'Every Statute Prima Facie Prospective Unless Stated Otherwise' : Supreme Court Says 2002 Amendment To CST Act Won't Affect Accrued Rights

The Supreme Court yesterday (on February 12) held that though after the amendment of Section 8(5) of the Central Sales Tax Act, the State Government's right to grant exemption from tax has ceased to exist, the amendment is prospective. Thus, it would not apply to the cases where an absolute exemption has already been granted.The amended Act nowhere stipulates that rights previously accrued stand nullified or all previous exemptions stand cancelled or revoked., the Bench of Justices P.S. Narasimha and Pankaj Mithal said. In the present case, the assessee/respondent was aggrieved, among other things, by the three trade circulars issued by the Commissioner of Sales Tax, Mumbai for revising the assessments. In the impugned circulars, the respondent was asked to refund the exempted portion of the tax which was provided under the Package Scheme of Incentives. The notices were issued on the ground that the respondent has failed to submit declarations in Form 'C' or 'D', as required under Section 8(4) of the Act.Essentially, the aforementioned scheme was brought in by the State of Maharashtra under Section 8(5) of the Act. The scheme provided partial/total exemption from payment of sales tax. Pertinently, the respondent was eligible for tax exemption and was accordingly issued the Eligibility Certificate. However, the event took a turn when the CST Act was amended by the Finance Act, of 2002.For context, this provision empowered the State Government to grant partial or full exemption from taxes on inter-state sales or commerce in the public interest. Apart from this, it also dispensed the requirement, under Section 8(4) of the Act, which made this exemption subject to providing Form 'C' or 'D'.However, after the amendment, though the State Government continues to have the power in the public interest to grant an exemption, the same is subject to fulfilment of the requirements given in Section 8 (4).“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.”Building on this, the Court clarified that the amendment is prospective in nature. Thus, such restrictions would not apply retrospectively to cases where absolute exemption was permitted prior to the amendment. The Court pointed out that the benefit granted to the respondent was under the 1993 scheme; thus, the benefit was still available.To support this, the Court relied upon several cases including Darshan Singh v. Ram Pal Singh and Anr. and observed:“It is a cardinal principle of construction that every statute is prima-facie prospective 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.”Inter-alia, the Court also relied upon MRF Ltd. Kottayam vs. Asstt. Commissioner (Assessment) Sales Tax and Others, where it was held that premature deprivement of the benefit of exemption is arbitrary the State Government cannot issue a notification to take away such a right.“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 Court said.It added that even the Eligibility Certificate was not revoked. Thus, the substantive right granted through the same continues to subsist. In view of this, the Court held that the State Government was not justified in issuing the impugned notices and taking away the granted benefit. The requirement of submission of Form 'C' and 'D' would apply prospectively after 11.05.2002 i.e., after the Finance Act of 2002., the Court said and dismissed the appeal.Case Name: THE STATE OF MAHARASHTRA & ORS. V. PRISM CEMENT LIMITED & ANR., CIVIL APPEAL NO.13928 OF 2015Citation : 2025 LiveLaw (SC) 198Click here to read/ download the judgment

'Every Statute Prima Facie Prospective Unless Stated Otherwise' : Supreme Court Says 2002 Amendment To CST Act Won't Affect Accrued Rights

Gyanvi Khanna

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