2015 (1) TMI 81 - HC - VAT and Sales Tax

Court upholds retrospective definition of 'units in pipeline' under Rule 28C(3)(o) - legality of order confirmed

The court upheld the constitutionality of the retrospective definition of 'units in pipeline' under Rule 28C(3)(o) of the Haryana General Sales Tax Rules, ... Constitutional validity of Notification - retrospective change in the meaning of eligible industrial unit' regarding 'unit in pipeline' - change in incentive scheme – Notification ultra vires of Article 14 of Constitution of India or not –Held that:- Power to enact rules shall include power to enact them retrospectively from the date on which policy for incentives to industry is announced by the State Government and for this purpose, rules 28A, B, C of the Rules shall have retrospective effect from April 1, 1988, August 1, 1997 and November 15, 1999, respectively - Thus, a rule, notified to achieve objects of the policy granting incentives to industry, can be notified retrospectively, thereby negating the argument raised by counsel for the petitioner that the Act does not empower amendment of rules, with retrospective effect - thus, challenge to the retrospectivity of definition of 'units in pipeline', on the ground of want of statutory sanction is rejected. Notification passed by High Level Screening Committee, constituted under rule 28C of the Haryana General Sales Tax Rules, 1975 declining to treat the petitioner as a 'unit in pipeline' – Whether the definition of 'units in pipeline' takes away any right that may have vested in the petitioner under rule 28, before introduction of sub-clause (o) – Held that:- The definition of 'eligible industrial unit', as enacted before the amendment required an industrial unit, including 'units in pipeline' to be registered and holding a registration certificate - The amendment enacted by sub-rule (o) merely reiterates this part of the original provision and says nothing more - The petitioner, was not registered with any Department of the Government before April 30, 2000 - the petitioner applied for registration with the Department of Industries pursuant to an application made on May 17, 2000 and was granted a provisional registration certificate on May 24, 2000, i.e., after April 30, 2000, the cut-off date - The petitioner applied for registration as a unit on May 17, 2000 and was registered on May 24, 2000, thereby failing to fulfil the first condition. The petitioner purchased land on April 3, 1996, obtained a certificate for change of land use on August 18, 1997 but did not take any steps to set up an industrial unit from August 18, 1997 to April 30, 2000 - all formalities relating to setting up of the unit, supply of machinery, etc., were set into motion after the cutoff date of April 30, 2000 - The mere fact that the petitioner may have gone into commercial production on March 30, 2002 and made its first sale on March 30, 2002, would not confer any benefit on the petitioner as it does not fall within the definition of 'units in pipeline' - The right to claim exemption as 'units in pipeline' as on April 30, 2000, required the petitioner to comply with the four conditions set out in the definition of 'units in pipeline' - The power to define 'units in pipeline' with retrospective effect having been affirmed and as the petitioner as per his own showing not being registered with any Department as on April 30, 2000, the notification cannot be said to operate to the prejudice of the petitioner - The order passed by the Higher Level Screening Committee is in consonance with the facts of the case as the petitioner failed to establish its credential as a 'unit in pipeline' as on April 30, 2000 - the petitioner is not entitled to be treated as a 'unit in pipeline' – Decided against petitioner. Issues Involved:1. Constitutionality of the notification dated October 15, 2001.2. Legality of the order dated April 26, 2005, by the High Level Screening Committee.3. Retrospective application of rules.4. Definition and eligibility of 'units in pipeline.'Detailed Analysis:1. Constitutionality of the Notification Dated October 15, 2001:The petitioner challenged the notification dated October 15, 2001, arguing it was ultra vires of Article 14 of the Constitution of India. The notification retrospectively defined 'units in pipeline' under Rule 28C(3)(o) of the Haryana General Sales Tax Rules, 1975. The court examined whether the retrospective definition was constitutionally valid. It held that the rule-making authority, empowered by sub-section (2A) of section 64 of the Haryana General Sales Tax Act, 1973, could enact rules with retrospective effect. Thus, the challenge to the retrospectivity of the definition on the grounds of lack of statutory sanction was rejected.2. Legality of the Order Dated April 26, 2005, by the High Level Screening Committee:The petitioner sought to quash the order dated April 26, 2005, which declined to treat the petitioner as a 'unit in pipeline.' The court analyzed whether the petitioner's application was rightly rejected based on the criteria set out in Rule 28C(3)(o). The court found that the petitioner was not registered with the Department of Industries before the cut-off date of April 30, 2000, and thus did not meet the eligibility criteria. Therefore, the order by the Higher Level Screening Committee was upheld as legal and valid.3. Retrospective Application of Rules:The petitioner argued that the retrospective application of the definition of 'units in pipeline' caused serious prejudice. The court noted that the Haryana General Sales Tax Act, 1973, explicitly allowed for retrospective rule-making through section 64(2A). The court held that the retrospective operation of the definition did not adversely affect the petitioner's rights, as the petitioner failed to fulfill the required conditions by the specified cut-off date. Thus, the retrospective application was deemed lawful.4. Definition and Eligibility of 'Units in Pipeline':The court examined whether the petitioner qualified as a 'unit in pipeline' under the amended Rule 28C(3)(o). The conditions required the unit to be registered with the Department of Industries, have arranged land or premises, applied for finances, and start production within two years. The petitioner did not meet the first condition of being registered by April 30, 2000, and most steps to set up the unit were taken after this cut-off date. The court found that the petitioner's failure to comply with these conditions rendered it ineligible for the benefits as a 'unit in pipeline.' Consequently, the petitioner's claim for exemption was dismissed.Conclusion:The court dismissed the writ petitions, holding that the petitioner did not qualify as a 'unit in pipeline' and the retrospective definition under Rule 28C(3)(o) was constitutionally and legally valid. The order by the Higher Level Screening Committee was upheld as it was in consonance with the facts and the law.