Madras High Court
M/S. Motorola Mobility (Chennai) ... vs State Industries Promotion ... on 16 August, 2024
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
2024:MHC:3106
W.P.No. 27710 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Order reserved on 28.03.2024
Order pronounced on 16.08.2024
CORAM
THE HONOURABLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY
W.P.No. 27710 of 2022
&
WMP No. 26978 of 2022
M/s. Motorola Mobility (Chennai) Private Limited
Represented by its Authorised Signatory
Mr. Ramesh Rajendran AWFIS Spaces Solutions,
Primus, SP-7A, South Phase,
Guindy Industrial Estate,
Chennai,
Tamil Nadu- 600 032. ... Petitioner
-vs-
1. State Industries Promotion Corporation of Tamil Nadu Limited
A Government of Tamil Nadu Undertaking
CIN: U74999TN197ISGC0005967
19-A, Rukmani Lakshmipathy Road, Post Box No.7223
Egmore, Chennai- 600 008.
2. Secretary to Government of Tamil Nadu
Department of Industries
Secreteriat, Government of Tamil Nadu
Fort St, George,
Chennai- 600 009.
3. Commercial Tax Department,
1/35
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W.P.No. 27710 of 2022
Assistant Commissioner (ST)
Valluvarkottam Assessment Circle,
Chennai-600 006. ... Respondents
PRAYER: Writ Petition filed under Article 226 of the Constitution of
India, to issue a writ of Certiorarified Mandamus calling for the
records contained in letter bearing Ref: P-
IV/SAP/Motorola/IPS/105/2008 dated March 17, 2021, and all
letters, orders, and notices issued consequent thereto, including letter
bearing Ref. ID/SAP/Motorola/IPS/105/2008 dated September 1,
2021 issued by Respondent No. 1, and to quash the same as arbitrary,
unjust, unreasonable, and illegal, and to consequentially direct the
Respondents to grant the benefit of the 'Investment Promotion
Subsidy' to the Petitioner by reimbursing the Petitioner with the
amount of VAT and CST paid by the Petitioner during the period
from February 1, 2008 to January 31, 2013 as verified, and endorsed
by Respondent No.3., and pass such further or other orders as this
Hon'ble Court may deem fit and necessary and thus render justice.
For Petitioner : Mr. Satish Parasaran,
Senior Advocate
for M/s. Arun Karthick Mohan &
Mr. Suhrith Parthasarathy
For Respondents : Mr. P.S. Raman, Advocate General
Assisted by Mr. K. Palaniappan
ORDER
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The facts of the case are summarized as follows: Motorola India
Private Limited (MIPL) entered into a Memorandum of
Understanding (the MoU) with the Government of Tamil
Nadu/second respondent on 07.06.2006 to invest USD 30 million for
establishing a manufacturing facility to produce various
telecommunication equipments and products and undertake
software development, trading, systems integration and logistics
activities and for provision of engineering and IT-enabled services
within three years of signing of the MoU. Subsequently, on
12.06.2006, the second respondent issued G.O. (Ms.) No.58
Industries (MIB.1) Department, Government of Tamil Nadu dated
12.06.2006 (GO Ms. No.58) approving MIPL's proposal and provided
exemption from the Tamil Nadu General Sales Tax (TNGST) and
Central Sales Tax (CST) for 5 years on the first sale to the Domestic
Tariff Area(DTA). On 12.09.2006, SIPCOT/the first respondent
issued the Allotment Order whereby MIPL was allocated 70 acres in
the Special Economic Zone (SEZ) to establish the manufacturing
facility with a lease period of 99 years. MIPL commenced operations
from 04.02.2008. The MoU imposed a minimum investment
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obligation of Rs.135 crore and a maximum time limit for such
investment on MIPL and also imposed obligations on the second
respondent to provide concessions to MIPL, inter alia, by way of
exemption from TNGST and CST.
2. After the Tamil Nadu Value Added Tax Act, 2006 (TNVAT
Act) came into force in 2007, the second respondent issued G.O.
(Ms.) No. 80 Industries (MIF1) Department, Government of Tamil
Nadu dated 26.03.2008 (GO Ms. No.80), stating, inter alia, that the
companies that executed MoUs would be paid 'Investment
Promotion Subsidy' equivalent to the TNVAT paid by them subject to
a sliding scale and other conditions and that a cell would be
especially established for the purpose of collecting taxes and issuing
necessary certificates for refund and soft loan for MoU companies.
MIPL applied for an eligibility certificate (EC) on 16.12.2008 for the
Investment Promotion Subsidy and the EC was granted on
12.06.2009. The EC inter alia promised the reimbursement of TNGST
and CST up to Rs. 135 crores under the Structured Assistance
Package. For financial years 2007-08, 2008-09, 2009-10, MIPL paid
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applicable VAT/CST towards the products manufactured in the
facility and sold to the DTA and thereafter claimed reimbursement
thereof. On 21.06.2010, after providing clarifications and the
VAT/CST certificates sought by the first respondent, the petitioner
requested the latter to issue the refund certificate through the MoU
cell.
3. After the Motorola group's decision to reorganize its business
and operate its mobile device manufacturing and enterprise-oriented
business, respectively, as separate entities, the facility in the SEZ was
transferred to and vested in the petitioner company, Motorola
Mobility Chennai Private Limited (MMCPL) under a scheme of
arrangement. The scheme of arrangement, by which the transfer was
effected, was sanctioned by the High Court of Punjab and Haryana
(PHHC) by its order dated 17.09.2010 in C.P.Nos 46-48 of 2010. After
taking over the manufacturing operations in July 2010, the petitioner
informed the second respondent about the said transfer by its letter
dated 30.08.2010 and requested the name of the entity to be changed
from MIPL to MMCPL in the MoU. By letters dated 28.09.2010 and
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22.12.2010, the first respondent was requested to incorporate the
name change in the lease dead, EC and other documents. Thereafter,
on 28.12.2010, the Development Commissioner, in-charge, SEZ,
approved the name change in the letter of approval (LoA) dated
27.02.2007.
4. On 12.1.2011, the Joint Commissioner (CT), MoU cell,
refused the claim of reimbursement of VAT and CST for the period
1.2.2008 to 31.12.2009 citing non-compliance with the requirements
of notice dated 24.8.2010. The petitioner replied on 20.01.2011 by
stating that it had submitted the requisite details on 27.09.2010. On
20.12.2011, the petitioner again requested for processing the refund
claims by asserting that MoU obligations had been completed. This
was followed by a reminder for release of VAT refund on 14.02.2012.
Meanwhile, on 6.1.2012, the second respondent informed the
petitioner that the request for name change had been accepted at
department level but was pending at the cabinet level. On 04.04.2012,
the first respondent sent a letter to the petitioner stating that the EC
issued earlier in the name of MIPL would be amended by
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substituting the name of the petitioner for MIPL and that since the
petitioner has already fulfilled its obligations, it need not furnish a
corporate guarantee and can avail the Structured Assistance Package
after complying with the basic legal formalities. The petitioner was
further directed to approach the MoU cell for obtaining a certificate
for the eligible refund amount.
5. In a significant turn of events, the petitioner passed a board
resolution on 24.12.2012 and eventually suspended the company's
operations on 03.02.2013 at the SEZ facility indefinitely. On 11.1.2013,
prior to the actual suspension of operations, the second respondent
issued GO (Ms.) No.2, Industries (MIB.1) Department, Government
of Tamil Nadu dated 11.01.2013 (GO Ms. No.2) amending the name
from MIPL to MMCPL in GO Ms. No. 58. On 10.12.2020, the
petitioner wrote to the Industrial Guidance and Export Promotion
Bureau (GUIDANCE), with copies marked to the first and second
respondents, about the proposed divestment of the factory and the
transfer of lease rights over the facility to LuxShare India Private
Limited(LuxShare). This was approved by the first respondent on
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20.2.2021. On 26.02.2021, the petitioner again requested for the
promised incentive, i.e. refund of amounts paid towards VAT and
CST. Thereafter, in March 2021, the third respondent issued
certificates acknowledging the petitioner's payment of CST/VAT
from 2008 to 2013. In response to the petitioner's letter dated
26.02.2021, the first respondent issued the impugned letter on
17.03.2021 rejecting the petitioner's claim on the ground that the
petitioner should be in regular production at the time of
disbursement of the incentive and since the petitioner had
indefinitely closed the facility from 24.12.2012 and is in the process of
transferring control over the facility, its request cannot be
entertained.
6. On 29.04.2021, the petitioner replied to the first respondent's
refusal letter by reiterating that the reasons mentioned in the letter
are not in line with the original requirements as per the EC for
availing the Investment Promotion Subsidy. On 05.05.2021, the
petitioner wrote to the Deputy Commissioner and requested for
processing the claim by enclosing inter alia the EC, SIPCOT's waiver
of corporate guarantee, and a copy of GO Ms. No.2. In response, on
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1.09.2021, the first respondent again denied the petitioner's claim
stating that the reasons mentioned in the petitioner's letter dated
05.05.2021 are not in line with the EC conditions thereby confirming
the earlier denial. Pursuant thereto, the petitioner filed an RTI
application dated 17.03.2022 seeking details regarding the eligibility
to receive tax exemptions, incentives, and benefits under the
Structured Assistance Package, and the first respondent replied that
the conditions are as mentioned in the EC. Against this backdrop, the
present writ petition arises.
7. Oral arguments on behalf of the petitioner were advanced by
Mr. Satish Parasaran, learned Senior Advocate, and on behalf of the
respondents by Mr. P.S. Raman, learned Advocate General, assisted
by Mr. Palaniappan. Both the petitioner and the respondents filed
written submissions.
8. Mr. Satish Parasaran submitted the following:
a) The impugned letters of the first respondent are in direct
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contravention of the MoU and GO Ms. No.58 read with the EC.
b) As per the statutory auditor's certificate, the company had
invested Rs. 199.66 crores as on 31.03.2008. By investing more than
Rs.135 crores and establishing the facility within the prescribed time
limit of three years of signing the MoU, the petitioner has fulfilled all
the obligations under the EC and the MoU and is therefore entitled to
be reimbursed in respect of amounts paid towards VAT and CST
from 01.02.2008 to 31.01.2013.
c) The respondents' refusal of the refund on the grounds that
the petitioner is not in continuous production in the facility is extra-
contractual; the petitioner actively manufactured the products and
provided services from 01.02.2008 to 31.01.2013 and only stopped
manufacturing activity on 03.02.2013 as opposed to the respondent's
contention that it stopped such activity on 24.12.2012.
d) Because the period of the reimbursement claim pertains to
01.02.2008 to 31.01.2013, the fact that the petitioner was in the
process of transferring the facility's operations to Luxshare in 2020-21
is immaterial in approving the petitioner's claim for reimbursement.
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9. The petitioner relied on Commissioner of Customs (Imports) v.
Tullow India Operations Ltd. (2005) 13 SCC 789; Jai Beverages (P) Ltd. v.
State of J&K (2006) 5 SCC 772; and State of Jharkhand v. Brahmputra
Metallics Ltd. 2020 SCC OnLine SC 968 to substantiate contentions
regarding eligibility for the subsidy.
10. On behalf of the respondents, learned Advocate General
submitted the following in response:
a) GO Ms. No. 58 offers the following incentives if the MoU
company fulfils the investment commitment of Rs.135 crore in
eligible fixed assets within three years from the date of MoU: 1)
exemption from sales tax and CST for the period of five years only on
the first sale by MIPL from the SEZ into the DTA, subject to capping
eligible investment in fixed assets, 2) capital subsidy of Rs.75.00 lakh
as per NIP 2003, 3) ETP subsidy of 25% of capital cost of ETP or Rs.25
lakhs, whichever is lower, and 4) training subsidy with the ceiling of
Rs.35 lakh or 30% of total cost of training abroad to the local labour
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force, whichever is lower. The EC towards TNGST and CST
reimbursement was issued with a direction to execute the agreement
and other documents with the respondent corporation. Till
November 2011, the petitioner company failed to furnish the
particulars called for by the respondent on 16.06.2009 and by
reminders issued subsequently on 18.02.2010 and 21.04.2010.
b) The petitioner furnished certificates from the jurisdictional
officer of the Commercial Taxes Department and not from the
Special Cell for MoU companies, which is the competent authority to
issue certificates, as per GO Ms No.80. Without furnishing tax
certificates from the MoU cell, the petitioner company made a
representation to the first respondent requesting to process the
refund stating that it had submitted the requisite documents. Such
request was correctly rejected.
c) In its letters dated 25.05.2009 and 28.05.2009 to the
respondent, the petitioner has not furnished details regarding the
claimed remittance of Rs. 73,30,424/- towards output VAT/CST.
d) The petitioner failed to complete the execution of legal
documents, such as the Deed of Agreement for Investment
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Promotion Subsidy Sanctioned under the Structured Package
Assistance Scheme, by furnishing the details called for by the
respondent via letter dated 16.6.2009 and reminders dated 18.02.2010
and 21.04.2010.
e) The petitioner's claims for VAT and CST reimbursement are
unsustainable because the company has sold the assets to a third
party after suspending the operations and thereby violated the
conditions of the EC. For claiming benefits, the beneficiary unit
should be in regular production at the time of disbursement of the
eligible incentive and should also be in possession of the assets
considered for the issue of EC.
f) The petitioner has approached the Court belatedly in
September 2022 seeking reimbursement of VAT/CST for the period
February 2008 to January 2013. Therefore, the writ petition is liable to
be dismissed on the ground of laches.
11. The judgment of the Division Bench of this Court in M/s
Divyam Spinners v. State of Tamil Nadu and others, W.A.No.1152 of
2021, Judgment dated 14.07.2021 (Divyam Spinners), was relied on to
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contend that a subsidy should not be granted for defunct assets.
Discussion, analysis and conclusion:
12. At the outset, I consider the plea of laches. On perusing the
counter affidavit of the first respondent, it is noticeable that the plea
of laches was not raised directly or by laying the factual foundation
for such plea. Both limitation and laches are typically mixed
questions of fact and law unless all relevant facts are admitted.
Therefore, in the absence of a pleading on the factual foundation,
such contention is liable to be rejected. In any event, in this case, all
earlier communications, including letter dated 22.08.2017, only called
for the execution of legal documentation. Thereafter, the impugned
letters rejecting the claim for reimbursement were issued on
17.03.2021 and 01.09.2021 and the writ petition was filed in
September 2022. For both these reasons, the contention regarding
laches is rejected.
13. In order to decide whether the petitioner company has
fulfilled the conditions to claim the refund, it is necessary to set out
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and examine the relevant parts of the MoU, GO and EC. The relevant
clauses thereof are set out below:
1. Memorandum of Understanding ('MoU')
“1. Obligation of Motorola:
(a) ....
Motorola hereby commits to establish the Facility
with investments in the range of US$ 30 million
(about Rs.135 crores at current exchange rate of
INR 45 for one US$) in Eligible Fixed Asset
within 3 years from the date of this MoU, which
will be contingent on the State fulfilling its
obligations as stated hereunder. Hence, the
primary obligation of Motorola is to
establish Facility with a direct investment of
not less than US$ 30 million (about Rs.135
crores at current exchange rate) within 3
years from the date of this MoU.
2. Obligation of the GoTN:
(a) .... The State Government hereby
acknowledges and confirms that Motorola's
investment in the state of Tamil Nadu are
based entirely on the benefits, concessions,
incentives and facilities set forth in the MoU
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being granted in a timely manner by the State
Government.
(c) It shall be the sole and absolute
responsibility of the State Government to
perform or caused to be performed all the
obligations hereunder, whether undertaken by
itself or on behalf of any of its agencies,
including but not limited to agencies such as the
municipality or municipal corporation, the Tamil
Nadu Electricity Board, Pollution Control Board,
SIPCOT, the Guidance Bureau (hereinafter
defined as “Agencies”) or any other
entities/departments/ministries responsible
for facilitating or providing Motorola the
relevant benefits, concessions, incentives and
facilities as undertaken by the State
Government hereunder. The State Government
shall ensure that all required clearances and
approvals to be provided by the State
Government or its agencies are given in a timely
manner provided Motorola has submitted the
required applications or information and complies
with regulations prescribed under various
statutes as applicable. Upon making of the
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requisite applications and furnishing of the
relevant information, the State Government
further undertakes, in good faith, to in a timely
manner notify Motorola of any inadequacies or
insufficiencies in the application made or
information furnished and agrees to assist
Motorola in taking all necessary steps for
completion of the requisite application form(s)
and furnishing of the relevant information in
order to facilitate completion of the approval
process expeditiously.
3. General Provisions:
(k) Unless otherwise agreed by the Parties in
writing, this MoU including Schedules attached
hereto, constitutes the entire understanding
between the Parties concerning the subject
manner hereof and supersedes all prior
communications or agreement, written or oral.
(emphasis added)
THE SCHEDULE
GOVERNMENT OF TAMILNADU (GoTN)
SUPPORT
Sales Tax exemption
31. Motorola will be manufacturing Products
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that are classified as Information Technology
Agreement (ITA) products and hence direct
imports of ITA products into India by dealers will
not suffer basic customs duty. Therefore, direct
imports by dealer have market competitiveness in
DTA. Motorola informed that the local
manufacturing suffers a cost disadvantage vis-à-
vis direct imports from Motorola Inc’s China
facility. The sales tax exemption on its products
sale to the Domestic Tariff Area (“DTA”) will
help to minimize this cost disadvantage and to
help its products to be competitive in DTA.
Otherwise, direct imports become cheaper and
advantageous vis-à-vis local manufacturing.
33. Accepting the request of Motorola, the State
Government offers exemption from TNGST and
CST to Motorola on the first sale from SEZ to
DTA for a period of five (5) years from the date of
commencement of manufacture subject to the
ceiling on eligible investments made by Motorola
within three (3) years from the date of MoU. This
exemption will not be available for subsequent
sales. In effect, Motorola at the SEZ can claim tax
exemption on its first sales from SEZ to DTA and
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subsequent sales in DTA will be taxable.
34. In case the State Government introduces
VAT, then the State Government guarantees to
fully protect the existing TNGST and CST
benefits extended to Motorola in a suitable
manner so that the value of exemption benefits
will not diminish in the post-VAT scenario. A
suitable mechanism will be formulated for this.”
2. G.O. (Ms) No.58 dated 12.06.2006 issued
by Industries (MIB.1) Department,
Government of Tamil Nadu
“(iv) Exemption from Tamil Nadu Government
Sales Tax and Central Sales Tax
Exemption from Tamil Nadu Government Sales
Tax and Central Sales Tax will be given for 5
years. This exemption will be available only on
the first sale by M/s. Motorola from the Special
Economic Zone (SEZ) into the Domestic Tariff
Area (DTA). Subsequent sales in Domestic Tariff
Area will be taxable. This exemption will be
subject to capping at eligible investment in Fixed
Assets.”
3. Eligibility Certificate for Investment
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Promotion Subsidy No. 3/V/IPS/N/2009
dated 12.06.2009
“2. The holder of this certificate shall be entitled
for reimbursement of TNGST and CST paid by
the company as Investment Promotion Subsidy
based on G.O.(Ms.) No.58, Industries (MIB.1)
Department, dated 12.06.2006 that has indicated
the following:
I. TNGST and CST REFUND:
TNGST and CST will be exempted for 5
years. This exemption will be available only
on the first sale by MIPL from SEZ into the
Domestic Tariff Area (DTA). Subsequent
sales in DTA will be taxable. This exemption
will be subject to capping at eligible
investment in fixed assets.
3. Based on the above, the holder of this eligibility
certificate can approach SIPCOT for
reimbursement of TNGST and CST paid by the
company for a sum not exceeding Rs. 135.00
Crores (Rupees One Hundred and Thirty Five
Crores Only) under Structured Assistance
Package taking into consideration investment in
“Eligible Fixed Assets” for a period of 5 years
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(from 01.02.2008 to 31.01.2013) as per above
cited G.O. The period of operation of this
Eligibility Certificate shall be within the
period of full availment of eligible amount or
the above said period whichever is earlier.
4. The company shall not sell or otherwise dispose
of wholly or in part or lease out wholly or in part
of or effect any change in the ownership of the
fixed assets of the company or encumber the same
in any manner other than the charges created or
to be created in favour of SIPCOT without the
prior written permission from SIPCOT.
5. The company shall not close or shift the unit to
a new location without obtaining prior written
permission from SIPCOT.
6. The company shall not change the name and/
or constitution / or management without
obtaining prior written permission of SIPCOT.
8. The Investment Promotion Subsidy shall be
secured by way of first charge on the fixed assets
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created/proposed to be created and the same shall
be on pari passu with other first charge holders.
The company shall execute necessary
documents/agreements as required for the
Investment Promotion Subsidy.
9. The company shall undertake to comply any
other conditions stipulated by
Government/SIPCOT with reference to
Structured Package of Assistance.
10. The company shall be eligible for
Investment Promotion Subsidy as long as it
manufactures products for which the E.C. has
been issued. If the company fails to manufacture
the product for which the E.C. has been issued or
manufactures any other goods under the guise of
the products for which the eligibility certificate
has been issued shall stand cancelled and the
Investment Promotion Subsidy disbursed will be
recalled together with penal interest.
11. In case of furnishing false information/
documents for obtaining Investment Promotion
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Subsidy, SIPCOT reserves the right to cancel the
EC and initiate legal action for recovery of entire
Investment Promotion Subsidy with interest.
13. Violation of any of the conditions of the
Eligibility Certificate and/or connected Govt.
Orders will result in a cancellation of EC and
withdrawal of Investment Promotion Subsidy
entirely and company is liable to pay the entire
Investment Promotion Subsidy in one lump sum
with interest.”
(emphasis added)
Thus, on reading the MoU, it is evident that the primary obligation of
MIPL was to invest about Rs.135 crore in eligible fixed assets within
three years from the date of the MoU. The corresponding obligation
of the State Government was to provide all the benefits, concessions,
incentives and facilities set out in the schedule thereto. Paragraph 33
of such schedule, which is extracted above, provides for exemption
from TNGST and CST for the first five years on the first sale from the
SEZ to the DTA. When the MoU is read with GO Ms. No. 58 and the
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EC, it follows that the MoU company is eligible for refund of
VAT/CST by way of Investment Promotion Subsidy for five years on
the first sale to the DTA upon satisfying inter alia the following
conditions: (i) investment of Rs. 135 crores in eligible fixed assets
within three years of signing the MoU; (ii) no change in ownership of
the fixed assets or closure or change in the location, name,
constitution or management of the company without the prior
written permission from the first respondent; (iii) securing the
Investment Promotion Subsidy by way of a first charge over the fixed
assets; (iv) manufacturing only telecommunication equipments and
products, especially ITA products; and (v) execution of necessary
documents/agreements as required for the Investment Promotion
Subsidy. As regards the EC, which is limited in scope to the
Investment Promotion Subsidy of refund of specific taxes, it should
also be noticed that the entitlement to subsidy is limited not only by
value (a maximum of Rs.135 crore) but also by time (01.02.2008 to
31.01.2013). Indeed, the EC states categorically that the period of
operation is only up to the earlier of the above.
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14. The petitioner has placed on record about three certificates
dated 10.12.2008 from BSR & Co., Chartered Accountants. These
certificates clearly evidence that MIPL invested about Rs.199.66
crores as on 31.03.2008 in the fixed assets. The list of fixed assets is
specified in one of such certificates. It is further certified therein that
the company commenced commercial production on 04.02.2008.
These facts are admitted in paragraph 1(iii) of the first respondent's
counter affidavit. Indeed, in GO Ms. No.2, the Government records
as under:
“....The company has made an investment of
Rs.205.21 crores and provided employment to
about 289 persons within the investment period,
thereby fulfilling its obligation committed in the
MoU dated 7.6.2006.”
Hence, the petitioner's predecessor-in-interest fulfilled the first
condition of investing more than the minimum threshold of Rs. 135
crores within three years from the date of signing the MoU
(07.06.2006).
15. The EC also stipulates that MIPL should not, inter alia,
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transfer the fixed assets or close the unit or change the name of the
enterprise without the prior approval of the first respondent,
SIPCOT. MIPL informed the second respondent about the scheme of
arrangement by which MIPL merged with MMCPL/petitioner on
30.08.2010 before the PHHC sanctioned the scheme of arrangement
via order dated 17.09.2010. The petitioner also informed the first
respondent about the change via letters dated 28.09.2010 and
22.12.2010. Thereafter, on 04.04.2012, the first respondent
acknowledged that the petitioner had established the facility in
accordance with the MoU and GO Ms. No. 58, and that it is eligible to
claim the refund on compliance with basic legal formalities.
Subsequently, GO Ms. No. 2 was issued by the second respondent to
incorporate the amendment from MIPL to MMCPL in GO Ms.
No.58. Therefore, the second condition has also been fulfilled as
regards this transfer and the petitioner cannot be denied the refund
on this ground.
16. As for the subsequent transfer from the petitioner to
LuxShare, such transfer was made in late 2020, which is much later
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than the five year period of operation of the EC. Even otherwise, both
the respondents were informed about such transfer prior thereto by
communication dated 10.12.2020. In response thereto, SIPCOT/ the
first respondent on 20.2.2021 communicated its approval for the
transfer of leasehold rights for the remaining lease period of 84 years.
When viewed in the context of the date of the petitioner's request and
the response thereto, it cannot be said that the condition in the EC
regarding prior approval for transfer was violated. Before turning to
the remaining conditions, I consider the tenability of the rejection on
the grounds of the petitioner not being in continuous operation and
that the certificates were not issued by the competent authority.
17. Clause 10 of the EC stipulates that “(t)he company shall be
eligible for Investment Promotion Subsidy as long as it manufactures
products for which the E.C. has been issued” and not that the company
should be in continuous operation at the time of reimbursement.
Indeed, such a condition is not prescribed in the MoU, GO Ms
No.58, GO Ms. No.2 or the EC. The refund claim is with respect to
the period running from 01.02.2008 to 31.01.2013 when the petitioner
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company was in continuous operation and had paid VAT and CST
on goods sold to the DTA. Such refund claim was made from time to
time during the period of operation, such as by letters dated
21.06.2010, 14.02.2012 and 11.04.2012. In response, for instance, by
communication dated 04.04.2012, the first respondent acknowledged
fulfilment of obligations by MIPL and called for compliance with
basic legal formalities as a prerequisite for availing the Structured
Assistance Package. The company ceased operations on 03.02.2013
subsequent to the board resolution on 24.12.2012. In this contractual
and factual context, the transfer of lease rights and operations to the
third party, LuxShare, for which the first respondent granted
approval on 20.02.2021, cannot be cited as a reason to reject the claim
for refund. The reliance on Divya Spinners also does not advance the
cause of the respondents because there is no indication therein,
unlike in this case, that the investment was made on the basis of an
express representation by the Government of Tamil Nadu that the
investment is based entirely on the benefits, concessions, incentives
and facilities set forth in the MoU being granted in a timely manner
by the State Government. Besides, although the fixed assets were not
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used for a few years, it appears that such assets are being used by
LuxShare currently pursuant to the transfer.
18. Next, I turn to the contention that the petitioner is not
entitled to the reimbursement claim as the certificates were not
issued by the competent authority. While dealing with this issue, it
bears repetition that the MoU records that the second respondent
acknowledges that MIPL's investment was based entirely on the
benefits, concessions, incentives and facilities extended thereunder.
Such MoU also imposed an obligation on the second respondent to
facilitate the expeditious grant of benefits, concessions, incentives
and facilities by assisting in the processing of applications. The
record shows that the certificates were issued by the Assistant
Commissioner, Commercial Taxes Department. As per GO Ms.
No.80, the MoU cell comprises the Deputy Commissioner, Assistant
Commissioner, two commercial tax officers, and three system
operators from the Commercial Taxes Department. The relevant
parts of GO Ms. No.80 read as under:
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“c)Necessary certificate for making refund and
soft loan to the MoU companies will be issued by
this cell, after receiving tax from MoU
companies.
d) the refund and soft loan will be made by
SIPCOT on the basis of the certificates issued by
the above mentioned cell, after applying the terms
and conditions as given in the MoU or the G.O
sanctioning the structural package.”
Thus, these tax certificates - which were issued by the Assistant
Commissioner and addressed to the Deputy Commissioner of the
MoU cell with a copy to the petitioner - concerning the tax period
2008-13 certify the petitioner's payment of the tax amount of Rs.
28,55,58,008 towards VAT/CST for the said period and thereby
establish the petitioner's eligibility for the refund claim. Absent any
explicit stipulation in GO Ms. No. 80 about the issuing authority's
rank in the MoU cell, the refund claim cannot be denied on the
ground that the tax certificates were not issued by the competent
authority especially in light of the obligations imposed on the second
respondent under the MoU.
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19. As regards the third condition discussed in paragraph 13
supra, i.e. the creation of a charge over the fixed assets, the first
aspect to be noticed is that the impugned letters of rejection do not
contain an assertion of breach thereof. As discussed earlier, the
period of operation of the EC was from 01.02.2008 to 31.01.2013
because no subsidy is payable thereafter. The intention appears to be
to ensure that there is security for the disbursed subsidy so as to
enable recovery of such disbursed amount if the EC is cancelled on
account of breach during the five year period running from 2008 to
2013. None of the documents on record indicate that MIPL or the
petitioner manufactured ineligible products or that they invested in
ineligible fixed assets or that they provided false information.
Therefore, there has been no breach of the EC, especially conditions
specified in paragraphs 10, 11 or 13 thereof.
20. With regard to the submission and execution of documents,
the respondents have placed on record letters dated 16.06.2009,
29.05.2013 and a few reminders in relation thereto. There is
reference to execution of necessary documents or compliance with
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basic legal formalities in the EC and other documents, such as letter
dated 04.04.2012 from the first respondent; however, there is nothing
on record to indicate that the Deed of Agreement for Investment
Promotion Subsidy Sanctioned under the Structured Package
Assistance Scheme was forwarded to the petitioner and that the
petitioner refused to execute the same. Therefore, on these counts
also, the rejection cannot be sustained. Moreover, in the reply dated
17.05.2022 to the RTI query by the petitioner, the respondent
confirmed that the conditions to be fulfilled for availing tax
exemptions under the Structured Assistance Package are those
enumerated in the EC. The upshot of this discussion is that the
petitioner has substantially fulfilled conditions for refund and would
be entitled thereto subject to execution of necessary documents in
accordance with the MoU, EC and applicable Government Orders.
21. For the reasons stated above, the impugned letters rejecting
the petitioner's refund claim are quashed and the respondents are
directed to grant the benefit of the 'Investment Promotion Subsidy' to
the Petitioner subject to the submission or execution of necessary
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documents, including an agreement, in conformity with the MoU,
GO Ms. Nos.58 and 2 and the EC. The respondents are, therefore,
directed to forward to the petitioner the draft Deed of Agreement
prepared in accordance with the MoU and applicable Government
Orders and call for any other documents, if required, within 15 days
from the date of receipt of a copy of this order. The reimbursement
shall be made within two months from the date of
execution/submission of such agreement and documents. W.P.No.
27710 of 2022 is disposed of on these terms without any order as to
costs. Consequently, connected miscellaneous petition is closed.
16.08.2024
Index : Yes/No
Internet : Yes/No
Neutral Citation : Yes/ No
kal
To
1. State Industries Promotion Corporation of Tamil Nadu Limited
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A Government of Tamil Nadu Undertaking
CIN: U74999TN197ISGC0005967
19-A, Rukmani Lakshmipathy Road, Post Box No.7223
Egmore, Chennai- 600 008
2. Secretary to Government of Tamil Nadu
Department of Industries
Secreteriat, Government of Tamil Nadu
Fort St, George,
Chennai- 600 009
3. Commercial Tax Department,
Assistant Commissioner (ST)
Valluvarkottam Assessment Circle,
Chennai-600 006.
SENTHILKUMAR RAMAMOORTHY J.
kal
https://www.mhc.tn.gov.in/judis
Pre-delivery order made in
&
16.08.2024
https://www.mhc.tn.gov.in/judis
