TaxTMI 
TaxTMI 
TaxTMI 
2014 (8) TMI 861
X X X X Extracts X X X X
X X X X Extracts X X X X
....Haryana Valued Added tax Act, 2003 (in short, the "HVAT Act") against the orders dated 21.9.2011, Annexure A.6, 7.10.2009, Annexure A.4 and 29.2.2008, Annexure A.2 passed by the respondent authorities. 3. As per order dated January 30, 2013 passed by this Court, learned counsel for the appellant relied upon questions of law framed in VAT Reference No.9 of 2010 as the questions of law arising in this case, which read thus:- "(i) What is the amount of 'deferred tax' within the meaning of Section 61(2) (d) (iii) of the Haryana Value Added Tax Act, 2003 and how will the amount of one half of the amount of deferred tax payable upfront along with the filing of the tax returns be computed under section 61(2) (d) (iii) of the Act? (ii) How the tax benefit in case of payment of one half of the amount of deferred tax upfront along with the tax returns will be counted towards exhausting the capping limit on the amount of deferment of payment of tax? (iii) Whether the clarification issued under Section 56(3) of the Act by the Financial Commissioner and Principal Secretary to Government Haryana in Haldi Ram's case dated 12.7.2004 dealt with the aforesaid questions and if it did,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x required to be paid upfront alongwith the tax returns. According to the learned counsel, the dealer collecting 100% sales tax is required to deposit 50% upfront and 50% shall be retained by the assessee. Reliance was placed on judgments in Associated Cememt Companies Limited v. State of Bihar and others, (2004) 7 SCC 642 (SC), Nathi Devi vs. Radha Devi Gupta, (2005) 2 SCC 271, Union of India and another v. Hansoli Devi and others, (2002) 7 SCC 273, Commissioner of Trade Tax, UP vs. SS Ayodhya Distillery and others, (2009) 19 VST 251and The State of Punjab v. Jullundur Vegetables Syndicate, (1966) 17 STC 326(SC) in support of the submissions. 7. On the other hand, learned counsel for the State besides supporting the impugned order submitted that the amount of tax deferred should be calculated after deducting the amount of input tax paid on the goods purchased from within the State for use in the manufacture of the goods for sale. According to the learned counsel, exemption provisions should be strictly construed. Learned counsel raised the following three points:- i) What is the amount of deferred tax within the meaning of section 61(2) (d) (iii) of HVAT Act read with Rule 69 of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he State Government, in the prescribed manner the amount of tax in respect of which it has availed of exemption from payment after reducing therefrom the tax paid by it before such failure; (ii) An industrial unit availing the benefit of capital subsidy may, in the prescribed manner, change over to deferment of payment of tax for the remaining period and the remaining extent of benefit but where an industrial unit does not choose to do so, the benefit of capital subsidy to it shall cease to take effect on and from the appointed day; (iii) An industrial unit availing the benefit of deferment of payment of tax, whether by change over under the foregoing provisions or otherwise, may, in lieu of making payment of the deferred tax after five years, pay half of the amount of the deferred tax upfront along with the returns and on making payment in this manner, the tax due according to the returns shall be deemed to have been paid in full; and (iv) The tax deferred in every other case shall be converted into interest free loan in the manner prescribed. Explanation, - For the purpose of this clause, "tax" includes the tax under the Act of 1973 and the Central Act." 10. A composite read....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. The Unit may, in lieu of availing deferment of tax, elect, by indicating in the application made under sub-rule (1), to make payment of one-half of the tax otherwise due before the time prescribed for filling of quarterly returns and where the tax is so paid the unit shall have no further liability to pay tax for the said period and such payment for the purpose of computation of tax benefit availed by the unit and input tax passed on to the purchaser, if otherwise admissible to him, shall be deemed to be the full payment. This facility shall also be available to a unit who has been availing the benefit of deferment of payment of tax before the appointed day provided such unit sends an intimation to the officer incharge of the district within 15 days of coming into force of these rules in writing in this behalf. The entitlement or the revised entitlement certificate, as the case may be, shall be subject to the conditions and restrictions specified therein or under the existing rules under which the eligibility/entitlement certificate to such applicant was issued." 12. According to the aforesaid rule, the authority on receiving an application in Form VAT-A5 under sub rule (1) sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ective from 1.4.1988 to 31.3.1997. Sub rule (4) of Rule 28A gives a tax concession to industrial units, relevant portion of which is in following terms:- "(a) Subject to other provisions of this rule, the benefit of tax exemption or deferment shall be given to an eligible industrial unit holding exemption or entitlement certificate, as the case may be to the extent, for the period, from year to year in various zones from the date of commercial production or from the date of issue of entitlement/exemption certificate as may be opted, as under:- Quantum and period of tax exemption/tax deferment (I) New Industrial Units Name of the Zone and the area comprised therein Small scale Medium scale/large scale Time limit Zone 'A' comprising Centrally and State notified backward areas 150% of fixed capital investment 125% of fixed capital investment 9 years Zone 'B' comprising areas other than zones 'A' and 'B' 125% of fixed capital investment 100% of fixed capital investment 7 years Zone 'C' comprising Faridabad and Ballabgarh complex administration areas 100% of fixed capital investment 90% of fixed capital investment 5 years (II) Units undert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cks of Faridabad district. Category B Controlled areas of Kundli, Bahadurgarh and Panipat towns, Industrial Model Town Manesar and Urban Estate, Punchkula. Category C Rest of the state. (5)(a) Subject to other provisions of this rule, an eligible industrial unit (except a prestigious unit) holding a valid entitlement certificate shall be entitled to the concession of deferment of payment of sales tax including central sales tax and conversion of the same to capital subsidy, computed on the sale of goods (including bye-products and waste) manufactured by the unit or arising from the process of manufacturer and declared in the sales tax returns filed by the unit, without taking into account the rebate admissible under section 15-A or the rules framed under the Act, at the scale, subject to the time limit and the extent related to the fixed capital investment(FCI), as tabulated below:- Category Extent of concession Tax concession Small Scale Period Scale of tax Medium/ Large scale A 125% of fixed capital investment 100% of fixed capital investment 9 years Ist to 9th year: 50% B 125% of fixed capital investment 100% of fixed capital investment 10 years Ist year:80% 2n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this rule would not be required to give security/bank guarantee against the benefit to be availed of under this rule." 17. Rule 28C had some unique features which was not present in Rules 28A and 28B, which are described below:- (1) Tax concession of retention of part of tax as capital subsidy at a graded scale 80% to 20% or fixed 50% was given. (2) As per illustration, amount of tax paid on goods purchased from within the State on payment of sales tax and used in manufacture was not to be reduced from tax payable on sale of goods manufactured for calculation of amount of tax to be retained as capital subsidy but the said amount was to be counted as payment of tax against the tax payable on sale of goods. (3) A unit availing tax concessions under rule 28A or 28B had the option to switch over to rule 28C at the fixed scale of 50% of tax concession within its balance period and monetary limit of tax concession. The tax concessions available under the HGST Act were saved with certain fundamental modifications by virtue of Section 61 of the HVAT Act on repeal and replacement of the HGST Act by HVAT Act with effect from 1.4.2003. 18. From the reading of section 61(2)(d) of HVAT Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-section (1) does not apply and who is of the class or classes mentioned in column 2 of the Table below and whose gross turnover in any year first exceeds the taxable quantum specified in column 3 there against, shall, subject to the provisions of sub-section (4), be liable to pay tax on and from the day mentioned in column 4 there against on the sale of goods effected by him in the State- TABLE xx xx xx xx xx Provided that this sub section shall not apply to a dealer who deals exclusively in exempted goods. Note: Where a dealer is covered under more than one of the class or classes mentioned in the Table above, the liability to pay tax shall commence from the earliest day he becomes liable to tax. (3) If a dealer liable to pay tax under sub section (1) or sub section (2) purchases any taxable goods in the state from any source in the circumstances that no tax is levied or paid under this Act on_their sale to him and he either exports them out of State or uses or disposes them of in the circumstances in which no tax is payable under this Act or the Central Act by him to the State on them or the goods manufactured therefrom, then, he shall, subject to. the provision of sub-sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g liability to pay purchase tax. Sub-section (4) gives method of calculation of tax levied under sub-sections (1), (2) and (3). Tax is to be calculated on taxable turnover in accordance with the provisions of section 6 at the rates of tax applicable under section 7. For this purpose, where turnover is taxable at different rates, it shall be split according to rates of tax applicable and tax is calculated on each part separately. Sub section (5) provides for reduction of input tax from the tax computed under sub-section (4). It deals with three eventualities: firstly, where tax calculated under sub-section (4) is more than the input tax, the difference of the two shall be the tax payable; secondly, where input tax is more, the difference of the two shall be the amount refundable; and lastly, where input tax is in minus due to reversal of input tax credit, the sum of the two will be the tax payable. Under section 3(3), if any purchase tax is leviable, then that shall also be added to the liability to pay tax. On the basis of sub-sections (3) and (4), the tax payable shall be output tax + purchase tax - input tax. This has been provided under Rule 40(4) of HVAT Rules which reads thus:....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the form of tax deferment under the HVAT Act for the remaining period and the remaining extent of benefit that was admissible under the HGST Act. The expression falling in Clause (iii) of Section 61(2) (d) is "pay half of the amount of the deferred tax upfront alongwith returns and on making payment in this manner, the tax due according to the returns shall be deemed to have been paid in full." A plain reading of the same shows that what is required to be paid by a unit opting for payment of 50% of deferred tax, is the payment of half of the amount of the deferred tax upfront.The provision nowhere provides that deferred tax would be calculated after computation of tax payable is determined according to the returns. It only provides that if half of the deferred tax is paid, then it would be assumed that the tax due according to returns is deemed to have been paid in full. Thus what is required to be paid, is 50% of the deferred tax which would be computed on the basis of tax on sale of the goods manufactured by the industrial unit and the benefit of the payment of tax on the purchase of the goods used in manufacture i.e. input tax shall be allowed as the tax paid in advance. The ill....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ication has been sought are as follows:- Under Tax Concession Not under Tax concession Goods Namkeen, Snacks, Sweets other than confectionary Confectionary, cooked food, processed food etc. Taxability Full rate of tax is to be charged at prevailing rates. Half of the tax so charged or collected shall be paid to Govt. up-front (if opted for upfront payment) and retain rest half of the tax. Or This 50% of tax can be passed to the consumer by charging 100% tax and collecting 50% only and paying the same to the Govt. to compete the hard market. Full rate of ax is to be charged and collected at the prevailing rates and depositing the same with the Govt. on the due dates. Input Tax Benefit Tax though paid to Govt. is 50% yet input benefit to the purchaser is passed 100%. As full tax is charged or the sale : Input tax benefit is passed full to the purchaser. Restriction on Export out of State Rule 28C of HGST Act imposes restriction on Export out of State upon the goods under Tax concession i.e. Namkeen, snacks and sweets. No such restriction on export out of State is there on the goods which are not under tax concession. Production level The industrial unit availi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... payment). It is upto the dealer to pass 50% of tax to the consumer by charging 100% tax and collecting 50% only and paying the same to the govt. to compete in the market. However, it is made clear that input benefit shall be passed to the purchaser only to the extent of tax charged in the tax invoice. 27. The following query had been posed in the clarification sought by M/s Haldi Ram Manufacturing Co. (P) Limited:- "Full rate of tax is to be charged at prevailing rates. Half of the tax so charged or collected shall be paid to Govt. up-front (if opted for upfront payment) and retain rest half of the tax. Or This 50% of tax can be passed to the consumer by charging 100% tax and collecting 50% only and paying the same to the Govt. to compete the hard market." 28. The clarification given answering the said question in favour of the dealer is as follows:- "The unit may, in lieu of availing deferment of tax, elect, by indicating in the application made under sub rule (1) to make payment of one half of the tax otherwise due before the time prescribed for filing of quarterly returns and where the tax is so paid the unit shall have no further liability to pay tax for the said period ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as long as the circular remains in force, it is not open to the subordinate officers to contend that the circular is erroneous and not binding on them. 20. In the case of Union of India and anr. V. Azadi Bachao Andolan and anr. Reported in (2004) 10 SCC 1 a circular was issued by CBDT under Section 119 of the Income-tax Act, 1961. It was challenged inter alia on the ground that it was ultra vires the provisions of Section 19(1). The argument was rejected by this Court in the following words: "47. It was contended successfully before the High Court that the circular is ultra vires the provisions of Section 119. Sub-section (1) of Section 119 is deliberately worded in a general manner so that CBDT is enabled to issue appropriate orders, instructions or directions to the subordinate authorities "as it may deem fit for the proper administration of this Act". As long as the circular emanates from CBDT and contains orders, instructions or directions pertaining to proper administration of the Act, it is relatable to the source of power under Section 119 irrespective of its nomenclature. Apart from sub-section (1), sub-section (2) of Section 119 also enables CBDT 'for the purpose of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lars are illegal or that they are ultra vires Section 3(1A), which it is not, it was open to the State to nullify/withdraw the said circular under Section 60 of the 1963 Act. Till today, the circular continue to remain in force. Till today, it has not been withdrawn. In the circumstances, it is not open to the officers administering the law working under the Board of Revenue to say that the said circular is not binding on them. If such a contention was to be accepted, it would lead to chaos and indiscipline in the administration of tax laws. 22. In the case of Steel Authority of India v. Collector of Customs, Bombay reported in 2000 (115) ELT 42 (SC) a similar situation arose. It was submitted on behalf of the revenue in that case that the Trade Notice had been issued only by Bombay Customs and, therefore, it was not binding on other Customs. This argument was repelled by the Division Bench of this Court by stating that the Trade Notice issued by one Customs House must bind all Customs Authorities and, if it is erroneous, it should be first withdrawn or amended. In the present case also, it is not open to the assessing officers to reopen the completed assessments on the ground tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the Central Board of Revenue under section 5(8) of the Indian lncome-tax Act 1922 which corresponded to section 119 of the Present Act and this circular provided that if any such outstanding loans or advances of past years were repaid on or before 30th June 1922, they would not be taken into account in determining the tax liability of the shareholders to whom such loans or advances were given. This circular was clearly contrary to the plain language of section 2(6A)(e) and section 121(B), but even so this Court held that it was binding on the Revenue and since "past transactions which would normally have attracted the stringent provisions of section 12(1B) as it was introduced in 1955, were substantially granted exemption from the operation of the said provisions by making it clear to all the companies and their shareholders that if the past loans were genuinely refunded to the companies they would not be taken into account under section 12(1B)" sections 2(6A) (e) and 12(1B) did not suffer from the vice of unconstitutionality. This decision was followed in Ellerman Lines case (supra) where referring to another circular issued by the Central Board of Revenue under section 5(8)....