Supreme Court of India
THE STATE OF MAHARASHTRA & ORS.versusPRISM CEMENT LIMITED & ANR
- Citation
- 2025 INSC 199
- Decided
- 12 February 2025
- Disposal
- Dismissed
Holding
The amendment to Section 8(5) of the Central Sales Tax Act, 1956 is prospective and cannot impair a substantive right of tax exemption that accrued before its commencement, and the State cannot revoke the entitlement certificate without notice and hearing.
Summary
Prism Cement Ltd., a unit that had been granted an absolute tax exemption under the Package Scheme of Incentives 1993 (PSI 1993) through an Eligibility Certificate (20‑02‑1998) and an Entitlement Certificate (24‑03‑1998), challenged the Maharashtra State's attempt to withdraw that benefit after the Finance Act, 2002 amended Section 8(5) of the Central Sales Tax Act, 1956. The State issued trade circulars and notices demanding payment of tax for assessment years 2002‑2005, alleging non‑submission of Forms C and D required under the amended provision. The Supreme Court examined whether the amendment could be applied retrospectively to extinguish a substantive right that had already accrued, and whether the State could cancel the entitlement without notice or a hearing. Relying on principles of statutory construction, the doctrine of vested rights, and precedents such as MRF Ltd. and S.L. Srinivasa Jute Twine Mills, the Court held that the amendment was prospective and could not impair the already granted exemption. Consequently, the State was not authorised to revoke the entitlement certificates without due process, and the requirement to file Forms C/D applied only to future transactions. The appeal was dismissed, upholding the tax exemption.
Issues considered
- Whether the amendment to Section 8(5) of the Central Sales Tax Act, 1956 by the Finance Act, 2002 applies retrospectively to withdraw tax exemption benefits granted under the Package Scheme of Incentives, 1993.
- Whether the State Government can cancel an entitlement certificate and withdraw a vested tax exemption right without notice or an opportunity of hearing.
Legislation cited
- Bombay Sales Tax Act, 1959s. 38
- Central Sales Tax Act, 1956s. 8(4), s. 8(5)
- Finance Act, 2002
- General Clauses Act, 1897s. 6
Headnote
Issue for Consideration Whether the amendment to s.8(5) of the Central Sales Tax Act, 1956 (CST Act), introduced by the Finance Act, 2002, applies retrospectively to take away tax exemption benefits granted under the Package Scheme of Incentives, 1993 (PSI 1993). Whether the in taking away a right accured to the assessee-respondent on mere prospective amendment of s.8(5) without revoking the Entitlement Certificate dated 24.03.1998 without notice or opportunity of hearing. Headnotes† Central Sales Tax Act, 1956 – s.8(5) – Amendment of s.8(5)
Subjects
Package Scheme of Incentives, 1993Prospective amendment of s.8(5) of Central Sales Tax Act, 1956Tax exemption benefitsProspective amendmentRetrospective amendmentEligibility certificateEntitlement certificateEnforcement of the Finance Act, 2002Notice or an opportunity of hearingPrinciple of constructionSales TaxInter-State trade – ‘C’ Form – ‘D’ FormTrade circulars
Judgment
[2025] 2 S.C.R. 1861 : 2025 INSC 199
The State of Maharashtra & Ors.
v.
Prism Cement Limited & Anr.
(Civil Appeal No. 13928 of 2015)
12 February 2025
[Pamidighantam Sri Narasimha and Pankaj Mithal,* JJ.]
Issue for Consideration
Whether the amendment to s.8(5) of the Central Sales Tax Act,
1956 (CST Act), introduced by the Finance Act, 2002, applies
retrospectively to take away tax exemption benefits granted under
the Package Scheme of Incentives, 1993 (PSI 1993).
Whether the State Government was justified in taking away a
right accured to the assessee-respondent on mere prospective
amendment of s.8(5) without revoking the Entitlement Certificate
dated 24.03.1998 without notice or opportunity of hearing.
Headnotes†
Central Sales Tax Act, 1956 – s.8(5) – Amendment of s.8(5) of the
Central Sales Tax Act by the Finance Act, 2002 with effect from
11.05.2002 – Effect of Amendment – Whether the amendment to
s.8(5) of the Central Sales Tax Act, 1956 (CST Act), introduced
by the Finance Act, 2002, applies retrospectively to take away
tax exemption benefits granted under the Package Scheme
of Incentives, 1993 (PSI 1993):
Held: In the case at hand, the assessee-respondent was held
eligible for absolute exemption under the PSI 1993 issued in
exercise of power under s.8(5) of the CST Act as per Eligibility
certificate dated 20.02.1998 and Entitlement certificate dated
24.03.1998 granting exemption to it from payment of tax under
the BST Act and CST Act to the extent of Rs.273.54 crore or up
till 2012, whichever is earlier – The said exemption granted to the
assessee-respondent was much prior to the enforcement of the
Finance Act, 2002 with effect from 11.05.2002 – The amended Act
nowhere stipulates that rights previously accrued stand nullified
or all previous exemptions stand cancelled or revoked – The
requirement for fulfilling the condition of s.8(4) of the CST Act for
* Author
1862 [2025] 2 S.C.R.
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getting the benefit of tax exemption came subsequently after the
amendment of s.8(5) with effect from 11.05.2002 and would apply
prospectively to transactions in respect of which eligibility and
entitlement certificates are issued subsequently – It is a cardinal
principle of construction that every statute is prima-facie perspective
in nature unless it is expressly or by necessary implication made
to have retrospective operations – Unless there are words in the
statutes sufficient to show the intention of the legislature to affect
existing rights, it is deemed to be prospective only. [Paras 21 and 23]
Central Sales Tax Act, 1956 – s.8(5) – Amendment of s.8(5) of
the Central Sales Tax Act by the Finance Act, 2002 with effect
from 11.05.2002 – Whether the State Government was justified
in taking away a right accured to the assessee-respondent
on mere prospective amendment of s.8(5) without revoking
the Entitlement Certificate dated 24.03.1998 without notice or
opportunity of hearing:
Held: The law is settled that if a substantive right has accrued
to a person, it cannot be taken away unilaterally without notice
or an opportunity of hearing to the said person – Thus, after the
amendment of s.8(5), the Government was not authorised to pass
a unilateral order affecting the rights of the assessee-respondent for
claiming absolute exemption from payment of tax – The assessee-
respondent was not given any notice either cancelling the Eligibility
Certificate or the Entitlement Certificate – Therefore, without revoking
the said certificates, the substantive right which had accrued to the
assessee-respondent thereunder continues to subsist and does not
get impacted by the subsequent amendment of s.8(5) inasmuch
as there is nothing in the amended provision which provides for
taking away such a right granted to the assessee-respondent –
The State Government while applying the aforesaid amended
s.8(5) was not justified in taking away such a right accrued to the
assessee-respondent on mere prospective amendment of s.8(5)
without revoking the Entitlement Certificate dated 24.03.1998 without
notice or opportunity of hearing. [Paras 28 and 29]
Central Sales Tax Act, 1956 – s.8(5) – Amendment of s.8(5) of
the Central Sales Tax Act by the Finance Act, 2002 with effect
from 11.05.2002 – Whether the requirement of submission of
Form ‘C’ and ‘D’ would apply prospectively after 11.05.2002
i.e., after the Finance Act of 2002:
[2025] 2 S.C.R. 1863
The State of Maharashtra & Ors. v. Prism Cement Limited & Anr.
Held: The State Government was not competent to issue the
impugned notices for revising the assessment of the assessee-
respondent and to demand the exempted tax only for the reason
that the assessee-respondent has not submitted Form ‘C’ and ‘D’
in support of inter-State sale, trade & commerce – The requirement
of submission of Form ‘C’ and ‘D’ would apply prospectively after
11.05.2002 i.e., after the Finance Act of 2002. [Para 30]
Case Law Cited
MRF Ltd. v. Asstt. Commissioner (Assessment) Sales Tax &
Ors. [2006] Supp. 6 SCR 417 : (2006) 8 SCC 702; Southern
Petrochemical Industries Co. Ltd. v. Electricity Inspector & Ors.
[2007] 6 SCR 955 : (2007) 5 SCC 447; Darshan Singh v. Ram
Pal Singh & Anr. [1990] Supp. 3 SCR 212 : AIR 1991 SC 1654;
S.L. Srinivasa Jute Twine Mills (P) Ltd. v. Union of India & Anr.
[2006] 2 SCR 235 : (2006) 2 SCC 740; Shree Digvijay Cement
Co. Ltd. & Ors. v. State of Rajasthan & Ors. [1999] Supp. 5 SCR
428 : (2000) 1 SCC 688 – referred to.
List of Acts
Central Sales Tax Act, 1956; Bombay Sales Tax Act, 1959; Finance
Act, 2002; General Clauses Act, 1897.
List of Keywords
Package Scheme of Incentives, 1993; Prospective amendment
of s.8(5) of Central Sales Tax Act, 1956; Tax exemption benefits;
Prospective amendment; Retrospective amendment; Eligibility
certificate; Entitlement certificate; Enforcement of the Finance Act,
2002; Notice or an opportunity of hearing; Principle of construction;
Sales Tax; Inter-State trade – ‘C’ Form – ‘D’ Form; Trade circulars.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13928 of 2015
From the Judgment and Order dated 30.08.2012 of the High Court
of Judicature at Bombay in WP No. 6475 of 2009
With
Civil Appeal Nos. 13522, 13523, 13524, 13525, 13526 and 13527
of 2015 and Civil Appeal Nos. 2328-2334 of 2025
1864 [2025] 2 S.C.R.
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Appearances for Parties
Tushar Mehta, Solicitor General, Aniruddha Joshi, Siddharth
Dharmadhikari, Aaditya Aniruddha Pande, Bharat Bagla, Sourav
Singh, Aditya Krishna, Ms. Preet S. Phanse, Adarsh Dubey,
Ms. Deepanwita Priyanka, Ritesh Patil, Mrs. Anil Katiyar, Atulesh
Kumar, S.N. Terdal, Advs. for the Appellants.
Rakesh Mudgal, AAG, V. Sridharan, Ms. Meenakshi Arora, Sr. Advs.,
Punit Dutt Tyagi, Ms. Apeksha Mehta, S. Sriram, Sahil Parghi,
S. Sriram, Ms. Neha Choudhary, Ms. Umang Motiyani, Aayush
Agarwal, Ms. Falguni Gupta, Ms. Charanya Lakshmikumaran,
S. Ravi Shankar, Ms. Yamunah Nachiar, M/s. Gagrat And Co,
Ujjwal A. Rana, Himanshu Mehta, Zoheb Hossain, M/s. K.J. John
And Co, Ms. Surekha Raman, Amarjit Singh Bedi, Shreyash
Kumar, Yashwant Sanjenbam, Rishabh Sancheti, Ms. Padma
Priya, Naman Jain, Vidhan Malik, K. Paari Vendhan, Ms. Anushree
Prashit Kapadia, Ms. Ekta Kundu, M.P. Devanath, Sudhir Mehta,
Ms. Sailee Mehta, Ms. Dharita Purvish Malkan, Alok Kumar, Kush
Goel, Suraj Pandey, Ms. Neha Ambashtha, Purvish Jitendra Malkan,
Dr. Monika Gusain, Advs. for the Respondents.
Judgment / Order of the Supreme Court
Judgment
Pankaj Mithal, J.
Civil Appeal No. 13928 OF 2015:
1. Heard learned counsel for the parties at length.
2. The assessee-respondent Prism Cement Limited, a public limited
company, invoked the extraordinary writ jurisdiction of the High Court,
challenging the three trade circulars issued by the Commissioner
of Sales Tax, Mumbai1 on 27.05.2002, 20.07.2002 and 08.02.2007
respectively and various notices issued by the Deputy Commissioner
of Sales Tax under Section 38 of the Bombay Sales Tax Act, 19592 for
revising the assessments of the assessee-respondent made for the
1 In short ‘Commissioner’
2 In short ‘BST Act’
[2025] 2 S.C.R. 1865
The State of Maharashtra & Ors. v. Prism Cement Limited & Anr.
assessment years 2002-2003 to 2004-2005. Consequentially, calling
upon the assessee-respondent to pay/refund the exempted portion
of the tax as per the provision of Package Scheme of Incentives
19933 on the sale of goods effected in the course of inter-State trade
or commerce.
3. The above writ petition has been allowed by the Division Bench of the
High Court by the impugned judgment and order dated 30.08.2012
and it has been held that even after the amendment of Section 8(5)
of the Central Sales Tax Act4 by the Finance Act, 2002 with effect
from 11.05.2002, the State Governments are empowered to grant
total or partial exemption from tax payable on inter-State sales
covered under Section 8(1) as also under Section 8(2) of the CST
Act in public interest, subject to the fulfilment of requirements of
Section 8(4) of the CST Act. Accordingly, the trade circulars and the
notices impugned were quashed holding that the State of Maharashtra
incorrectly proceeded to issue the same on the premise that the
State Government had no power to grant total or partial exemption
in respect of transactions covered under Section 8(2) of the CST
Act after the 2002 amendment.
4. Under challenge in this appeal is the aforesaid judgment and order
dated 30.08.2012 passed by the High Court allowing the above writ
petition.
5. The State of Maharashtra introduced the PSI in 1993 so as to
encourage the establishment of industrial units in backward areas
and for that purpose envisaged to provide tax incentives, inter alia,
including partial/total exemption from payment of sales tax under
the BST Act as well as CST Act. This scheme was announced in
exercise of powers under Section 8(5) of the CST Act vide notification
dated 05.07.1980. The scheme provided a specified time period and
the maximum amount up to which units were entitled to avail such
incentives.
6. Undisputedly, the assessee-respondent was eligible for tax exemption
under the said scheme and was duly issued the Eligibility Certificate
dated 20.02.1998 and the Entitlement Certificate dated 24.03.1998
3 Hereinafter referred to as ‘PSI 1993’
4 In short ‘CST Act’
1866 [2025] 2 S.C.R.
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granting exemption from payment of tax under the BST Act and
CST Act to the extent of Rs.273.54 crores or up till 2012 whichever
is earlier.
7. The assessee-respondent in the three assessment years 2002-2003,
2003-2004 and 2004-2005 availed the tax exemption benefits under
the above scheme but after the CST Act was amended by the Finance
Act, 2002 with effect from 11.05.2002, the State of Maharashtra, on
the basis of the impugned trade circulars and the notices issued
in the month of February, 2009 under Section 38 of the BST Act,
sought to revise the tax demand of the assessee-respondent on the
pretext that the assessee-respondent has failed to comply with the
conditions of Section 8(4) of the CST Act with regard to submission
of declarations in Form ‘C’ or ‘D’.
8. In the above backdrop, the issue which arises for consideration is
whether the exemption from tax granted under the PSI 1993 issued
under Section 8(5) of the CST Act as it existed at the relevant time
read with eligibility & entitlement certificate could be withdrawn by
the subsequent amendment to Section 8(5) of the CST Act by the
Finance Act of 2002 with effect from 11.05.2002 as the assessee-
respondent failed to fulfil the requirements of Section 8(4) of the
CST Act which mandated for submission of declaration in Form ‘C’
or ‘D’. Ancillarily, whether the aforesaid amendment could be applied
retrospectively taking away the benefit which have accrued to the
assessee-respondent prior to coming into force by the Finance Act
2002.
9. In this context we had to first refer to Section 8(1) of the CST Act as
it stood prior to its amendment by the Finance Act 2002 with effect
from 11.05.2002. The Section 8 of the CST Act as a whole as it stood
prior to the amendment by the Finance Act 2002 reads as under:
“Section 8: Rates of tax on sales in the course of inter-
State trade or commerce
1. Every dealer, who in the course of inter-State trade or
commerce:
(a) sells to the Government any goods; or
(b) sells to a registered dealer other than the Government
goods of the description referred to in sub-section (3);
[2025] 2 S.C.R. 1867
The State of Maharashtra & Ors. v. Prism Cement Limited & Anr.
shall be liable to pay tax under this Act, which shall be
four percent of his turnover.
2. The tax payable by any dealer on his turnover insofar
as the turnover or any part thereof relates to the sale of
goods in the course of inter-State trade or commerce not
falling within sub-section (1):
(a) in the case of declared goods, shall be calculated at
twice the rate applicable to the sale or purchase of such
goods inside the appropriate State; and
(b) in the case of goods other than declared goods, shall
be calculated at the rate of ten percent or at the rate
applicable to the sale or purchase of such goods inside
the appropriate State, whichever is higher.
…
3. The goods referred to in clause (b) of sub-section (1):
(a) Omitted.
(b) are goods of the class or classes specified in the
certificate of registration of the registered dealer purchasing
the goods as being intended for resale by him or subject to
any rules made by the Central Government in this behalf,
for use by him in the manufacture or processing of goods
for sale or in mining or in the generation or distribution of
electricity or any other form of power;
(c) are containers or other materials specified in the
certificate of registration of the registered dealer purchasing
the goods, being containers or materials intended for being
used for the packing of goods for sale;
(d) are containers or other materials used for the packing
of any goods or classes of goods specified in the certificate
of registration referred to in clause (b) or for the packing of
any containers or other materials specified in the certificate
of registration referred to in clause (c).
4. The provisions of sub-section (1) shall not apply to any
sale in the course of inter-State trade or commerce unless
the dealer selling the goods furnishes to the prescribed
authority in the prescribed manner:
1868 [2025] 2 S.C.R.
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(a) a declaration duly filled and signed by the registered
dealer to whom the goods are sold containing the
prescribed particulars in a prescribed form obtained from
the prescribed authority; or
(b) if the goods are sold to the Government, not being
a registered dealer, a certificate in the prescribed form
duly filled and signed by a duly authorized officer of the
Government.
5. Notwithstanding anything contained in this section, the
State Government may, if it is satisfied that it is necessary
so to do in the public interest, by notification in the Official
Gazette and subject to such conditions as may be specified
therein, direct:
(a) that no tax under this Act shall be payable by any
dealer having his place of business in the State in respect
of the sales by him in the course of inter-State trade or
commerce, from any such place of business of any such
goods or classes of goods as may be specified in the
notification; or that the tax on such sales shall be calculated
at such lower rates than those specified in sub-section (1)
or sub-section (2) as may be mentioned in the notification.
(b) that in respect of all sales of goods or sales of such
classes of goods as may be specified in the notification,
which are made, in the course of inter-state trade or
commerce, by any dealer having his place of business
in the State or by any class of such dealers as may be
specified in the notification to any person or to such class
or persons as may be specified in the notification, no tax
under this Act shall be payable or the tax on such sales
shall be calculated at such lower rates than those specified
in sub-section (1) or sub-section (2) as may be mentioned
in the notification.”
10. Section 8(1) of the CST Act provides for a rate of tax for sales carried
out by dealer to registered dealers of the other States or the sale
of goods to the Government in respect of specified goods. It inter-
alia provides that every dealer who in the course of the inter-State
trade or commerce sells to the Government any goods or sells to
[2025] 2 S.C.R. 1869
The State of Maharashtra & Ors. v. Prism Cement Limited & Anr.
the registered dealer other than the Government, the goods of the
particular description, shall be liable to pay tax at the rate of 4 per
cent of its turnover.
11. Section 8(2) of the CST Act prescribes the rate of tax in respect
of sales carried by the dealer in other states, not covered by Sub
Section 1. It provides that the dealer shall be liable for payment of
tax twice the rate applicable to the sale or purchase of such goods
inside the state on the declared goods and where the goods are
other than declared goods the rate of tax shall be 10 per cent or at
the rate applicable to the sale or purchase of such goods inside the
state whichever is higher.
12. Section 8(4) of the CST Act mandates that the sales under Section 8(1)
are required to be supported by the prescribed declarations in the
Form ‘C’ or ‘D’ as provided under Rule 12 of the CST Rules; meaning
thereby that exemption/lower rate of tax on inter-State sales or
commerce was permitted only in respect of the sales in the other
state to the registered dealer or the Government subject to providing
Form ‘C’ or ‘D’.
13. Section 8(5) of the CST Act is an overriding provision and it overrides
Section 8(1) and Section 8(4). Sub Section (5) of Section 8 of the
CST Act empowers the State Government to issue notification to
grant partial or full exemption from taxes on inter-State sales or
commerce in public interest and to prescribe different grade of tax.
14. In view of the mandate contained in Section 8(4) of the CST Act
that the inter-State sales or trade under Section 8(1) are required to
be supported by the declarations as envisaged in Form ‘C’ and ‘D’
as provided under Rule 12 of the CST Rules, the issue whether in
granting exemption/partial exemption on tax on such sales, the State
Government is competent to dispense with the production of Form
‘C’ and ‘D’, came to be considered in the case of Shree Digvijay
Cement Co. Ltd. and Others vs State of Rajasthan and Others5.
This Court in deciding the above case inter-alia held that as Section
8(5) starts with a non-obstinate clause and overrides Section 8(1)
and 8(4) of the CST Act, the power of the State Government to grant
exemption/partial exemption from tax includes dispensing with the
5 (2000) 1 SCC 688
1870 [2025] 2 S.C.R.
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requirement of Form ‘C’ and ‘D’ in respect of inter-State sales and
trade. To put it simply it was held that when the State Government
grants exemption/partial exemption in tax in exercise of powers
under Section 8(5) it impliedly has the power to dispense with the
requirement of Form ‘C’ and ‘D’.
15. It was to overcome the decision of this Court in Shree Digvijay
(Supra) that Section 8(5) of the CST Act was amended by Finance
Act 2002 with effect from 11.05.2002. The amended Section 8(5) of
the CST Act reads as under:
“Section 8(5) - Notwithstanding anything contained in this
section, the State Government may, if it is satisfied that it
is necessary so to do in the public interest, by notification
in the Official Gazette and subject to such conditions as
may be specified therein, direct:
(a) no tax under this Act shall be payable by any dealer
having his place of business in the State in respect of
the sales by him, in the course of inter-State trade or
commerce, to a registered dealer or the Government from
any such place of business of any such goods or classes
of goods as may be specified in the notification, or that the
tax on such sales shall be calculated at such lower rates
than those specified in sub-section (1) or sub-section (2)
as may be mentioned in the notification; or
(b) in respect of all sales of goods or sales of such classes
of goods as may be specified in the notification, which are
made in the course of inter-State trade or commerce, to a
registered dealer or the Government by any dealer having
his place of business in the State or by any class of such
dealers as may be specified in the notification to any person
or to such class of persons as may be specified in the
notification, no tax under this Act shall be payable or the
tax on such sales shall be calculated at such lower rates
than those specified in sub-section (1) or sub-section (2)
as may be mentioned in the notification.”
16. The aforesaid amendment clearly reveals that the State Government
though continues to have the power in public interest to grant
exemption/partial exemption of tax on inter-State sale, trade or
[2025] 2 S.C.R. 1871
The State of Maharashtra & Ors. v. Prism Cement Limited & Anr.
commerce but the same is subject to fulfilment of the requirements
laid down under Sub-Section (4) of Section 8 of the CST Act which
means that henceforth the exemption so granted would be admissible
only if Form ‘C’ and ‘D’ are supplied by the dealer in context with
the aforesaid interstate sale, trade and commerce.
17. The aforesaid amendment regulates the power conferred upon the
State Government under Section 8(5) of the CST to grant exemption/
partial exemption from tax to dealers on inter-State sales, trade and
commerce subject to the fulfilment of the requirements laid down in
sub-Section (4) of the Section 8 i.e., of production of Form ‘C’ and ‘D’
as the case may be in contrast to the absolute power of exemption/
partial exemption that was permitted under the unamended Act. It is
worth noting that the aforesaid amendment is prospective in nature
and has been made applicable with effect from 11.05.2002 and is
not applicable from any anterior date or to transactions prior to the
aforesaid date. In other words, the absolute power initially conferred
under Section 8(5) upon the State Government to grant exemption/
partial exemption of tax in connection with inter-State sale, trade or
commerce with the amendment was circumscribed and restricted
to the fulfilment of the requirement of Section 8(4) of the CST Act
which prescribes for the submission of Form ‘C’ and ‘D’ only w.e.f.
11.05.2002. However, such restrictions are prospective in nature and
would not apply retrospectively to cases where absolute exemption
was permitted much prior to the amendment.
18. In the instant case, the assessee-respondent was granted tax
benefits under the PSI 1993 issued in exercise of power under
Section 8(5) of the CST Act as per the eligibility and entitlement
certificates dated 20.02.1998 and 24.03.1998 respectively and that
said benefit was available to the assessee-respondent up to the
period of 2012 or to the extent of Rs.273.54 crore, whichever was
earlier. The said benefit granted to the assessee-respondent was not
with any restriction, much less the condition of submission of Form
‘C’ and ‘D’. Thus, on the basis of such exemption granted by the
petitioner vide Eligibility Certificate dated 20.02.1998 and Entitlement
Certificate dated 24.03.1998, a substantive right had accrued to the
respondent to claim the said benefit up to the year 2012 or to the
extent of Rs.273.54 crore.
1872 [2025] 2 S.C.R.
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19. True it is that, in view of the amendment of Section 8(5) by the
Finance Act, 2002, the State Government ceases to have power to
grant exemption in respect of sale of goods covered under Section
8(2) but that is not the issue herein. The precise issue in the present
case is whether the aforesaid amendment would take away the right
which had accrued to the assessee-respondent under the Eligibility/
Entitlement certificates wherein absolute exemptions were granted
without any condition of submission of Form ‘C’ and ‘D’.
20. It is to be noted that the circular, issued by the Commissioner under
Section 8(5) of the CST Act after the amendment by the Finance Act,
2002, though empowers the State Government to grant exemption, is
restrictive in nature subject to the fulfilment of the conditions specified
under Section 8(4) of the CST Act, but the issue is whether that
restriction is retrospective or only prospective in nature. Therefore,
the issue which remains is whether such restriction would apply
even to the transactions which had taken place earlier i.e. where
Eligibility and Entitlement certificates were issued much prior to the
enforcement of the amending Act.
21. In the case at hand, the assessee-respondent was held eligible for
absolute exemption under the PSI 1993 issued in exercise of power
under Section 8(5) of the CST Act as per Eligibility certificate dated
20.02.1998 and Entitlement certificate dated 24.03.1998 granting
exemption to it from payment of tax under the BST Act and CST
Act to the extent of Rs. 273.54 crore or up till 2012, whichever is
earlier. The said exemption granted to the assessee-respondent was
much prior to the enforcement of the Finance Act, 2002 with effect
from 11.05.2002. Therefore, by virtue of the unamended Section
8(5) and the Notification issued thereunder as well as under the
aforesaid Eligibility and Entitlement certificates, a substantive right
of exemption from payment of tax had accrued to the assessee-
respondent. The contention is that though after the amendment, the
right of the Government to grant absolute exemption has ceased
to exist, but that is only prospective in nature and would not apply
to cases where an absolute exemption without any restriction has
already been granted. The amended Act nowhere stipulates that rights
previously accrued stand nullified or all previous exemptions stand
cancelled or revoked. The requirement for fulfilling the condition of
Section 8(4) of the CST Act for getting the benefit of tax exemption
[2025] 2 S.C.R. 1873
The State of Maharashtra & Ors. v. Prism Cement Limited & Anr.
came subsequently after the amendment of Section 8(5) with effect
from 11.05.2002 and would apply prospectively to transactions in
respect of which eligibility and entitlement certificates are issued
subsequently.
22. In support of the above contention, reliance has been placed upon
Darshan Singh v. Ram Pal Singh and Anr.6 which provides that the
benefits conferred earlier to the amendment would remain unaltered,
however, the availment of the said benefit in future would be restrictive
to conditions imposed by the amended provision.
23. It is a cardinal principle of construction that every statute is prima-
facie perspective in nature unless it is expressly or by necessary
implication made to have retrospective operations. Unless there are
words in the statutes sufficient to show the intention of the legislature
to affect existing rights, it is deemed to be prospective only.
24. In S.L. Srinivasa Jute Twine Mills (P) Ltd. vs. Union of India &
Anr.7 this Court has quoted the observations of Lopes L.J.: “every
statute, it is said, which takes away or impairs vested rights acquired
under existing laws, or creates a new obligation or imposes a new
duty, or attaches a new disability in respect of transactions already
past, must be presumed to be intended not to have a retrospective
effect”.
25. This Court, while relying upon the above observation in reference to
Section 6 of the General Clauses Act, 1897 which provides for the
effect of the repeal, observed that in term of clause (c) of Section
6, unless a different intention appears the repeal shall not affect
any right, privilege or liability acquired, accrued or incurred under
the repealed enactment. The effect of the amendment would be the
same as the repeal of the Act. Accordingly, it was held that a person
would be entitled to protection, as had accrued to him prior to the
amendment of the Act, for the period such right had accrued to him
under the unamended Act.
26. This Court in the case of MRF Ltd. Kottayam vs. Asstt.
Commissioner (Assessment) Sales Tax and Others8 was dealing
6 (1992) Supp. 1 SCC 191 : AIR 1991 SC 1654
7 (2006) 2 SCC 740
8 (2006) 8 SCC 702
1874 [2025] 2 S.C.R.
Supreme Court Reports
with an exemption from Sale Tax granted for a fixed period under
the eligibility certificate. During the currency of the exemption period,
State Government issued another notification which had an effect
of discontinuing such an exemption. The Court held that premature
deprivement of the benefit of exemption is arbitrary, unjust and
unreasonable and that the State Government did not have the
power to issue a notification to take away or affect the rights already
accrued in favour of a person/ assessee. It was held that the persons/
units eligible for exemption prior to the issuance of the subsequent
notification would have the benefit of the exemption for the full period
of exemption already granted.
27. In another case Southern Petrochemical Industries Co. Ltd. vs.
Electricity Inspector & Etio and Others9, while dealing with a
privilege of exemption from payment of tax, this Court held that in
a case where the right of exemption of tax for a fixed period has
accrued and the conditions for exemptions have been fulfilled, the
withdrawal of the exemption cannot affect the rights already accrued,
unless the statutes provide otherwise.
28. Moreover, the law is settled that if a substantive right has accrued to
a person, it cannot be taken away unilaterally without notice or an
opportunity of hearing to the said person. Thus, after the amendment
of Section 8(5), the Government was not authorised to pass a
unilateral order affecting the rights of the assessee-respondent for
claiming absolute exemption from payment of tax. The assessee-
respondent was not given any notice either cancelling the Eligibility
Certificate or the Entitlement Certificate. Therefore, without revoking
the said certificates, the substantive right which had accrued to the
assessee-respondent thereunder continues to subsist and does not
get impacted by the subsequent amendment of Section 8(5) inasmuch
as there is nothing in the amended provision which provides for taking
away such a right granted to the assessee-respondent.
29. The State Government while applying the aforesaid amended Section
8(5) was not justified in taking away such a right accrued to the
assessee-respondent on mere prospective amendment of Section
8(5) without revoking the Entitlement Certificate dated 24.03.1998
without notice or opportunity of hearing.
9 (2007) 5 SCC 447
[2025] 2 S.C.R. 1875
The State of Maharashtra & Ors. v. Prism Cement Limited & Anr.
30. In view of the above facts and circumstances, on the above short
point, the State Government was not competent to issue the impugned
notices for revising the assessment of the assessee-respondent and
to demand the exempted tax only for the reason that the assessee-
respondent has not submitted Form ‘C’ and ‘D’ in support of inter-State
sale, trade & commerce. The requirement of submission of Form
‘C’ and ‘D’ would apply prospectively after 11.05.2002 i.e., after the
Finance Act of 2002. Accordingly, in our opinion the appeal lacks
merit and hence dismissed.
Civil Appeal No. 13523 of 2015, Civil Appeal No. 13524 of 2015,
Civil Appeal No. 13525 of 2015, Civil Appeal No. 13526 of 2015,
Civil Appeal No. 13527 of 2015, Civil Appeal No. 13522 of 2015
and Civil Appeal Nos. of 2025 arising out of S.L.P. (C) Nos.
11314-11320 of 2018:
31. Leave granted in Special Leave Petition (C) Nos. 11314-11320 of
2018.
32. In view of the order passed in Civil Appeal No. 13928 of 2015 today,
these appeals are dismissed without any order as to costs.
Result of the case: Appeals dismissed.
†
Headnotes prepared by: Aishani Narain, Hony. Associate Editor
(Verified by: Ankit Gyan, Editor)
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