TaxTMI 
TaxTMI 
2011 (4) TMI 1253
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....ckward area of Zaghadia for the manufacture of caustic soda and other related speciality chemicals and for setting up a captive power plant for the purpose. Under the incentive schemes promulgated by the State Government for the year 1995-2000, the petitioner was eligible for various sales tax reliefs by way of sales tax exemption on the purchase of raw materials, processing materials, consumable stores or packing materials and also to exemption in respect of sales of manufactured products. The relevant policy was followed by a notification issued by the State Government under section 49(2) of the Act containing entry 255 and later entry 69. Initially the petitioner was granted eligibility certificate by the Industries Commissioner for Rs. 20 crores which came to be increased from time to time and lastly, the same came to be increased to Rs. 157.762 crores and the period of exemption was mentioned as March 25, 1996 to March 24, 2006. The petitioner had applied for registration as pioneer unit at Zaghadia, a backward area in District Bharuch by an application dated June 21, 1994. Later on, it also applied for eligibility certificate. The petitioner was granted registration certific....
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....ncentives under the scheme, one of which was "electricity generation (except captive electricity generation)". It is the case of the petitioner that as the petitioner had installed the captive power plant for use in its own industry, the production of electricity was not a banned industry and did not fall within the list of banned industries. The surplus electricity which remained with the petitioner after the use in its own plant had to be disposed of in accordance with the energy policy of the Government of Gujarat. The Government of Gujarat by a resolution dated November 9, 1998 provided in detail the disposal of surplus electrical power by industries which had set up captive power plant. In the said resolution, it was provided that with the previous consent of GEB, surplus power could be supplied from such captive power plants to its group companies and sold to GEB as laid down in the said policy. The tariff for supply to the group companies would be on "no profit no loss" basis. Electricity was exempt from sales tax under section 28 of Schedule I. Thereafter, the petitioner received various notices from the Sales Tax Officer, Class I, Flying Squad, Unit 1, Ahmedabad, the firs....
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....e for the petitioner, invited attention to the provisions of the Scheme to submit that to the extent of raw material used by an eligible unit in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat, the petitioner, an eligible unit was entitled to the benefit of sales tax to the extent it exceeded 1/4th of one per cent and to the extent the amount of general sales tax exceeded %th of one per cent on the raw materials purchased by it. It was submitted that the petitioner had set up the captive power plant which was considered to be an eligible investment under the scheme and that the naphtha used for the purpose of generating electricity which was used in the manufacture of caustic soda, was raw material used in the manufacture of goods for sale as contemplated under the scheme and as such, the petitioner was entitled to the benefit of exemption from sales tax to the extent provided under the scheme in respect of naphtha used in generating electricity. It was submitted that the stand of the respondent that to the extent the electricity generated in the captive power plant had not been used by the petitioner for manufacturing of goods and had ....
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....her hand, Ms. Maithili Mehta, learned Assistant Government Pleader opposed the petition. It was submitted that under the scheme, the petitioner is entitled to the benefit of exemption from payment of sales tax to the extent indicated in the scheme in respect of raw materials used in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat. It was submitted that in the present case, insofar as the first issue is concerned, the petitioner had diverted part of the electricity produced by it to the GEB and its group concerns. Admittedly, the electricity so diverted was not used in the manufacture of goods for sale within the State of Gujarat. Hence, to the extent of naphtha used in the manufacture of electricity which was not used in the manufacture of caustic soda, the petitioner was not entitled to the benefit under the scheme and was liable to pay sales tax on naphtha under the normal rates and not by availing of the benefit under the scheme. Insofar as the second issue is concerned, it was submitted that under condition No. 19(iii) of the conditions imposed under the scheme, the aggregate amount of tax at the rate of four per cent or at the rat....
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....hat if on the same goods sales tax is leviable no general sales tax be levied. (1)If the eligible unit furnishes to the selling dealer a certificate in form 26 appended hereto, obtain from the registering authority, declaring inter-alia that the goods are required for use by him within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat or as packing materials in the packing of the goods so manufactured. (2) If the eligible unit fulfils the conditions specified hereunder and further conditions as may be laid down from time to time. (3) Sales by an eligible unit of the goods manufactured by him. Whole of sales tax or general sales tax or both as the case may be. (1) If the eligible unit does not give any certificate in form No. 40 prescribed in the Gujarat Sale Tax Rules, 1970 to any dealer purchasing such goods from him and if he incorporates the following declaration in the bill, invoice or cash memo issued by him in respect of the sale of such goods, namely: "This sale is exempt from tax under sub-entry (3) of entry No. 255 in the Sc....
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....a reduced rate of tax in form 26. Entry 255 also lays down the conditions subject to which the eligible unit would be entitled to exemption under the scheme. The relevant conditions for the purpose of the present petition are as under: "6. The eligible unit shall actually use the goods purchased within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat or as packing material in the packing of the goods so manufactured. Explanation.-For the purpose of this condition, 'sale outside the State of Gujarat' shall mean transportation of goods by the eligible unit to his own place of business or to the place of business of his agent, at any place within India but outside the State of Gujarat for sale there. 19. For the purpose of arriving at the limit of tax exemption, the aggregate of the following shall be considered: (i) The aggregate amount of tax calculated at the rate of tax mentioned against the goods sold or purchased in column 3 or 4 to Schedule IIA, IIB or III or the lower rate as specified by the notification under section 49(2) of the Gujar....
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....consumable stores in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat or as packing materials in the packing of the goods so manufactured. The eligible unit is also required to fulfil the other conditions specified under entry 255 as well as further conditions as may be laid down from time to time. Thus, the scheme is clear and unambiguous insofar as the controversy involved in the present case is concerned. Under the Scheme, the eligible unit is entitled to avail of the benefit of exemption from payment of sales tax to the extent laid down thereunder on the raw materials, packing materials and consumable stores purchased by it from a registered dealer, provided it uses the same for manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat or as packing materials for the goods so manufactured. Hence, if the raw materials or consumable stores so purchased are not used for the manufacture of goods, as contemplated under entry 255(2), the eligible unit would not be entitled to exemption from payment of sales tax on such goods. Section 50 of the Act makes provision for liability to pay tax in the event of br....
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.... electricity was not used in the manufacture of caustic soda, the petitioner would not be entitled to the benefit under the scheme. The first respondent was, therefore, justified in initiating action against the petitioner under section 50of the Act for breach of condition in respect of the goods (naptha) not used by it for the manufacture of caustic soda. The above view taken by this court finds support in a decision rendered by a Division Bench of this court on February 26, 2010 in the case of AMI Pigments Pvt. Ltd. v. State of Gujarat [2010] 32 VST 97 (Guj) rendered in Special Civil Application No. 9169 of 2006 and other cognate matters wherein the court has held thus (page 155 in 32 VST): "126. Before we conclude, we make it clear that though we have held that fuels consumed by the industry to generate electricity which is used in the manufacture of end-product is considered to be raw material or processing material or consumable stores for the purpose of section 15B, rule 42A or exemption notifications issued from time to time under the Act, as per the decision of the apex court in the case of Maruti Suzuki Ltd. v. Commissioner of Central Excise [2010] 1 GSTR 200 (SC); [2009....
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....erred to the branch, it cannot be said that the same have been sold within the State of Gujarat so as to be eligible for the benefit of the scheme. Hence, it is apparent that in respect of the goods which have been transferred to the branch, the petitioner would not be entitled to the benefit under entry 255(2) in respect of the raw material used in the manufacture of such goods. In the circumstances, the provisions of section 50 of the Act would clearly be attracted and the respondent was justified in initiating proceedings thereunder for breach of the provisions of the scheme. However, as submitted by Mr. Kaji for the petitioner, the goods which were transferred to the branch may have been subsequently sold either within the State of Gujarat or may have been transferred to a branch outside the State of Gujarat so as to be eligible for the benefit under the scheme. However, since the matter has not been considered from that angle, the said facts have not been brought on record. Hence, unless the petitioner is given an opportunity to show how the goods transferred to the Branch at Vapi had been dealt with, it would not be possible to decided the issue correctly. However, the breac....
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....breach committed by transferring goods by way of branch transfer, appears to have computed the purchase tax on the raw materials used for manufacture of such goods as well as naphtha used in generating electricity for manufacture of such goods and has reduced the ceiling limit of exemption to that extent. Insofar as the ceiling limit of exemption is concerned, the same is granted to the petitioner by virtue of sales tax exemption certificate issued under the scheme. Breach of the provisions of the scheme as aforesaid, may entail payment of tax to the extent the petitioner has committed a breach of provisions of the scheme. But the first respondent has no power to reduce the ceiling limit of exemption granted under a certificate issued under the provisions of the scheme which is based upon the eligible investment made in setting up the unit. Thus, the respondent has proceeded on a totally erroneous footing and instead of passing an order for breach of provisions of the scheme under entry 255(2), has proceeded on the basis that there is a breach of condition No. 19(iii) of the conditions. In fact, in relation to the second issue, the impugned order passed by the first respondent is i....