Sales Tax — PSI units established under 1988 Scheme — Retrospective amendment to Rule — Providing calculation of CQB — Bad in law to that extent they are inconsistent with para 2.11 of 1988 GR — Rule 31AA of the Bombay Sales Tax Rules, 1959.

Sales Tax — PSI units established under 1988 Scheme — Retrospective amendment to Rule — Providing calculation of CQB — Bad in law to that extent they are inconsistent with para 2.11 of 1988 GR — Rule 31AA of the Bombay Sales Tax Rules, 1959.

The dealer company, entitled to sales tax exemption under the Package Scheme of Incentives (PSI), 1988 under the Bombay Sales Tax Act, 1959 as per terms and conditions of Government Resolution, dated September 30, 1988 subject to maximum specified limit of notional sales tax liability to be calculated as per Para 2.11 of the said GR. Section 41B of the Act, inserted from May 1, 1994, empowers the Commissioner of sales tax to determine the cumulative quantum of benefits (CQB) received by any dealer to whom any certificate of entitlement is granted under various specified PSI at any time from January 1, 1980, in the manner prescribed by the Rules. Rule 31AA was inserted in the Bombay Sales Tax Rules, 1959 from March 24, 1995 providing for calculation of CQB for any period starting from January 1, 1980. The assessment of the dealer was completed for the periods 1994-95 to 1996-97 and the assessing authority calculated CQB as per Rule 31AA against which dealer filed appeals before the Appellate Authority as well as filed writ petition before the Bombay High Court challenging the constitutional validity of Rule 31AA providing for calculation of CQB to that extent they are inconsistent with Para 2.11 of GR dated September 30, 1988.

Held:

 (i) There can be no dispute that the State Legislature has power to make laws with retrospective effect, but if that law arbitrarily impairs or seeks to take away the rights vested in the citizens, then such law must be held to be bad in law to the extent it is made retrospectively.

(ii) In the present case, the petitioners had a vested right in computing CQB as per Para 2.11 of the 1988 GR and since that vested right is sought to be divested by introducing Rule 31AA retrospectively, it must be held that Rule 31AA to the extent it seeks to apply to the units established under the 1988 scheme prior to the insertion of said rule is bad in law.

(iii) When the PSI itself was to operate based on the exemption granted under the sales tax law, it is difficult to envisage that in calculating the CQB, the Scheme intended to ignore the exemptions available under the sales tax law. In any event, the language used in Para 2.11 of the 1988 GR does not directly or indirectly indicate that in calculating CQB the exemptions provisions contained under the sales tax law have to be ignored.

(iv) The calculation of CQB under PSI 1988, as per Para 2.11 of 1988 GR, has to be made with reference to tax payable, by a unit not covered under PSI 1988, at maximum rate of tax payable under the Act or rules including exemptions or concessions available under any other provisions of the Act, rules or notifications. Accordingly, the High Court allowed the writ petition filed by the company.