2017 (7) TMI 375 - HC - VAT and Sales Tax

Court dismisses petition for Sales-tax incentives post-2005, emphasizes Scheme's consistent application.

The court dismissed the petition, ruling that the petitioners were not entitled to Sales-tax incentives for investments made after 31st December 2005. The ... Sales-tax Incentives scheme - investment made by the petitioners in the fixed assets for the Unit of commissioning of the said project in two phases - quantum of investment for the eligibility certificate - mistake in publication - interpretation of statute - whether the petitioner-Company is entitled to incentives/ sales tax exemption under the Scheme on the investment/ expenditure incurred after 31st December 2005 and upto 31st December 2007 treating the Phase II project of the petitioners as a pipeline project and/or on the investment/expenditure incurred after 31st December 2005, but within a period of 18 months from the date of commencement of commercial production? Held that: - it is required to be noted that in case of Small Scale Industrial Units, Medium and Large scale Industrial Units, the assets acquired upto the period of six months or within 1 year from the date of commencement of commercial production or till the date of completion of the said Scheme ie., 31st December 2005; whichever is earlier between the two, shall be considered eligible for the purpose of Incentives. However, in the Gujarati version of the Incentive Scheme, the expression “whichever is earlier between the two” is missing in case of Industrial Units having project cost exceeding ₹ 10 Crores. The aforesaid seems to be an inadvertent mistake in publication/typing - Nobody can be permitted to take undue advantage/ disadvantage of the beneficial Scheme due to inadvertent mistake in publication. It is required to be noted that even considering Clause 3.8 of the Scheme, in case of Industrial Units having project cost exceeding ₹ 10 Crores, it is mentioned that the assets acquired within a period of 18 months form the date of commencement of production, or till the completion of the said Scheme, shall be considered eligible for the purpose of incentives. Therefore, the submissions made on behalf of the petitioners that the assets acquired upto 30th April 2007 are required to be considered eligible for the purpose of incentive; if is accepted, in that case, the words/expressions “till the completion of the said Scheme” shall be meaningless. The intention of the framers of the Scheme ie., the State Government is very clear and unambiguous ie., to consider the assets acquired maximum upto 31st December 2005 shall be considered eligible for the purpose of incentives, or the assets acquired within a period of 18 months from the date of commencement of commercial production, if the same is before 31st December 2005. Even the petitioners also understood that the assets acquired within a period of 18 months from the commencement of commercial production or till the Scheme ends on 31st December 2005 [whichever is earlier between the two] shall be considered eligible for the purpose of the incentive. It is also not the case on behalf of the petitioners in the petition that in fact they understood, considering Clause 3.8 that the assets acquired within a period of 18 months from the date of commencement of the commercial production shall also be considered eligible for incentive and therefore, they made investment subsequently. The petitioners have also not pleaded any estoppel or promissory estoppel. Under the circumstances, when the petitioners and all other Industrial Units/ Undertakings/Projects [105 in number] understood the Scheme, the manner in which the State Government had pleaded and all are treated equally and in case of all Industrial Undertakings/Projects, the assets acquired only upto 31st December 2005 are considered eligible for the purpose of incentive, the petitioners are not entitled to incentive on the assets acquired subsequently after commencement of commercial production or after 31st December 2005. The petitioners are not entitled to the incentives/Sales-tax exemption on the total expenses/investment made thereafter upto 31st December 2007 and/or upto 31st April 2007; as claimed. It is also held that they are entitled to Incentives/Sales-tax exemption on the investment made or assets acquired upto the date of commercial production upto 30th October 2005 - petition dismissed - decided against petitioner. Issues Involved:1. Eligibility for Sales-tax incentives on capital investment made after 31st December 2005.2. Consideration of Phase II project as a 'pipeline project' for incentives.3. Interpretation of Clause 3.8 of the Incentive Scheme regarding investment eligibility.4. Application of promissory estoppel.Detailed Analysis:1. Eligibility for Sales-tax incentives on capital investment made after 31st December 2005:The petitioners sought to quash the decision that capital investments made after 31st December 2005 were not eligible for Sales-tax incentives. They argued that the denial was against the terms and objectives of the Incentive Scheme 2001, which aimed at economic growth and employment in Kutch district. The petitioners claimed eligibility for investments made up to 31st December 2007, arguing that the Scheme was extended for pipeline projects.The court found that the petitioners had commenced commercial production on 30th October 2005, and the Scheme clearly stated that only investments made up to 31st December 2005 were eligible. The court held that the petitioners were not entitled to incentives for investments made after this date, as the Scheme did not consider Phase II as a pipeline project.2. Consideration of Phase II project as a 'pipeline project' for incentives:The petitioners contended that Phase II of their project should be treated as a pipeline project, thus making them eligible for incentives on investments made up to 31st December 2007. They argued that the Scheme was extended for pipeline projects, and their Phase II investments should be included.The court rejected this argument, stating that the Scheme defined pipeline projects as those not commencing commercial production before 31st December 2005. Since the petitioners had started production on 30th October 2005, their Phase II could not be considered a pipeline project. Therefore, the petitioners were not eligible for incentives on investments made after 31st December 2005.3. Interpretation of Clause 3.8 of the Incentive Scheme regarding investment eligibility:The petitioners argued that Clause 3.8 of the Scheme did not include the phrase 'whichever is earlier between the two' for projects exceeding Rs. 10 crores, unlike other categories. They claimed eligibility for incentives on investments made within 18 months from the commencement of production, up to 30th April 2007.The court noted that the omission of the phrase 'whichever is earlier between the two' in the Gujarati version of the Scheme was an inadvertent mistake. The English version included this phrase, and the court emphasized that the Scheme intended to limit eligibility to investments made up to 31st December 2005 or within 18 months from the commencement of production, whichever was earlier. Accepting the petitioners' interpretation would render the phrase 'till the completion of the said Scheme' meaningless. The court upheld the State's interpretation, denying incentives for investments made after 31st December 2005.4. Application of promissory estoppel:The petitioners did not explicitly plead promissory estoppel but implied that they made investments based on the understanding that they would receive incentives. The court found no evidence that the petitioners relied on Clause 3.8 to make investments up to 30th April 2007. The petitioners had initially applied for incentives based on investments made up to 31st December 2005, and their later claims were seen as an afterthought.The court concluded that the petitioners and other similar projects understood the Scheme as limiting eligibility to investments made up to 31st December 2005. Therefore, the petitioners were not entitled to incentives for investments made after this date.Conclusion:The court dismissed the petition, ruling that the petitioners were not entitled to Sales-tax incentives for investments made after 31st December 2005. The court upheld the State's interpretation of the Scheme and found no basis for treating Phase II as a pipeline project or applying promissory estoppel. The petitioners' claims were deemed an afterthought, and the court emphasized the need for consistent application of the Scheme's provisions.