TaxTMI 
TaxTMI 
2014 (6) TMI 829
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....ed. 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 the various sectors, the Government decided to gi....
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.... 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 to stay and suspend implementation, execution and operation of the ....
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....s 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 (MSME) sector are supplier of auto components as Original Equipment Manufacturer (OEM) to auto manufacturers. Though lar....
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....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 being occupied by them. In case of only those petitioners who file such undertakings before this Court, in respect of the accommodat....
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....t 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, Government of India has also favored incentives for the development of automobile industries in the States. As mentioned earlier, the exercise of finalization of....
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....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 1983165.69 358679 This shows sharp rise during two years. After the year 2010, the State government had discontinued to give VAT incentives to the large Industrial Unit (Having investment of Rs.10 Crore or more in Plant and Machinery) but continued to support micro small and medium industries by way of 5% interest....
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....id 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 scheme of loan is based on VAT plus CST payable by the company on Sales of Nano Car. If the Tata Motors sells car to distribution company or any other dealers in the State, then Tata Motors has to pay VAT on sells of such cars. Subsequently, these cars are sold outside the Gujarat by the marketing company or dealers, the VAT paid is refunded to them is as per the VAT....
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....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 laches. By way of the present petition, the petitioner seeks to challenge the resolution dated 01/01/2009 issued by the respondent no. 1. Passing of the aforesaid resolution is within the personal knowledge of the petitioner, as claimed by him in the petition. Further, based on the resolution passed by the respondent no. 1, the respondent no. 3 has invested huge sum of money for its project i....
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....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 respondent no. 3 is already mentioned in the resolution dated 01/01/2009 and such industrial promotion assistance in the form of loan is neither new nor uncommon. VAT is only a measure applied by the State to ensure that the financial assistance disbursed is in line with the production achieved and not more. That many States, under their respective policies, have announced industrial promotion as....
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.... 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 respondent no. 3 has in fact paid VAT and CST amounting to over Rs.380 crore to the State Government on such sales of cars to the TML Distribution Company Limited. The respondent no. 1 is aware about the aforesaid wholly owned subsidiary of the respondent no. 3 including the sale of the Nano Cars from the Sanand plant to the wholly owned subsidiary of the respondent no. 3. That as on 31/12/201....
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....te 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 have been provided in the affidavit in reply filed on behalf of the State. Mr. Jani submitted that the Government Resolution, which is the subject matter of challenge, in no manner could be termed as unconstitutional or illegal, warranting any interference by this Court in exercise of the public interest jurisdiction. Mr. Jani submitted that after the establishment of the project by the respondent No.3, Tat....
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....ovide 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. Thakore prays that there being no merit in this petition, the same be rejected with costs. 9. Having heard the learned counsel appearing for the parties, and having gone through the materials on record, the only question that falls for our consideration in this petition is, whether the Government Resolution dated 1st January, 2009, providing for a loan equal to the gross value of VAT and Central Sales Tax payable to the State ....
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....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 take upon themselves Administrative and executive functions. This does not mean that traditional litigation should stay out. They have to be tackled by other effective methods, like decentralizing the judicial system and entrusting majority of traditional litigation to Village Courts and Lok Adalats without the usual populist stance and by a complete restructuring of the procedural law which is the villain in delaying disposal of cases.... It is only ....
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....dual 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. (5) The Courts should be fully satisfied that substantial public interest is involved before entertaining the petition. (6) The Court should ensure that the petition which involves larger public interest, gravity and urgency must be given priority over other petitions. (7) The Courts before entertaining the PIL should ensure that the PIL is aimed at redressal of genuine public harm or public injury. The Court should also ensure that there is no personal gain, private ....
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....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 past. Tata Group is one of India's leading industrial houses and enjoys a reputation as a responsible corporate citizen even prior to independence. Tata Motors Limited (TML), which is a part of the Tata Group, is seeking to relocate some of its operations related to manufacturing plant for automobile products and components for the manufacture of the small car "Nano" from Singur in West Bengal......... In addition to the Phase I Investment, subject to market response and conditions, TML m....
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.... 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 estimate and may vary based on the actual TML Phase I Investment/ expenditure incurred in relation thereto. ii. For the avoidance of doubt, it is made absolutely clear that the TML Phase I Investment shall be related only to the development, manufacture and sale of the Nano car, its components and related activities including the items set out in Schedule I. iii. It will include the expenditure towards power supply i.e. 220 KV connection (having double circuit - feeding from two sources) up to the Project's....
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....ating 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 I Investment, which could be expanded to 3,50,000 Nano cars per annum. Incentives outlined above would be limited to TML Phase-I Investment only. ii. Subsequently, subject to market response and conditions, TML may make such additional increase to its investment in the Project to increase the capacity of the Plant as mentioned above, from 2,50,000 Nano cars per annum or 3,50,000 Nano cars per annum, as the case may be, upto 5,00,000 Nano cars per annum in Phase II. iii. Incidental to the establishment of the Project, TML will establish an In....
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....s 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 present petition has been filed with altogether a new issue as discussed above. 19. We are not impressed by the submission of Mr. Oza that the Government Resolution providing for a loan equal to the gross value of VAT and Central Sales Tax payable to the State of Gujarat amounts to refund of tax. 20. Having given our anxious thoughts and consideration to the issue in question, we are of the opinion that the loan advanced in the instant case by the Government in favour of the respondent No.3 is with a view to encourage the establishment of the automobile ind....
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....011 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 Act, 1988 and amounts to paying VAT in the State of Gujarat with the intention to procure higher amount of loan. 26. We find absolutely no legal bar under any of the provisions of the Motor Vehicles Act, 1988, in transferring a vehicle to a distribution and logistic company so that such a company can in turn transfer the vehicle to the dealers in other parts of the country. We are of the view that this itself would not make the vehicle a secondhand vehicle in the hands of the ultimate purchaser. 27. From the materials on record, it appears that the TML Distribution Compa....
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....stem 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 under the Constitution. When a law has been enacted in relation to the protection of environment and such law is being given effect to and there is no challenge to such law, the duty of the Courts would be to see that the Government and other respondents act in accordance with law and there is no other obligation for the Court to examine further in the matter. We respectfully agree with the view expressed in the Sardar Sarovar project's case and apply the same to the facts arising in this case." 31. In Pathan Mohammed Suleman Rahematkhan Moh. Suleman [Special Leave Petition (C) No. 3....
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....nge 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 Court, the principal argument was the principle of promissory estoppel. It was argued before the Supreme Court that the representation made by the State Government resulted in a binding agreement and therefore, the Government could not have resiled from its promise. On the point of promissory estoppel, the Supreme Court, on the basis of the materials on record, took the view that the rights of the parties were governed by the old and not the new policy. The Court also observed that the appellant was never intimated that the Government had changed its policy in respect of refund of Sales-tax. Howe....
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.... 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 expanding industries is well known to be one of the methods to grant incentive to encourage industrialisation. Avowed objective is to enable the industry to stand up and compete in the market. Sales tax is an indirect tax which is ultimately passed on to the consumer. If an industry is exempt from tax the ultimate beneficiary is the consumer. The industry is allowed to overcome its teething period by selling its products at comparatively cheaper rate as compared to others. Therefore, both the manufacturer and consumer gain, one by concession of non-levy and other by non-payment. Such provisions in an Act or....
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....rore, 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 the industries to the State Government on sale made by it of its finished products. The Court took the view that the same was not permissible, being contrary to the Constitution. 37. In the present case, as discussed above, the amount of loan paid by the Government to the respondent No.3 does not amount to refund of tax. As observed by the Supreme Court itself in Amrit Banaspati Co.Ltd. (supra), that exemption from tax to encourage industrialization should not be confused with refund of tax. In the same manner, deferment of tax to encourage industrialization should not be confused with refund of tax. The am....