Bombay High Court
Finolex Cables Limited & Another vs The State Of Maharasthra & Otehrs on 20 August, 2016
Bench: S.C. Dharmadhikari
Judgment-WP.1009.1998.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 1009 OF 1998
1. Finolex Cables Limited }
a company incorporated }
under the provisions of the }
Companies Act, 1956 and }
having its registered office }
at 26-27 Mumbai Pune road, }
Pimpri, Pune - 411 018 }
}
2. T. M. Arsiwalla }
Director - Finance of the }
above company, residing }
at B-8, Melody Complex, ig }
ICS Colony, Ganeshkhind, }
Pune 411-007 } Petitioners
versus
1. The State of Maharashtra }
}
2. The Commissioner of Sales }
Tax, Maharashtra State, }
Mumbai, having his office }
at Vikrikar Bhavan, 8 th floor, }
Mazgaon, Mumbai - 400 010 }
}
3. Additional Commissioner }
of Sales Tax, Pune Zone, }
Pune, having his office at }
Tilak Bhavan, 14-A, Navi }
Peth, Pune - 411 030 } Respondents
Mr. P. C. Joshi with Mr. Piyush Shah for
the petitioners.
Mr. V. A. Sonpal - Special Counsel for the
respondents.
CORAM :- S. C. DHARMADHIKARI &
G. S. KULKARNI, JJ.
Reserved on 12 th April, 2016
Pronounced on 20 th August, 2016
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
JUDGMENT :- (Per S. C. Dharmadhikari, J.)
1. By this writ petition under Article 226 of the Constitution
of India, the petitioners seek a declaration that section 41D of the
Bombay Sales Tax Act, 1959 amended by way of insertion by the
Maharashtra Act No. XVI of 1995 called the Maharashtra Tax
Laws (Levy and Amendment) Act, 1995 as also Rule 31AAA of
the Bombay Sales Tax Rules, 1959 as ultra vires the constitution
of India being beyond legislative competence of the Maharashtra
State legislature, void and of no legal effect.
2. The declaration is claimed, according to the petitioners,
because these provisions curtail/restrict/withdraw the sale tax
incentives by way of deferral availed by the petitioners.
3. In the alternative and in the event this court were to uphold
the constitutional validity of the above provisions, then, they
ought to be read down so as not to affect the sales tax incentives
by way of deferral as availed by the petitioners. They would pray
that this court should, therefore hold that the availment of the
petitioners is in accordance with Package Scheme of Incentives,
1983, the agreements entered into pursuant thereto, the
eligibility certificate and the certificate of entitlement issued
thereunder. This court, therefore, should call for the records and
proceedings of the petitioners' case and to quash and set aside the
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notice Annexure 'S' to the petition. There are other prayers and
writs which claim a restraint and prohibition against the
respondents so as to prevent them from enforcing the notice.
4. Before we proceed further, we would prefer to reproduce a
copy of this notice. This notice Annexure 'S' at page 221 of the
paper book is in the following terms:-
"FORM 40
"Tilak Bhavan" 14-A,
ig Navi Peth, Pune - 411 030
Notice to a person when it is proposed to pass an order
which affects him adversely under section 55 or 57 of the
Bombay Sales Tax Act, 1959.
(See rule 62 of the Bombay Sales Tax Rules, 1959)
To
M/s Finolex Cables Ltd.
Urse Division, Urse, Tal, Maval, Dist. Pune
Registration No. N 25 H 336 Licence No. ----------
Permit No. ---------- Recognition No. ----------
Authorisation No. ----------
Whereas it is proposed to pass an order to the effect
mentioned below, you are hereby informed that if you wish
to prefer any objection against such order you should
attend at the office of the undersigned at above address at
11.00 A. M. on the 27-10-1997.
Gist of the order proposed to be passed:-
Separately attached for the period 1.4.91 to 31.3.92.
Seal
Sd/-
Place: Pune Signature :__________
RHTADVI
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Dated: 3/10/1997 Designation: Additional
Commissioner of Sales Tax
Pune Zone, Pune"
5. The background for the same is to be found in the case of
the petitioners.
6. The case projected is that petitioner no. 1 is a company
incorporated under the provisions of the Indian Companies Act,
1956 and it carried out at the relevant time the business of
manufacture and sale of jelly filled telephone cables, submersible
insulated winding wires etc. The raw materials, inter alia,
consumed for the manufacture are copper wire rod, HDPE, LDPE,
jelly compound, polyester tape, polyol tape, steel tape etc. The
other materials are set out in para 12(i) of the writ petition. It is
the case of the petitioners that they are registered under the
Bombay Sales Tax Act, 1959 (for short "the BST Act") and the
Central Sales Tax Act, 1956 (for short "the CST Act"). They have
been regularly assessed to tax.
7. The petitioners made Application No. 2166(86)-TL dated
31st December, 1986 to the Government of India, Ministry of
Industry, Department of Industrial Development, for grant of
Industrial Licence under the Industries (Development and
Regulation) Act, 1951 for the expansion in manufacture of jelly
filled telephone cables.
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Judgment-WP.1009.1998.doc
8. The government of India, Ministry of Industry, Department
of Industrial Development, Secretariat for Industrial Approval, by
letter No. CIL 157(88) dated 21 st July, 1988 communicated
approval of expansion from 5,00,000 CKM of jelly filled telephone
cables to 10,00,000 CKM at the petitioners' unit at Village Urse,
Taluka Maval, District Pune. The Government of India, Ministry
of Industry, Department of Industries Development, Secretariat
for Industrial Approvals, by their letter dated 7 th February, 1991
re-endorsed theig capacity of the petitioners' industrial
undertaking at village Urse, Taluka Maval, District Pune, for the
manufacture of jelly filled telephone cables from 19(Tan) lakh
CKM to 12(Twelve) lakh CKM.
9. Respondent no. 1 in continuation of past policies,
formulated a scheme popularly known as the Package Scheme of
Incentives, 1983. The said scheme was introduced under its
Resolution No. IDL-1082/(4077) IND-8 dated 4th May, 1983. The
purpose of the scheme was to achieve dispersal of industries
outside the Bombay-Thane-Pune belt. Applications were invited
from eligible units.
10. The petitioners made an application to the State Industrial
and Investment Corporation of Maharashtra in the prescribed
form for eligibility under Part I of the Package Scheme of
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Incentives, 1983 for a proposed new unit for manufacturing five
lakh CKM jelly filled telephone cables at village Urse, Taluka
Maval, District Pune. The said application was made by the
petitioners after complying with the requirement of completing
all initial effective steps.
11. The petitioners, thereafter, entered into an agreement
dated 18th August, 1988 with the Governor of Maharashtra
(Government) in order to enable the petitioners to avail sales tax
incentives by way of deferral under the Package Scheme of
Incentives, 1983 in respect of their new unit at village Urse,
Taluka Maval, District Pune. The petitioners also entered into an
agreement dated 18th August, 1988 with the Governor of
Maharashtra (Government) towards special capital incentives
available to the petitioners under the Packaged Scheme of
Incentives, 1983.
12. The State Industrial and Investment Corporation of
Maharashtra Limited, after processing the petitioners' above
application, issued Eligibility Certificate No. FINC(I)/ 1983/
DEFERRAL/EC-2101 dated 6th June, 1990. The eligible unit was
located at Village Urse, Taluka Maval, District Pune. The goods to
be manufactured were jelly filled telephone cables with a capacity
of 5 lakh CKM per annum, and submersible insulated winding
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wires with a capacity of 8000 K. M. per annum. The raw
materials required as inputs were shown as copper wire rod,
HDPE, LDFE, jelly compound, polyster tape, polyol tape, steel
tape. The capital cost of the project was shown at Rs.1672.90
lakhs. The date of commencement of production was endorsed as
5th May, 1990. The maximum entitlement of sales tax incentives
by way of deferral was fixed at Rs. 1338.32 lakhs. The eligibility
certificate was valid for five years from 1 st April, 1990 to 30th
April, 1995.
13. In terms of the Package Scheme of Incentives, 1983 and the
eligibility certificate issued thereunder, the Deputy Commissioner
of Sales Tax (Headquarters) and Director of Training,
Maharashtra State, Bombay issued Certificate of Entitlement
No.N-25/H/R-31B/217 dated 12th June, 1990 for availing sales
tax incentives under Part I of the Package Scheme of Incentives,
1983 of Government of Maharashtra by way of deferment of sales
tax liability. The terms and conditions set out in the certificate of
entitlement with regard to the incentives are identical to those
set out in the eligibility certificate.
14. The petitioners are a large/medium scale industrial unit
qualified under the caption new unit under the Package Scheme of
Incentives, 1983. The petitioners' unit fell in Group 'C'. The
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incentives available under the Package Scheme of Incentives,
1983 were that the petitioners were entitled to sales tax
incentives by way of deferral of Rs.1338.32 lakhs. The period of
eligibility was five years from 1st April, 1990 to 30th April, 1995.
The petitioners have since been manufacturing and selling their
goods and have availed the sales tax incentives available under
the Packaged Scheme of Incentives, 1983, the agreements
entered into pursuant thereto, eligibility certificate and
certificate of entitlement issued thereunder.
15. The petitioners have filed their returns and for the period
1st April, 1991 to 31st March, 1992, which forms the subject
matter of the instant petition, have already been assessed by
order of assessment dated 31st March, 1995 passed under section
33(3) of the Act. The claim of the petitioners towards sales tax
incentives in view of the Package Scheme of Incentives, 1983,
eligibility certificate and certificate of entitlement was examined
and allowed by the assessing officer. Likewise, assessment under
section 9(2) of the CST Act was finalised.
16. The petitioners had carried the matter in appeal before the
Deputy Commissioner of Sales Tax (Appeal) on certain issues.
The Deputy Commissioner of Sales Tax (Appeals) by his order
dated 18th March, 1996 partly allowed the appeal and did not
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reverse the findings of the assessing officer in respect of the sales
tax incentives claimed and allowed. Likewise, the petitioners'
appeal against the order of assessment passed under the CST Act
also came to be disposed of.
17. Respondent no. 1 retrospectively amended section 41D by
way of insertion to the BST Act by Maharashtra Act XVI of 1995
called the Maharashtra Tax Laws (Levy and Amendment) Act,
1995.
18.
Respondent no. 3 has issued notice dated 3 rd October, 1997
in Form 40 under section 57 of the BST Act read with Rule 62 of
the Bombay Sales Tax Rules together with gist of order proposing
therein to revise the order of assessment and the order passed in
appeal by restricting the sales tax incentives, levying interest
under section 36(3) (b) and penalty under section 36(2) (c) read
with Explanation II.
19. The petitioners say and submit that section 41D of the BST
Act amended by way of insertion by Maharashtra Act XVI of
1995 called the Maharashtra Tax Laws (Levy and Amendment)
Act, 1995 and Rule 31AAA of the Bombay Sales Tax Rules, 1959
amended by way of insertion by Notification No. STR-1195/CR-
80/Taxation-I dated 31st May, 1996 are ultra vires the
Constitution of India, beyond the legislative competence of
respondent no. 1, violative of Articles 14, 19(1)(g), 265 and 300A
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Judgment-WP.1009.1998.doc
of the Constitution of India, void, invalid and inoperative and/or
otherwise not attracted to the case of the petitioners and in
violation of the doctrine of promissory estoppel. The petitioners
further say and submit that the notice dated 3 rd October, 1997 in
Form 40 issued by respondent no. 3 under section 57 of the BST
Act read with Rule 62 of the Bombay Sales Tax Rules, 1959
together with the gist or order is without jurisdiction and/or in
excess of jurisdiction and/or improper exercise of jurisdiction and
is illegal, bad in law, suffers from a mistake apparent on the face
of the record and is violative of the doctrine of promissory
estoppel.
20. An affidavit in reply has been filed for opposing admission
and granting interim reliefs in this petition. In this affidavit, it is
stated that the petitioners have enclosed agreement before issue
of EC 1983 Scheme, which is shown as Exhibit 'K' to the writ
petition at page 143. Relying upon page 4 para 1 at page 146 of
the petition that the petitioners had agreed for maximum
production in their unit for manufacture of jelly filled telephone
cables not exceeding 5 lakh CKMs per annum and the petitioner
being aware the stipulations that the incentives under the scheme
are relating only and exclusive to the eligible unit and only for the
products and for maximum production at the eligible unit as
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Judgment-WP.1009.1998.doc
considered admissible under the eligible certificate to be issued to
the petitioners, it is not open to the petitioners to argue
otherwise. The eligibility certificate is then referred in para 4 and
it is stated that the petitioners were aware that they are eligible
for sales tax incentives to the extent of 5 lakhs CKMs per annum
only. It is stated that the Additional Commissioner of Sales Tax,
Pune Zone, on scrutiny of the assessment and appeal record of the
petitioners for the period from 1 st April, 1991 to 31st March,
1992, observed that the petitioners' total sale of jelly filled
telephone cable products for value of Rs.75, 75, 47, 016/- were
allowed for deferral under 31-B, whereas, the admissible sales as
per the entitlement certificate are at Rs.45,45,00,000/- in respect
of 5 lakhs K.M. Thus, the sales of jelly filled telephone cable
produced and sold in excess of 5 lakhs K.M. has become taxable
since it is produced in excess of production capacity ceiling. It
was, therefore, proposed to levy tax on the excess production by
taking recourse to section 57 of the BST Act. That is by revising
assessment order and appeal order and hence, notice in Form 40
was issued to the petitioners and the petitioners were requested
to show cause as to why the orders passed should not be revised
on the basis of the gist enclosed along with the notice in Form 40.
Instead of giving a reply to the notice, the writ petition was filed.
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21. In paras 6 and 7 of this affidavit, this is what is stated:-
"6. I say and submit that while considering the
representations made by the manufacturers in backward
area and considering their grievances put forth by them/
eligible units in backward areas, the Government of
Maharashtra has also taken into account the misuse of
benefits given to eligible units, malpractices noticed by
the Sales Tax Department, undue advantage taken of
certain loop-holes in the package scheme of incentives
and modus operandi used by certain eligible units brought
to the notice of the Government by the Sales Tax
Department, the Government has introduced and
amended Section 41 C and 41 D of the B. S. T. Act, 1959
w.e.f. 1.10.1995 to check unhealthy competition with
existing units in developed areas and also to monitor the
cumulative benefits of incentives smoothly, legally and
correctly. The amendments were not made with an
intention to put forth some restrictions on a legible units
in backward areas or to curtail the benefits by way of
Sales Tax incentives enjoyed by such units in backward
areas. The Government can modify the package scheme
of incentive in the public interest and also withdraw some
concessions given earlier. In this respect I rely on the
Supreme Court decision in the case of M/s. Arvind
Industries and others Vs. State of Gujrat and others (Civil
Appeal No. 951 of 1976 and M/s. Vijay Oil Mills Co. Vs.
Commissioner of Sales Tax and others (Civil Appeal No.
1011 of 1977) decided on 23.8.1995 and reported in 99
STC 333. It is held by the Supreme Court that the
Government is entitled to modify or withdraw benefits.
7. I say and submit that the Rules under Section 41 D
of the B. S. T. Act, 1959 have since been framed and
published on 31st May, 1996. During the time, the 1979
Scheme 1983 Scheme and 1988 Scheme were inforce,
certain restrictions were specified by the Government of
India under the Industrial Development and Regulation
Act. These restrictions inter alia provided that no unit
will produce more than the capacity prescribed for such
unit under the industrial Licence issued to it. In other
words production in excess of licenced capacity was
prohibited. This was a law inforce as passed by the
parliament. It will not be proper for the State
Government to grant incentive to production in excess of
the licenced capacity as such grant would be contrary to
the spirit and letter of the Industrial Development and
Regulation Act. It was necessary that such incentive
should be related to the licenced capacity of the unit. For
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such reason the section has been enacted and Rules have
been framed. Thus I say and submit that the provisions of
section 41 D are valid piece of Legislature introduced in
the interest of public."
22. Thus, it is submitted that there are remedies available for
seeking redressal and reliefs. Therefore, the writ petition should
not be entertained.
23. The petitioners filed a rejoinder affidavit and controverted
the statements in the affidavit in reply. The petitioners in para 3
of the rejoinder affidavit referred to the Package Scheme of
Incentives, 1983 and the agreement entered in pursuance
thereto, the eligibility certificate and the certificate of entitlement
issued thereunder. It is stated that the petitioners have correctly
availed sales tax incentives by way of deferral during the
subsistence of the eligibility period and up to the exhaustion of
the total sales tax incentives admissible under the scheme. Para
2 of the eligibility certificate has been reproduced and it is
submitted that only two conditions are prescribed. These are
exhaustion of the total sales tax incentives and the expiry of the
period of eligibility whichever event occurs earlier. The
respondents cannot take into account factors or reasons which
are extraneous and non germane to the package Scheme of
Incentives, 1983. It is stated that the petitioners are entitled to
avail benefit of sales tax incentives by way of deferral up to the
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total prescribed sales tax incentives and within the period of
validity. The petitioners have thus reiterated their stand in the
writ petition. At pages 242 to 244 of this petition, this is what is
stated by the petitioners in their rejoinder affidavit:-
" I say that the Respondents are estopped from
curtailing/restricting/withdrawing the incentives availed
by the petitioners. I say that Respondents reliance on the
decision of the Honourable Supreme Court in the case of
Arvind Industries and Others 99 STC 33 is misplaced. In
that case the Honourable Supreme Court had observed
that the appellant had failed to make out any factual
basis for a case of promissory estoppel. I say that in the
instant petition, the Government of Maharashtra had
announced a package Scheme of Incentives, 1983,
inviting applications from eligible units. Terms and
conditions were set out in the Scheme. I say that the
Petitioners after completing the initial effective steps had
filed an application for availing the incentives. The
Petitioners had also entered into agreements. Letters of
intent was issued by the Respondents. Physical
inspection of the eligible Unit was also carried out.
Eligibility Certificate and Certificate of Entitlement were
issued by the Respondents. I say that the doctrine of
promissory estoppel is clearly applicable in the instant
case and the Respondents cannot take actions at variance
with the prescribed conditions, which are to the
detriment of the petitioners. I say that the Petitioners
have acted on the representations made by the
respondents in the Package Scheme of Incentives 1983,
the Agreement entered in pursuance thereto, the
eligibility Certificate and Certificate of Entitlement issued
thereunder and altered their position and it is therefore
not permissible for the Respondents to resile from their
promises or representations to the prejudice, of the
Petitioners.
6. I say that the Petitioners interalia carry on the
business of manufacture and sale of Jelly Filled
Telephone Cables and Insulated Electrical Wires. I say
that the Government of India, Ministry of Industry,
Department of Industrial Development, Secretariat for
Industrial Approvals had by their letter dated 7th
February, 1991 communicated approval of expansion
from 5,00,000 CKM of Jelly Filled Telephone Cables to
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7,00,000 CKM of Jelly Filled Telephone Cables at village
Urse. I say that this letter is annexed as Exhibit H to the
petition at Page No. 72. I say that the total Production
capacity was enhanced to 12,00,000 CKM of Jelly Filled
Telephone Cables, that is 5,00,000 CKM of Jelly Filled
Telephone Cables to be manufactured at the petitioners
unit at Pimpri, and 7,00,000 CKM of Jelly Filled
telephone Cables to be manufactured at the eligible unit
at village Urse. Earlier the Government of India, Ministry
of Industry, Department of Industrial Development,
Secretariat for Industrial Approvals had by letter dated
21st July, 1988, at Exhibit G at page 67 of the petition,
communicated approval for expansion in production of
Jelly Filled Telephone Cables from 5,00,000 CKM to
10,00,000 CKM, out of which 5,00,000 CKM of Jelly
Filled Telephone Cables was to be manufactured at the
petitioners unit at Pimpri, and 5,00,000 CKM of Jelly
Filled Telephone Cables were to be manufactured at the
eligible unit at village Urse. I say that in 1991, the
Government of India had delicenced the petitioners
industry. I say that the production capacity in the
petitioners eligible unit at village Urse has increased from
time to time due to unbuilt capacity. I say that the
petitioners have availed the benefit of Sales Tax
Incentives by way of Deferral only in respect of the
production at the Eligible Unit at village Urse. I therefore
say that advertence to this aspect of the matter by the
Respondents to the effect that licenced capacity has
relevance in determining disbursal of incentives and the
licenced capacity of the Petitioners is less is totally
misplaced and without appreciation of facts set out in the
petition."
24. The petitioners have pointed out as to how they have
availed the benefits in terms of the scheme and not in
contravention thereof.
25. Thereafter, a detailed affidavit in reply has been filed by the
respondents, after the writ petition was admitted. In this detailed
affidavit, apart from denials, in para 10, this is what is stated:-
"10. With reference to grounds of the Petition in Para A, I
say that the amendments in question do not in any
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manner levy fresh taxes for the first time as falsely
alleged. If the Package Scheme of Incentives is read in its
proper perspective, it will be explicitly clear that the
scheme of calculation of cumulative quantum of benefits
was already in the Scheme and by the amendment of the
Act, it has been brought in the statute books for the
purpose of clarification and thereby avoiding
misinterpretation by the dealers to claim more benefits
than what they are entitled as per the Scheme. The
amendments merely have provided the procedure and the
substance thereof is in consonance and conformity with
the Package Schemes announced from time to time.
Without admitting that the amendment in any manner
sought to levy taxes retrospectively, it is within the
competence of the legislature to enforce fiscal statutes
retrospectively when clear intention thereof is found in
the enactment, especially when it is clarificatory in
nature, as also the principles of promissory estoppel does
not apply to Statutory enactment when the same is in
larger interest of the society. The amendments have been
brought to avoid large scale, excessive or unlimited claims
of incentives irrespective of the sanction as per eligibility
and entitlement certificates and contrary to the principles
of the Schemes. The Petitioner is seeking to interpret the
scheme in the sense that the moment the eligibility
certificate and entitlement certificate are obtained, it gets
unlimited and unfettered right to claim entire sales tax
exemption or deferment for any quantity of the goods
manufactured and sold in the unit in utter disregard to the
Eligibility and entitlement Certificates. The proposition of
law canvassed by the Petitioner is misconceived and not
in conformity with the settled position in law."
26. Thereafter, it is denied that the respondents have upset the
scheme or the promises and assurances given in the past. They
submit that the amendments are in conformation of the scheme.
In para 12, the respondents have explained their stand thus:-
"12. With reference to ground (d) of the Petition, I say
that Petitioners were entitled to the availment of the
benefits only to the extent of quantifies, the items
specified, for the period, at the unit specified and to the
extent as provided in the Certificates and it is not correct
to isolate the quantum aspect as referred to in the
eligibility certificate to be ignored as against the other
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specifications. I say that to interpret the scheme in the
manner in which the Petitioner seeks to interpret it will
lead to logical absurdity and large scale revenue loss not
envisaged by the Respondent and throw the
implementation of the scheme out of gear. The Petitioner
and the Respondents clearly spelled out the extent of the
benefits available in the eligibility and entitlement
Certificates. If the distorted interpretation of the
Petitioner is accepted, there will be unprecedented loss of
revenue not envisaged and will not the purpose of the
Scheme in as much as instead of decentralization of
industries, it will paradoxically concentrate the industries
in backward areas and perhaps even unjustifiable shift
from developed to undeveloped areas which is not the
intention of the Respondents. The amendments, in fact,
are as much clarificatory as by way of some extension of
benefits to the eligible units in as much as the extra
productions above the sanctioned limit is made unlimited
in case of SSI units and 25% in the case of the other MDI
units over and above the capacity enumerated in the
Eligibility Certificate."
27. It is stated that even without the amendments in the
statute, the respondents are entitled to recover the excess sum as
per the provisions of the scheme. However, the respondents have
permitted, by the impugned amendment, higher level of
production to the extent of 125% instead of restricting to the limit
specified in the eligibility certificate. It is, therefore, unwarranted
on the part of the petitioners to challenge the amendment, which,
in fact, confer additional benefits on them rather than
curtailment thereof. It is stated that the continuation or
curtailment of the incentives is sole discretion of the respondents
considering the facts and circumstances, keeping in view its
budgetary constraints and need for promotion and
decentralization of industries. The respondents submit that the
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quantity up to which the petitioners are eligible to claim benefits
in the eligibility certificate is explicit and patent. It is known to
the petitioners. It is not correct to say that the eligibility
certificate is silent about the quantity up to which the incentives
will be available. The Petitioners claimed incentives in excess of
the permissible limit mentioned in the eligibility certificate. As
provided in the scheme, it does not confer any right on the
petitioners to claim incentives unless they obtain eligibility
certificate for such expansion or installation of a factory in such
areas. For the additional capacity, the petitioners have not
obtained the eligibility certificate. Therefore, they are not
entitled to extension of the benefits as claimed. Thus, it is stated
that it is not just a quantum of the benefit but also with reference
to the quantum of production which is to be found in the scheme.
Once that is part and parcel of the scheme, then, there is no
substance in the constitutional challenge. In para 22 of the
affidavit in reply, the arguments on the principle of promissory
estoppel are dealt with and it is submitted that the said principle
cannot be applied for the reasons and grounds set out in the said
paragraph. On these statements in the rejoinder affidavit, it is
submitted that the petition be dismissed.
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28. On the above material, we have to consider the submissions
of the learned counsel appearing for the parties.
29. Mr. P. C. Joshi learned counsel appearing for the petitioners
contended that the notice in Form 40 initiating the revision
proceedings relied solely on the alleged conditions in entitlement
certificate. The State in the first affidavit in reply relied on
column 5 of the eligibility certificate which described the unit and
was not a condition for grant of incentive while the second
affidavit in reply refers to production capacity endorsed in the
eligibility certificate and the later inserted section 41D and Rule
31AAA framed thereunder. Both are not expressly retrospective,
however, the respondents seek to apply the later inserted
legislation to the closed matters decided in accordance with the
law then in force. Such an action cannot be sustained nor
supported by any provisions of law nor such orders can be said to
be erroneous or improper for justifying any revisional action
under challenge before this Court.
30. By the action of revision, the later inserted section 41D is
sought to be applied in a discriminatory and arbitrary manner. If
the petitioners were not holding any entitlement certificate, there
would have been no restriction on the quantity of product to be
manufactured while the revision action on the basis of section
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41D an artificial restriction not intended nor contemplated under
the scheme is sought to be applied in a discriminatory manner.
31. Mr. Joshi further submitted that the petitioners were
entitled to defer the tax payable in the periodical returns as well
as the dues on assessment as per Rule 3B/C against the validity
period of the entitlement and eligibility certificate from 1 st May,
1990 to 30th April, 1995. The petitioners exhausted the financial
ceiling of Rs.1338.32 crores on 31 st January, 1994. The
assessing authority, while passing the order of assessment for the
period 1991-92 and the appellate authority followed Rule 31B/C
that prevailed during the relevant period.
32. Mr. Joshi further submitted that Section 41D was inserted
on 1st October, 1995 while the order of assessment was passed on
31st March, 1995. Therefore, the said section cannot have any
application especially when the required rule was not even
framed till 31st May, 1996 by insertion of Rule 31AAA.
33. Mr. Joshi further submitted that while the proposed
revision action referred to the entitlement certificate as
mentioned in notice in Form 40 dated 3rd October, 1997, the
respondent finding that revisional action cannot be defended, a
new case is sought to be made out by referring to column 5 of the
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
eligibility certificate. Such an action cannot be permissible
especially when the basic jurisdiction of initiation of revisional
proceedings is under challenge.
34. The reliance of the respondents on column 5 of the
eligibility certificate is also erroneous and contrary to the law laid
down by this court in the case of State of Maharashtra vs.
Maharashtra Metal Powder Ltd.1 decided on 24th November,
2015. The aforesaid appeal arose out of the single judge judgment
in the case of Maharashtra Metal Powder Ltd. vs. the State of
Maharashtra2 decided on 15th October, 2009.
35. Mr. Joshi further submitted that Rule 31AAA insofar as it
adversely affected the right of deferral under the provisions of
Package Scheme of Incentives, 1983, is invalid and contrary to
the scheme as well as the law settled by this court in the case of
Prasad Power Control3 followed in the case of Shakti Arora
Expert Ltd.4.
36. Mr. Joshi further submitted that Rule 31B/C provided for
repayment of deferred amount after a period of 12 years in six
annual installments. Section 38B was later on amended
providing for premature repayment of deferred amount on the
1 Letters Patent Appeal No. 305 of 2011
2 WP/896/1993
3 41 VST 436
4 2012 (56 VST 62)
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
basis of net present value in accordance with Rule 31D. The
petitioners made such repayments much in advance and was
certified by an order dated 29th September, 2003. Therefore, the
impugned notice in Form 40 is infructuous and is required to be
quashed.
37. Mr. Joshi further submitted that the petitioners having
invested huge amount for establishing a unit in a backward area
of the State of Maharashtra, solely with the understanding that it
will have the benefit of deferring the amount of sales tax,
purchase tax and central sales tax for a period of 12 years and
would be allowed to collect the same and utilise it for that period
as a running capital. The erroneous interpretation by the
authorities under the Act contrary to Package Scheme of
Incentives have violated the principles of promissory estoppel.
The latest judgment of the Hon'ble Supreme Court of India on the
point is in the case of Devi Multiplex and Anr. vs. State of Gujarat
and Ors.5.
38. Mr. Sonpal appearing for the respondents submits that the
writ petition has no merit and must be dismissed. He would
submit that the petitioners are not entitled to any relief and for
the reasons more particularly and elaborately set out in the
5 (2015) 9 SCC 132
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
affidavit filed in reply. There is absolutely no foundation laid for
the constitutional challenge. The petitioners do not have a vested
right in claiming any relief much less in terms of the prayers of
this writ petition. Mr. Sonpal summarised his contentions by
urging that the impugned notice is not without jurisdiction as
falsely contended. Mr. Sonpal urges that:-
(a) Section 41D is not scheme specific and provides for
restriction in respect of all schemes prior to and after the
amendment.
(b) The notice under section 57 does not refer to section
41D or Rule 13AAA.
(c) The agreements, the eligibility certificate and
entitlement read together clearly demonstrate that there is
ceiling to the maximum quantity that can be covered for
availment of incentives irrespective of section 41D or Rule
13AAA.
(d) The challenge to constitutional validity or legislative
competence does not survive in view of the field of
legislation under Entry 54 of List II of Seventh Schedule is
not transgressed.
(e) The notice under section 57 is within thepowers
expressly provided by the BST Act and therefore, it cannot
be claimed that the notice is without jurisdiction.
(f) The amendment is in no way imposing fresh levy in
the present context inasmuch as the scheme, agreement,
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
eligibility certificate and entitlement certificate clearly
provided for ceiling of maximum production.
(g) The provisions in the present context are statutory
incorporation of the conditions of the scheme, agreement,
eligibility certificate and entitlement certificate.
(i) The insertion of Rule 31AAA is for benefit of the
dealers inasmuch as it has given weighted ceiling from the
basic available to the dealers. The Rule provides for no
ceiling for SSI Units and weighted additional allowance of
110 to 125 of maximum production capacities to be ceiling
instead of the ceiling fixed in the scheme, agreement,
eligibility certificate and entitlement certificate.
(j) Presuming while not admitting that there is in any
manner fresh levy of taxes or additional levy of taxes
retrospectively, firstly there is no bar to enact a legislation
with retrospective effect including levy of the taxes from
retrospective effect. [J. K. Spinning and Weaving Mills Ltd.
vs. Union of India 1987(32) ELT 234 (SC)]
(k) The scheme, agreement, eligibility certificate and
entitlement certificate clearly and in no ambiguous terms,
unequivocally and explicitly provide that the availment of
deferral shall be subject to the quantitative limits fixed in
the eligibility and entitlement certificates. Thus, there is no
curtailment contrary to the scheme. The scheme,
agreement, eligibility certificate and entitlement certificate
nowhere provide that the incentives can be claimed without
any ceiling. Therefore, there is no question of once
promising to grant and then subsequently withdrawing any
incentive as alleged.
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
(l) The petitioners have fairly admitted in para 13(g)
that they were entitled to avail sales tax incentives by way
of deferral in respect of the quantum specified in those
certificates. Thus, the amendment in no way affects the
petitioners whereby the availment is reduced below the
licenced capacity or the capacity mentioned in the
application, agreement, eligibility certificate or entitlement
certificate.
(m) The petitioners are entitled to 25% more production
over the licenced capacity or approved production as
mentioned ig in application, agreement, eligibility and
entitlement certificate and amendment cannot be said to
prejudice but benefit the petitioners.
(n) There cannot be estoppel against the statute.
(o) The power to grant exemption incorporates in itself
the power to withdraw in public interest.
(p) The public interest is paramount.
(q) The incentives available are unit based and not
company based incentives that is to say incentives are in
respect of the eligible unit of the petitioners as approved
and not for whole turnover of the petitioners from every
unit other than at the village Urse.
(r) The permission of Central Government to increase
production from 5 lacs to 10 lacs was not a project specific
at Urse village but petitioners specific which expanded
present capacity from 5 lacs at Pimpri in Haveli taluka to
additional 5 lacs at Urse village at Maval taluke totaling to
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
10 lacs. Another expansion of two lacs is also petitioners
specific and not unit specific.
(s) It is not the case of the petitioners that excess
production over 5 lacs CKM is related only to the Urse unit.
(t) The principle of promissory estoppel is not applicable
in the present facts and circumstances as supported by the
judicial precedents.
39. With the assistance of both counsel appearing for both sides,
we have perused the writ petition and the annexures thereto. We
have also perused the affidavits placed on record. We have also
perused the relevant statutory provisions and the decisions.
40. The facts have already been recorded in detatils.
41. In this case, we are concerned with the Package Scheme of
Incentives, 1983. It is common ground that in order to achieve
dispersal of industries outside the Bombay-Thane-Pune belt and
to attract them to the underdeveloped and developing areas of the
State, the Government of Maharashtra has been implementing a
package scheme of incentives to new units/expansion setup in the
developing regions of the State since 1964 under a scheme
popularly known as Package Scheme of Incentives.
42. This scheme was continued up to 31st March, 1983 with
amendments from time to time. In the light of experience gained
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
during the period, a modified 1983 package Scheme of Incentives
has been introduced from 1st April, 1983, rationalising the scope,
various scales and mode of release of incentives particularly with
a view to ensure that incentives are made available to the
intending units promptly. It has been clarified that the scheme
will remain in operation for a period of five years from 1 st April,
1983 to 31st March, 1988. Consistent with the objectives of the
scheme, however, the Government may, at any time, make any
amendments to the scheme.
43. Thereafter, the salient features of the scheme are set out.
These features are under several heads, namely, classification of
areas, coverage, eligibility, expansion/diversification, export-
oriented unit, resource-based unit, edible oil industry, incentives.
We are concerned here with some features and would refer to
those in details. As far as classification of areas is concerned, the
areas in the State have been classified into four groups as detailed
in the annexure to the scheme. Bombay Metropolitan Area and
Pune Metropolitan Area being considered as developed areas, are
covered under Group 'A', where no incentives are available. Rest
of the State is divided in three groups, namely, Group 'B', Group 'C'
and Group 'D' depending on the industrial backwardness of the
area concerned the incentives are offered in these areas on a
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
graded scale. The minimum amount of incentives is available in
Group 'B' and maximum amount is available in areas covered
under Group 'D'.
44. As far as expansion/diversification is concerned, an
existing unit in any of the areas under Group 'B', Group 'C' and
Group 'D' desirous of expansion/diversification in the same taluka
where the existing unit is located, will also be considered eligible
for incentives under the 1983 Scheme if it satisfies the conditions
set out at internal page 4 running page 78 of the paper book. The
units which may have filed on or before 31 st March, 1983
applications for eligibility under the 1979 Scheme are advised to
approach the concerned implementing agencies regarding their
eligibility. Such units may not be considered eligible under the
1983 scheme. However, decision regarding eligibility in such
cases will depend on facts of each case to be decided by the
implementing agencies. There are two types of incentives - (a)
Part - I which includes special capital incentives and (b) Part - II.
Both parts of the incentives are mutually exclusive and no unit
will be eligible to get both the incentives simultaneously. The
option once exercised hereunder shall be final and binding on the
unit. These incentives and particularly with regard to sales tax
read as under:-
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Judgment-WP.1009.1998.doc
"INCENTIVES UNDER PART I
For New Units (including a Pioneer Unit which is
a New Unit)
A new eligible unit under Part I will be entitled to:
(i) Sales Tax Incentive either by way of exemption or
by way of deferral; and
(ii) Special Capital Incentive.
For Expansion/Diversification (including
'Expansion/Diversification qualifying as a
Pioneer Unit' with Fixed Capital Investment
exceeding Rs.25 crores)
In the case of Expansion/Diversification the eligible unit
will be entitled to;
Sales tax incentive only by way of deferral;
No Special Capital Incentive will be admissible for
Expansion/Diversification.
Sales Tax Incentive by way of Exemption:
An eligible unit will be exempted from payment of -
(a) Sales tax under the Bombay Sales Tax Act, 1959, on
purchases of raw materials and sales of finished products
of the eligible unit; and
(b) Central Sales Tax payable under the Central Sales
Tax Act, 1956, on the sales of finished products of the
eligible unit effected in the course of inter-State trade or
commerce.
SALES TAX DEFERRAL
An eligible unit will be entitled to defer the payment
of following taxes:
(a) Purchase tax payable under the Bombay Sales Tax
Act, 1959, on the purchases of raw materials;
(b) Sales tax payable under the Bombay Sales Tax Act,
1959, on the sales of finished products of the eligible
unit; and
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
(c) Central sales tax payable under the Central Sales
Tax Act, 1956, on the sales of finished products of the
eligible unit effected in the course of inter-State trade or
commerce.
An amount of sales tax liability so deferred shall be paid
by the eligible unit after 12 years in six equal annual
instalments.
The scales of incentives under Part I either by way
of Exemption/Deferral will be as follows:
Eligible Units
Period Ceilings
in Area
For Medium/Large Scale Units
Group 'B' and 3 years or earlier 75 per cent of
Resource-based if the ceiling is fixed capital
units reached investment
Group 'C' ig 5 years or earlier 80 per cent of
if the ceiling is fixed capital
reached investment
Group 'D' 7 years or earlier 85 per cent of
if the ceiling is fixed capital
reached investment
Pioneer units 9 years or earlier 90 per cent of
if the ceiling is fixed capital
reached investment
For Small Scale Units
As per the scales 100 per cent of
in B/C/D areas fixed capital
respectively investment
depending on
location of the
unit
"
45. These features, as elaborately pointed out, would indicate as
to how the policy was devised so as to encourage dispersal of the
industries. That was also evolved so as to de-congest certain
areas. Then what we have is the form of application for eligibility
styled as Form No. 1. The petitioners filled in this application in
the prescribed form for eligibility under Part - I of the 1983
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
Scheme of Incentives. That was in connection with their
proposed new unit for manufacturing 5 lacs CKM jelly filled
telephone cables at Village Urse, Taluka Maval, District Pune. The
petitioners pointed out in that application that they are public
limited company. It is a light engineering industry and project,
for which, registration is obtained for manufacture of jelly filled
telephone cables. The petitioners also pointed out that they are
informally in possession of land. Agreement for sale has already
been signed, sale deed and conveyance will be effected on 29 th
February, 1998. The permission for non agricultural use has
been granted by the Government. They pointed out that their
registration authority is the Ministry of Industry, Department of
Industrial Development and they have obtained registration on
26th May, 1987. Their annual capacity is 5 lacs CKM for this
proposed unit. The location of the unit, the fixed assets, which
are being acquired and other details including registration
obtained under the BST Act and the CST Act have been set out.
They have stated that they would abide by the terms and
conditions of the letter of intent/eligibility certificate to be issued
in pursuance of this application. This application is made on 1 st
February, 1988 and the above details can be found in the Form,
which is prescribed and filled in and copy of which is available at
page 103 to 111 of the paper book.
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
46. Then, what we have on record is the letter of the
Government of India, Ministry of Industry, Department of
Industrial Development, which is on the subject of grant of
industrial licence under the Industries (Development and
Regulation) Act, 1951. This suggests that the existing capacity of
the unit and to manufacture the jelly filled telephone cables is 5
lacs CKM. The letter was issued and it was with standard
conditions attached and valid for a period of one year. Then, what
we have on record is the communication from the Maharashtra
Pollution Control Board (the consent). Terms thereof are also set
out in that document. The copies of this are to be found at pages
129 to 140 of the paper book. Then, what we have is the other
details in respect of of cash flow statement. Annexure 'K' at page
143 is the agreement by the petitioners with the Governor of
Maharashtra.
47. We would refer to the necessary details of this agreement.
48. The agreement was entered into after the petitioners
approached the Government for sales tax incentives under the
said 1983 Scheme and requested the Government to permit them
to avail the sales tax incentives by way of deferral of the sales tax
liability under the deferral scheme as outlined in the Government
Resolution dated 5th July, 1982, which, the Government agreed to
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
provide. The Government has called upon the entrepreneur to
enter into a general agreement as required under the said scheme
and the procedure which the entrepreneur has agreed to is then
appearing in the clauses of the agreement. Since reliance is
placed on clause (2) of the agreement, we reproduce it as under:-
"2. The Entrepreneur hereby confirms that he is aware
of that the incentives available to him under this scheme
are relating only and exclusives to the eligible unit and
only for the products and for maximum production at
the eligible unit as considered admissible under the
Eligible Certificate to be issued to him."
49. A bare perusal thereof would indicate that the petitioners
have confirmed that they are aware of the incentives available
under this scheme are relating only and exclusively to the eligible
unit and only for the products and for maximum production at
the eligible unit as considered admissible under the eligibility
certificate to be issued to it. Thereafter, there are various clauses
and which would bind the parties.
50. We have also before us the agreement dated 18 th August,
1988 and which records that the petitioner company would get
Rs.20 lacs as special capital incentives or such similar amount as
may be found admissible. Then, what we have before us is the
incentives under part I of the 1983 Scheme as notified and that is
Annexure 'N' at page 174 of the paper book. That states in clause
(11) that maximum entitlement of sales tax incentive by way of
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Judgment-WP.1009.1998.doc
deferral not to exceed Rs.1338.32 lacs. The validity period was
stipulated as 1st May, 1990 to 30th April, 1995. The terms and
conditions, based on which the eligibility certificate is issued, are
found in the document itself and at page 180 of the paper book,
clause (vii) reads as under:-
"(vii) During the Operative Period of Agreement(s)
entered into by the Holder of this Eligibility Certificate
for Incentives under the 1983, 1988 Scheme, the
industrial unit, for which this Eligibility Certificate is
issued, shall not without prior approval of SICOM
atleast 30 days prior to contemplated event:
(a) sell or otherwise dispose of/ lease/ hire/ shift/
remove/transfer/alienate in any manner, with or
without consideration, any of the fixed assets of
the eligible unit;
(b) writ off/keep the fixed assets in disuse
without writing them off;
(c) close the unit or shift the unit in part or its
entirety from its existing location to any other
location;
(d) change or alter the constitution/
management/constituents comprising the
ownership of the unit;
(e) where the unit is owned by a limited
company/co-operative society/trust, the limited
company, co-operative society, trust as the case
may be shall not merge or amalgamate with any
other limited company/co-operative society/trust
or permit or cause any other limited company/co-
operative society/trust to be merged with the
existing company/co-operative society/trust."
51. Thereafter, an addendum was issued to this eligibility
certificate and that is to be found on 3 rd March, 1992. Thus, there
was an eligibility certificate dated 14th January, 1992 to which an
addendum is issued on 3rd March, 1992.
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
52. That there is an assessment order, which has a clear
reference to all this and what the petitioners are aggrieved by is
not the assessment order, but their returns filed for the year
1991-92, which is the subject matter of this petition, was
assessed by these assessment orders passed under the BST Act
and the CST Act, copies of which are at Annexures 'O' and 'P'. The
petitioners having carried the matter in appeal before the Deputy
Commissioner of Sales Tax, Mumbai (Appeals), he did not disturb
the findings of the Assessing Officer in respect of the sales tax
incentives claimed and allowed. So, both the appeals were
disposed of by orders, copies of which are at Annexures 'Q' and 'R'.
53. However, the retrospective amendments to the statute
resulted in the notice at Annexure 'A'. The gist of the order
leading to the notice reads as under:-
"GIST OF ORDER
M/s Finolex Cables Ltd.
Period : 1.4.91 to 31.3.92
On scrutiny of Assessment order dated 31.3.95
passed by Sr. Asstt. Commr. Of Sales Tax (Assessment) A-
22, Pune Division R. C. No. N-25-H-336/MAH N 25 F-1959
for the period 1.4.91 to 31.3.92 under the B.S.T. & C.S.T.
Act and Appeal order No. DC/APP/PN/A-91/95-96/761
dated 18.3.96 under B.S.T. Act 1959 and No.DC/APP/PN/
CA-66/95-96/762 dated 18.3.96 passed by the Dy.
Commr. Of Sales Tax (Appeals) Pune, it is observed that
while assessing the dealer total sales of jelly filled
telephone cable products for value of Rs.75,75,47,016/-
were allowed for deferent under 31-B whereas the
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
admissible sales as per the Entitlement Certificate
(Capacity 5 lakhs K. M.) for which the sale value arrives
only at Rs.45,45,00,000/-.
Thus the sales of jelly filled telephone cable
produced & sold in excess of 5,00,000 K. M. has become
taxable since it is produced in excess of production
capacity ceiling.
In view of the above facts, the Sr. Asstt. Commr. Of
Sales Tax (Assessment) A-22, Pune Division, Pune has not
applied his mind properly while allowing all sales for
defertment. Had the Sr. Asst. Commr. Of Sales Tax
(Assessment) A-22, Pune Division, Pune properly gone
through the Entitlement Certificate No. N-25/H/R-31/B-
217, he would have not allowed sales in excess of
5,00,000 K. M. capacity. The Assessment order passed by
the Sr. Asstt. Commr. Of Sales Tax (Assessment) A-22,
Pune is not just and proper. The Dy. Commr. Of Sales Tax
(Appeals), Pune has not taken corrective action to set
right the defect and salvage loss of Govt. Revenue and
hence his order in Appeal is also not proper.
I therefore propose to revise the Assessment order
and appeal order disallowing the excess benefit of
defertment and to levy interest 36(3)(b) & penalty u/s
36(2)(c) Expl. II by passing revision order.
You are therefore requested to attend this office on
27.10.1997 at 11.00 A. M. and submit your explanation
in writing as to why said revision order should nto be
passed. In case, if you fail to attend or respond, matter
will be completed without further notice to you which
please be noted.
Sd/-
Place:- Pune Signature :- ________
RHTADVI
Dated : Addl. Commissioner of Sales Tax,
Pune Zone, Pune"
54. The petitioners submit that the revision in the assessment
order and the appellate order disallowing the excess benefit of
deferral amount is proposed to be made and even interest would
be levied.
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Judgment-WP.1009.1998.doc
55. The petitioners have submitted, as already noted above,
that the attempt is a retrospective tax effect, for the first time.
That is sought to be given and that is impermissible.
56. That is relying upon the two provisions. Section 41D of the
BST Act and Rule 31AAA of the BST Rules read as under:-
"41D. Annual ceiling on benefits to be availed
of under Package Scheme of Incentives. (1)
Notwithstanding anything contrary contained in any
of the package Scheme of Incentives, no eligible Unit to
whom the eligibility Certificate has been granted shall
be eligible to draw the benefits in any year, whether
preceding or succeeding the date of commencement of
the Maharashtra Tax Laws (Levy and amendment)
Act, 1995 (Mah. XVI of 1995), in respect of the
production in excess of the annual production capacity
of that unit as may be prescribed by the State
government, having regard to licensing provisions of
the Industries (Development and Regulation) Act,
1951.
(2) The benefits availed of by any eligible unit in
contravention of sub-section (1) shall be and shall be
deemed to have been withdrawn and such Unit shall be
liable to pay the tax n respect of sales or purchases, in
so far as they relate to such excess production referred
to in sub-section (1).
Rule 31AAA. Appraisal of annual production
capacity. - The annual production capacity of an
eligible unit to whom the eligibility certificate has been
granted under any package scheme of incentives, shall,
in respect of any period commencing on or after the 1 st
January 1980, be taken to be as shown in the table
below:-
Package
Serial Annual production
Scheme of Type of unit
No. capacity
Incentives
1 1979 Scheme (a) Small-scale No ceiling in respect
industrial units of annual
including (a) small- production capacity.
scale units manufa-
cturing electronics
equipments;
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
(b) Medium scale
and large scale (b) Capacity means
units. 125 per cent of the
capacity as
indicated in the
registration
certificate or licence
issued by the
competent
authority under the
Scheme or the
capacity as
appraised by the
term lending
financial institution
or bank whichever
is less.
2 1984 Scheme (a) Small-scale No ceiling in respect
industrial units of annual
including (a) small- production capacity.
ig scale units manufa-
cturing electronics
equipments;
(b) Capacity means
(b) Medium scale 125 per cent of the
and large scale capacity as
units. indicated in the
registration
certificate or licence
issued by the
competent
authority under the
Scheme or the
capacity as
appraised by the
term lending
financial institution
or bank whichever
is less.
3 1988 Scheme (a) Small-scale No ceiling in respect
industrial units of annual
including (a) small- production capacity.
scale units manufa-
cturing electronics
equipments;
(b) Capacity means
(b) Medium scale 110 per cent of the
and large scale capacity as
units. indicated in the
registration
certificate or licence
issued by the
competent
authority under the
Scheme or the
capacity as
appraised by the
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
term lending
financial institution
or bank whichever
is less.
"
57. Mr. Sonpal relies upon these provisions to submit that this
opens with a non obstante clause. It overrides any contrary
stipulation in any of the package scheme incentives. No eligible
unit to whom the eligibility certificate has been granted shall be
eligible to draw the benefits in any year, whether preceding or
succeeding the date of commencement of the Maharashtra Tax
Laws (Levy and amendment) Act, 1995, in respect of the
production in excess of the annual production capacity of that
unit as may be prescribed by the State Government, having
regard to licensing provisions of the Industries (Development and
Regulation Act, 1951. These benefits are deemed to have been
withdrawn.
58. The argument before us is that this section was inserted by
the above amendment w.e.f. 1st October, 1995 and therefore,
would not govern anything prior thereto, particularly the period
under consideration in this petition.
59. As far as Rule 31AAA is concerned, that Rule deals with a
situation of appraisal of the annual production capacity of an
eligible unit to whom the eligibility certificate has been granted
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
under any package scheme of incentives in respect of any period
commencing on or after the 1st January, 1980. That would be
taken in terms of the table shown above. Mr. Joshi appearing for
the petitioners has placed reliance on the decision of a learned
Single Judge of this court in the case of Maharashtra Metal
Powders Private Limited (supra). There, somewhat identical
controversy was dealt with by the learned Single Judge. Paras 2,
3, 4, 7, 9, 10 and 12 of this decision read as under:-
3. It does not appear to be in dispute that the petitioner
installed additional machinery in December, 1987 by
availing a further loan of Rs.10 lacs, and stepped up their
production beyond 300 MT per annum and availed sales
tax exemption for 398.963 MT for period from 01.07.1986
to 30.06.1989, 612.812 MT for period from 01.07.1987 to
30.06.1988, 557.261 MT for period from 01.07.1988 to
30.06.1989. Thus, in the three years amount of excess
sales tax exemption incentive availed was Rs.2.11 lacs for
98.963 MT in the first year, Rs.6.03 lacs for 312.802 MT
in the second year and Rs.7.38 lacs for 257.261 MT in the
third year, in all Rs.15.52 lacs. It is not in dispute that the
total exemption availed had not exceeded Rs.70.08 lacs.
4. It is likewise not in dispute that the Sales Tax Officer
concerned had assessed petitioners liability to pay sales
tax for all those three years, and, by orders dated
16.03.1990 and 30.03.1992, held the petitioner entitled to
a refund. Question of excess availment came up only in
assessment order dated 30.03.1993 for the period from
01.04.1989 to 31.03.1990.
7. The learned counsel for the petitioner submitted that
assessments for the relevant years were completed and in
fact Assessing Officer had held the petitioner entitled to a
refund. However, the Assistant Commissioner of Sales Tax
issued a notice on 26.11.1992 along with a gist of order
indicating that the petitioner was liable to pay tax as well
as penalty. Notice and the gist of order showed that the
Assistant Commissioner intended to exercise his
revisional jurisdiction under Section 57 of the Bombay
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Judgment-WP.1009.1998.doc
Sales Tax Act.
9. Reliance on judgment of the Supreme Court in State
Bank of India Vs. Chandra Govindji, reported at (2000) 8
SCC 532 is misplaced. The judgment is unhelpful as the
Court merely observed that earlier adjournment which
was granted cannot be the ground for rejecting the
adjournment, which was finally sought. Such prayer for
adjournment would have been considered only on the
ground on which it was sought. It may be seen that even
so viewed adjournment, sought on the ground that the
Advocate was busy before other authorities, could not
have been granted. It was improper for the Advocate to
seek adjournment for fourth time on the ground that he
was busy in attending to some other cases. Even before
Civil Courts the counsel being busy in other courts is no
ground for adjournment and there is no reason why before
the Revenue Authorities such a ground should be
entertained. It cannot be said that the petitioner was
denied reasonable opportunity of being heard. The
opportunity which was available, was squandered away by
the petitioner, for which he must blame himself. Therefore,
no interference is called for in the order on this ground.
12. In order to examine these rival contentions it would be
necessary to find out what were the terms on which this
incentive was made available to the petitioner. The
eligibility certificate issued by SICOM on 05.09.1983 gives
details about the petitioner company, its plant and
investment therein in items (1) to (9). The certificate then
stipulates as under:-
"This Eligibility Certificate under Part-I of the
1979 Package Scheme of Incentives
(hereinafter referred to as :the 1979 Scheme:)
is hereby issued to M/s. Semi Conductor
Packages Private Limited for their new unit set
up at Village : Moregaon, Dist : Bhandara for
manufacture of Pyrotechnic Aluminium
Powder, 300 M.T. Per annum involving Fixed
Capital Investment of Rs.82.45 lacs approved
as detailed on prepage.
2. The period of this Eligibility Certificate shall
stand automatically curtailed
(i) from the point of time when the total sales
tax incentive admissible under the Scheme/ the
sales tax incentive as per the entitlement
under the scheme availed of/ drawn exceeds
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Judgment-WP.1009.1998.doc
the limits laid down in Clauses 2.13/ 5.3 of
paras 1 and 2 of the Deferral Scheme notified
under Government Resolution, No. IDL7082/
(3559)IND8, dated July 5, 1982, namely
eighty five percent of the Gross Value of Fixed
Capital Investment of Rs.82.45 lacs i.e.
Rs.70.08 lacs of Rs.82.45 lacs.
OR
(ii) from the date from which the
Certificate of Entitlement issued by the
Commissioner of Sales Tax is cancelled or
revoked, whichever event occur earlier."
60. Then, the court dealt with the rival contentions from para
20 and held thus:-
20. I have considered the contention of the
learned Assistant Government Pleader about
applicability of this Rule 6.2 and find that it has
no relevance to the petitioner's case, since the
petitioner's unit is not a 'Near New Unit' or unit
which was already existing sought to be
expanded or diversified under 1979 Scheme.
This clause would apply to a unit which was
already granted exemption or incentive under
1979 scheme and sought to expand or
diversified. The learned Assistant Government
Pleader submitted that even for expansion or
diversification of a unit, which had been
granted incentive under 1982 scheme, the
same rule would apply. Even if this contention
is accepted for a while, it would have only
enabled the petitioner to apply for eligibility
certificate in respect of the capital incentive for
augmentation of the capacity. It does not put a
restriction on augmentation of the capacity as
such. It must be borne in mind that an enabling
provision has to be distinguished with a
restrictive covenant. Rule 6.2 is an enabling
provision and not a restrictive provision.
21.Thus, the conditions incorporated in
eligibility certificate, certificate of entitlement,
indentures, two schemes of 1979 and 1982 do
not show that there was either any restriction
on augmentation of capacity by a new unit for
claiming incentive by way of exemption for
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
such additional production, so long as the total
incentive claimed did not exceed the monetary
ceiling as also the time restriction.
22.At the cost of repetition it has to be stated
that if a unit exhausted monetary ceiling before
the time period elapsed the incentive was to
come to an end, irrespective of the fact that the
period of validity was still available. Likewise,
even if the unit did not exhaust the entire
monetary ceiling on the incentives if the period
of validity was over, the unit would not be
entitled to seek incentives beyond that period.
Except for these two conditions, there is no
third condition about annual ceiling on
production. Reference to annual production in
the certificate of eligibility in Clause 5 is only in
the nature of enumeration of facts about the
unit. At the cost of repetition it has to be
pointed out that Clause (1) of the certificate
names the holder of the certificate, clause (2)
gives address of the unit, clause (3) gives office
address, clause (4) gives DGTD registration
number, clause (5) enumerates class of goods
or products manufactured by the eligible
industrial unit, clause (6) is about capital cost
of the project of the eligible unit, clause (7) is
about various sales tax registration, clause (8)
mentions a date of commencement of the
production and clause (9) states the Sales Tax
Officer with whom returns are to be filed. Thus,
the reference to 300 MT per annum in Clause
(5) of this certificate is merely descriptive of
the goods to be produced and is not a condition
of eligibility. The conditions, subject to which
Eligibility Certificate was granted, are
enumerated separately in the certificate itself
and those do not refer conditions to any ceiling
on production.
23.The revenue would have been entitled to
deny the benefits of the incentive granted to
the petitioner only upon showing that there
was a condition putting ceiling on the annual
production and that such condition was
breached. In the absence of any such
stipulation in the two certificates issued, in the
two schemes as also the indentures, it would
not be open to the revenue to put such an
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
additional restriction, particularly when the
petitioner has not claimed any additional
capital incentive for the additional investment
of Rs.10 lacs made for augmenting capacity in
December, 1987.
61. A letters patent appeal was filed to challenge this order
being Letters Patent Appeal No. 305 of 2011 and that also has
been dismissed.
62. We find much substance in the contentions of the
petitioners. Once there was no embargo or prohibition on
augmentation or increase in the production capacity and the
expansion has been sanctioned, then, the impugned notice, which
totally disregards all this, cannot be sustained. The petitioners
have pointed out that there is a promise and contained in this
package scheme of incentives, which promise can be culled out
from the various terms and conditions. The petitioners have
submitted and rightly so that they had availed sales tax
incentives during the relevant period, namely, 1 st April, 1991 to
31st March, 1992. The period of eligibility had not expired nor
had the quantum fixed been achieved. It is in these
circumstances that the assessing officer allowed the incentives
claimed after duly examining the record. Even the appellate
order confirms this position. Now, the third respondent desires to
restrict the incentives availed of by the petitioners and levy
interest under section 36(3)(b) and penalty under section 36(2)
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
(c) read with Explanation II. Respondent no. 3 has observed that
the incentives have to be restricted in view of the annual
licence/registration/production capacity, which was never
envisaged in the package scheme of incentives, the agreement
entered in pursuance thereof, the eligibility certificate and the
certificate of entitlement. That is why the petitioners have
rightly submitted that the revisional powers cannot be exercised
so as to defeat the scheme and such a scheme which contains
clear assurances and promises on behalf of the State provided the
petitioners fulfill the conditions thereof cannot be set at naught
by the process undertaken.
63. The petitioners have pointed out that they have set up their
unit in a backward area of Pune District, which is categorised as
'C' zone in the Package Scheme of Incentives, 1983. That was on
the basis of the incentives available to them. The petitioners
never apprehended at that time that the benefits under the
scheme would be curtailed or denied in the manner done. The
period of eligibility was reckoned as from 1 st April, 1990 to 30th
April, 1995 and the quantum of incentives was 1338.32 lacs. It is
in these circumstances that they have challenged the legality and
validity of the legal provisions referred above.
64. The petitioners have also relied upon a Division Bench
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Judgment-WP.1009.1998.doc
judgment of this court in the case of Commissioner of Sales Tax,
Mumbai vs. PCE VEE Textile Ltd.6. The facts and circumstances
of that case were also identical. It is in this backdrop that the
Division Bench, from paras 15 onwards, held as under:-
15. It is pertinent to note that the 1993 Scheme was
initially made applicable only to the new units /pioneer
units / prestigious units established in the backward area.
However, para 3.8(I)(i)(c) of 1993 scheme reads as
follows:-
"3.8 Gross Fixed Capital Investment
(I) Gross Fixed Capital Investment shall mean and
include, in the case of:
(i) New Fixed Assets - The value of new Fixed
Assets acquired at site and paid for
Explanation-
(a) .........
(b) .........
(c) Any acquisition of new Fixed Assets outside the
project scheme accepted by the Implementing
Agency can be considered for the purposes of
proportionate incentives during the residual
eligible period provided such acquisition is not less
than 25% of the Gross Fixed Capital Investment at
the end of the previous financial year of the
Eligible Unit."
Thus, para 3.8 (I)(i)(c) of the 1993 scheme envisaged
grant of proportionate incentives to a unit acquiring new
fixed assets outside the project scheme, provided such
acquisition was not less than 25% of the
Gross Fixed Capital Investment.
16. In the light of the representation received from the
Industries particularly the existing units, the State
Government deleted para 3.8(I)(i)(c) and substituted a
new para 3.8.(I)(i)(c) by issuing Government Resolution
dated 6/7/1994. The newly substituted para 3.8 (I)(i)(c)
reads as follows :-
" 3.8 (I(i)(c)
Any acquisition of the new Fixed Assets outside
the project scheme accepted by the implementing
Agency can be considered for incentives, other
6 (2009) 26 VST 281
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
than Special Capital Incentives, provided such
acquisition is not less than 25% of the Gross
Fixed Capital Investment at the end of the
previous financial year. A separate Eligibility
Certificate will be issued for availing of such
benefits with eligibility period as admissible to
new unit in the relevant area and for the relevant
category of units as per the scheme. However, for
the purpose of sales tax benefits, the quantum of
entitlement will be limited to 75% of that
admissible to a new unit in the relevant area and
for the relevant category of units as per the
scheme. A unit cannot, however, claim benefits
for acquisition of new Fixed Assets under this
clause more than twice.
Explanation : Existing units will also be entitled
for benefits under this clause, provided
acquisition of new Fixed Assets by such units is
not less than 25% of the Gross Fixed Investment
at the end of the previous year. "
As per the newly substituted para 3.8(I) (i)(c) not
only the units acquiring new fixed assets outside the
project scheme but also the existing units acquiring new
fixed assets not less than 25% of the gross fixed assets
became entitled to the incentives under the 1993 scheme
irrespective of the fact that the acquisition of the new
fixed assets resulted in increase in the production
capacity or not. However, in such cases, the quantum of
incentives was limited to 75% of the incentives available
to a new unit in the relevant area and for the relevant
category of units. Thus, as per the newly inserted para 3.8
(I)(i)(c) of the 1993 scheme, the eligible units were
required to obtain a separate eligibility / entitlement
certificate from the SICOM/ sales tax authorities with the
quantum of incentives which the existing unit is entitled
to and the period within which those incentives could be
availed. Neither para 3.8(I)(i)(c) nor any other provision
under the 1993 scheme nor any provision under the BST
Act / CST Act provide for utilization of the incentives in
each year proportionately on the finished products
attributable to the fixed assets newly acquired by the
Existing Unit.
17. In these circumstances, the question to be considered
is, whether the Deputy Commissioner of Sales Tax after
determining the quantum of incentives and the time
period during which the said incentives could be availed,
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Judgment-WP.1009.1998.doc
was justified in inserting conditions (i) and (m) in the
Entitlement Certificate so as to impose ceiling on the
utilization of the incentives per year? In other words, the
question is, if the grant of incentives to an existing unit
under the 1993 scheme is based on newly acquired fixed
assets and not on the production capacity of the newly
acquired fixed assets, whether the Deputy Commissioner
of Sales Tax could impose conditions to the effect that the
said incentives can be availed proportionately to the
production of the finished products attributable to the
newly acquired fixed assets?
18. While admitting that there is no specific provision in
the 1993 scheme for availing the incentives on
proportionate basis, it is contended on behalf of the
applicant that since the incentives are given to an Existing
Unit on acquisition of certain additional fixed assets and
the said incentives are to be utilized on the tax payable on
the finished products, it must be held that the incentives
under the 1993 scheme are to be availed on the finished
products attributable to the new fixed assets acquired by
the Existing Unit. It is contended that in the present case,
the assessee had expressed its inability to maintain
separate books of account. As a result, identification of the
finished products attributable to the newly acquired fixed
assets was not possible and, therefore, the Dy.
Commissioner was justified in determining the
proportionate quantity of finished products attributable to
the newly acquired fixed assets at 59.84% of the total
production and accordingly direct the assessee to avail the
incentives on 59.84% of the total production till the time
period set out in the Entitlement Certificate or till the
quantum of incentives granted under the 1993 scheme
are exhausted, whichever is earlier.
19. We see no merit in the above contentions. Admittedly,
there is no provision in the entire 1993 scheme as
amended on 6/7/1994 requiring the existing unit to avail
the incentives proportionate to the finished products
attributable to the newly acquired fixed assets. In fact,
unlike in the 1988 scheme, where the basis for grant of
incentives was increase in the installed capacity, in the
1993 scheme, the basis for grant of incentives is
acquisition of new fixed assets and not increase in the
production capacity. If increase in the production capacity
is not the criteria for grant of incentives under the 1993
scheme, then there is no question of availing the quantum
of incentives under the 1993 scheme proportionately to
the products attributable to the newly acquired fixed
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
assets. In the present case, admittedly, the acquisition of
new fixed assets has not resulted in increase in the
production capacity of the existing unit. In such a case,
the question of availing the incentives on the finished
products attributable to the newly acquired fixed assets
does not arise at all.
20. It is pertinent to note that para 3.8 I (i)(c) as it stood
originally, did provide for availing the incentives by a unit
acquiring new fixed assets outside the project scheme on
proportionate basis. However, that para has been
substituted with effect from 6/7/1994 and in the newly
substituted para 3.8 I(i)(c) the provision for availing the
incentives on proportionate basis has been completely
omitted. Thus, the 1993 scheme as amended in 1994
makes a specific departure from the earlier schemes and
provides for availing the incentives not on the
proportionate basis but on the total production of the
Existing Unit. In these circumstances, imposing conditions
for availing the incentives on prorata basis would be
contrary to the 1993 scheme of incentives.
21. It is, however, contended by the learned A.G.P. that
since the incentives as per para 5.1 (I)(A)(iii) of the 1993
scheme are available on the finished products and
definition of the term 'finished products' contained in para
3.6 of the 1993 scheme read with Rule 31B of the Bombay
Sales Tax Rules, 1959, ('BST Rules' for short) require
every unit to maintain separate books of account in
respect of the finished products, it is abundantly clear that
the incentives under the 1993 scheme are to be availed on
the finished products attributable to the newly acquired
capital assets and, therefore, in the absence of any
possibility of maintaining books of account for
identification of the finished products attributable to the
newly acquired fixed assets, the Dy. Commissioner was
justified in incorporating the impugned conditions in the
Entitlement Certificate.
26. It is pertinent to note that with a view to impose
ceiling on the utilization of incentives by an eligible unit
under different schemes, by Finance Act, 2001 section
41BB has been inserted into the BST Act, thereby
empowering the State Government to prescribe different
ratios for different classes of dealers under different
schemes. In the Statement of Objects & Reasons for
inserting Section 41BB in the B.S.T. Act, it is clearly stated
that the said Section is introduced with a view to restrict
grant of incentives in proportion to the goods
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
manufactured in the expansion unit located in the
backward areas of the State. However, for the reasons best
known to the State Government, till date no Rules have
been framed prescribing different ratios for different class
of dealers under different schemes. In these
circumstances, the argument that the Dy. Commissioner
was justified in imposing ceiling on the utilization of the
incentives under the 1993 scheme in proportion to the
production attributable to the newly acquired fixed assets
cannot be accepted.
27. It is contended by the learned A.G.P. that Section
41BB is a general provision and is not relevant in the
context of availing incentives under the 1993 scheme.
Relying upon the decision of the Apex Court in the case of
Mahim Patram Private Limited V/s. Union of India
reported in (2007) 6 VST 248 (S.C.), it is contended that
even though the State Government has not framed the
Rules and prescribed the ratio for availing the incentives,
the Dy. Commissioner was justified in imposing ceiling for
availing the incentives under the 1993 scheme on prorata
basis. We see no merit in the above contention. In the case
of Mahim Patram (Supra), the provisions of the C.S.T. Act
clearly provided that till the Central Government frames
Rule under the C.S.T. Act for determination of the
turnover in relation to interstate works-contracts,
determination of the turnover may be carried out by the
Assessing Officer in a State in terms of the Rules made by
that State Government. In the present case, neither the
1993 Scheme nor the B.S.T. Act nor the B.S.T. Rules
contain a provision for availing the incentives on prorata
basis. Moreover, Section 41BB inserted to the B.S.T. Act
by Finance Act, 2001 specifically requires the State
Government to prescribe the ratio for availing of the
incentives on prorata basis and admittedly, till date the
State Government has not prescribed the ratio for availing
the incentives by different classes of dealers under
different schemes. Thus, the decision of the Apex Court in
the case of Mahim Patram Private Limited (supra) is
wholly distinguishable on facts. Therefore, in the absence
of any provision under the 1993 scheme and
alternatively, in the absence of any ratio prescribed by the
State Government by framing Rules, it was not open to the
Deputy Commissioner of Sales Tax to direct the assessee
to avail the incentives under the 1993 scheme in
proportion to the production attributable to the newly
acquired fixed assets.
65. The only argument of Mr. Sonpal is that clause 2 of the
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Judgment-WP.1009.1998.doc
agreement entered into with the Governor of Maharashtra
Annexure 'K' dated 18th August, 1988 would enable the
respondents to exercise the power as is sought to be exercised by
the impugned notice. Mr. Sonpal has relied upon this clause to
urge that the amendment does not impose any fresh levy, but
throughout there was a ceiling of maximum production. When we
repeatedly asked him as to where does he find this stipulation,
Mr.Sonpal then changed track and argued that the incentives are
unit based and not company based. The incentives are in respect
of the eligible unit of the petitioners as approved and not for
whole turnover of the unit and from every unit other than at
Village Urse. The permission of the Central Government to
increase production from 5 lacs to 10 lacs was not a project
specific at Urse Village but petitioners specific which expanded
present capacity from 5 lacs at Pimpri in Haveli Taluka to
additional 5 lacs at Urse Village at Maval Taluka totaling to 10
lacs. Another expansion of two lacs is also petitioner specific and
not unit specific. Therefore, the excess production over 5 lacs
CKM cannot be said to be for the Urse unit. If the above argument
is noted, then, implicit therein is the admission that there is no
ceiling on the maximum production. Mr. Sonpal then submits,
relying upon the judgment of the Hon'ble Supreme Court of India
in the case of J. K. Spinning and Weaving Mills Ltd. vs. Union of
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
India7, that there could be fresh or additional levy of taxes
retrospectively and such legislation can be invoked. We do not
think that any of these submissions can be accepted. Even the
argument on the incentives being unit specific, there has to be a
specific term based on which the same can be canvassed. That is
absent.
66. In the case of J. K. Spinning (supra), the Hon'ble Supreme
Court was considering a different controversy altogether. There
was no issue as the present one. Therefore, we do not think that
any assistance can be derived from the principle therein.
67. Mr. Joshi is right in contending that the petitioners were
entitled to defer the tax payable in the periodical returns as well
as the dues on assessment as per Rule 31B/C as against the
validity period of the entitlement and eligibility certificate from
1st May, 1990 to 30th April, 1995. The petitioner exhausted the
financial ceiling of Rs.1,338.32 crores on 31st January, 1994. The
assessing authority, while passing the order of assessment for the
period 1991-92 and the appellate authority, followed Rule 31B/C.
Once section 41D was inserted on 1st October, 1995, while the
order of assessment was passed on 31 st March, 1995, then, we do
not think that against such a finalised process and assessment,
7 1987(32) ELT 234 (SC)
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Judgment-WP.1009.1998.doc
the amended provisions can be invoked. Mr. Joshi is right in
relying upon the order passed by the Nagpur Bench of this court
in Letters Patent Appeal No. 305 of 2011 decided on 24 th
November, 2015. In the view thereof, column 5 of the eligibility
certificate cannot be relied upon. The Division Bench held thus:-
1. Heard Ms Bharti Dangre, learned Government
Pleader for appellant and Mr S. P. Dharmadhikari,
learned Senior Advocate for respondent at length.
Perused the eligibility certificate and impugned
judgment delivered by the learned single Judge.
2. Learned Government Pleader submits that
augmentation in production capacity by Rs. 10 lacs
ought to have been treated as an expansion and,
therefore, the concession flowing from 1979 Package
Scheme of Incentives is erroneously held available to
the respondents. Second contention is, as the
production capacity exceeded 300 MT per annum, the
condition of eligibility was again breached.
3. With the assistance of respective counsel, we have
perused relevant clauses. We find that expansion
undertaken by respondent cannot be held to be
prohibited under paragraph 5.1 of the 1979 Package
Scheme of Incentives. Respondent-Unit is admittedly
a New Unit and para 5.1 explains that incentive under
Part-I will not be available to a Near New Unit or for
Expansion/Diversification of the Existing unit. Once
we find that respondent-Unit is a new unit and it is
nether a near new unit nor an existing unit, the
conclusion of learned single Judge that it would be
impermissible to say that the respondent-Unit could
not have expanded the capacity of its new unit for
which exemption was granted, does not call for any
interference.
4. Similarly, the other bone of contention is about
annual production capacity. In Certificate issued to
respondent-Unit on 5th September 1983, name of
product is mentioned against column no. 5 and
thereafter production capacity of 300 MT per annum
has been recorded. There is nothing on record to show
that production capacity was an essential term or
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
condition of eligibility under 1979 Package Incentive
Scheme. Consideration by learned single Judge in this
respect also does not show any error or perversity.
5. We, therefore, find no case made out for
interference. Letters Patent Appeals are, therefore,
dismissed. No costs.
68. A somewhat identical issue was dealt with by this court in
the case of Prasad Power Control (supra) followed in the case of
Shakti Arora Expert Ltd. (supra). Following these two judgments
and applying them to a case of the present nature, which was
somewhat similar to the case before us ( Rajesh Steel Industries
and Anr. vs. Development Corporation of Konkan Ltd. and Anr. 8
decided on 12th July, 2016), the Division Bench of this court held
as under:-
24. ..... We are having completely at our disposal
the legal position elucidated and set at rest by the
judgment of the Division Bench of this Court in Prasad
Power Control Pvt. Ltd. and Another Vs.
Commissioner of Sales Tax, Mumbai and Others, 9
wherein identical question of law relating to the Package
Scheme of 1988 was raised.
25. In that case also, the challenge was raised to
the Constitutional validity of Section 41B read with Rule
31AA to the extent, it was found repugnant to the
industrial policy contained in 1988 Package Scheme.
Identical arguments were advanced by these very
learned counsels for parties appearing in those
proceedings also. Facts of these proceedings are more or
less similar to the facts of the said case. In that case also
the petitioners had set up an industrial unit to
manufacture electrical goods at village Mahim, Taluka
Palghar, District Thane, an area declared as backward,
with a view to avail of the exemption method of the
assessment tax under the 1988 Scheme. The said
9 (2011) 41 VST 436 (Bom.)
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Judgment-WP.1009.1998.doc
scheme was similar or one may even call identical with
the Scheme of 1983 with which presently we are
concerned. Both the schemes were introduced by the
State Government with a view to achieve dispersal of
industries outside the Mumbai-Pune-Thane belt. To
attract these units to the under developed and
developing areas, the State Government had evolved a
Package Scheme of Incentives to new units set up in the
developing regions.
26. In view of introduction of Rule 31AA to the
Act and Rules having effect from 1st January, 1980,
petitioners in that case had challenged the Constitutional
validity of Section 41B and Rule 31AA by contending
that the petitioners' vested right in computing the CQB as
per para 2.11 of 1988 GR was prejudicially affected. It
was urged that the petitioners cannot be divested
retrospectively by introduction of such rules. The same
line of argument, advanced in this case that, Rule 31AA
is merely of the clarificatory nature and does not
introduce any new method of CQB and, therefore, does
not divest the petitioner therein of his vested rights, was
advanced by the learned counsel for the Revenue and
while dealing with this argument, it was held by Division
Bench of this Court as follows:
"A plain reading of para 2.11 of the 1988 GR
clearly shows that the quantum of benefits availed
of by a unit covered under the 1988 scheme has to
be calculated with reference to the tax that would
have been payable by a unit if not covered under
the 1988 Scheme on assessment at the maximum
rates of tax specified under the local sales tax law
as applicable from time to time.
Sales tax/purchase tax are levied on
sale/purchase of certain goods at the rates
specified in the Schedule to the BST Act. Where
the sales/purchases are covered under the
partial/total exemptions granted under the BST
Act/BST Rules, then, the sales tax/purchase tax in
respect of those sales/purchases becomes payable
at the rates prescribed under the exemption
provisions. In respect of sales/purchases covered
under the exemption provisions, the rate of tax
applicable is the rate of tax set out in the
exemption provisions and not the rate of tax set
out in the Schedule to the BST Act. Thus,
computation of tax at the maximum rate arises
only when the sales/purchases are covered under
the exemption provisions. Where the
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Judgment-WP.1009.1998.doc
sales/purchases are not covered under the
exemption provisions, the tax is payable at the
rate prescribed under the Schedule to the BST Act
and there is no question of paying taxes at the
maximum rates of tax.
31. Para 2.11 of the 1988 GR neither directly
nor indirectly provides that in calculating the CQB
availed of by a unit covered under the 1988
Scheme, the exemption provisions contained in
the BST Act/BST Rules should be ignored. Para
2.11 of the 1988 GR provides that the notional tax
liability of a unit covered under the 1988 Scheme
would be the tax payable by a unit not covered
under the 1988 Scheme, would be the tax
determined as payable after taking into
consideration the exemptions granted under the
BST Act/BST Rules. Therefore, the CQB availed of
by a unit covered under the 1988 Scheme, as per
para 2.11 of the 1988 GR had to be computed on
the basis of the tax payable by a unit not covered
under the 1988 Scheme as per the provisions
including the exemption provisions contained in
the BST Act/BST Rules.
32. The expression "computed at the maximum
rates of tax under the local sales tax law" clearly
denotes that the computation is not referable to
the rate of tax specified in the Schedule to the BST
Act, but is referable to the maximum rate of tax
payable in view of the exemption provisions
contained under local sales tax law. By using the
wider expression "local sales tax law", it is amply
made clear in para 2.11 that it is the tax which is
actually payable by a unit not covered under the
1988 Scheme should be the basis for calculating
the CQB availed of by a unit covered under the
1988 Scheme. Para 2.11 of the 1988 GR cannot
be construed to mean that the computation of tax
has to be made by ignoring the exemption
provisions contained in the BST Act/BST Rules.
When a notification issued under section 41 of the
BST Act grants partial exemption, then the tax
payable pursuant to the notification is the
maximum rate of tax payable on sale/purchase of
goods referred to in the notification. There is
nothing in para 2.11 to suggest that the tax
payable by a unit in the light of notification issued
under section 41 of the BST Act should not be
treated as the maximum rate of tax payable under
local sales tax law. As noted earlier, the Schedule
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
to the BST Act does not prescribe
maximum/minimum rate of tax. It is only when
partial exemption is granted under the sales tax
law, the question of paying tax at the maximum
rate arises. In these circumstances, it is not
possible to accept the contention of the
Commissioner that the expression "computed at
the maximum rates of tax" in para 2.11 of 1988
GR refers to the rate of tax specified in the
Schedule to the BST Act and not to the rate of tax
payable under the sales tax law including the
exemption provisions contained in the sales tax
law.
33. As noted earlier, para 2.11 of the 1988 GR
refers to the tax payable by a unit not covered
under the 1988 Scheme at the maximum rate of
tax specified under the local sales tax law. If a
unit not covered under the 1988 Scheme sells the
electrical goods exclusively to a undertaking
engaged in the generation and distribution of
electrical energy, then the maximum rate of tax
payable by that unit would be at six per cent or
four per cent depending upon the period of
sales/purchases, in spite of the fact that the rate
of tax prescribed under the Schedule to the BST
Act is 10 per cent. Similarly, if the unit which is
not covered under the 1988 Scheme makes
sales/purchases to the undertakings which are
not engaged in the generation and distribution of
electrical energy, then the exemption provisions
would not be applicable and the tax payable by
that unit would be at 10 per cent as per the
Schedule to the BST Act. Para 2.11 of the 1988
GR neither stipulates that in determining the
notional tax liability, the exemption provisions
under the BST Act/BST Rules have to be ignored
nor does it stipulate that the sales to the
undertakings engaged in the generation and
distribution of electrical energy should be treated
as sales to undertakings which are not engaged in
the generation and distribution of electrical
energy. Therefore, in our opinion, the expression
"computed at the maximum rates of tax" in para
2.11 of 1988 GR simply refers to the tax actually
payable by a unit not covered under the 1988
Scheme as per the local sales tax law including the
exemption provisions contained in the BST
Act/BST Rules.
Once it is held that para 2.11 of the 1988 GR
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
provides for computation of notional tax liability
on the basis of the tax actually payable by a unit
not covered under the 1988 Scheme under the
provisions of th sales tax law which includes the
exemption provisions contained under the BST
Act/BST Rules, then it would have to be held that
rule 31AA inserted with effect from March 24,
1995 to the extent it directs the Commissioner to
compute the CQB by ignoring the exemption
provisions is bad in law. The reason being that the
petitioners had established a unit in the backward
area on the assurance contained in the 1988 GR
to the effect that the CQB would be computed at
the maximum rates specified under the local sales
tax law and not at the rate specified in the
Schedule to the BST Act. The said terms and
conditions which forms the basis for entering into
a contract between the State Government and the
petitioners could not be altered retrospectively by
introducing rule 31AA with effect from March 24,
1995.
27. .....
28. .....
29. Before concluding, it was further held in the
said decision that,
"......we may note that the package schemes of
incentives were issued by the State Government
from time to time with total exemption for the
period specified therein, so as to attract
establishment of units in the backward areas of
the State. When the package scheme of
incentives itself was to operate based on the
exemption granted under the sales tax law, it is
difficult to envisage that in calculating the CQB,
the scheme intended to ignore the exemptions
available under the sales tax law. In any event,
as noted above the language used in para 2.11 of
the 1988 GR does not either directly or indirectly
indicate that in calculating the CQB the
exemption provisions contained under the sales
tax law have to be ignored."
30. In the end, it was concluded that,
J.V.Salunke,PA
Judgment-WP.1009.1998.doc
".......calculation of CQB availed of by a unit
covered under the 1988 Scheme as per para 2.11
of the 1988 GR had to be made with reference to
the tax payable by a unit not covered under the
1988 Scheme at the maximum rates of tax
specified under the local sales tax, which includes
the exemption provisions contained in the BST
Act/BST Rules and, therefore, rule 31AA inserted
to the BST Rules with effect from March 24, 1995
to the extent it provides that the calculation of
CQB under the 1988 Scheme has to be made by
ignoring the exemption provisions contained
under the sales tax law is illegal and contrary to
law."
69. Therefore, after following the above principles and applying
them to the present case, we do not think that any larger question
much less about the legality and validity of the provisions needs
to be considered. We are of the view that the petition must
succeed without examining the issue as to whether section 41D
and Rule 31AAA can be held to be unconstitutional and ultra
vires Articles 14 and 265 of the Constitution of India. We are of
the opinion that the amended provisions cannot be invoked and
applied in the present factual controversy.
70. Therefore, the writ petition succeeds. Rule is made absolute
in terms of prayer clause (c).
(G.S.KULKARNI, J.) (S.C.DHARMADHIKARI, J.)
J.V.Salunke,PA
