Madras High Court
M/S.Aruppukottai Sri Jayavilas vs The Commercial Tax Officer on 5 February, 2021
WP.Nos.42967, 42991 &
42992 of 2002
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 05.2.2021
CORAM
THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM
and
THE HONOURABLE MS.JUSTICE R.N.MANJULA
Writ Petition Nos.42967, 42991 & 42992 of 2002 &
WPMP.Nos.63312, 63352 & 63354 of 2002
M/s.Aruppukottai Sri Jayavilas
Ltd., Aruppukottai ...Petitioner in
all the WPs
Vs
1.The Commercial Tax Officer,
Aruppukottai Assessment Circle,
Aruppukottai.
2.The Assistant Commissioner of
Commercial Taxes, Virudhunagar.
3.The State Industries Corporation
of Tamil Nadu Limited, Egmore,
Chennai-8.
4.The Tamil Nadu Taxation Special
Tribunal, rep.by its Registrar,
Chennai-1. ...Respondents
in all the WPs
PETITIONS under Article 226 of The Constitution of India praying
for the issuance of Writs of Certiorari to call for the records on the file
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of the fourth respondent herein O.P.Nos.682 to 684 of 2002 dated
23.10.2002 upholding the proceedings of the first respondent herein
respectfully in TNGST/923159/1994-95, TNGST/5800332/1995-96 and
TNGST/5800332/1996-97, all dated 21.6.2002 and quash the same.
For Petitioner : Mr.N.Inbarajan
For R1 & R2 : Mrs.G.Dhanamadhri, GA
For R3 : Mr.Ramesh Venkatachalapathy
COMMON ORDER
(Order of the Court was made by T.S.SIVAGNANAM,J)
These writ petitions have been filed by the petitioner - a
registered dealer on the file of the first respondent under the
provisions of the then Tamil Nadu General Sales Tax Act, 1959 (for
short, the Act) challenging the common order dated 23.10.2002
passed in O.P.Nos. 682 to 684 of 2002 by the Tamil Nadu Taxation
Special Tribunal, Chennai (for brevity, the Tribunal).
2. We have elaborately heard Mr.N.Inbarajan, learned counsel for
the petitioner, Mrs.G.Dhanamadhri, learned Government Advocate
appearing for respondents 1 and 2 and Mr.Ramesh Venkatachalapathy,,
learned counsel appearing for the third respondent.
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3. The petitioner challenged the assessment order passed by the
Assessing Officer namely the first respondent herein confirming the
proposal in the notice dated 18.4.2002 stating that the petitioner
wrongly availed the Interest Free Sales Tax (IFST) deferral loan of
Rs.70,31,851/- and repaid the same belatedly. In spite of an elaborate
reply/objections dated 06.5.2002, filed by the petitioner, the Assessing
Officer did not agree with the stand taken by the petitioner and
accordingly rejected the objections and confirmed the proposal. The
first respondent issued the proceedings dated 21.6.2002 demanding
interest under Section 24(3) of the Act.
4. Aggrieved by that, the petitioner was before the Tribunal
seeking to quash the order dated 21.6.2002 by filing O.P.Nos.682 to
684 of 2002 and to direct the Assessing Officer to follow the conditions
in the Notification issued by the Government in G.O.Ms.No.500
Industries (MIG II) Department dated 14.5.1990, which announced
incentive scheme for industries and more particularly the IFST deferral
scheme. However, the Tribunal, by the common impugned order dated
23.10.2002, dismissed the said petitions. Aggrieved by the same, the
petitioner is before us by way of these three writ petitions.
5. The short issue, which falls for consideration, is as to whether
the Notification issued in G.O.Ms.No.119 Commercial Taxes and
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Religious Endowments Department dated 13.4.1994, which stipulated
a benchmark for enjoying the benefit of IFST deferral scheme can be
made applicable to the petitioner. As noted above, the Government in
the said Government Order in G.O.Ms.No.500 dated 14.5.1990, with a
view to encourage more industries in the State of Tamil Nadu, decided
to grant several concessions to industries, which were to be started in
75 backward taluks i.e other than 30 most backward taluks from
among the 150 backward taluks. The Government also thought fit to
grant certain benefits to the existing units undertaking expansion or
diversification, for whom, the deferral of sales tax would be given for
nine years and the total amount thus given should not exceed 80% of
the additional investment made in fixed assets. The Government Order
further stated that the application for IFST deferral scheme should be
filed before the General Manager, District Industries Centre (DIC)
concerned in the case of small scale industries and before the SIPCOT
in the case of medium and major industries before commencement of
commercial production.
6. It is not disputed by the respondent – Department that the
petitioner commenced commercial production on 01.10.1991 and
submitted their application to the SIPCOT for grant of eligibility
certificate. In the meantime, there were representations given by the
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industries stating that the condition that they had to apply before the
commencement of commercial production was working hard and
requested for amendment. Accordingly, the Government, by letter
dated 06.11.1990, deleted the said condition and substituted the same
with the wordings that 'application for interest free sales tax
deferral should be made within one year from the date of
commencement of commercial production'. However, this may not
be very relevant to the case on hand.
7. As mentioned above, the petitioner commenced commercial
production on 01.10.1991 and applied for eligibility certificate to the
SIPCOT. The eligibility certificate was not granted within a reasonable
time and therefore, the petitioner continued to remit sales tax. This
has been admitted by the Department. However, the eligibility
certificate was granted on 17.6.1993 stating that the petitioner would
be entitled to deferral sales tax not exceeding Rs.123.59 lakhs interest
free for five years from the month, in which, the holder's unit
commenced its commercial production i.e. from 01.10.1991 to
30.9.1996.
8. The said eligibility certificate dated 17.6.1993 also contained
the condition that the sales tax deferral benefit was subject to the
sales tax payable on products manufactured by the capacity created by
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expansion scheme at Melakandamangalam village, Aruppukottai Taluk,
that the petitioner should continue to pay tax at the level it was paying
to the Commercial Tax Department prior to taking up this expansion
and that only the incremental sales tax liability that would arise due to
the additional production out of the envisaged expansion scheme had
to be allowed for the deferment facility.
9. Since the petitioner commenced commercial production on
01.10.1991 and though they applied for the eligibility certificate
immediately and the same having been granted only on 17.6.1993,
they submitted a representation for rescheduling the period of deferral.
In the meantime, an inspection was conducted in the business
premises of the petitioner on 17.1.2002 and the need for inspection
was stated to be for verification of the correctness of the accounts.
Pursuant to the said inspection, a proposal was given by the Deputy
Commercial Tax Officer, Sivakasi dated 31.5.2002, which was termed
as a D3 proposal. In paragraph 'V' of the proposal, which dealt with
availment of the IFST Deferral Loan, the Inspecting Officer rightly took
note of the rescheduling of the IFST deferral period and held that there
was no deviation nor wrong availment was noticed and that the entire
amount of Rs.123.59 lakhs was also repaid from December 1999 to
May 2001.
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10. Though this was the state of affairs, the Assessing Officer, on
his own volition, issued the show cause notice dated 18.4.2002 to the
petitioner stating that the petitioner wrongly availed the IFST deferral
scheme. On perusal of the said notice dated 18.4.2002, we find that
the Assessing Officer had not stated as to on what basis, he alleged
wrong availment of the IFST deferral loan to the tune of
Rs.70,31,851/-.
11. Be that as it may, the petitioner submitted their objections
and also referred to the D3 proposal wherein the Inspecting Officer
clearly recorded that there was no violation of the IFST deferral
scheme conditions. The petitioner objected to the said notice dated
18.4.2002. However, the Assessing Officer did not agree with the
same, rejected the objections and confirmed the proposal vide
proceedings dated 21.6.2002 demanding interest under Section 24(3)
of the Act. Ultimately, the matter landed up before the Tribunal by way
of the said original petitions.
12. Unfortunately, the Tribunal also did not take note of this
factual position and more particularly the findings given in the D3
proposal, to which, the Sales Tax Department attached a very high
importance. The legal issue is no longer res integra in the sense that
the effect of G.O.Ms.No.119 dated 13.4.1994 qua the benefit granted
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to the industries under G.O.Ms.No.500 dated 14.5.1990 was
considered by several Hon'ble Division Benches of this Court.
13. First of such decisions is in the case of Thiagarajar Mills
Ltd., Singanallur Vs. ACCT, Central Assessment Circle-I,
Coimbatore [W.A.No.509 of 1994 dated 22.2.1995]. An identical
case as in the case on hand arose before the Hon'ble First Bench of
this Court and the appeal filed by the dealer was allowed. It would be
beneficial to refer to the entire text of that judgment, which reads as
follows :
“In view of our order in W.P.No.16952 of
1994 passed by us today, this writ appeal is
entitled to succeed. We may also make it clear
that G.O.Ms.No.119 CT & RE Department
dated 13.4.1994 is prospective and such of the
expansion units or diversified units, which are
set up after 13.4.1994 will only be governed
by G.O.Ms.No.119 dated 13.4.1994. As the
expansion unit involved in this writ appeal had
come into existence long before 13.4.1994, it
will not be governed by G.O.Ms.No.119 dated
13.4.1994 and as such, its sales tax liability
has to be determined without reference to the
said Government Order and only as per G.O.
Ms.No.500 dated 14.5.1990. Accordingly, the
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writ appeal is allowed and the order of the
learned Single Judge is set aside. The demand
made by the first respondent is quashed. The
respondents are directed to determine the tax
liability of the petitioner – appellant in respect
of the expansion unit without reference to the
existing unit.”
14. In terms of the above decision, G.O.Ms.No.119 dated
13.4.1994 can have only prospective application. In G.O.Ms.No.119
dated 13.4.1994, for the first time the Government imposed a
condition for eligibility to avail deferral sales tax and this was termed
as Base Production Volume (BPV) and Base Sales Volume (BSV) and in
actual parlance, it has been referred to as benchmark.
15. It was argued by the Department that if the benchmark was
not achieved by the concerned industry, then they were not entitled to
the benefit of the deferral scheme and any availment of the same
would be construed as a wrong availment.
16. The correctness of this stand was tested by the Hon'ble First
Bench of this Court in the said decision and it was held that G.O.Ms.
No.119 dated 13.4.1994 would have prospective effect. In other
words, the industries, which were granted eligibility certificate in terms
of G.O.Ms.No.500 dated 14.5.1990 cannot be imposed with the
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benchmark condition introduced for the first time in G.O.Ms.No.119
dated 13.4.1994. The Assessing Officer as well as the Tribunal
appeared to have been guided by the rescheduled date of eligibility as
mentioned in the eligibility certificate dated 31.1.1995, by which, the
period was rescheduled from 01.12.1994 to 30.11.1999.
17. Admittedly, this period falls much after the Notification in
G.O.Ms.No.119 dated 13.4.1994. What is interesting to note is that in
G.O.Ms.No.119 dated 13.4.1994, a specific direction was issued to the
State Government and the District Industries Centre to work out BPV
and BSV and incorporate the same in the eligibility certificate at the
time of issuance by the SIPCOT and the District Industries Centre. The
wordings in paragraph 3(v) of the Government Order in G.O.Ms.No.
119 dated 13.4.1994 were that the BPV and the BSV would have to be
worked out and incorporated in the eligibility certificates at the time of
issue by the SIPCOT and the District Industries Centre.
18. If such is the position and the date of eligibility certificate of
the petitioner being 17.6.1993, G.O.Ms.No.119 dated 13.4.1994 could
not have been applied to the petitioner. Therefore, even though the
rescheduled period was from 01.12.1994 to 30.11.1999, the eligibility
for the deferral scheme would date back to the date of the original
eligibility certificate dated 17.6.1993, as in that certificate, conditions
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have been imposed and the reschedulement dated 31.1.1995 was only
reschedulement of dates and nothing else.
19. In fact, the respondent – Department initially understood the
position clearly and therefore, they did not amend the eligibility
certificate by incorporating the BPV and the BSV in the eligibility
certificate. We also take note of the decision of this Court in the case
of M/s.Sulochana Cotton Spinning Mills (P) Ltd. Vs. State of
Tamil Nadu [reported in (1995) 98 STC 125] wherein the Hon'ble
First Bench of this Court framed three questions for consideration, the
first of which was with regard to scope and ambit of G.O.Ms.No.500
dated 14.5.1990 and the second question was as to what was the
effect of another Government Order in G.O.Ms.No.92 dated 22.2.1991
on G.O.Ms.No.500 dated 14.5.1990, as G.O.Ms.No.92 dated 22.2.1991
brought in certain conditions. The Hon'ble First Bench of this Court,
after explaining the scope and ambit of G.O.Ms.No.500 dated
14.5.1990, while answering the second question, held that G.O.Ms.No.
92 dated 22.2.1991 would have only prospective effect. The reasons
assigned by the Hon'ble First Bench of this Court in the said judgment
would fully apply to the facts of this case.
20. As pointed out by Mr.N.Inbarajan, learned counsel for the
petitioner, the respondent – Department does not dispute the fact that
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the Inspecting Officer gave a clean chit to the petitioner and in no
uncertain terms stated that the IFST deferral availed by the petitioner
in 'A' unit was found to be in order and that no deviation or wrong
availment was noticed. We are of the clear view that the Tribunal
committed a serious error in not granting relief to the petitioner.
21. For all the above reasons, the writ petitions are allowed, the
common impugned order is set aside and the orders passed by the
first and the second respondents in this regard are quashed. No costs.
Consequently, all connected pending WPMPs are closed.
05.2.2021
To
1.The Commercial Tax Officer, Aruppukottai Assessment Circle,
Aruppukottai.
2.The Assistant Commissioner of Commercial Taxes, Virudhunagar.
3.The State Industries Corporation of Tamil Nadu Limited, Egmore,
Chennai-8.
4.The Registrar, Tamil Nadu Taxation Special Tribunal, Chennai-1.
RS
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WP.Nos.42967, 42991 &
42992 of 2002
T.S.SIVAGNANAM,J
AND
R.N.MANJULA,J
RS
W.P.Nos.42967, 42991 & 42992
of 2002 & WPMP.Nos.63312,
63352 & 63354 of 2002
05.2.2021
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