TaxTMI 
TaxTMI 
2011 (6) TMI 267
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.... assessment orders before the Appellate Authority constituted under the BST Act and that the said appeals are pending. 2. The basic dispute raised in this Writ Petition is, when a unit is established as per the Government Resolution dated 30th September 1988 ('1988 GR' for short) which provides for a mechanism to calculate the notional sales tax liability of a unit covered under the 1988 Package Scheme of Incentives ("1988 Scheme" for short), whether a different mechanism for calculating the notional sales tax liability can be introduced with retrospective effect from 1st January 1980 by inserting Section 41B to the BST Act and inserting Rule 31AA to the BST Rules, so as to defeat the rights vested in the units established under the 1988 Scheme prior to the insertion of Rule 31AA ? 3. Section 41B of the BST Act inserted with effect from 1st May 1994 empowers the Commissioner of Sales Tax to determine the Cumulative Quantum of Benefits ("CQB" for short) received by any dealer to whom a Certificate of Entitlement under the Package Scheme of Incentives has been granted under Entry 136/E3 of the Schedule to the Notification issued under Section 41 of the BST Act at any ....
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....ion method prescribed under the 1988 Scheme, decided to set up a unit to manufacture electrical goods at Village Mahim, Taluka Palghar, District Thane. Accordingly, the petitioner No.1 applied for and obtained an eligibility certificate dated 3rd January 1992 from the implementing agency, namely, the Development Corporation of Konkan Limited valid for seven years from 3rd January 1992 to 2nd January 1999, with a financial ceiling of Rs.22,64,971/which was increased to Rs.26,87,800/by a corrigendum dated 5th November 1999. As per the said eligibility certificate, the petitioners were required to set up an industrial unit at Village Mahim, Taluka Palghar, District Thane to manufacture tower and tower accessories, marshaling boxes, L.T. & H.T. Fuses, switches and switch gear panels etc. and during the period from 3rd January 1992 to 2nd January 1999 the petitioners were entitled to purchase raw materials and sell the manufactured goods without payment of purchase tax / sales tax subject to the above financial ceiling. 8. After issuance of the Eligibility Certificate on 3rd January 1992, the State Government entered into an agreement with the petitioners on 7th January 1992 whe....
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....Unit set up in the developing regions of the State of Maharashtra and certificated by the relevant Regional Development Corporation as an eligible unit under the 1988 Scheme falling under the Package Scheme of Incentives and to whom a Certificate of Entitlement has been granted would be exempt from the whole of the sales tax. Similarly, Entry 136(2)(b) of the Notification issued under Section 41 of the BST Act provides that sales of any goods being raw materials by a registered dealer to a registered dealer referred to in Entry 136(2)(a) shall be exempt from whole of purchase tax. 12. Thus, the levy of sales tax / purchase tax on electrical goods of all types was at 10% as per the Schedule to the BST Act. However, by Entry 47 of the Notification issued under Section 41 of the BST Act, partial exemption was granted from payment of purchase tax on purchase of raw materials and sales tax on sale of electrical goods when made to undertakings engaged in the generation or distribution of electrical energy. The exemption from payment of purchase tax / sales tax was in excess of 4% (from 1st July 1981 to 25th March 1987), in excess of 6% (from 26th March 1987 to 30th September 1995) and i....
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.... thus : "2.11 Notional Sales Tax Liability :(a) Sales Tax / purchase tax / additional tax that would have been payable by the Eligible Unit on the purchases of raw materials and sales tax / turnover tax / additional tax that would have been payable by the Eligible Unit on the sales of finished products / byproducts / scrap goods of the Eligible Unit under the Local Sales Tax Law but for an exemption under the 1988 Scheme and computed at the maximum rates of tax specified under the Local Sales Tax Law as applicable from time to time. For the purpose of the above clause, sales made on consignment basis within the State of Maharashtra or branch transfers within the State of Maharashtra shall also be deemed to be sales made within the State exigible to tax". 17. Section 41B inserted to the BST Act by Maharashtra Act 29 of 1994 with effect from 1st May 1994 reads thus :" 41B. Calculation of cumulative quantum of benefits under Package Scheme of Incentives. (1) In order to determine whether the cumulative quantum of benefits received by any dealer to whom a Certificate of Entitlement has been granted by the Commissioner under entry 136 of the Schedule to the notification....
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....ses of raw materials to the Government by the said dealer under any of the provisions of the Act and the amount of additional tax in relation to such purchase tax which would have been payable to the Government if the exemption granted under the said entry was not available; (b) a sum equal to the amount of sales tax which would have been payable by a selling dealer not holding a Certificate of Entitlement on the sale of raw materials to the said dealer if the set off under rule 42AC is not admissible to the said dealer in respect of such purchases; Provided that during the period from 15th April, 1994 to 30th November, 1994, the calculation shall be made at the rate of tax applicable to such goods as reduced by 4% from the applicable rate of tax; (c) a sum equal to the amount granted as drawback, setoff or, as the case may be, refund under rule 42AC to the said dealer; (d) a sum equal to 4 per cent of the turnover of interState sales of finished products manufactured by the said dealer in the eligible unit and specified in the eligibility certificate granted to him by the implementing agency and if the interState sales of such products are generally liable for Central sales tax at....
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....ioner's unit was not covered under the 1988 Scheme, then on purchase of raw materials and sale of electrical goods to undertakings engaged in the generation / distribution of electrical energy, the petitioners would have been liable to pay purchase tax / sales tax at 6% or 4% as the case may be as per the Notification issued under Section 41 of the BST Act and was liable to pay purchase tax / sales tax at 10% when sales were made to others. The submission is that as per para 2.11 of the 1988 GR, the "notional sales tax liability" computed cannot exceed the actual sales tax liability that would have been incurred by the unit if not covered under the 1988 Scheme. In support of the above contention, Mr.Joshi relied upon the decisions of this Court in the case of Varun Polymol Organics Limited V/s. State of Maharashtra reported in 97 STC 55 (Bom.), decision in the case of Multifilms Plastics Private Limited V/s. SICOM reported in 105 STC 458 (Bom.), decision of the Gujarat High Court in the case of ARDEEC Engg (Saurashtra) Private Limited V/s. State of Gujarat reported in 117 STC 178 (Guj.) and a decision of the Orissa High Court in the case of Luis Packaging Private Limited V/s. State....
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....ioner, on the other hand, submitted that the Writ Petition filed to challenge the validity of Rule 31AA suffers from gross delay and laches as Rule 31AA came into force with effect from 24th March 1995, whereas the Writ Petition is filed belatedly in the year 2000. He submitted that Rule 31AA is in consonance with para 2.11 of the 1988 GR, as is evident from the fact that even before the insertion of Rule 31AA, para 2.11 was interpreted in consonance with Rule 31AA and assessment orders were passed for the period 199192, 199293 and 199394 on 6th January 1995 and the said assessment orders have been accepted by the petitioners. Therefore, it is not open to the petitioners to contend that Rule 31AA is inconsistent with para 2.11 of the 1988 GR. 24. Plain reading of para 2.11 in the 1988 GR, according to Mr.Sonpal is that the maximum rate of tax that would have been leviable should be considered for the calculation of CQB and any sale on any declaration except 'C' form are liable to be ignored. He submitted that Rule 31AA is clarificatory in nature. Mr.Sonpal submitted that it is not the case of the petitioners that the State legislature lacked the legislative competence to in....
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....ax liability would be the rate shown in the Schedule appended to the BST Act and not the rate as reduced by any notification issued under Section 41 of the BST Act. Therefore, it is not open to the petitioners belatedly in the year 2000 to contend that the CQB has to be calculated at the rate specified in the exemption notification. 28. We have carefully considered the rival submissions. The question to be considered in the present case is, whether under para 2.11 of the 1988 GR, the CQB was liable to be calculated by ignoring the exemption provisions contained in the BST Act / BST Rules ? 29. Plain reading of para 2.11 of the 1988 GR clearly shows that the quantum of benefits availed by a unit covered under the 1988 scheme has to be calculated with reference to the tax that would have been payable by a unit if not covered under the 1988 Scheme on assessment at the maximum rates of tax specified under the local sales tax law as applicable from timetotime. 30. Sales tax / purchase tax are levied on sale / purchase of certain goods at the rates specified in the schedule to the BST Act. Where the sales / purchases are covered under the partial / total exemption....
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....ed in the BST Act / BST Rules. When a notification issued under Section 41 of the BST Act grants partial exemption, then the tax payable pursuant to the notification is the maximum rate of tax payable on sale / purchase of goods referred to in the notification. There is nothing in para 2.11 to suggest that the tax payable by a unit in the light of notification issued under Section 41 of the BST Act should not be treated as the maximum rate of tax payable under local sales tax law. As noted earlier, the schedule to the BST Act does not prescribe maximum / minimum rate of tax. It is only when partial exemption is granted under the sales tax law, the question of paying tax at the maximum rate arises. In these circumstances, it is not possible to accept the contention of the Commissioner that the expression "computed at the maximum rates of tax" in para 2.11 of 1988 GR refers to the rate of tax specified in the schedule to the BST Act and not to the rate of tax payable under the sales tax law including the exemption provisions contained in the sales tax law. 33. As noted earlier, para 2.11 of the 1988 GR refers to the tax payable by a unit not covered under the 1988 Scheme at t....
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....e petitioners could not be altered retrospectively by introducing Rule 31AA with effect from 24th March 1995. 35. In the case of Suprabhat Steel Limited (supra), the Apex Court was called upon to consider the validity of a notification issued by the State Government which was repugnant to the industrial policy approved by the State Government. The Apex Court on consideration of the rival contentions held (see para 7) thus :" 7. Coming to the second question, namely, the issuance of notification by the State Government in exercise of power under section 7 of the Bihar Finance Act, it is true that issuance of such notifications entitles the industrial units to avail of the incentives and benefits declared by the State Government in its own industrial incentive policy. But in exercise of such power it would not be permissible for the State Government to deny any benefit which is otherwise available to an industrial unit under the incentive policy itself. The Industrial Incentive Policy is issued by the State Government after such policy is approved by the Cabinet itself. The issuance of the notification under section 7 of the Bihar Finance Act is by the State Governmen....
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....t orders and the circular must be held to be contrary to the 1988 GR. If the assessments for 199192 to 199394 have attained finality then the consequences for those years would be as per the assessments, but the same would not affect the assessments which are pending before the adjudicating authority or the appellate authority. 39. The argument advanced on behalf of the Commissioner that Rule 31AA is in consonance with para 2.11 of 1988 GR is also not acceptable, because, in our opinion, Rule 31AA introduced with effect from 24th March 1995 for the first time provides for calculation of CQB by ignoring the exemption provisions contained in the the BST Act / BST Rules, which is contrary to para 2.11 of the 1988 GR. Such a Rule which purports to take away retrospectively the vested rights of the traders who have established their units in the backward areas based on para 2.11 of the 1988 GR must be held to be bad in law to the extent it is made applicable retrospectively. 40. It was contended on behalf of the Commissioner that the State Legislature has power to make laws with retrospective effect and accordingly Section 41B of the BST Act inserted by the State legisla....