TaxTMI 
TaxTMI 
2014 (6) TMI 829
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....our the respondent No.3, Tata Motors Limited. 2. The case made out by the petitioner in this petition may be summarized as under:- 2.1 The petitioner is a local resident of village Adalaj, situated at the outskirts of the city of Ahmedabad. The petitioner is a practicing Advocate in the District Court at Gandhinagar and is also a Member of the Syndicate of the Gujarat University. 2.2 It is his case that the State Government has, in violation and contravention of its policy decisions, been providing fiscal incentives to the Tata Motors Limited, in the form of a loan to the Tata Motors Limited at 0.1% simple interest per annum for the amounts equal to the gross Value Added Tax and Central Sales Tax payable to the State Government, on the sale of the Nano Car and it's parts and components from the date of commencement of the sale of the Nano car. 2.3 According to the petitioner, in the year 2008, the newly introduced project of the Tata Motors Limited, viz. "Nano project" had to be shifted from Singur, West Bengal to the State of Gujarat. It is his case that only with a view to show the development by way of investment of mega projects by the multinational companies in....
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.... Nano cars all over the country. 3. In such circumstances referred to above, the petitioner has prayed for the following reliefs:- (A). Be pleased to admit and allow the present petition. (B). Be pleased to issue a writ of Mandamus or a writ in nature of Mandamus and/or any other appropriate writ/s, order/s, and/or direction/s and thereby quashing and setting aside Government Resolution dated 01/01/2009 at ANNEXURE-C and further be pleased to quash and set aside the agreement made between State Government and the respondent no. 3 pursuant to the impugned government resolution and further be pleased to declare the sanctioned and disbursed loan bad and void in nature and also direct the State government authority to recover the same from the respondent no. 3. (C). Be pleased to issue a writ of Mandamus or a writ in nature of Mandamus and/or any other appropriate writ/s, order/s, and/or direction/s and thereby declare no exemption, concession or any kind of benefit or relief on and against the collection of VAT and further be pleased to declare the sales of NANO car as a Depot Transfer instead of sale. (D). Pending hearing and final disposal of this petition, be pleased....
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....oject, the minimum investment is Rs.1000 crore and employment generation to 2000 persons is proposed by the department. The Quantum of incentive and type of incentives are also not specifically proposed. It was proposed to give need based assistance to Mega project which have a spin off effect on the employment and industrial development in the State. The sectors of Mega projects proposed are as under:- 1. Auto and auto components 2. Ship building and ship repair 3. Semi conductor fabrication 4. Industries having a Nano technology application 5. Maintenance, repair and overhaul (MRO) hub for air craft The proposed evaluation criteria of Mega projects are as under:- 1. It should be a manufacturing unit. 2. The project should envisage the use of high-end State-of-the art/ cutting edge technology. 3. It should meet the criteria of capital investment of Rs.1000 crore and employment generation of 2000 persons. 4. It should have a proven multiplier effect. 5. It should add to skill formation and capacity building. It is a fact that Gujarat has a strong engineering base and number of engineering units, mainly in Micro Small and Medium Enterprise (MSM....
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....terest Litigation, which is not in public interest and intended only for media attention and publicity. Consequently, Special Civil Application is dismissed. However, in the facts of the case, we are not awarding any costs." (3). SCA No. 15993 of 2008:- "6. Even so, having regard to the fact that the petitioners have been residing on the land in question for quite some time and that the petitioners' children are studying in the primary school at Northkotpura which primary school is being run by the State Government and the Collector, Ahmedabad, we are inclined to direct the State authorities to continue to run the primary school at Northkotpura till the end of the current academic year and to permit the petitioners to occupy their residential accommodation on the land in question till the end of the current academic year. However, these benefits shall be extended to only those petitioners who file an undertaking before this Court by 30/11/2009 stating that they will handover vacant and peaceful possession of the land in question at the end of the academic year 2009-10, that is, 30th April, 2010 and that they will not induct any other persons in the temporary accommodation bei....
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....en less incentives, compared to TATA Nano Project. These companies were offered remission of VAT+ CST to the amount equal to the 100% of fixed capital investment made by the company or 15 years whichever is earlier. Tata Nano Project being the first large automobile project in the State, more incentives were offered compared to other Automobile projects. Automobile industries are non polluting industry. After the publication of white paper by GOI in 2000, the Government of India has published a report on Automotive Mission 2006-2016 for the development of Indian Automotive Industries. The Government of India, Ministry of Heavy Industries and public enterprise had prepared the report on automotive mission 2006-2016 for the development of Indian Automotive Industries, in which various interventions from States were recommended by the Ministry in its report. Under the said intervention, the Ministry has suggested that the manufactures of automobile company shall be supported by Tax Holiday, one-stop-clearance, Tax deduction of 100% of export profit etc. The copy of the chapter 5 (Page 32) of report in which various interventions recommended, is annexed herewith (Annexure-R1). Thus,....
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....ore since January, 2009 i.e. after the coming of Nano project in Sanand. At the same time, the Government has also promoted the Micro, Small and Medium Enterprise (MSME) Industrial units. The year wise data are given as under:- Year No. of MSME units Investment (Rs. In Lacs) Employment 2006-07 4065 316236.40 75424 2007-08 12240 845126.59 191599 2008-09 16482 828134.98 235874 2009-10 17543 859131.23 210451 2010-11 20241 971427.93 210395 2011-12 31445 1301568.67 257953 2012-13 35510 1447443.23 244362 Total 137526 6569069.03 1426058 The Tata Nano Project at Sanand, Dist. Ahmedabad started production in April, 2010. Thereafter, MSME units registered only in Ahmedabad District are as under:- Year No. of MSME units Investment (Rs. In Lacs) Employment Generated 2006-07 849 47884.35 12900 2007-08 2239 129914.23 35321 2008-09 3713 157646.86 46036 2009-10 5704 284809.81 49474 2010-11 6762 289253.26 51545 2011-12 11445 456066.98 75008 2012-13 15559 617590.16 88395 Total 46271 1983....
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.... released proportionate loan as per G.R. dated 01/01/2009. The loan is to be disbursed to the company as per the Government Resolution dated 01/01/2009 to the extent of Gross Value Added Tax paid by the Company. As per the record of commercial Tax Commissioner Office, the company has paid Rs.382.00 Crore VAT up to 31/03/2013. Industries Commissionerate has paid Rs.273.45 Crore of loans paid to the company as per para 1 of the G.R. dated 01/01/2009. The meeting of Executive Committee was held on 30/03/2013, is as per para 8 of the G.R. dated 01/01/2009. Industries Commissioner is a Chairman of the said committee and chief secretary is not a member of the committee. The loan is paid to the company as per the para 1 of the Government Resolution dated 01/01/2009. Therefore, there is no violation of the contravention of the policy. The company has sold car to its distribution company in Gujarat and company has paid the amount of Rs.382.00 crore VAT to the State Government. As stated earlier, the loan given to the company for amount equal to the gross value added tax paid (VAT) and Central Sales Tax (CST) payable to Government of Gujarat is as per para 1 of the resolution. The s....
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....esults into development of incidental industrial activities in small scale and medium scale industries. It also results into further development of service industries like banking, hospitality and such other industries. This development overall contributes to the growth of society, State and nation. It is for these reasons that the State of Gujarat is a leading contributor to the Central Government in terms of direct and indirect tax of nation. Considering all these aspects it is respectfully submitted that the petition is devoid of any substance and merits." 5. Stance of the respondent No.3, Tata Motors Limited: An affidavit in reply has been filed by one Hemant Vasudev Kulkarni, Plant Head, Ahmedabad, on behalf of the respondent No.3, Tata Motors Limited. The stance of the respondent No.3 may be summarized thus: The petitioner has no locus standi to file the present petition under Article 226 of the Constitution of India behind the veil of public interest litigation. No real and genuine public interest is espoused in the petition and in such circumstances, the petition is required to be dismissed with exemplary costs. The petition suffers from gross delay and lache....
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.... has claimed himself to be a practicing advocate and a syndicate member of the Gujarat University. In such circumstances, it was incumbent and mandatory on the part of the petitioner in a public interest litigation to conduct due and proper inquiry and place before the Court all the relevant facts, documents and information. Had this disclosure been made, there would have been no cause of action available to the petitioner. That the petitioner, by alleging that the respondent no. 1 is disbursing the amounts by way of loan against the payment of VAT, is seeking to give an impression as if the respondent no. 1 is giving any deferment of VAT payment or any VAT incentives or concessions to the respondent no. 3. The said averments/ allegations are wrong and incorrect. In fact, the respondent no. 1 by its resolution dated 01/01/2009 has agreed to provide industrial promotion assistance in the from of repayable loan which would be equivalent to the gross VAT paid on the sale of Nano Cars and its parts and components from the date of the commencement of the sale of Nano Cars by the respondent no. 3. The terms and conditions for providing such industrial promotion assistance to the respo....
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....lier, in March, 2008 as a wholly owned subsidiary of the respondent no. 3 to look after the outbound logistics needs of the respondent no. 3 at various locations around the country and for various kinds of vehicles including commercial vehicles and provide sales and finance support to its dealers and sales team and it was but natural for respondent no. 3 to entrust the distribution of vehicles manufactured at Sanand as well to TML Distribution Company Limited. That the wholly owned subsidiary of the respondent no. 3 was established to accomplish the aforesaid objectives. The Gujarat VAT Act prescribes the circumstances under which a sale can be made on which VAT can be charged. All sales made and VAT charged for the cars produced at Sanand have been in clear compliance with the provisions of the Gujarat VAT Act and tax has been deposited as per the provisions of the said Act. To term such sales as fictitious or as a misuse or abuse is wholly incorrect. Sale of cars made within the State of Gujarat and then dispatched as per the provisions of the Gujarat VAT Act and/or Central Sales Tax Act is well recognized and in line with the widely accepted trade practices in this regard. The r....
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....untry by such wholly owned subsidiary company. According to Mr. Oza, such modus operandi is with a view to claim larger amount of loan from the State Government by showing fictitious sales figure within the State of Gujarat, which in fact, should be the sales figure of the car sold at different places all over the country. Mr. Oza submitted that the special favour shown to the respondent No.3 by the State Government smacks of lack of bonafide and by providing such incentive, the State Government is not gaining anything out of the same. Mr. Oza prays that there being merit in this petition, the same deserves consideration and the reliefs prayed for in this petition may be granted. 7. Submissions on behalf of the respondent No.1, State of Gujarat: Mr. P.K. Jani, the learned Government Pleader vehemently opposes this petition and submits that the petition is lacking in bonafide and deserves to be rejected solely on such ground. Mr. Jani submitted that in the past also, many petitions in public interest were filed to stall the project of the respondent No.3, and all those petitions were rejected with costs. Mr. Jani submitted that the details of the petitions filed in the past....
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....ich has been challenged, is a part of the Industrial Policy, 2009. Mr. Thakore submitted that the principal contention canvassed on behalf of the petitioner that the Government is disbursing the loan amount in favour of his client against the payment of VAT, which amounts to refund of tax, is devoid of any merit. According to Mr. Thakore, the Government, vide it's Resolution dated 1st January, 2009, has agreed to provide industrial promotional assistance in the form of a repayable loan, which would be equivalent to the gross VAT paid on the sale of the Nano cars and its parts and components from the date of the commencement of the sale of Nano cars by his client. Mr. Thakore submitted that VAT is only a measure applied by the State to ensure that the financial assistance disbursed is in line with the production achieved and nothing more than that. Mr. Thakore also refuted the allegations levelled by the petitioner that his client has floated its own subsidiary in Gujarat and is effecting sales to its subsidiary, which is impermissible under the Motor Vehicles Act, 1988, and also amounts to paying VAT in the State of Gujarat, resulting in higher entitlement of loan. Mr. Thako....
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.... (x) That before taking any action in public interest the Court must be satisfied that its forum was not being misused by any unscrupulous litigant, politicians, busy body or persons or groups with mala fide objective of either for vindication of their personal grievance or by resorting to black-mailing or considerations extraneous to public interest. 11. In the case of Shri Sachidanand Pandey Vs. State of West Bengal, reported in AIR 1987 SC 1109, the Supreme Court observed as follows :- "Today public spirited litigants rush to file cases in profusion under this attractive name. They must inspire confidence in Courts and among the public. They must be above suspicion. Public Interest Litigation has now come to stay. But one is led to think that it poses a threat to Courts and public alike. Such cases are now filed without any rhyme or reason. It is therefore necessary to lay down, clear guidelines and to outline the correct parameters for entertainment of such petitions. If Courts do not restrict the free flow of such cases in the name of Public Interest Litigation, the traditional litigation will suffer and the Courts of law, instead of dispensing justice, will have to ta....
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.... directions in PIL. 180. We have carefully considered the facts of the present case. We have also examined the law declared by this Court and other Courts in a number of judgments. In order to preserve the purity and sanctity of the PIL, it has become imperative to issue the following directions: (1) The Court must encourage genuine and bonafide PIL and effectively discourage and curb the PIL filed for extraneous consideration. (2) Instead of every individual judge devising his own procedure for dealing with the Public Interest Litigation, it would be appropriate for each High Court to properly formulates rules for encouraging the genuine PIL and discouraging the PIL filed with oblique motives. Consequently, we request that the High Courts who have not yet framed the rules, should frame the rules within three months. The Registrar General of each High Court is directed to the Secretary General of this Court immediately thereafter. (3) The Courts should prima-facie verify the credentials of the petitioner before entertaining a PIL. (4) The Courts should be prima-facie satisfied regarding the correctness of the contents of the petition before entertaining petition. ....
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....on of loan to the Tata Motors Limited for the Nano car project is the subject matter of this petition, we deem it necessary to look into the resolution in details. The preamble of the Resolution reads as under:- "Preamble:- For more than three decades, Gujarat is the preferred destination for investment in almost all industrial sectors, barring a few. As a result of the proactive role of the State Government to attract investments, number of entrepreneurs/ industrial houses are selecting the State as a destination of choice for investments in the sectors of Textile, Gems and Jewellary, Chemicals and Petrochemicals, Pharmaceuticals and Drugs, Steel, Cement, Engineering among others. However, the State is yet to attract good investment in the Automobile and Auto ancillary sector. The auto sector has strong presence in other States like Maharashtra, Tamil Nadu and outskirts of Delhi State, where as Gujarat has only one car project. Though Gujarat has a strong engineering base, and number of engineering units, mainly in the MSME Sector, are engaged in the supply of auto components as OEMs to auto manufacturers, no major player has set up any unit in the State during recent pas....
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....January, 2009. 16. We shall now look into the few salient features of the Resolution dated 1st January, 2009. "1. Type of Loan Government of Gujarat (GoG) will provide fiscal incentives to TML in the form of a loan to TML at 0.1% simple interest per annum for amounts equal to the gross Value Added Tax (VAT) and Central Sales Tax (CST) payable to the GoG (or an equivalent Goods and Services Tax (GST) or any other similar law for the levy of tax in Gujarat, on sale and purchase of goods, as and when introduced), on the sale of the Nano car and its parts and components from the date of commencement of the sale of the Nano car. 2. Quantum of Loan: i. The maximum loan amount will be equal to: (a) 330% of the "TML Phase I Investment" or (b) such amount as has been disbursed to TML by the Govt. till the 20th year from the date of commencement of the sale of the "Nano"; whichever is lower. However overall amount of loan shall in no case exceed the gross amount of tax paid to the GoG in the 20 year period under above mentioned laws. "TML Phase I Investment" means an amount based on fixed Capital Investment as set out in Schedule I attached hereto. As at present it is an es....
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....en GoG and TML, on the basis of approval of an Executive Committee. Separate account will be maintained by IC office for loan amount released to TML. A copy of the order releasing the loan amount will be sent to CCT, IMD and FD in addition to AG and other relevant offices. 7. High Level Committee: The High Level Committee means the committee constituted under Govt. Resolution No. MIS-102008-55-I dated 01/01/2009 of Industries and Mines Dept. Govt. of Gujarat. 9. Repayment This loan will be repayable in monthly installments stating from the First month of 21st Year (from the date of drawdown of such loan amount) of the commencement of first sale of the "Nano". The loan amount availed in the first month of the first year will be repaid in the first month of the 21st year along with interest and the loan amount availed in the second month fo the first year will be repaid in the second month of the 21st year along with interest and so on. The repayment will be along with the interest amount for that amount of principal. 12. Other Conditions:- i. TML will set up a Plant with the capacity to manufacture approximately 2,50,000 Nano cars per annum pursuant to TML Phase....
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....t the end of the farmers whose lands were acquired by the Government for the project, and due to political unrest, the respondent No.3 had to wind up the project at Singur. Later on, they started negotiations with the Government of Gujarat and ultimately, the State Government allotted land in favour of the respondent No.3 at Sanand, Dist. Ahmedabad, for the project of manufacturing of Nano car. 18. It also appears from the materials on record that no sooner had the Government of Gujarat decided to allot the land in favour of the respondent No.3, than various public interest litigations were filed before this Court on the premise that the Government should not allot such a huge parcel of land in favour of the respondent No.3, as it would amount to distributing the natural resources, which belongs to the people. However, it appears that all those petitions filed in the public interest were rejected with costs. Thus, so far as the issue with regard to the allotment of land and the set-up of the project at Sanand is concerned, was set at rest by this Court with the dismissal of all petitions filed in the public interest. Long thereafter, i.e. almost after a period of four years, the....
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....y of 20 years. This is evident from Clause 2 (vii) of the Resolution dated 1st January, 2009 referred to above. 24. It has also been brought to our notice that such a provision of loan dependent upon the recovery of VAT is found in various other incentive policies of different States. We have been taken through the Government of Haryana Industrial Policy, 2005; Orissa Industrial Policy, 2007; State of Tamil Nadu Ultra Mega Integrated Automobile Project Policy; State of Andhra Pradesh Industrial Investment Promotion Policy, 2010- 15; Bihar Industrial Incentive Policy, 2011 and the West Bengal State Support for Industries Scheme, 2008. In all the above referred policies of the different State Governments, we found such incentive being provided to the industries. 25. We are also not impressed by the submission of Mr. Oza that the incentive policy of the State Government is being misused by the respondent No.3 by showing the sales first to its wholly owned subsidiary company in Gujarat and thereafter, the subsidiary company effecting the sales to the different dealers of the respondent No.3 all over the country. According to Mr. Oza, this is impermissible under the Motor Vehicles....
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....e. 30. In this context, we may quote with profit the decision of the Supreme Court in N.D Jayal and ors. Vs. UOI, reported in (2004) 9 SCC 362, wherein the Supreme Court made the following observations, which are worth noting:- "10. Once such a considered decision is taken, the proper execution of the same should be undertaken expeditiously. It is for the Government to decide how to do its job. When it has put a system in place for the execution of the project and such a system cannot be said to be arbitrary, then the only role which the Court has to play is to ensure that the system works in the manner it was envisaged. It is made clear in that decision that the questions whether to have an infrastructural project or not and what is the type of project to be undertaken and how it has to be executed, are part of policy-making process and the Courts are ill-equipped to adjudicate on a policy decision so undertaken. However, a note of caution was struck that the Courts have a duty to see that in the undertaking of a decision, no law is violated and people's fundamental rights as guaranteed under the Constitution are not transgressed upon except to the extent permissible und....
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.... by the State Government, the appellant company approached the Government and expressed its interest in setting up Vanaspati manufacturing unit in the State. The appellant purchased the land and various other material at a cost of Rs. 15 lac and had also placed an order for purchase of plant and machinery of value of Rs. 35 lac. Even rules were framed by sanctioning of the President of India, which provided for refund of sales and purchase tax to new and expanding industries. Thereafter, the Government, all of a sudden, changed its policy, much to the prejudice of the appellant. The sudden change of the policy declared by the Government was challenged before the High Court. The learned Single Judge of the High Court directed the State Government to refund the sales-tax and interstate Sales-tax. The Government challenged the order passed by the learned Single Judge before the Division Bench, by way of a Letters Patent Appeal, and the Division Bench of the High Court, exercising jurisdiction under Letters Patent, set aside the order passed by the learned Single Judge, directing refund of sales-tax. The matter was carried by the company before the Supreme Court. Before the Supreme Cou....
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....re of the tax' (Halsbury's Laws of England, Vol. 52, paragraph 20.04). Therefore even a legislature, much less government, cannot enact a law or issue an order or agree to refund the tax realised by it from people in exercise of its sovereign powers, except when the levy or realisation is contrary to a law validly enacted. A promise or agreement to refund tax which is due under the Act and realised in accordance with law would be a fraud on the Constitution and breach of faith of the people. Taxes like sales tax are paid even by a poor man irrespective of his savings with a sense of participation in growth of national economy and development of the State. Its utilization by way of refund not to the payer but to a private person, a manufacturer, as an inducement to set up its unit in the State would be breach of trust of the people amounting to deception under law. 11. Exemption from tax to encourage industrialization should not be confused with refund of tax. They are two different legal and distinct concepts. An exemption is a concession allowed to a class or individual from general burden for valid and justifiable reason. For instance tax holiday or concession to new or expand....
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....h to the Constitution and the law. Realisation of tax through State mechanism for sake of paying it to a private person directly or indirectly is impermissible under Constitutional scheme. The law does not permit it nor equity can countenance it. The scheme of refund of sales tax was thus incapable of being enforced in a court of law. 13. Fallacy of such constitutionally inhibited policy, sacrificing public interest resulting in illegal private enrichment is exposed by claim of refund for nearly Rs. 2 crore, for a period of three years, only, when total investment in establishing the unit was Rs. 1.5 crore, Levy of tax to raise revenue for promoting economic growth of the State reduced itself in enhancing (sic to) the profit margin of the manufacturer and the sales tax stood converted into income of the appellant. Such contrivance of law even though bona fide is legally unenforceable." 36. In our opinion, the decision of the Supreme Court in Amrit Banaspati Co.Ltd. (supra) has no application worth the name, so far as the case at hand is concerned. In the said case before the Supreme Court, the policy of the State Government was to refund the sales-tax which would be paid by t....