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State of Haryana and others v. Bharti Teletech Ltd.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 6791 of 2004)Decided 20 Jan 2014
Civil Appeal No. 6791 of 2004
Justice H.L. Dattu · Justice Dipak Misra · Justice S.A. Bobde

Background

A telephone manufacturer received a time-limited sales-tax exemption subject to maintaining the beneficiary unit's production for five years after the exemption ended. When that unit's output fell, the company sought to count production from an expansion unit to meet the condition. Tax authorities demanded repayment of the exemption benefit with interest, but the High Court set their orders aside.

Decision Breakdown

The Supreme Court allowed the State's appeal and restored the tax authorities' orders. The production condition applied to the particular unit that had received the exemption, and output from a separate expansion unit could not be combined to preserve that benefit. Registration and eligibility of the additional unit did not make the two units interchangeable for this purpose. The rule expressly required repayment of the full benefit with interest upon violation, subject to its stated safeguards and exception for satisfactorily explained circumstances beyond the unit's control. Liberal interpretation of an exemption could not erase its clear conditions.

Lesson Learnt

A business accepting a conditional tax incentive must track obligations that continue after the concession period. Meeting a target elsewhere in the business will not necessarily protect a benefit granted to one specified unit.

Official source (sci.gov.in)View Judgment (PDF)

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