2013 (3) TMI 136 - HC - VAT and Sales Tax

Court rules in favor of company over misinterpreted incentive scheme clause.

Rama Phosphates Ltd. Versus State of Rajasthan and others

Rama Phosphates Ltd. Versus State of Rajasthan and others - [2013] 58 VST 511 (Raj) Issues:Challenge to assessment order and order denying benefit of Incentive Scheme, 1987 under Rajasthan Sales Tax Act, 1954.Analysis:The petitioner company challenged an assessment order and an order denying the benefit of Incentive Scheme, 1987 under the Rajasthan Sales Tax Act, 1954. The petitioner was granted an Eligibility Certificate under the scheme for the period 20.01.1998 to 20.01.2005 for eligible investments. The issue arose when the authorities initiated assessment proceedings against the petitioner after the incentive period ended, alleging a breach of condition under the scheme. The petitioner argued that the restriction on branch transfers beyond 20% of production capacity only applied during the scheme period and not thereafter. The petitioner contended that the authorities misinterpreted the clause, leading to the recovery of sales tax dues. The respondent argued that the petitioner should have pursued a regular appeal instead of a writ petition.The court analyzed the Incentive Scheme, 1987, which exempted industrial units from tax on sales within the state based on eligible investments. The relevant clause stipulated conditions for availing benefits, including maintaining production levels and restricting branch transfers exceeding 20% of total production. The court noted that compliance with the restriction on branch transfers was only required during the period of the eligibility certificate. The court highlighted the difference between the two conditions, emphasizing that the restriction did not apply beyond the scheme period. The court found that the authorities' action against the petitioner was based on a misinterpretation of the clause, leading to erroneous demands for tax recovery.The court rejected the argument regarding the availability of alternative remedies, noting that pursuing an appeal would have been futile given the authority of the Additional Commissioner. The court emphasized that the availability of alternative remedies is a rule of discretion, not a jurisdictional bar. Upon a purposive interpretation of the clause, the court found no breach by the petitioner and allowed the writ petition. The court quashed the orders raising demands and the order by the Additional Commissioner. All demands for tax, interest, and penalty related to the period in question were also quashed.