w w w . L a w y e r S e r v i c e s . i n



Maharashtra Metal Powders Private Limited v/s The State of Maharashtra, Department of Industries, Energy and Labour Secretary, Mantralaya & Others

    Writ Petition No.896 of 1993 with Writ Petition No.1525 of 1993 with Writ Petition No.1526 of 1993

    Decided On, 04 November 2009

    At, In the High Court of Bombay at Nagpur

    By, THE HONOURABLE MR. JUSTICE R.C. CHAVAN

    For the Petitioner: S.P. Dharmadhikari, Senior Advocate with M.M. Agnihotri, Advocate. For the Respondents: S.B. Ahirkar, A.G.P.



Judgment Text

1. By these three petitions, the petitioner challenges notices issued and orders passed by Sales Tax Department on 27.11.1992, 29.03.1993, 30.03.1993 and 04.05.1993 indicating that the petitioner would be liable to pay sales tax and would not be entitled to avail of incentive for periods from 01.07.1986 to 30.06.1987, 01.07.1987 to 31.03.1989 and 01.06.1989 to 31.03.1990. The petitioner also questions letter dated 24.04.1990 by SICOM Limited [presumably succeeded for implementation of scheme by the respondents, Development Commissioner (Industries)] whereby the petitioner was informed that it had availed tax incentive by way of exemption in excess of admissible capacity for the aforementioned periods.


2. Facts, which are material for deciding these petitions, are as under:


In order to encourage industries being set up in non-industrialized areas of the State, the Government promulgated a package scheme of incentives by way of refund of sales tax etc. The scheme of incentives implemented w.e.f. 01.08.1979 and modified by orders dated 05.07.1982 applies to the petitioner industry. In accordance with this scheme petitioners set up a medium scale industry at Maregaon, District : Bhandara which commenced production of aluminum metal powder on 01.07.1983 was granted eligibility certificate on 05.09.1983 for 7 years from 09.09.1983 to 08.09.1990. Since the capital cost of the project was Rs.82.45 lacs, entitlement of the petitioner to exemption of sales tax liability was limited to Rs.70.08 lacs. The eligibility certificate dated 05.09.1983 was issued for the petitioner?s new unit for manufacture of 300 MT per annum of pyrotechnic aluminium powder. The period of validity was to be curtailed to the point of time at which the exemption liability limit was reached, i.e. the certificate was to be valid till 08.09.1990 or exhaustion of exemption from liability limited at Rs.70.08 lacs, whichever was earlier.


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.


5. The petitioner was called upon to refund to the Sales Tax Department a sum of Rs.15.52 lacs with interest at 15.5% per annum to the Sales Tax Department. Notices were issued under Rule 62 of the Sales Tax Rules to the petitioner. Since the petitioner filed a reply but failed to contest the proceedings in respect of excess availment in the first year, for excess production of 97.216 MT (and not 98.263 MT), the Assistant Commissioner for Sales Tax, by order dated 24.04.1993 ordered recovery of Rs.2,85,511/- with penalty of Rs.3,02,642/- in all Rs.5,88,153/-. This order is challenged in Writ Petition No.896/1993. In the other two petitions, notices issued for the second and third year are challenged. Orders of recovery have not been passed for those years, as this Court had granted interim relief in those petitions.


6. I have heard learned counsel for the petitioner and the learned Assistant Government Pleader for the respondents at adequate length.


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 Sales Tax Act.


8. The learned Senior Counsel for the petitioner submitted that Sub-section (3) of section 57 provides that no order shall be passed which would adversely affect any person unless such person has been given reasonable opportunity of being heard. The order impugned shows that the authority had adjourned the matter on 21st December, 1992, 15th January, 1993, 28th January, 1993 and 15th February, 1993. On that date another application for adjournment was sent by the Advocate for the petitioner. The Assistant Commissioner observed that the adjournment was sought on the ground that the counsel was busy in ?time barring cases? of Income Tax and Sales Tax and did not attend the Assistant Commissioner?s office personally though it was situated in the same campus. The learned counsel for the petitioner suggested that rejection of application for adjournment and passing of the order adverse to the petitioner which followed, was possibly an outcome of the hurt ego of the authority because the Advocate had not appeared in person to move the adjournment application. It may not be permissible to draw such inference.


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.


10. The learned Senior Counsel for the petitioner next submitted that under the scheme, the petitioner was entitled to avail of incentive by way of exemption from sales tax up to a sum of Rs.70.08 lacs. This could be availed irrespective of annual quantum of production. He submitted that though the petitioner had incurred additional capital expenditure of Rs.10 lacs for augmenting the capacity of unit, the petitioner had not claimed any enhanced limit for exemption from payment of sales tax. Therefore, according to him, the only restrictions on claiming the incentive were the monetary ceiling of Rs.70.08 lacs and the time frame during which the exemption was to be availed i.e. from 09.09.1983 to 08.09.1990.


11. The learned Assistant Government Pleader, on the other hand, submitted that in order to avail of exemption the petitioner was obliged to comply with all the three conditions, namely, production limit of 300 MT per annum, monetary ceiling of Rs.70.08 lacs, to be claimed maximum within a period of seven years. According to him, it would be impermissible for a unit which could not avail of the exemption in the initial years to claim exemption in bulk towards the end of the period of exemption. He submitted that the object of keeping a ceiling on the production limit per annum was to ensure that there was a uniform spread over and the revenue did not suddenly lose a big chunk. He also submitted that since the scheme itself was meant for encouraging industrial activities in backward areas, it was necessary to ensure that the activity was sustained rather than being carried out by fits and starts. Therefore, according to him, since the eligibility certificate issued by SICOM, as also indentures which the petitioner has executed and which the learned Assistant Government Pleader made available for my perusal, incorporated all these three conditions, the petitioner was entitled to avail of the incentive only if all the three conditions were fulfilled. Therefore, according to him, the authority was right in passing the impugned order.


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 pre-page.


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 the limits laid down in Clauses 2.13/ 5.3 of paras 1 and 2 of the Deferral Scheme notified under Government Resolution, No. IDL-7082/-(3559)-IND-8, 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.?


13. The conditions enumerated in this Eligibility Certificate included the following conditions:


?(vii) During the Operative Period or Agreement (s) entered into by the Holder of this Eligibility Certificate for Incentive under the 1979 Scheme, the industrial unit, for which this Eligibility Certificate is issued, shall not without prior approval of SICOM the contemplated event :


(a) sell or otherwise dispose of / lease/ hire/ shift / remove / transfer / ailment in any manner, with or without consideration, any of the fixed assets of the eligible unit.


(b) write off/ keep the fixed assets in disuse without writing them off.


(c) close the unit or shift the unit in part or in 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/ cooperative society/ trust, the limited company, cooperative society, trust as the case may be shall not merge or amalgamate with any other limited company/ cooperative society/ trust or permit or cause any other limited company/ cooperative society/ trust to be merged with the existing company/ cooperative society/ trust.?


Similar condition is to be found in the indentures which were made available for my perusal by the learned Assistant Government Pleader. Condition No.4 in the first indenture reads as under:


?4. During the Operative Period of this Agreement or of any other agreements/documents executed/ as may be executed in connection with any other benefits under the 1979 Scheme and/ or the Procedure made thereunder as amended from time to time whichever period expires later, the Entrepreneur agrees that he / they/ it shall not, without the prior written permission of the Corporation?


(a) make any change in the Constitution of the said unit;


(b) Dispose of any of the Fixed Assets of the said unit?


Condition No.10 in the second indenture is similarly worded.


14. It may be seen from this condition No.(vii) in the Eligibility Certificate and the two conditions in the indentures that they refer to several changes but do not mention expansion of the plant or its capacity. The reference to changes in the constitution of the said unit has to be read in the context of Clause (vii) (d) & (e) quoted above. Had the authorities so desired they could have also incorporated a condition about expansion of the capacity of the plant.


15. On the basis of the certificate dated 05.09.1983 issued by SICOM the Sales Tax Authorities issued certificate of entitlement on 07.09.1983. This refers to the Eligibility Certificate issued by SICOM in paragraph 2. The conditions (a) to (c), incorporated in this certificate, may be usefully reproduced as under:


?(a) This certificate is valid for the period from 9.9.1983 to 8.9.1990 and is liable to be cancelled with effect from the date of cancellation of eligibility certificate referred to in para 2 above.


(b) The holder of this certificate is entitled to claim exemption under the said entry only in respect of its/ his sales and purchases relating to the said Industrial Unit, effected during the period of validity to this Certificate.


(c) Sales of goods manufactured at the said Industrial Unit by the holder of this certificate shall be free from whole of tax if he incorporates the following declaration in addition to the certificate under Section 12A of the Act in the sales bill or Cash Memorandum issued by him, in respect of the sales, namely:-


?This sale is exempt from tax under the provisions of entry No. 136 of the Schedule appended to the Government Notification, Finance Department,No.STA-1059-(iii)-G-1, dated 28.12.1959, and the buyer purchasing these goods and any subsequent buyer purchasing these goods shall ?


(i) not be entitled to claim drawback, set-off or refund under any provisions of the Act or the Rules framed thereunder, in respect of the purchases of these goods.


(ii) not give any certificate in Form 31 of 31-A under the P.S.T. Rules, 1959 to any subsequent purchaser of these goods.?


Conditions (d) to (g) are about exemptions for purchases made by the unit. Conditions (h) and (i) are about additional place of business and therefore, not relevant for deciding the present case. Condition (j) which is relevant reads as under:


?(j) No Authorization, Licence, Recognition or Permit shall be obtained by the holder of this certificate where he has no additional place of business and where he has additional place of business and has obtained Authorization, Licence, Recognition or as the case may be a Permit, he shall not use the Authorization, Licence, Recognition or as the case may be the Permit for making purchases for the purpose of the business carried on by the said Industrial Unit in respect of which this certificate has been granted.?


This condition would show that if a entrepreneur does not have an additional place of business, he should not obtain any authorization, licence, recognition or permit. If he has an additional place of business and has already obtained authorization or permit, he should not use such authorization, permit etc. for the purpose of business which is being carried out in the industrial unit for which incentive is sanctioned. This is intended to prevent exemption being claimed for goods manufactured elsewhere through the incentive granted for the unit in backward area. It may be mentioned here that it is not the case of revenue that the petitioner had passed of goods manufactured elsewhere as those produced in the unit for which incentive was granted. It is their specific case that the capacity of the unit was augmented in December, 1987 and thus, the production exceeded 300 MT per annum.


16. After having taken a note of the certificates of eligibility and entitlement granted to the petitioner by the authorities, as also the indentures executed by the petitioner, it may be useful to refer to the terms of the scheme itself to find out as to what were the conditions on which availment of incentives was dependent. The scheme popularly known as ?1979 Scheme? was brought into force by the Government Resolution dated 05.01.1980. The learned Assistant Government Pleader also made available for my perusal the procedural Rules under the 1979 Scheme which were notified by Government Resolution dated 11.08.1980. There is no dispute that the petitioner had established a new unit. The unit was neither a ?near new unit? nor relocated unit. The Government Resolution dated 05.07.1982 substituted and modified some of the clauses in 1979 Scheme. Clause 2.13 of 1979 scheme as substituted by 1982 Scheme reads as under:


?PERIOD OF REVISION UNDER PART I OF THE SCHEME:


2.13 There shall be undertaken every year a Review of all the eligible units covered under Part-I of the Scheme in order to decide the continuance or discontinuance of Sales Tax Incentive as per the Eligibility Certificate granted to the unit.


This Review shall be taken up within a period of Six Months from the close of the year.


If during the course of the Review it is noticed by the Implementing Agency that the total Sales Tax Incentive availed of/National Sales Tax Liability has exceeded the ceilings mentioned below, the Implementing Agency shall curtail the period suitable stamps to get the certificate of Entitlement issued by the Sales Tax Authorities cancelled.


In order to monitor the position regarding the Sales Tax Incentive availed of vis--vis the Gross Fixed Capital Investment of the eligible unit, the Implementing Agency shall be entitled to call for the required information/ details for any shorter period and examine the position from time to time where it has reason to believe that the cumulative Sales Tax Incentive availed of/National Sales Tax Liability is likely to exceed the limits prior to the occasion for Review for the year in question or the year next following:-


IMAGE


17.Similarly substituted paragraph 5 of 1979 Scheme substituted by Government Resolution dated 05.07.1982 reads as under:


?5.1 ELIGIBILITY:


The Sales Tax Incentive under Part ? I will be admissible only to a New Unit and not to a Near New Unit or for Expansion/Diversification of the Existing Unit.


The Sales Tax Incentive will be admissible to an eligible unit at its option either by way of Exemption or by way of DEFERRAL but not both.? (Emphasis supplied).


....


....


QUANTUM:


5.3 Subject to the other provisions of the Resolution in general, and the provisions for Monitoring and Review in particular, the Sales Tax Incentive will normally be admissible for the periods indicated below and, the quantum of Sales Tax Incentive admissible will be subject to the following ceilings, namely:-


IMAGE


18. The learned Assistant Government Pleader submitted that Clause 5.1 which provides that Sales Tax Incentive will be admissible only to a new unit and not for expansion or diversification of existing unit is significant and therefore, the augmented capacity which amounts to expansion could not have been used for seeking exemption. Expansion or diversification of existing unit has to be read in the context of the definition of ?existing unit? and the petitioner?s unit was definitely not an ?existing unit?. It was a new unit. Therefore, it would be impermissible to say that the petitioner could not have expanded the capacity of his new unit for which exemption was granted.


19. The learned Assistant Government Pleader submitted that Rule 6.2 of the procedural rules notified by Government Resolution dated 11.08.1980 provided as under:


?6.2 In the case of Expansion/ Diversification or Near New Unit under the 1979 Scheme, the application for eligibility certificate for Special Capital Incentive shall be made to the Implementing Agency in the prescribed form No.IV.?


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 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

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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 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. 24. In view of this, three petitions are allowed. Impugned orders / notices viz. : letter of SICOM dated 24.04.1990 and (a) notice dated 27.11.1992 and order dated 29.03.1993 in Writ Petition No.896/1993; (b) notice dated 30.03.1993 in Writ Petition No.1525/1993 and (c) notice dated 04.05.1993 in Writ Petition No.1526/1993, are quashed and set aside.
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