Himachal Exemption – Peripheral activities – Premature Withdrawal – No superior Public Interest
In a landmark judgment delivered by the Himachal Pradesh High Court, Notification No. 1/2008-CE amending Notification 50/2003-CE was consigned to trashcan – at least partly. The Court held that Government is estopped from withdrawing the exemption benefit for peripheral activities like preservation during storage, cleaning operations, packing or repacking of such goods in a unit container or labelling or re-labelling of containers, sorting, declaration or alteration of retail sale price and have not been subjected to any other process or processes amounting to manufacture in the States of Uttarakhand or Himachal Pradesh.
Drawing strength from Section 38-A (c) which preserves the rights, privileges etc that accrue from existing notifications, the Court held that the rights secured by investors who came to these states with the promise of exemption benefits for ten years cannot be taken away by the Government midway. Countering the Government's view point that Notification 1/2008-CE serves public interest, the High Court observed that Notification 50/2003-CE was issued to attract investors to the States of Himachal Pradesh and Uttarakhand and when the investors have set shop with huge investments, withdrawing benefit of this exemption for peripheral activities in the name of public interest defeats the very purpose.
First exemption was in Public Interest and so was the withdrawal – Government says second one is in superior Public Interest.
It observed that the public interest which the Government thought would serve at the time of issuing the said notification does not fizzle out midway through the sunset clause and will not serve any greater public interest when investments are made by industrial units to undertake these very peripheral activities hoping to gain some tax sops.
This judgment should serve as an eye opener to the policy makers in the North Block that public interest is not a blank cheque given to them to tinker with. They should realize that when such a notification is issued, it is bound to attract huge investments from industries hoping that they can enjoy the benefits at least for the pre-determined time. It serves nobody's cause to withdraw exemptions midway citing flimsy grounds as it happened in the instant case.
Incidentally, Section 38A was brought in to give life back to amended/rescinded notifications to protect Government Revenue – Now, there can't be one-sided legislation – what is applicable to the government is also applicable to the trade.
We bring you this landmark judgement today.
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