Bombay High Court
Vinod S/O Ratilal Patira vs Commissioner Of Sales Tax, ... on 19 June, 2007
Author: R Chavan
Bench: A Joshi, R Chavan
JUDGMENT
R.C. Chavan, J.
1. The petitioners in two petitions are entrepreneurs, who set up their industries in backward areas of State in order to take advantage of a Package Scheme of incentives promulgated by the Government of Maharashtra in the year 1979. Under the Scheme, the units established in backward areas were to get exemption from payment of sales tax for a period up to nine years to the extent of 100/90% of fixed capital investment. The respondent. Sales Tax Department passed an assessment order in respect of petitioner in Writ Petition No. 221 of 1992 for the period from 1-1-1988 to 31-3-1989 and made a demand note ignoring the fixed capital investment by the petitioner. Respondent No. 2. State Industrial and Investment Corporation of Maharashtra Limited (SICOM., for short) in Writ Petition No. 317 of 1993 wrote to the petitioner therein by the impugned letter dated 18-1-1993 that the eligibility certificate entitled the petitioner to claim 90% of the estimated capital cost of Rs. 614 lacs, which came to Rs. 552.60 lacs only and, therefore, the petitioner was not entitled to claim exemption to the extent of Rs. 652.13 lacs, which the petitioner had sought. Aggrieved by these adverse communications from the respondents, the petitioners have approached this Court by filing these petitions.
2. Upon admission of petitions, the respondents were issued with notices to enable the respondents to put in their objections to the petitioners' prayer. While the State or the Sales Tax Department do not seem to have filed any reply or return in both these petitions, respondent No. 2 in Writ Petition No. 317 of 1993. SICOM has filed an affidavit-in-reply, wherein it is contended that the assumption of the petitioners that their entitlement to exemption from sales tax automatically gets increased as and when further investments are made by them, was not correct, and that the petitioners' entitlement to exemption was restricted to the relevant percentage of the capital cost of the project. According to respondent No. 2. SICOM, any additional incentive by way of sales tax exemption was required to be specifically sought by the petitioners by applying in Form No. 4, which the petitioners had not done. The respondents, therefore, wanted the petition to be dismissed.
3. We have heard the learned Advocates for the petitioners and the learned AGP for respondent. State and Sales Tax Department.
4. It may be seen that there is no dispute that petitioner Vinod in Writ Petition No. 221 of 1992 obtained an eligibility certificate on 25-3-1985 under the Scheme for incentives notified by the Government on 5-1-1980 (the 1979 Scheme). The Scheme was later modified on 5-7-1982. Petitioner Vinod established a factory for PVC pipes. The petitioner was granted eligibility certificate by the Development Corporation of Vidarbha Limited, which is annexed as Annexure-B to the petition, showing that the petitioner proposed to make fixed capital investment of Rs. 3,08,000/-for the purpose of the 1979 Scheme of Sales Tax Incentives. The petitioner has annexed a certificate of entitlement issued by the Deputy Commissioner of Sales Tax at Annexure-C to the petition, which mentions that the certificate would be valid for a period from 15-3-1985 to 14-3-1994, i.e. for nine years, and that the petitioner would be entitled to total cumulative sales tax incentives by way of exemption subject to a ceiling of 100% of the fixed capital investment and the period of sales tax incentives admissible would be nine years or earlier if the ceiling is reached. Accordingly, the petitioner had been granted sales tax exemption against fixed capital investment from time to time.
5. The petitioner claimed that after the initial investment, he had to further make capital investments in the projects and his total investment came to Rs. 5,74,931/-, as per Annexure-E annexed to the petition. The petitioner, therefore, claimed that he was entitled to exemption up to Rs. 5,74,931/-. Therefore, the petitioner has taken exception to the impugned communication dated 25-11-1991 at Annexure-G, whereby he was informed that he had already availed exemption to the tune of Rs. 3,08,000/-, which was the ceiling limit in the entitlement certificate and, therefore, was not entitled to any further exemption.
6. Writ Petition No. 317 of 1993 does not give similar details about the exact capital investment, though it seems that the petitioner had claimed total fixed capital investment of Rs. 7,68,99,493/-and had claimed exemption of 90% of the fixed capital investment, i.e. Rs. 6,92,09,544/- , as per Annexure-I to the petition.
7. From the arguments advanced, the question that arises for decision in these petitions is whether an entrepreneur would have to restrict his claim for sales tax exemption to the initial capital investment mentioned in the eligibility certificate or certificate of entitlement issued at the time of commencement of project, or, whether such an entrepreneur would be entitled to add amounts spent in fixed capital investment even during the currency of the exemption certificate. With the help of the learned Advocates for the parties, we have gone through the original Scheme notified by Government Resolution dated 5-1-1980, as also the modified Scheme notified by Government Resolution dated 57-1982. Clause 2.5 in the 1980 Scheme reads as under:
FIXED ASSETS:
2.5 The term 'Fixed Assets. covers all the assets of the unit as erected at site and includes
a) Land;
b) Building-and built-up area used for the eligible unit including administrative building, residential quarters, industrial housing and all such facilities provided in the building as are required for the manufacturing processes.
c) Plant and machinery, tools and equipments including handling and haulage equipment, or tools as are necessarily required and exclusively used for sustaining the working of the unit;
d) The cost of development of the environment of the location of the unit, such as fencing, construction of roads and other infrastructural facilities which the eligible unit had to incur under project;
e) Installation charges and pre-operative expenses capitalised;
f) Technical know-how including the cost of drawings, know-how and the fees.
(Quoted from pages No. 19 and 20 of the paper book of Writ Petition No. 221 of 1992)
8. As regards gross capital fixed investment, the following part of Clause 2.7 incorporating conditions to be applied while computing eligibility are material. Condition III reads as material:
GROSS FIXED CAPITAL INVESTMENT:
2.7 i)
a)
b) ...
c) ...
d) ...
CONDITIONS:
I) ...
II) ...
III) Subject to the provisions of paras (I) and (II) above, the Gross Fixed Capital Investment at the end of each year will be computed as follows:
Gross Fixed Capital Investment at the beginning of the year, plus additions, if any, made to the Gross Fixed Capital Investment during the year, less the Original value to the unit of any Fixed Assets written off/disposed of/sold during the year.
(Quoted from page 21 of Writ Petition No. 221 of 1992)
9. Sales tax incentives are referred to in Clauses 5 and 6 of the Scheme. As far as the period of eligibility being nine years is concerned, there is no dispute. As regards the procedure of computation is concerned, the reference in both these clauses is to 'cumulative gross fixed capital investment with reduction of written off, etc.'. The concept of cumulative gross fixed capital investment obviously rules out the possibility of the gross fixed capital investment being restricted to amount mentioned in the eligibility certificate at the time of commencement of the activity, or availing the Scheme, obviously as ongoing addition up to prescribed time-limit of period of exemption is permitted.
10. The 1982 Scheme refers to sales tax exemptions in Clause 5. Clause 5.3 refers to the quantum of exemption and reads as under:
QUANTUM:
5.3. Subject to the other provisions of the Resolution in general and the provisions for Monitoring and Review in particular, the Sales Tax Incentive will normally be admissible for the periods indicated below and, the quantum of Sales Tax Incentive admissible will be subject to the following ceilings, namely:
Ceiling for the Sales Tax Incentive Under Part-I.
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Small Scale Units Medium/Large Scale Units
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Group Group Group 'D' Group 'B' Group Group 'D' pioneer
'B' 'C' 'C' unit
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Period for which 5 years 7 years 9 years 3 years 5 years 7 years 9 years
sales tax
incentives
admissible
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Total cumulative 100% of Fixed 75% of the 80% of the 85% of the 90% of the
sales tax Capital Fixed Fixed Fixed Fixed
incentive i.e. Investment Capital Capital Capital Capital
sales tax during the Investment Investment Investment Investment
liability deferred above period
/notional sale tax
liability as the
case may be.
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during the above period
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For Resource Based Units : As per Group 'B' area.
(Quoted from pages No. 42 and 43 of the paper book of Writ Petition No. 221 of 1992)
11. It may be seen that even this clause clearly specifies that the exemption is to be availed up to a fixed percentage of capital investment during the above period., i.e. during the period for which sales tax incentive is admissible. This rules out the interpretation that the sales tax exemption was to be restricted to the gross fixed capital investment referred to in the eligibility or entitlement certificate. In view of this, there can be no doubt that both the communications impugned in these two petitions cannot be sustained.
12. The learned Advocates for the petitioners drew our attention to the judgments of the Supreme Court in (i) M/s. Motilal Padampat Sugar Mills Co. Ltd. v. The State of Uttar Pradesh and Ors. reported , (ii) Mangalore Chemicals & Fertilisers Ltd. v. Deputy Commissioner of Commercial Taxes and Ors. , (iii) Amrit Banaspati Co. Ltd. and Anr. v. State of Punjab and Anr. , and (iv) State of Punjab v. Nestle India Ltd. and Anr. reported in 2004 SAR (Civil) 611, and the judgment of Full Bench of this Court in Tapti Oil Industries and Anr. etc. v. State of Maharashtra and Ors. .
13. We have carefully gone through these judgments, which lay down, first, that the Government would not be allowed to go back on a representation made by it in the matter of concessions in taxation and, secondly, that the conditions prescribed for eligibility for exemption could not be altered by subsequent notification, since eligibility once earned is not lost.
14. In view of this clear legal position, the two communications impugned in these petitions, viz. the show cause notice dated 25-11-1991 issued by respondent No. 2 -Assistant Commissioner of Sales (Adm.-IV), Nagpur Division, Amravati, to petitioner in Writ Petition No. 221 of 1992, and letter dated 18-1-1993 issued by respondent No. 2. SICOM to petitioner in Writ Petition No. 317 of 1993 cannot be sustained. They are accordingly quashed and set aside.
15. What this Court has decided is the principle underlying the entitlement, and not the assessment of amount of eligibility in terms of what the petitioners have claimed. It would be necessary for the petitioners in these two petitions to satisfy the authorities by producing relevant factual evidence to show as to what was their cumulative capital investment during the nine-year period entitling them to exemptions under the 1979/1982 Schemes, before actually availing of the benefit, and assessing authorities would be entitled to scrutinise correctness thereof unless eligibility certificate under the scheme is already issued by the competent authority.
16. Rule is made absolute in terms of paras No. 14 and 15. There shall be no order as to costs.
