Court stays order on 75% subsidy entitlement under Rajasthan Investment Promotion Scheme

The court granted interim relief by staying the operation of the impugned order regarding the 75% subsidy entitlement under the Rajasthan Investment Promotion Scheme, 2003. The court directed the appellant-State to make a partial cash payment of Rs. 58 crores and adjust the remaining Rs. 58.79 crores against future tax liabilities. This arrangement aims to prevent undue deprivation of the petitioner-company's entitled subsidy during the appeal process. The stay application was disposed of with these directions.

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Issues Involved:
1. Entitlement to increased subsidy at 75% under the Rajasthan Investment Promotion Scheme, 2003.
2. Validity of the withdrawal notification dated April 28, 2006.
3. Clarification issued on May 22, 2008.
4. Methodology of payment for undisputed arrears of subsidy.
5. Interim relief pending final disposal of the appeal.

Detailed Analysis:

1. Entitlement to Increased Subsidy at 75%:
The primary issue in this case is the entitlement of the petitioner-company to an increased subsidy of 75% of the additional tax liability under the Rajasthan Investment Promotion Scheme, 2003. The learned single judge upheld the petitioner-company's claim for the increased subsidy, stating that the company had satisfied all conditions for binding the State to grant the increased subsidy. The judge noted, "the petitioner-company satisfied all the conditions for binding down the respondent-State by the assurance and promise of increased subsidy of 75 per cent of additional tax liability for entire period of seven years."

2. Validity of the Withdrawal Notification Dated April 28, 2006:
The withdrawal notification dated April 28, 2006, sought to delete the sub-clauses introduced by the notification dated December 2, 2005, which provided for the increased subsidy. The single judge held that this withdrawal notification could not be applied retrospectively to the petitioner-company, stating, "whether the withdrawal notification dated April 28, 2006 can be applied to the petitioner-company giving it virtually retrospective effect... The answer has to be in clear negative."

3. Clarification Issued on May 22, 2008:
The Finance Department issued a clarification on May 22, 2008, stating that the benefit of the amendment dated December 2, 2005, could not be granted for cases where the benefit was granted after April 27, 2006. The single judge found that this clarification could not negate the increased subsidy entitlement of the petitioner-company, as the entitlement certificates were issued for a period of seven years, binding the State.

4. Methodology of Payment for Undisputed Arrears of Subsidy:
The appellant-State had released an undisputed amount of Rs. 116.79 crores in arrears of subsidy but adopted a methodology of making book entries instead of cash payments. The respondents argued that this method was unfair and harsh. The court found merit in this argument and directed that Rs. 58 crores be paid in cash within 30 days, with the remaining Rs. 58.79 crores to be adjusted against future tax liabilities.

5. Interim Relief Pending Final Disposal of the Appeal:
The court decided to stay the operation of the impugned order regarding the increased subsidy at 75% during the pendency of the appeal, subject to certain conditions. The court ordered the appellant-State to pay Rs. 58 crores in cash and adjust the remaining Rs. 58.79 crores against future tax liabilities. The court emphasized that this arrangement was interim and subject to final orders in the appeal.

Conclusion:
The court granted interim relief by staying the impugned order's operation regarding the 75% subsidy, while directing partial cash payment and adjustment of the undisputed subsidy amount. The arrangement aims to balance equities and ensure that the petitioner-company is not unduly deprived of its entitled subsidy during the appeal's pendency. The stay application was disposed of with these directions.

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