TaxTMI 
TaxTMI 
2006 (12) TMI 462
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....spite the fact that the production of the existing unit and diversified unit are totally different and the existing unit was subsequently sold to a third party, is the issue that arises for our consideration in W. P. Nos. 37042, 40030, 40031 and 44733 of 2002 and 3230, 3231, 3232, 3233, 3234 and 21162 of 2003. II. GOVERNMENT ORDERS THAT ARE RELEVANT TO DECIDE THE CONTROVERSIES Before touching the facts and circumstances pertaining to these two batches of writ petitions, it is apt to refer the Government Orders which are relevant to decide the controversies referred to above, based on which, both the petitioners, viz., India Cements and Hindustan Motors claim the benefit under the deferral of sales tax in the case of India Cements and waiver of sales tax in the case of Hindustan Motors. The Government of Tamil Nadu, with a view to promote industrialisation, introduced an Interest-free Sales Tax Deferral Scheme in G. O. Ms. No. 500, Industries (MIG-II) Department, dated May 14, 1990, as per which the State Industries Promotion Corporation of Tamil Nadu Ltd., the second respondent herein (in short, "SIPCOT") is the authorised agency to receive applications, sanction and ....
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.... any of the Government agencies including Madras Export Processing Zone, Madras Metropolitan Development Authority, the scheme of interest-free sales tax loan/deferral ordered in the Government order first, third and fourth read above is modified as follows: (i) For the existing units undertaking expansion or diversification, deferral of sales tax will be given for nine years and the total amount thus given shall not exceed 80 per cent of the additional investment made in fixed assets. (ii) For the new units, the total amount of deferral of sales tax will be given for nine years to the full extent of the total investment made in fixed assets. (b) The interest-free sales tax deferral scheme is extended to the expansion (Part-I) as well as to the starting of new industries (Part-II) in the other areas also, where this scheme was not in vogue hitherto. The deferral of sales tax for the industries in these areas will be for five years subject to a maximum of 60 per cent of the total investment made in fixed assets in the case of new industries and 50 per cent of the additional investment in fixed assets made in the case of expansion/diversification of the existing industries. (c) ....
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....ear will be deferred/waived within the overall ceiling for which the eligibility certificate issued by the authority. The deferred instalments shall be payable by the assessed units after the completion of the period of deferral together with the sales tax of the current year, without any interest thereon. In case the unit avails the complete deferral/waiver benefit before the completion of specified deferment period of five years or nine years, as the case may be, the unit has to pay the normal sales tax immediately after the date of full availment of eligible deferral amount. The assessee of the unit for which the sales tax has been waived will start paying the current sales tax dues after the comple tion of the waiver period or immediately after the full availment of eligible waiver amount, whichever is earlier. However, the deferred amount of sales tax for five years or nine years, as the case may be, has to be paid after the completion of the deferral period along with the current dues, i.e., in the case of deferral of nine years the amount deferred in the first year being payable along with the sales tax due in the 10th year, the amount deferred in the second year being payab....
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....case of small-scale industries and by the SIPCOT in the case of medium and major industries. In the same G. O. P. No. 92, Commercial Taxes and Religious Endowments, dated February 22, 1991, in respect of the existing industries in the abovesaid most backward taluks and in three industrial complexes, the Government granted remission of sales tax on the sale of products manufactured by the capacity created by expansion/diversification only for a period of five years from the date of commencement of production on or after May 14, 1990 subject to the ceiling of the total investment made in fixed assets under expansion/diversification subject to the production of eligibility certificate issued by the General Manager, District Industries Centre in the case of small-scale industries and by the SIPCOT in the case of medium and major industries and it is made clear that such remission shall be granted for only one expansion or diversification of the existing unit, if carried out in the same taluk where the original project is located. Similarly, by the same G. O. P. No. 92, Commercial Taxes and Religious Endowments, dated February 22, 1991, the Government granted deferment of payment of sa....
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.... after deducting the quantum of tax under the CST Act for the same period subject to the production of eligibility certificate issued by the General Manager, District Industries Centre in the case of small-scale industries and by the SIPCOT in the case of medium and major industries and on condition that the tax so deferred shall be paid after the completion of the deferral period along with the tax assessed for that year and that the deferral of sales tax shall be eligible for only one expansion/diversification of the existing unit, if carried out in the same taluk where the original project is located. Thereafter, by notification in G. O. P. No. 396, Commercial Taxes and Religious Endowments, dated September 10, 1991, the Government in exercise of the powers conferred by sub-section (1) of section 17A of the TNGST Act granted deferral of payment of tax payable by any industry having an investment of Rs. 100 crores and above to be set up anywhere in Tamil Nadu on the sale of the products manufactured by the industry for a period of twelve years from the date of commencement of production on or after July 18, 1991 up to a ceiling of 100 per cent of the value of fixed assets after d....
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....ated in the agreement form in respect of deferral of sales tax. (iii) It may be prescribed that the assessing officers must keep a close watch over the performance of the industry and foreclose the scheme and enforce the recovery of the tax assessed for all the years covered by the scheme if the monthly returns or check of accounts during assessment or otherwise show that the industry has stopped production in excess of the permitted period. (iv) Special arrangements may be made in the offices of the Commissioner of Commercial Taxes and Deputy Commissioners to ensure that the relief given in each case is entirely in terms of the eligibility certificate issued, that the terms and conditions are complied with and recoveries when due, strictly enforced. (v) The benefit of deferral of sales tax may be restricted to diversification only where the end-products can be distinguished from the products of the old unit." (emphasis(1) supplied) Then, the Government, by G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994, in order to protect the revenue and also to increase the production level of industries which propose to avail the concessio....
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.... revenue of the Commercial Taxes Department before the expansion, it was considered that the above conditions, i.e., fixing of base production volume and base sales volume may be insisted in all industries seeking the benefits of deferral of sales tax to their taking up of expansion projects. The Special Commissioner and Commissioner of Commercial Taxes, Madras has now reported that while issuing eligibility certificate for expansion cases, SIPCOT alone adds a clause that past revenue before the expansion should be protected as other organisations, particularly District Industries Centre, do not seem to be aware of this system and issue very open-ended eligibility certificates, which often cause problems to the Commercial Taxes Department, especially when some industries tend to take on more and more of the manufacture in the expanded units and decrease it in the old units. Accordingly, Commissioner of Commercial Taxes, for the reason stated above, has recommended that the principles laid down for Ashok Leyland Limited, referred to in Government Letter Ms. No. 113, Industries dated March 15, 1993, may be adopted as general principles for all expansion cases and therefore he has sug....
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....ted March 13, 1996, March 4, 1997 and September 24, 1997 proposed to set up an expanded unit at Dalavoi village, Sendurai taluk to avail the benefit of Sales tax Deferral Scheme under G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 and addressed to the SIPCOT for the issue of eligibility certificate and made an application to that effect in prescribed form. The SIPCOT issued an eligibility certificate under Interest-free Sales Tax Deferral Scheme/Expansion on February 13, 1998 which reads as follows: "STATE INDUSTRIES PROMOTION CORPORATION OF TAMIL NADU LIMITED, 19A, RUKMANI LAKSHMIPATHY ROAD, EGMORE, Chennai -- 600 008 Eligibility Certificate Under IFST Deferral Scheme--Expn. Eligibility Certificate No.: 4/XII/D/E. Date of issue: 13-2-1998 This eligibility certificate is hereby granted to M/s. The India Cements Ltd., located at Dalavoi Village, Sendurai Taluk, Perambalur District, manufacturing cement under the new Interest-free Sales Tax Deferral Scheme of the Government of Tamil Nadu. 2.. Subject to the conditions mentioned in the sales tax deferral scheme and those mentioned hereinafter, the holder of this certificate s....
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....ion, the base figure would be the highest of the volume of production/sale in the company in any one of the years during the last 3 years. Till reaching the volume of production/ sale specified earlier the company would continue to pay tax and any liability in excess of the production/sale specified above alone will be eligible for deferment. The highest production/sales achieved by the company prior to the proposed expansion/diversification in the last three years is: Portland cement -- production in lakh tonnes -- 25.86 (95-96)/ S.T.O. -- Rs. 72,882 lakhs (1996-97). Production details: Cement plant Location Quantity in lakh tonnes Sankar Nagar Tamil Nadu 10.60 Sankari Durg Tamil Nadu 6.09 Chilamkur Andhra Pradesh 9.21 25.86 Sales turnover details: Cement plant location Sales within Tamil Nadu Sales outside Tamil Nadu Rs. in lakh Total Sankar Nagar, Tamil Nadu 10,926 19,970 30,896 Sankari Durg, Tamil Nadu 7,731 8,644 16,375 Chilamkur, Andhra Pradesh 13,326 11,923 25,249 Add price 31,983 40,537 72,520 Difference5.4. The subject company has furnished the production/turnover details of its group companies vide its letter dated September 24, 362....
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.... India Cements Ltd., having their registered office at Dhun Building, 827, Anna Salai, Chennai 600 002 represented by Sri. N. Srinivasan, Managing Director, on the second part; both parties herein shall include their respective successors, legal representatives, executors, administrators, nominees, assignees, etc. Whereas M/s. The India Cements Ltd., have established a new industrial unit at Dalavoi Village, Sendurai Taluk, Perambalur District, a notified most backward block of Senthurai and have commenced production of their products at the new unit. 1. Here italicised. Whereas the Government have by their G. O. P. No. 92 Commercial Taxes and Religious Endowments Departments dated February 22, 1991, directed that deferral of sales tax will be given for new industries as well as existing industries while undertaking expansion/ diversification of units for a period of 12 years and the total amount thus given deferral shall not exceed the total investments made in fixed assets in each new industries or in such new unit and under expansion/diversification of the amount specified in the eligibility certificate issued by the General Manager, District Industries Centre/ SIPCOT whiche....
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....r expansion/diversification or the amount specified in the eligibility certificate issued by the District Industries Centre/SIPCOT, whichever is lower. 3.. The party of the second part agrees to repay the Government loan in instalments: The first year's loan in the thirteenth year along with tax payable for the corresponding months of (on or before 20th of the month) that year, the second year's loan in the fourteenth year April month for April along with tax payable for the corresponding months of that year, and so on as per G. O. P. No. 92, Commercial Taxes and Religious Endowments Department dated January 22, 1991 read with G. O. Ms. No. 48, Commercial Taxes and Religious Endowments Department, dated February 11, 1994. In case of default in payment of Government loan, the party of the second part undertake that: (a) in the case of partnership firm, the movable and immovable properties of the partners; (b) in the case of proprietary concern, the movable and immovable properties of the proprietors; and (c) in the case of limited companies, the movable and immovable properties of the company shall be liable to be attached/proceeded towards the realisation of outstand....
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....vailed sales tax concessions previously to any other person. (b) In the case of any specific proof to the effect that the promoter/ partner/director of the firm or company has grossly and habitually defaulted payment of tax or attempted to derail the tax recovery proceedings by changing the constitution of the existing firm/company or by transferring of fixed assets to another, etc. while doing business now or earlier in any other name, Commercial Tax Department has full rights to cancel the proceedings and agreement that has been entered under interest-free sales tax deferral/waiver scheme and to recall the sales tax already deferred in one lump sum from the beneficiary. 11.. In case of default of any of the conditions mentioned in paras 3, 4, 5, 6, 7, 8, 9, 10(a) and 10(b) above, the deferral thus granted shall be cancelled for the entire period for which the same was granted. In default of repayment of Government loan or cancellation the deferral facility for violation of any of the conditions mentioned in paras 3, 4, 5, 6, 7, 8, 9, 10(a) and 10(b) above, such Government loan, tax and interest due thereon, shall be recoverable in such manner as specified under the Revenue Rec....
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....ed or manufactures any other goods under the guise of the products for which the certificate has been issued or if the Commercial Taxes Department is of the opinion that the company is not manufacturing the product for which the eligibility certificate dated February 13, 1998 has been issued, the eligibility certificate dated February 13, 1998 issued shall stand cancelled and the Commercial Taxes Department shall have the right to demand and collect the tax assessed for all the years covered by the scheme and the company is liable to pay the same in one lumpsum. M/s. India Cements was remitting the sales tax up to the level it reached the base sales volume, viz., the highest of the actual annual sales in the last three years prior to the expansion, stating that they also reached, in the financial year, base production volume, viz., the highest production in the last three years prior to the expansion, and submitted its return claiming the deferral of tax on the sale in excess of the base sales volume. But, the Assistant Commissioner of Commercial Taxes, referring to G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994, the qualifications ....
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....avoi as an expansion (which itself is artificial) the G. O. Ms. No. 119 dated April 13, 1994 would purport to say that the industry (consisting of the base production infrastructure + expansion infrastructure) pays tax up to the base sale volume and enjoys deferral thereafter; and (iii) the new industry, which is a separate industrial undertaking, with the sole investment infrastructure utilities, management and work force already determined, had suffered by treating this as an expansion and even if it were an expansion, logically tax can only be collected on the base sale volume and further sale volume beyond the base volume should be treated as a result of the expansion investment. In the meanwhile, consequent to the erratum issued in notice dated March 21, 2002, the Assistant Commissioner issued a revised notice on March 22, 2002 informing that M/s. India Cements availed deferral before it reached the base production volume which is violative of the conditions laid down in the eligibility certificate and other Government Orders and M/s. India Cements was therefore liable to pay the excess availment of deferral of sales tax to the tune of Rs. 5,873.51 lakhs for the period from 1....
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....as well as the terms and conditions of the agreement dated April 12, 2000 are construed as though the holder of the eligibility certificate would be eligible for the benefit of deferral scheme only if they achieve both BSV/BPV but not otherwise. It is also contended that the benefit of deferral of sales tax scheme conferred by the statutory notifications issued under section 17A of the TNGST Act and section 9(2) of the CST Act cannot be whittled down by the directions issued in G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994, qualifications prescribed in the eligibility certificate dated February 13, 1998 and also the conditions imposed in the consequential agreement dated April 12, 2000, referred to above, as they had been issued exercising the power conferred under article 162 of the Constitution of India, as such executive orders should be subservient to the statutory notifications which gain the status of the authority of law. In any event, no tax can be levied or collected without any authority of law as per article 265 of the Constitution of India, more so after granting the benefit of deferral of sales tax scheme by statutory ....
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....asis(2) supplied) 1. Reported [2006] 143 STC 208 (TNTST). 2. Here italicised. According to the Revenue, the only interpretation that can be given to clause 3(ii) of G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 is that both base production volume and base sales volume should have to be reached before the industry could claim deferral of sales tax. Accepting the arguments of the Revenue, the Tribunal, by common order dated April 19, 2002 held that the scheme contemplates that both base production volume and base sales volume should be achieved before the industry could claim the benefit of deferral of sales tax, that therefore, the industry in whose favour the eligibility certificate was issued would have no right of deferral of sales tax on the date of reaching base sales volume without reaching base production volume or vice versa and that the M/s. India Cements Ltd., having availed the benefit based on the eligibility certificate as per the terms and conditions of the consequential agreement dated April 12, 2000 is bound to comply with the qualifications prescribed in the eligibility certificate dated February 13, 1998 and also t....
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....y Commissioners and Assistant Commissioners shall thoroughly verify all expansion cases and satisfy themselves that taxes have been paid until the BPV/BSV has been achieved. . . . Thus, the Assistant Commissioners shall monitor constantly with reference to each dealer availing deferral that there is no violation of any of the conditions of agreement as detailed in this circular and taxes are correctly paid by original and expansion units." (emphasis(1) supplied) PART B (M/s. Hindustan Motors Waiver of Sales Tax Cases) For the purpose of convenience, the petitioner in W. P. Nos. 37042, 40030, 40031 and 44733 of 2002 and 3230, 3231, 3232, 3233, 3234 and 21162 of 2003 is referred by its name, viz., M/s. Hindustan Motors Limited and the cases are referred to as M/s. Hindustan Motors Limited Waiver of Sales Tax Cases. The brief facts of the case, so far as required to dispose of these petitions, are as under: M/s. Hindustan Motors Ltd., is a registered company. It has two divisions in Tamil Nadu, one at Hosur wherein it manufactures powershift transmissions for earth moving equipments. The second division is at Adhigathur where Hindustan Motors Ltd., is manufacturing Lancer ....
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....wever, be the least of the amounts mentioned in 4.1. and 4.2. below: 4.1. Notional sales tax liability on account of Tamil Nadu general sales tax, Central sales tax, additional sales tax, surcharge and additional surcharge which would have accrued during the period of waiver in favour of Government, but for the waiver on the sales of finished goods manufactured by the unit. 4.2. 100 per cent of the value of initial gross fixed assets, i.e., Rs. 8428.94 lakhs (Rupees eight thousand four hundred and twenty eight lakhs and ninety four thousand only). 5. The period of operation of sales tax waiver scheme shall be within the period of full availment of the eligible amount for five years period, whichever is earlier. During this period of operation, the company shall not collect sales tax on the sales of its manufactured products. 6. The company shall submit periodical reports to the Commercial Tax Department on the extent of sales and sales tax waiver availed from time to time, during the "period of operation" as defined in para 5. 7. After expiry of the period of operation, as defined under para 5, the company shall immediately on further sales, start remitting the appli....
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..../company is liable to pay the same in one lump sum. Nil 13. Violation of any of the conditions in the eligibility certificate and connected Government Orders will result in withdrawal of waiver entirely. Sd/for Managing Director" (Emphasis(1) supplied) Consequently, M/s. Hindustan Motors Ltd., entered into an agreement with the Assistant Commissioner, Commercial Taxes on March 23, 2000, which reads as follows: "WAIVER OF SALES TAX (DEED OF AGREEMENT) 1. Ref.: The Managing Director, SIPCOT Ltd., Chennai -- Eligibility Certificate No. 44/E/W/5 years dated 22.12.98 waiver. This deed of agreement is made at Chennai on the 23rd day of March, Two Thousand between the Government of Tamil Nadu represented by the Assistant Commissioner of Commercial Taxes, Zone VII of the one part; (1)Here italicised. And Thiru/Tvl. HINDUSTAN MOTORS LTD. Having their registered office at 6.B, GST Road, Alandur, Chennai 600 016 represented by Tvl. G. Shyam Sundar, Vice President on the other part; both parties herein shall include their respective successors/legal heirs, legal representatives, executors, administrators, nominees and assignees. Whereas Tvl. HINDUSTAN MOTORS LTD., have (a....
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.... every year. 5.. The party of the second part shall maintain the fixed assets in good condition so that the market value of the assets is maintained from time to time. 6.. The party of the second part shall obtain the permission of the party of the first part before the sale of the fixed assets. 7.. The party of the second part shall furnish to the party of the first part the audited balance sheet and profit and loss account certified by the chartered accountant within six months of the close of the financial year. 8.. The party of the first part reserves the right to cancel or modify any of the above conditions at any time during the period of waiver without any notice. 9.. Any indulgence in malpractice of goods being disguided as manufactured goods then the waiver scheme could be foreclosed by Commercial Taxes Department and the tax assessed for all the years covered by the scheme be recovered in one lump sum. The total cost of fixed assets is Rs. 8428.94 lacs. The sales tax waiver period will be as follows: Waiver period: (1) 1998-1999 (1.10.1998) (1.01.1999) (2) 1999-2000 (3) 2000-2001 (4) 2001-2002 (5) 2002-2003 (30.9.2003) 10.. During the period of waiver, the pa....
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....ary 29, 2001, February 26, 2001 and October 18, 2001. On August 6, 2002, the officials of the Enforcement Wing of the Commercial Taxes Department, during the course of inspection, informed M/s. Hindustan Motors Ltd., that before enjoying the waiver benefit, M/s. Hindustan Motors Ltd., should comply with clause 10 of the eligibility certificate in which base production volume and base sales volume were fixed. M/s. Hindustan Motors Ltd., by way of abundant caution, also filed O.P. No. 866 of 2002 before the Tamil Nadu Taxation Special Tribunal to quash paragraph 10 of the eligibility certificate dated December 22, 1998 as ultra vires the notification in G. O. P. No. 396, dated September 10, 1991 issued under section 17(4) of the TNGST Act. In the meanwhile, a notice dated September 12, 2002 was served on M/s. Hindustan Motors Ltd., stating that M/s. Hindustan Motors Ltd., was granted the benefit of waiver of sales tax for the manufacture of passenger cars based on the eligibility certificate granted by the SIPCOT dated December 22, 1998 pursuant to which M/s. Hindustan Motors Ltd., also entered into an agreement with the Assistant Commissioner, Commercial Taxes on March 23, 2000, ....
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.... dated April 13, 1994 and that G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 is not in conflict with the Sales Tax Waiver Scheme as the Government is well within its power to issue G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 invoking executive power under article 162 of the Constitution of India to levy and collect tax authorised under the provisions of the Sales Tax Act when the holder of the eligibility certificate dated December 22, 1998 failed to comply with the conditions prescribed in the eligibility certificate dated December 22, 1998 and the terms and conditions of the consequential agreement. The abovesaid O.P. Nos. 867, 965, 966 and 1095 of 2002 were heard along with O.P. No. 866 of 2002 by the Taxation Special Tribunal, which, by order dated January 24, 2003, held that since the eligibility certificate dated December 22, 1998 issued to M/s. Hindustan Motors Ltd., and the terms and conditions incorporated in the agreement dated March 23, 2000 entered into between M/s. Hindustan Motors Ltd., and the Zonal Assistant Commissioner are only pursuant to paragraph 3(v) in G. O. Ms.....
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.... Deferral of Sales Tax Scheme governed by a statutory notification issued in G. O. P. No. 92, Commercial Taxes and Religious Endowments, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992 and therefore, the terms prescribed in the eligibility certificate dated February 13, 1998 and the agreement dated April 12, 2000 made in pursuance of the executive order in G. O. Ms. No. 119, Industries (MIG. II) dated April 13, 1994 are all subservient to the statutory rights conferred under the said statutory notifications made in G. O. P. No. 92, Commercial Taxes and Religious Endowments, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992, by exercising the power conferred under section 17A of the TNGST Act and section 9(2) of the CST Act; (iii) as per article 265 of the Constitution of India no tax can be levied or collected without authority of law. Since the M/s. India Cements Ltd., are entitled to the benefit of sales tax deferral scheme by virtue of statutory notifications made in G. O. P. No. 92, Commercial Taxes and Religious Endowments, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992, by exercising the power conferred under s....
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....for the sales made in the financial year in excess of BSV provided the actual production of the industry exceeds the BPV in that year; (vii) even if the word, "when" is read as "after", the M/s. India Cements Ltd., would be eligible for deferral of sales tax on the sales in excess of BSV after the actual production of the industry in the financial year exceeds the BPV and the benefit should date back to the date of reaching the BSV. It is, therefore, contended that the word "when" cannot be construed with reference to the time of an event for claiming the deferral of sales tax, but only with reference to a qualification prescribed for availing the benefit of sales tax deferral. Only by liberal interpretation of clause 3(ii), the object sought to be achieved by the sales tax deferral scheme can be achieved; (viii) the Revenue having given the benefit of deferral of sales tax for 12 years, of course, prescribing certain conditions, with reference to reaching of BPV/BSV, with the object of achieving the highest production and sale of the existing unit in the last three years prior to the commencement of the commercial production in the expansion unit, t....
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....Per contra, Mr. P. S. Raman, learned Additional Advocate-General appearing for the Revenue justifying the demand notices, reiterated the reasons that weighed the Special Tribunal in the order dated April 19, 2002 contends that: (i) G. O. P. No. 92, Commercial Taxes and Religious Endowments, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992 are nothing but the sources of the deferral scheme notified under section 17A of the TNGST Act and section 9(2) of the CST Act. Since the scheme notified under the said G. O. P. No. 92, Commercial Taxes and Religious Endowments, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992 do not provide the manner in which the said scheme has to be implemented, the Government is well within its executive power through G.O. Ms. No. 119, Industries (MIG.II) dated April 13, 1994 invoking the power conferred under article 162 of the Constitution of India to prescribe the method and also to provide the machinery with suitable directions and the procedure to be followed thereunder by the authorised agency, in the instant case, SIPCOT, for implementing the scheme; (ii) the contention of the M/s. India Cements Ltd., that ....
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.... said clause which is reflected in the eligibility certificate and the agreement entered into by the petitioner is, that both the base production volume and base sale volume should have to be reached before the petitioner could claim deferral of sales tax. In the alternative it means that if the base sale volume had been reached arlier, but the base production volume had not been reached, the petitioner will not be entitled to get the deferral facility. It is only after the base production volume is reached that the right of deferral accrues. Vice-versa, if the base production volume had been reached later, it is only after the base sale volume is reached that the petitioner will be entitled to get the deferral facility. This, in effect, means whichever condition is reached later then alone the petitioner gets the right to defer the payment of sales tax", as the said view of the Special Tribunal was confirmed by the division Bench of this court by order dated December 5, 2001 in W. P. No. 18199 of 1999. Mr. Devaraj, learned counsel appearing for the SIPCOT while adopting the arguments of Mr. P. S. Raman, learned Additional Advocate-General appearing for the Revenue, also con....
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.... to achieve the object intended under the waiver scheme; (iii) the G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 as well as the qualifications prescribed in the eligibility certificate dated December 22, 1998 as well as the terms and conditions provided in the agreement dated March 23, 2000 are not applicable to the diversification unit of the Hindustan Motors Limited for the reason that the directions imposed in clause 3(i) to 3(v) in G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 are all intended only to the expansion units, which seek the deferral of sales tax and not to the diversified units which seeks benefit of waiver of sales tax, merely because G. O. P. No. 92, Commercial Taxes and Religious Endowments, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992 issued under section 17(4) of the TNGST Act and section 8(5) of the CST Act contemplate that the diversified unit should get the eligibility certificate from the SIPCOT and clause 3(v) of G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 provides that in the said eli....
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.... machinery for implementing the waiver scheme, even though the said scheme is statutory in character in view of article 265 of the Constitution of India, the Government is well within its power to pass independent executive order in G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 invoking article 162 of the Constitution of India prescribing the method and machinery imposing necessary directions for the same. Consequently, the directions mentioned in the eligibility certificate dated December 22, 1998 obtained from SIPCOT as per G. O. P. No. 92, Commercial Taxes and Religious Endowments, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992 should be complied with as per the directions prescribed in G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994. After having applied for such eligibility certificate and submitting themselves for the qualifications prescribed in the eligibility certificate which had attained a statutory character on account of G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 issued under the executive power of the G....
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....le adopting the arguments of Mr. P. S. Raman, learned Additional Advocate-General appearing for the Revenue, also contends that the eligibility certificate derives the statutory status by virtue of G. O. Ms. No. 119 Industries (MIG-I) dated April 13, 1994 read with G. O. P. No. 92, Commercial Taxes and Religious Endowments dated February 22, 1991 and G. O. Ms. No. 376 dated October 27, 1992 and any violation of the qualifications prescribed in the eligibility certificates would disentitle the assessee to avail the benefits of the Sales Tax Waiver Scheme. VI -- COMMON CONTENTIONS AS TO THE INTEREST PAYABLE BY EITHER SIDES, VIZ., DEALER OR REVENUE Mr. C. Natarajan, learned Senior Counsel appearing for M/s. India Cements in India Cements deferral of sales tax cases and Mr. Sriprasath, learned counsel appearing for M/s. Hindustan Motors Limited in Hindustan Motors Limited waiver of sales tax cases as well as Mr. P. S. Raman, learned Additional Advocate-General appearing for the Revenue, submitted that the dealer as well as the Revenue would forego the interest on the tax payable by the dealer or on the amount refundable by the Revenue, as the case may be. VII -- CONSIDERATION AND F....
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.... rate of interest or defer or waive the sales tax as a special case for achieving the industrial development and to provide certain tax incentives which are also intended to attain the economic equality in the growth and development. The economic development of the State to bring it into equality with all other States and thereby develop the economic unity of India is one of the major commitments or the goals of the constitutional aspirations of this land. The Government of Tamil Nadu, namely, the 3rd respondent herein, enunciating the above new industrial policy in the national context of economy in transition, have come forward with the constructive incentives such as, sales tax deferral/sales tax waiver invoking the statutory power conferred on them under the relevant statutes, viz., the TNGST Act and the CST Act, in order to create a congenial atmosphere to the industries for stimulating rapid growth of industrialisation in the State, so that the State economy will grow faster and these incentives have been proposed to enhance the competitiveness of the State and also foster the pace of industrialisation in this part of the country. Accordingly, the Government issued statutor....
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....003. For the purpose of clarity, we propose to discuss the contentions made by both the sides, based on the issues that arise supplementary to the above controversies. VII-(B). IS THERE ANY CONFLICT BETWEEN THE PROVISIONS WHICH CONFER JURISDICTION TO GRANT THE BENEFITS OF THE SCHEMES AND THE PROVISIONS WHICH REGULATE THE PROCEDURE FOR THE IMPLEMENTING THE SCHEME: The source for both the schemes, viz., Sales Tax Deferral Scheme and Sales Tax Waiver Scheme is traceable to statutory provisions as the Sales Tax Deferral Scheme is notified in exercise of power conferred under section 17A of the TNGST Act and section 9(2) of the CST Act by way of G. O. P. No. 92, Commercial Taxes and Religious Endowments Department, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992 and the Sales Tax Waiver Scheme is notified in exercise of power conferred under section 17(4) of the TNGST Act and section 8(5) of the CST Act by way of G. O. P. No. 92, Commercial Taxes and Religious Endowments Department, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992. Concededly, both the Government Orders are published in the Gazette as contemplated under section 53(5) of the ....
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....27, 1992 were issued by exercise of statutory power, the same have the authority of law under article 265 of the Constitution of India, because it is a settled law that a notification of the State Government granting exemption, either by the Deferral of Sales Tax Scheme or Waiver of Sales Tax Scheme under the rule-making power conferred on the Government by the State Legislature, is nothing but an exercise of legislative power having authority of law within the meaning of article 265 of the Constitution of India [Video Electronics Pvt. Ltd. v. State of Punjab [1990] 77 STC 82 (SC)]. In this regard, it is apt to refer article 265 of the Constitution of India: "Article 265. Taxes not to be imposed save by authority of law.--No tax shall be levied or collected except by authority of law." The words "levied" and "collected" used in article 265 of the Constitution of India enjoin that at every stage, the process of taxation must be authorised by law, otherwise it lacks jurisdiction. Once such levy and collection of tax is exempted by the very same legislative power, by issuance of notification invoking the rule-making power conferred under the very statute....
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....o a distinction arising between the provision which confers the jurisdiction and the provision which regulates the procedure. While the former is a source of power to grant the exemption, the latter speaks about the method and machinery to implement the scheme and thus, provides a regulatory procedure for the same. Therefore, while G. O. P. No. 92, Commercial Taxes and Religious Endowments Department, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992 are referred to the source of power under the relevant provisions of the statute, viz., section 17A of the TNGST Act and section 9(2) of the CST Act in the case deferral of sales tax and section 17(4) of the TNGST Act and section 8(5) of the CST Act in the case of waiver of sales tax, and confer the jurisdiction on the Government to grant the benefit under the deferral/waiver scheme, the G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 provides the method and machinery and the terms and conditions that could be imposed by way of regulatory procedure and thus, stands on a different plane, but to achieve the same object, viz., to advance productivity by way of industrialisa....
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....FEBRUARY 22, 1991 AND G.O. MS. NO. 376, DATED OCTOBER 27, 1992 AND THE PROVISIONS OF THE REGULATORY PROCEDURE IN G.O. MS. NO. 119, COMMERCIAL TAXES AND RELIGIOUS ENDOWMENTS DEPARTMENT, DATED APRIL 13, 1994 AND THE QUALIFICATION PRESCRIBED IN THE ELIGIBILITY CERTIFICATES AND THE TERMS AND CONDITIONS INCORPORATED IN THE CONSEQUENTIAL AGREEMENTS It is a settled law that fiscal laws must be strictly construed and the words must say what they mean and nothing should be presumed or implied. It is also trite that the principle that fiscal statutes should be strictly construed does not rule out the application of the principle of reasonable construction to give effect to the purpose or intention of any particular provision as apparent from the scheme of the Act, with the assistance of such external aids, as are permissible under law [Shree Sajjan Mills Ltd. v. Commissioner of Income-tax, M. P. Bhopal [1985] 156 ITR 585 (SC); 1986 Tax LR 48]. In order to apply the principle of reasonable construction to give effect to the purpose or intention of the provision, as apparent from the scheme of the Act, the court must endeavour to harmonise the source of the Schemes as well as the regulatory....
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....2, Commercial Taxes and Religious Endowments Department, dated February 22, 1991 and G.O. Ms. No. 376, dated October 27, 1992 do not provide any method and machinery for the implementation of the schemes, the Government is well within its power to pass G.O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 prescribing the method and machinery for the implementation of the schemes. Since G. O. P. No. 92, Commercial Taxes and Religious Endowments Department, dated February 22, 1991 and G.O. Ms. No. 376, dated October 27, 1992 have not prescribed the method and machinery for the implementation of the schemes, it cannot be stated that it occupied the field. Consequently, the contention that, by way of executive order in G.O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 and the eligibility certificates issued pursuant to the said G.O., and the consequential agreements, the benefit conferred under deferral of sales tax scheme or waiver of sales tax scheme is sought to be whittled down stands rejected. On the other hand, by virtue of G.O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dat....
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....t arise as both stand on different plane, independently, of course, to achieve the same object. Hence, to contend that the directions in G.O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994 and the qualifications in the eligibility certificates and the terms and conditions incorporated in the consequential agreements are an inroad into the field occupied by G. O. P. No. 92, Commercial Taxes and Religious Endowments Department, dated February 22, 1991 and G. O. Ms. No. 376, dated October 27, 1992 and that there are conflicts between them is totally illogical and irrational. Consequently, the dealers having by their conduct and agreement elected to comply with the directions in G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994, and the qualifications prescribed in the eligibility certificates and the terms and conditions incorporated in the consequential agreements, with a specific knowledge that any violation thereof would deprive them of the benefit of the respective schemes, and thus, the dealers having approbated are not entitled to reprobate. It is thus inevitable to harmonise the directions giv....
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....evenue of the State, notified certain incentives for deferral or waiver of sales tax on certain conditions including that of obtaining eligibility certificate from the District Industries Centre/SIPCOT, by exercising the statutory power referred to above, with a view to boost industrialisation in both the economically backward and most backward taluks of the State and thereby to improve the productivity of the State, to maintain economic unity, to maintain a sustainable growth in productivity, to enhance gainful employment and to achieve the optimal utilisation of human resources so that the economy, industry, trade and commerce and the standard of living of the subjects of the State would grow and improve in all spheres, unit-wise which would qualify the country to compete globally in the matter of industrialisation. VII-(E) STATUTORY EFFECT OF ELIGIBILITY CERTIFICATES AND AGREEMENTS We have already held that since no room is provided for method and machinery for implementation of the Schemes in G. O. P. No. 92, Commercial Taxes and Religious Endowments Department, dated February 22, 1991 and G.O. Ms. No. 376, dated October 27, 1992, the Government, as an independent authority, ....
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....ng capital is put in by the same group of companies. (v) The base production volume and the base sales volume will have to be worked out and incorporated in the eligibility certificates at the time of issue by SIPCOT and District Industries Centres." (b) Relevant paragraphs of the eligibility certificates: (in the matter of M/s. India Cements -- Eligibility certificate dated February 13, 1998): 5.3. The company is eligible for deferral of sales tax only on the increased volume of production/sale. For the purpose of determining the increased volume of production, the base figure would be the highest of the volume of production/sale in the company in any one of the year during the last 3 years. Till reaching the volume of production/sale specified earlier the company would continue to pay tax and any liability in excess of the production/sale specified above alone will be eligible for deferment. The highest production/sales achieved by the company prior to the proposed expansion/diversification in the last three years is: Portland cement -- production in lakh tonnes -- 25.86 (95-96)/Sales Turnover -- Rs. 72882 lakhs (1996-97). Production details Cement plant Location Quan....
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....lakhs only) interest-free for twelve years from the month in which the holder's unit commenced its commercial production, i.e. from July 1, 1997 to May 31, 2009. (in the matter of M/s. Hindustan Motors Limited -- Agreement dated April 12, 2000): 3. The party of the second part shall not alienate/or dispose or encumber or lease out the said fixed assets until the period of waiver nor shall he/they remove the fixed assets from the unit's premises. Reading both the sources of the scheme, viz., G. O. P. No. 92, Commercial Taxes and Religious Endowments Department, dated February 22, 1991 and G.O. Ms. No. 376, dated October 27, 1992 as well as the regulatory procedure prescribed under G.O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994, the qualifications prescribed in the eligibility certificates and terms and conditions incorporated in the consequential agreements harmoniously, the following resultant features are derived at: (i) The existing industries are at liberty to apply for the benefit of deferral of sales tax or waiver of sales tax either by setting up the expansion units or diversified units in any of the most backward or b....
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....M/s. India Cements Ltd., and para 10 of eligibility certificate dated December 22, 1998 in the case of M/s. Hindustan Motors Limited and the terms and conditions incorporated in the consequential agreements in both the cases, would go to show that the word "when" mentioned in clause 3(ii) of G.O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994, if read as "if" or "after" whatever the case may be, the BPV which is the highest production of the last three years prior to the expansion should be achieved by the holder of the eligibility certificate for every assessment year of the total number of years, viz., 12 years in the case of deferral and 5 years in the case of waiver, besides reaching BSV in that particular year. By insisting that the BSV should also be reached, the revenue of the State gets protected in every assessment year during the entire period of deferral or waiver. To determine the date from which such benefit of deferral or waiver would follow, viz., from the date of reaching BPV or from the date of reaching BSV, or whichever is earlier or whichever is later, in the light of the intention behind the....
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....three others), whereunder the Special Tribunal held as follows: ". . . The only interpretation that could be given to the said clause which is reflected in the eligibility certificate and the agreement entered into by the petitioner is, that both the base production volume and base sale volume should have to be reached before the petitioner could claim deferral of sales tax. In the alternative it means that if the base sale volume had been reached earlier, but the base production volume had not been reached, the petitioner will not be entitled to get the deferral facility. It is only after the base production volume is reached that the right of deferral accrues. Vice-versa, if the base production volume had been reached later, it is only after the base sale volume is reached that the petitioner will be entitled to get the deferral facility. This in effect means whichever condition is reached later then alone the petitioner gets the right to defer the payment of sales tax." No doubt, the order of the Special Tribunal dated November 5, 1999(1), made in O.P. Nos. 1347 and 1348 of 1999 (Madras Cements Ltd. v. State of Tamil Nadu) was confirmed by the division Bench of this ....
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....cided by the division Bench of this court by order dated December 5, 2001, in Madras Cements Ltd. v. State of Tamil Nadu W. P. No. 18199 of 1999 was whether a dealer is entitled to estimate his turnover for the whole year at the beginning of the year and can make a rational estimate of the turnover in excess of base production from month to month and file a return accordingly, and the division Bench negatived the same confirming the earlier order of the Taxation Special Tribunal dated November 5, 1999(1) made in O. P. No. 1347 1. Reported in [2006] 143 STC 208. and 1348 of 1999 (Madras Cements Ltd. v. State of Tamil Nadu). But, the issue in the present batch of cases is whether the holder of eligibility certificate is entitled to the benefit of deferral of sales tax or waiver of sales tax, if he achieves the base production volume in any financial year during the period of deferral or waiver for the sales made in excess of base sales volume, and the said issue was not at all raised in the Madras Cements case before this court and therefore, the order dated December 5, 2001 confirming the order dated November 5, 1999(1) cannot be a binding precedent to decide the issue before us, n....
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....thdrawn only prospectively, but not retrospectively because, such executive circulars are binding on the authorities, as held by the apex court in Keshavji Ravji & Co. v. Commissioner of Income-tax [1990] 183 ITR 1. In Keshavji Ravji and Co. v. Commissioner of Income-tax [1990] 183 ITR 1, while dealing with section 119 of the Income-tax Act, which is pari materia to section 28-A of the Tamil Nadu General Sales Tax Act, the apex court held that the benefits of such circulars to assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. That apart, the clarification dated December 27, 2000 gains a statutory force in view of section 28-A of the Act, which was inserted by the Tamil Nadu Act 60 of 1997, which came into force with effect from November 6, 1997. 8.6.3. In Collector of Central Excise, Patna v. Usha Martin Industries [1998] 111 STC 254, a three-Judge Bench of the apex court held that when the Central Board of Excise and Customs made all others to understand a notification in a particular manner and when the latter have acted accordingly, it is not open to the ....
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....which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue. Similar view was taken by the apex court in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries [2002] 143 ELT 19. 8.6.9. In Commissioner of Customs, Calcutta v. Indian Oil Corporation Ltd. [2006] 144 STC 146 (SC); [2004] 2 RC 586 (SC); [2004] 165 ELT 257, the apex court held that the circulars issued by the Revenue under section 37-B of the Central Excise Act, 1944 (which is pari materia to section 28-A of the Act) are binding primarily on the basis of the language of statutory provisions buttressed by need of adjudicating officers to maintain uniformity in levy of tax/duty throughout the country and not on the basis of promissory estoppel, and that when a circular remains in operation, the Revenue is bound by it and cannot be allowed to plea that it is not valid or that it is contrary to the terms of statute. 8.6.10. It is, therefore, clear that even though the clarification dated November 9, 1989 is executive in nature, the same is binding on the authorities till the concessions given to the petitioner under the clarification were withdrawn, which ....
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.... Since reported in [2006 143 stc 208. in the case of expansion units is equally applicable to diversified units as well as new units for waiver of sales tax, the case of M/s. Hindustan Motors Limited stands on different footing for the reason that the production of the diversified unit is totally different from that of the existing industry, as, the existing unit, viz., earth moving equipment division was manufacturing earth moving equipment and the diversified unit was set up to manufacture Lancer cars. Further, the production and sale of earth moving equipment cannot be equated with that of Lancer cars as fairly conceded by the learned Additional Advocate-General, whereas the SIPCOT adopted the benchmark of existing industry for working out BPV/BSV for the diversified unit which is irrational, unreasonable and arbitrary and therefore, the denial of the benefit of Waiver of Sales Tax Scheme on the ground that M/s. Hindustan Motors Limited has not reached BPV is unjustified. Unfortunately, M/s. Hindustan Motors Limited themselves have chosen to approach SIPCOT on more than one occasion to amend and modify the eligibility certificate issued in their favour without challenging the i....
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.... the diversified unit manufacturing Lancer cars, there is no other option except to treat the diversified unit as new unit, set up for manufacturing a totally new product which is also entitled to the benefit of the waiver Scheme. Therefore, applying the reasonable construction, in order to achieve the object of the Scheme, we are satisfied to hold that M/s. Hindustan Motors Limited is entitled to the benefit permissible for the new unit. But, this court cannot undertake such an exercise invoking article 226 of the Constitution of India, as the power of judicial review conferred under article 226 of the Constitution of India, as repeatedly held by the apex court, is only to decide the error in the decision-making process, but not the decision itself. Of course an argument was advanced on behalf of M/s. Hindustan Motors Limited that on account of the benefit of waiver given to them, they had not collected sales tax from the consumers as per the terms of the eligibility certificate and therefore, they should not be made liable for the sales tax on the basis of the corrigendum for the period during which they had not collected sales tax. But, we are unable to appreciate the same. The....
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....y be, it is apt to refer to the following provisions of the TNGST Act and the CST Act. TNGST Act: Section 24. Payment and recovery of tax.--(1) to (2) . . . (3) On any amount remaining unpaid after the date specified for its payment as referred to in sub-section (1) or in the order permitting payment in instalments, the dealer or person shall pay, in addition to the amount due, interest at one and half per cent per month of such amount for the first three months of default and at two per cent per month of such amount for the subsequent period of default: Provided that if the amount remaining unpaid is less than one hundred rupees and the period of default is not more than a month, no interest shall be paid: Provided further that where a dealer or person has preferred an appeal or revision against any order of assessment or revision of assessment under this Act, the interest payable under this sub-section, in respect of the amount in dispute in the appeal or revision, shall be postponed till the disposal of the appeal or revision, as the case may be, and shall be calculated on the amount that becomes due in accordance with the final order passed on the appeal or revision as if....
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....sition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly: Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, by rules made in this behalf, make necessary provision for all or any of the matters specified in this sub-section. (2-A) All the provisions relating to offences, interest and penalties (including provisions relating to penalties in lieu of prosecution for an offence or in addition to the penalties or punishment for an offence but excluding the provisions relating to matters provided for in sections 10 and 10-A) of the general sales tax law of each State shall, with necessary modifications, apply in relation to the assessment, reassessment, collection and the ....
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....conclusion that would follow is that the dealer will be eligible for sales tax deferral in any financial year if the production exceeds the base production volume for the sales made in that year in excess of the base sales volume or base production volume, whichever is earlier. PART-B (In the matter of Hindustan Motors Limited) Similarly, following the detailed discussions made above, we are of the considered opinion that para 10 of the eligibility certificate is not applicable to M/s. Hindustan Motors Limited as the production in the diversified unit is entirely different from the existing industry which was manufacturing earth moving equipment which industry was subsequently sold to M/s. Caterpillar India Pvt. Ltd., and in such circumstances, the Lancer car plant of M/s. Hindustan Motors Limited should be considered as a new plant, and the Government is therefore, directed to consider the case of M/s. Hindustan Motors Limited in the light of the findings rendered above and taking note of the fact that the dealer has subsequently sold the existing industry, viz., earth moving equipment division to M/s. Caterpillar India Pvt. Ltd., and pass orders on merits within a period of th....