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of <h1>Court upholds Maharashtra VAT Act 2009, limits penalty; clarifies incentives under Package Scheme of Incentives</h1> <h3>M/s. Jindal Poly Films Ltd. And Another Versus The State of Maharashtra And Others</h3> M/s. Jindal Poly Films Ltd. And Another Versus The State of Maharashtra And Others - TMI, [2013] 63 VST 67 (Bom), 2014 (302) E.L.T. 359 (Bom.) Issues Involved:1. Constitutional validity of the Maharashtra Value Added Tax (Levy, Amendment and Validation) Act, 2009.2. Retrospective operation of the amendment and validation.3. Proportionality of incentives under the Package Scheme of Incentives.4. Imposition of penalty and interest with retrospective effect.Issue-wise Analysis:1. Constitutional Validity of the Maharashtra Value Added Tax (Levy, Amendment and Validation) Act, 2009:The constitutional validity of the Maharashtra Value Added Tax (Levy, Amendment and Validation) Act, 2009 was challenged. The court upheld the validity of the Act, stating that the legislature has the power to enact laws with retrospective effect to cure defects noted in judicial decisions. The court emphasized that validating legislation is constitutionally permissible to remove defects in the original enactment and to set right an anomaly.2. Retrospective Operation of the Amendment and Validation:The retrospective operation of the provisions of Sub-sections (1), (1A), and (1B) of Section 93 was challenged. The court held that retrospective legislation is permissible if it is intended to cure a defect and does not impose a new levy. The court noted that the legislative intent to grant proportionate incentives was clear from the introduction of Section 41BB in the Bombay Sales Tax Act, 1959, and Section 93(1) in the Maharashtra Value Added Tax Act, 2002. The court concluded that the amendment was a legitimate exercise of legislative power to cure the deficiency noted in the judgment of this court.3. Proportionality of Incentives under the Package Scheme of Incentives:The court examined the proportionality of incentives under the Package Scheme of Incentives of 1993. It noted that Section 41BB and Section 93(1) disclosed a legislative intent to allow benefits only on a proportional part of the turnover. The judgment in Pee Vee Textiles had noted that the legislative intent could not be effectuated in the absence of rules prescribing the ratio for the grant of proportionate incentives. The court held that the amending legislation provided a mechanism for computing proportionate incentives and was not arbitrary or violative of Articles 14 or 19(1)(g) of the Constitution.4. Imposition of Penalty and Interest with Retrospective Effect:The court addressed the imposition of penalty and interest under Section 93(2). It held that while the liability to pay interest was justified, the retrospective imposition of a penalty was harsh and arbitrary. The court stated that a penalty is in the nature of a penal or quasi-penal exaction and cannot be imposed merely because it is lawful to do so. Consequently, the court held that the imposition of a penalty under Section 93(2) would operate only prospectively.Conclusion:The court upheld the constitutional validity of Maharashtra Act 22 of 2009, except for the imposition of a penalty under Section 93(2), which would take prospective effect. The petitions were disposed of with no order as to costs.
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