2011 (10) TMI 391 - HC - VAT and Sales Tax

Court grants writ, quashes order, directs continued subsidy, release of arrears, and interest.

The court allowed the writ petition, quashed the impugned revisional order dated 31.3.2009, and directed the petitioner to continue receiving the ... Writ petition - Subsidy - Whether increased percentage of subsidy is allowed to assessee - In case of investment made in Modernization/Expansion/Diversification, the amount of subsidy shall be subject to a maximum of 50% of the additional amount of Rajasthan Sales Tax and the Central Sales Tax or VAT payable or deposited whichever is higher, in any of the three immediately preceding years known as base years - As investment predates the issue of notification dated 2.12.05, and particularly in one of the two cases the production commenced only 19 days after 2.12.05, therefore, be no doubt at all that the Applicant Company had started investment for expansion at Ras long before the new scheme was ever conceived The provision of the RIPS 2003 including amendments made thereof on 2.12.05 by addition of clauses 7 (vi) and (vii), were withdrawn on 28.4.06, primarily because of the promulgation of the Rajasthan Value Added Tax Act, 2006, the new tax regime now been legislated across the country in a bid to have a common national taxation system - the special tax dispensation made available to cement units by the issuance of the notification dated 2.12.05 lated but for just about five months - Held that: Applicant Company cannot retain tax subsidy in excess of the provisions of the amended RIPS 2003 Regarding principles of promissory estoppel - The amending notification dtd.2.12.2005 nor the RIPS, 2003 itself sought initiation of effective steps just after such notification and the only condition imposed was that the option should be given within the stipulated period and commercial production should be commenced during the operative period of the Scheme and subject to investment being over ₹ 200 crores and employment provided to more than 100 persons, and all the conditions admittedly and undisputedly were satisfied by the petitioner company - Held that: The orders granting increased benefit of 75% rebate or subsidy against additional tax liability to the petitioner company were neither erroneous nor prejudicial to the interest of State in any manner - Decided in favor of the assessee Issues Involved:1. Negative executive interventions and lack of political will affecting industrial growth.2. Judicial review of subordinate legislation and executive policy decisions.3. The legality of the amendment and its retrospective application.4. Principles of promissory estoppel and legitimate expectation.5. The validity of the revisional order by the Principal Secretary.6. The vested rights of the petitioner under the original scheme.Issue-wise Detailed Analysis:1. Negative Executive Interventions and Lack of Political Will Affecting Industrial Growth:The judgment highlights how negative executive interventions and lack of political will can cause sluggish and distorted industrial growth in a state rich in minerals, such as Rajasthan. The sufferer in this case is a cement manufacturing unit. The court observed that such interventions can significantly impact the growth and development of industries, leading to adverse economic consequences.2. Judicial Review of Subordinate Legislation and Executive Policy Decisions:The court emphasized the need for subordinate legislations, such as notifications issued by the executive, to include a preamble, context, reasons, and background, particularly defining their prospective and retrospective applications. This would ensure that judicial review becomes an effective exercise and prevent notifications with far-reaching consequences from adversely affecting industries.3. The Legality of the Amendment and Its Retrospective Application:The petitioner challenged the impugned order dated 31.3.2009, which invoked the Principal Secretary's revisional jurisdiction under the Rajasthan Investment Promotion Scheme, 2003 (RIPS, 2003). The amendment notification dated 28.4.2006 deleted clauses (vi) and (vii) of clause 7 of RIPS, 2003, which provided increased benefits to cement manufacturing units. The court found that the amendment could not be applied retrospectively to the petitioner, who had already commenced commercial production and taken effective steps before the amendment.4. Principles of Promissory Estoppel and Legitimate Expectation:The court held that the principles of promissory estoppel and legitimate expectation were applicable in this case. The petitioner had acted on the promise of increased benefits under the notification dated 2.12.2005 and had made significant investments and commenced production based on this promise. The court cited several judgments, including MRF Ltd. v. Asstt. Commissioner (2006) and S.L. Srinivasa Jute Twine Mills (P.) Ltd. v. UOI (2006), to support the applicability of these principles.5. The Validity of the Revisional Order by the Principal Secretary:The court found that the revisional order passed by the Principal Secretary was contrary to the principles of promissory estoppel and legitimate expectation. The order quashed the decisions of the State Level Screening Committee (SLSC) in favor of the petitioner on grounds other than those mentioned in the show cause notice or the application moved by the Commissioner. The court held that the revisional order was not sustainable and quashed it.6. The Vested Rights of the Petitioner Under the Original Scheme:The court concluded that the petitioner had a vested right to receive the increased benefit of 75% subsidy under the notification dated 2.12.2005. The petitioner had fulfilled all the conditions of the scheme and had been granted entitlement certificates by the SLSC. The withdrawal notification dated 28.4.2006 and the subsequent clarification dated 22.5.2008 could not deprive the petitioner of this vested right.Conclusion:The court allowed the writ petition, quashed the impugned revisional order dated 31.3.2009, and directed that the petitioner would continue to receive the increased rebate/subsidy of 75% of the additional tax liability under the notification dated 2.12.2005 for a period of seven years. The respondents were directed to release the arrears of such subsidy and allow set off against additional tax liability within one month, failing which the petitioner would be entitled to interest at 9% per annum.