Retrospective VAT incentive amendments cannot reopen fully exhausted exemption benefits for pre-amendment sales.

A retrospective validating amendment to VAT incentive provisions may remain constitutionally valid, but it operates only where the exemption benefit was still subsisting. Where scheme documents and entitlement certificates treated a unit as a pioneer unit and no proportionate-capacity condition was imposed, the later amendment could not be used to deny exemption for sales made before its effective date after the sanctioned ceiling had already been fully exhausted under the unamended scheme. On the facts, the unit had consumed its cumulative benefit before the amendment took effect, so the assessment and demand were unsustainable.

---

---

Issues: Whether the retrospective amendment to the value added tax incentive provisions could be applied to a pioneer unit that had already exhausted its cumulative quantum of benefits before the amendment took effect, so as to restrict exemption on sales made during the earlier period.

Analysis: The scheme documents and entitlement certificates treated the unit as a pioneer unit and did not impose a proportionate-capacity condition. The retrospective amendment to the incentive provision was upheld as constitutionally valid, but its operation was held to govern units whose benefits were still subsisting and had not been fully exhausted. The validating provision did not authorise denial of exemption for sales made before the amendment's effective date where the sanctioned ceiling had already been consumed under the earlier regime. On the facts, the unit had exhausted its cumulative benefit by March 2009 and had paid tax on sales thereafter, so the later amendment could not be used to reopen the already-consumed exemption for the period from 1 April 2005 to 27 August 2009.

Conclusion: The retrospective restriction could not be applied to the assessee's exhausted exemption entitlement for the relevant pre-amendment period; the assessment and demand were unsustainable and the issue was answered in favour of the assessee.

Ratio Decidendi: A validating retrospective amendment to incentive provisions cannot be applied to deprive an eligible unit of exemption already fully earned and exhausted under the unamended scheme for sales made before the amendment's effective date, unless the statute clearly requires such withdrawal.

---