the assessment was to the entire demand, and the interest component could not survive independently once the principal levy was not payable.

Conclusion: The interest charge could not be sustained.

Final Conclusion: The reference was answered in favour of the dealer, with the statutory exemption upheld and the connected demand, including consequential interest, not sustained.

Ratio Decidendi: Where a registered dealer has, in substance, challenged the entire tax demand arising from a pre-commencement transaction and the appeal shows objection to the levy itself, the benefit of a retrospective exemption provision cannot be denied on a narrow or hypertechnical reading of the grounds of appeal.

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