2017 (1) TMI 139 - HC - Customs

Petitioner Granted Interim Relief; Respondents Restricted from Tax Recovery Pending Final Decision

ADANI PORTS AND SPECIAL ECONOMIC ZONE LIMITED Versus STATE OF GUJARAT AND 1

ADANI PORTS AND SPECIAL ECONOMIC ZONE LIMITED Versus STATE OF GUJARAT AND 1 - TMI Issues Involved:1. Legality of the demand for payment of Conversion Tax under Section 67A of the Gujarat Land Revenue Code, 1879.2. Whether the land allotted for industrial purposes and assessed as nonagricultural can attract conversion tax.3. Interpretation of Section 67A in conjunction with Sections 37, 48, 65, 65A, and Rule 87.4. Impact of the absence of specific conditions regarding conversion tax in the allotment order and Sanad.5. Validity of demand based on an audit objection.6. Influence of executive instructions on the taxable event under Section 67A.7. Effect of procedural mistakes in issuing the Sanad on the levy of conversion tax.Detailed Analysis:1. Legality of the Conversion Tax Demand:The primary issue is whether the demand for Conversion Tax under Section 67A of the Gujarat Land Revenue Code, 1879, by the State Government is legally justified. The petitioner argued that the land was allotted for industrial purposes to develop a SEZ and not for agricultural use. Therefore, the provisions of Section 67A, which pertains to the conversion of agricultural land to nonagricultural use, do not apply.2. Land Allotted for Industrial Purposes:The petitioner emphasized that the land was specifically allotted for industrial purposes, as reflected in the allotment order and conditions attached. The land was never held or assessed for agricultural purposes by the petitioner. Thus, the first requirement for the levy of conversion tax under Section 67A is not fulfilled.3. Interpretation of Section 67A:The petitioner contended that Section 67A requires the land to be assessed or held for agricultural purposes before it can be converted for another use. Since the land was always intended for industrial use, the taxable event under Section 67A does not occur. The respondent, however, argued that the land was originally agricultural and the conversion to industrial use attracts the tax.4. Absence of Specific Conditions in Allotment Order and Sanad:The petitioner pointed out that neither the allotment order nor the Sanad contained any condition regarding the payment of conversion tax. The respondent's argument that the tax liability arises from a general reading of the statute, even without specific conditions, was contested by the petitioner.5. Validity of Demand Based on Audit Objection:The petitioner argued that the demand for conversion tax based on an audit objection is unjustified, as there is no specific provision in the Code that supports such a demand. The respondent's reliance on audit objections without clear statutory backing was questioned.6. Influence of Executive Instructions:The respondent cited the Government Resolution dated 06.06.2003, which consolidates provisions for granting lands for nonagricultural purposes and includes conditions for conversion tax. The petitioner argued that executive instructions cannot override the statutory requirements of Section 67A.7. Procedural Mistakes in Issuing Sanad:The respondent admitted that there was a procedural mistake in issuing the Sanad under the wrong section and form. However, they argued that this mistake does not negate the liability for conversion tax. The petitioner countered that procedural errors cannot justify the imposition of tax if the statutory requirements are not met.Conclusion:The Court found that the petitioner established a prima facie case for the admission of the petition and the grant of interim relief. The respondents were restrained from recovering conversion tax from the petitioner until the final decision of the petition. The Court emphasized that the observations made were tentative and not a final opinion on the merits of the case.