There Is No Exit From Entry Tax Relief
CAN exemphon from payment of entry tax be withdrawn with retrospective effect, long after the benefit was availed of by a company? The Supreme Court has said that it cannot be done, in a judgement delivered earlier this month in Birla Jute & Industries Ltd vs State of Madhya Pradesh.
The company was issued an eligilbility, certificate under an exemption notification in exercise of the power under the Madhya Pradesh Entry Tax Act ("Sthaniya Kshetra Me Mal Ke, Pravesh Par Kar Adhiniyam"). It was with reference to gunny bags.
Three years after the period of exemption expired, the government issued notice withdrawing the exemption with retrospective effect.
This was challenged by the company in the Madhya Prades high court. It asked the company to go back to the authorities for appropriate relief. Dissatisfied with this order, the company appealed to the Supreme Court.
The company argued that the exemption committee had no power or authority to review a certificate already granted. It pointed out that the Madhya Pradesh high court itself had ruled earlier in K P Enterprises vs Dy Commissioner of Sales Tax that "the order of withdrawal of eligibility certificate cannot be given retrospective effect." This is because, according to the high court, it would amount to causing greater hardship' to assessees be cause they might have acted upon the eligibility certificate issued by the competent authority. It would be unfair for the authority to change the rule and withdraw the benefit.
"If the authority wants to with draw the eligibility certificate, the effectivity of withdrawal shall be with effeet from the date of the or der and it cannot be made retrospective," the high court had emphasised in thatjudgment Approving of that judgment, the Supreme Court allowed the appeal of Birla Jute observing that "there was no justification for reviewing the cert~ficate long after the term thereof had expired and, long after its benefit had been availed by the company."
Recently, the Supreme Court eligibility had decided a from the similar case in State of Rajasthan vs Gopal Oil Mills. In that case, the eligibility certificates were issued to certain industrial units under which some benefits had been availed of by some companies under the state Sales Tax Act.
The Supreme Court directed that the unavailed benefit under the certificates would not be available to the industries. However, the Supreme Court went on to say that nothing could change with regard to the relief which. had already been given.
The court said: " ...but the extent to whieh the benefit under the State Act has already been availed on the basis of the eligibil ity certificates issued, the state government would not disturb that position by seeking to recover any amount under that head."
Therefore, governments should be careful while withdrawing ex-emptions and benefits promised.
Governments cannof withdraw benefits with retrospective effect af ter some time when the compa nies have already planned their af fairs assuming that the exemptions are in place.