Sick industrial unit wins VAT payment deferment after authority ignored section 174(2)(c) saving provisions during GST transition

The Allahabad HC quashed an order dated 09.05.2018 that denied deferment of VAT payment to a sick industrial unit with a BIFR-sanctioned rehabilitation scheme. The court held that the authority failed to consider section 174(2)(c) of the U.P. Goods and Services Tax Act, which contains repeal and saving provisions regarding the transition from VAT to GST regime. The authority incorrectly declared a Government Order dated 10.02.2014 inoperative without accounting for the statutory saving clause that preserved certain VAT benefits for sick units during the regime transition. The writ petition was allowed.

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Issues:
Challenge to order declaring deferment of Value Added Tax not available for a sick industrial unit under the Sick Industrial Companies (Special Provisions) Act, 1985 due to repeal of U.P. Value Added Tax Act and enforcement of U.P. Goods and Services Tax Act.

Analysis:

1. Background of the Case:
The petitioner, a producer of Vanaspati Ghee, was declared a sick unit under the Sick Industrial Companies (Special Provisions) Act, 1985. The Board of Industrial and Financial Reconstruction (BIFR) formulated a Rehabilitation Scheme for the petitioner, deferring Value Added Tax dues for five years starting from 24.09.2013.

2. Repeal of U.P. Value Added Tax Act:
The U.P. Value Added Tax Act was repealed on 01.07.2017 upon the enforcement of the U.P. Goods and Services Tax Act. Section 174 of the U.P. Goods and Services Tax Act contains a saving clause preserving rights, privileges, obligations, or liabilities acquired under the repealed Acts.

3. Impugned Order and Ignored Provisions:
The impugned order dated 09.05.2018 declared the deferment of Value Added Tax unavailable for the petitioner due to the repeal of the U.P. Value Added Tax Act. However, the order failed to consider the saving clause in section 174(2)(c) of the U.P. Goods and Services Tax Act, which protects rights acquired under the repealed Acts.

4. Court's Decision:
The High Court allowed the writ petition, quashing the impugned order dated 09.05.2018. The State Government was directed to reconsider the matter promptly, within six weeks from the date of the court's order. Additionally, the court ordered a stay on recoveries against the petitioner for Value Added Tax dues until a fresh decision is made by the State Government.

In conclusion, the High Court's judgment emphasized the importance of considering saving clauses when dealing with the impact of repealed legislation on existing rights and obligations. The court's decision provided relief to the petitioner, ensuring a fair reconsideration of the deferment of Value Added Tax dues in light of the legal provisions.

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