2026 (2) TMI 175 - HC - VAT / Sales Tax

Sales tax deferment entitlement during validity of final eligibility certificate upheld; State revisions dismissed, cancellation treated prospectively.

Entitlement to sales tax deferment continues while a final eligibility certificate subsists; the certificate was cancelled with prospective effect from ... Entitlement to sales tax deferment during subsistence of final eligibility certificate - cancellation of final eligibility certificate - prospective effect - recovery of tax where dealer collected tax during deferment period - promissory estoppel against the State - HELD THAT:- Admittedly there was a final eligibility certificate issued and the said final eligibility certificate was cancelled only from 24.11.2003 and beyond 24.11.2003 there is no dispute for the subsequent period that the respondent Company has committed any default. From the year 1993 till 2003, the respondent Company had a final eligibility certificate with it. Further, the respondent Company also in view of the final eligibility certificate having been issued had not collected sales tax from its customers. In the teeth of the undisputed factual matrix of the case, and taking into consideration the view expressed by the unified High Court of Andhra Pradesh in the earlier round of litigation, the findings arrived at by the STAT, the relevant portion of which is reproduced in the preceding paragraphs, cannot be said to be without jurisdiction, bad in law, perverse, or contrary to the evidence on record. Accordingly, we find no merit in the instant batch of Tax Revision Cases filed by the petitioner - State, and the well-reasoned order of the STAT does not warrant any interference. Therefore, instant batch of Tax Revision Cases, thus fail and are accordingly, dismissed. The question of law stands answered in favour of the respondent and against the petitioner – State. 1As a sequel, miscellaneous petitions pending if any, shall stand closed. However, there shall be no order as to costs. Issues: Whether the respondent (a dealer/refilling unit) is entitled to the benefit of sales tax deferment for the period prior to cancellation of its final eligibility certificate, notwithstanding a later finding that the unit was not a manufacturing unit.Analysis: The Sales Tax Appellate Tribunal found, on facts not vitiated by the High Court's earlier ruling, that the respondent held a final eligibility certificate in force until its cancellation effective 24.11.2003 and, during that period, was prohibited from collecting sales tax from consumers. The High Court precedent and the STAT reasoning establish that where the State issued a clear promise by granting a final eligibility certificate and the dealer did not collect tax during the subsistence of that certificate, the liability to pay tax arises only from the date the cancellation becomes operative; further, tax may be recovered only if it is shown that the dealer collected tax during the incentive period.Conclusion: The respondent is entitled to the benefit of sales tax deferment for the period prior to 24.11.2003 and cannot be compelled to pay tax for that period except to the extent tax was actually collected; the petitioner's revision against the STAT orders is dismissed and the question of law is answered in favour of the respondent.