Jayaswal Neco Industries LTD. vs. State Of Chhattisgarh

Facts

The petitioner, Jayaswal Neco Industries Ltd., challenged a Chhattisgarh State Government notification dated 31-10-2006, which incorporated amended provisions of Section 8(5) of the Central Sales Tax (CST) Act, 1956. The petitioner had been granted tax exemption under a notification dated 3-6-1993, initially valid until 21-9-2010 and later extended. The amendment to Section 8(5) of the CST Act, effective from 11-5-2002, mandated the production of Form C for availing exemption. The petitioner argued that this amendment could not affect their vested right to exemption. In WPT No. 122/2016, the petitioner also challenged an assessment order for the year 2006-2007. The State contended that the notification was valid and in accordance with law, and the petitioner had challenged it after a significant delay.

Held

The Court held that the amendment to Section 8(5) of the CST Act, effective from 11-05-2002, which mandated the production of Form C for availing tax exemption, was prospective in nature. It clarified that this amendment would not apply retrospectively to cases where absolute exemption was permitted much prior to the amendment. The Court found that the petitioner had been granted absolute exemption by the notification dated 3-6-1993, with the benefit commencing from 22-9-1996 and extending up to 21-9-2019 (and subsequently until 30-6-2017 due to GST). Therefore, the notification dated 31-10-2006 could not be applied to the petitioner to deny the exemption without the submission of Form C. Consequently, the assessment order dated 18-6-2010 and the order of the Chhattisgarh Commercial Tax Tribunal dated 26-11-2016 were quashed. The petitioner was held entitled to the benefit of exemption without the requirement of submitting Form C.

Key Issues

1. Whether the Chhattisgarh State Government notification dated 31-10-2006, issued under Section 15-B & 72(i)(b) of the Chhattisgarh VAT Act, 2005, read with Section 8(5) of the CST Act, 1956, is unconstitutional and invalid in law, specifically concerning its retrospective application to the petitioner's vested right of exemption. Petitioner's arguments: The petitioner contended that the notification, by imposing the requirement of Form C, sought to retrospectively take away a vested right of exemption granted by an earlier notification dated 3-6-1993. They argued that this vested right, accrued prior to the amendment of Section 8(5) of the CST Act, could not be unilaterally affected. They relied on the principle of promissory estoppel due to substantial investments made based on the concession granted. Revenue/State's arguments: The State argued that the notification was issued in exercise of statutory power and was in accordance with law. They contended that the petitioner had challenged the notification after approximately ten years, and that the Supreme Court's decision in Prism Cement Limited was distinguishable from the present case.