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The State of Maharashtra and Others v. Prism Cement Limited and Another

Civil Appeal · 2025 INSC 199Decided 12 Feb 2025
C.A. No.-013928-013928 - 2015 (with connected Civil Appeal Nos. 13522-13527 of 2015 and appeals arising out of S.L.P. (C) Nos. 11314-11320 of 2018)
Justice Pankaj Mithal · Justice Pamidighantam Sri Narasimha

Background

Under Maharashtra's 1993 incentive scheme to encourage industry in backward areas, Prism Cement was granted an Eligibility Certificate (1998) and Entitlement Certificate (1998) giving it tax exemption up to Rs. 273.54 crore or until 2012, without any condition to submit "Form C or D" declarations. In 2002, Parliament amended Section 8(5) of the Central Sales Tax Act to require such declarations going forward, and in 2009 Maharashtra's tax authorities issued notices trying to revise Prism Cement's earlier assessments (2002-2005) on the ground that those forms had not been filed. The Bombay High Court quashed those notices and circulars, ruling in the company's favour, and the State appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that the 2002 amendment to Section 8(5) of the CST Act was prospective only, since a statute is presumed not to have retrospective effect unless expressly stated, and it does not take away rights that had already vested. Since Prism Cement's exemption certificates were issued in 1998, well before the amendment, and granted an absolute, unconditional exemption, that already-accrued substantive right could not be undone by the later amendment or unilaterally withdrawn without notice or an opportunity to be heard - and no such notice had been given. The Court therefore held the State could not demand the exempted tax merely because Form C/D declarations (a post-2002 requirement) were missing, and dismissed the State's appeal along with the connected appeals.

Lesson Learnt

A right or benefit that has already legally vested under an old law - like a tax exemption certificate issued before a change in the rules - is generally protected from being taken away by a later amendment, unless the law says so explicitly and the person is given notice and a chance to be heard.

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

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