Sales tax incentive option could be changed before final certificate where later VAT rules did not bar the switch.

An industrial unit that had opted for sales tax deferment under an incentive scheme could change to tax remission before issuance of the final eligibility certificate, because the scheme allowed a one-time change of option and the later VAT rules did not expressly bar such a switch. The State Level Committee's recommendation was not binding after the earlier scheme was replaced by the statutory VAT framework, and it could not override the competent authority's interpretation of the new rules. The rejection was therefore unsustainable, with consequential eligibility and entitlement certificates to follow.

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Issues: (i) Whether an industrial unit that had initially opted for sales tax deferment under the incentive scheme could change its option to tax remission before issuance of the final eligibility certificate. (ii) Whether the recommendations of the State Level Committee were binding so as to compel acceptance of the requested change of option.

Issue (i): Whether an industrial unit that had initially opted for sales tax deferment under the incentive scheme could change its option to tax remission before issuance of the final eligibility certificate.

Analysis: Clause 4.4 of the scheme permitted a one-time change of option before issuance of the certificate by the Sales Tax Department. The petitioner had only received a provisional certificate when the VAT regime and Chapter IV-A of the Rules of 2006 came into force. Those rules substantially modified the earlier incentive structure, and did not contain any clear prohibition against a unit like the petitioner seeking to switch from deferment to remission. The rules required fresh application and provided the framework for continuation of benefits under the new regime, but did not show that the existing option had become immutable in the petitioner's case.

Conclusion: The petitioner was entitled to change its option from tax deferment to tax remission, and the refusal to permit such change was unsustainable.

Issue (ii): Whether the recommendations of the State Level Committee were binding so as to compel acceptance of the requested change of option.

Analysis: After the introduction of the VAT Act and the Rules of 2006, the earlier scheme stood replaced by the statutory framework. The State Level Committee no longer had authority to determine the true scope of the new rules or to bind the Government on their interpretation. Its recommendation could not override the statutory regime or displace the competent authority's decision-making power.

Conclusion: The Committee's recommendation was not binding on the Government.

Final Conclusion: The impugned rejection was set aside and the petitioner was held entitled to switch over to the remission scheme under the VAT Rules, with consequential issuance of eligibility and entitlement certificates and reworking of benefits.

Ratio Decidendi: Where the final eligibility certificate has not yet been issued and the governing incentive regime is later replaced by a statutory framework that does not expressly bar a change of option, the beneficiary may exercise the contractual or scheme-based option available to it; an advisory committee under the superseded scheme cannot control the interpretation of the new rules.

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