TaxTMI 
TaxTMI 
2015 (1) TMI 501
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....has been raised, by way of enforcement of the undertaking given by the petitioner-Company, pursuant to the Notification dated 22.2.2002. The order dated 7.4.2014 passed by the Assistant Commissioner, Commercial Taxes Department, Beawar (Rajasthan) has been challenged on the grounds that the undertaking is not enforceable against the petitioner-Company and that the petitioner-Company is not liable to pay any amount under the said undertaking. The petitioner- Company has also challenged the demand as patently without jurisdiction and without authority of law, as well as on the ground that the impugned order is not an order passed under the provisions of the Rajasthan Value Added Tax Act, 2003. The petitioner-Company has also challenged the Notification dated 22.2.2002, under which the undertaking was given. On these grounds, the writ petitions have been filed under Article 226 of the Constitution of India, without availing the statutory remedies of appeal and a second appeal to the Rajasthan Tax Board. 4. Brief facts giving rise to these writ petitions are that in the year 1996, the predecessor of the petitioner-Company, namely, DLF Cement established a new cement manufacturing unit....
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.... to the State Government to remove the disparity, on which a Notification dated 22.2.2002 in the case of the petitioner-Company and other similar special Notifications were issued in respect of other large scale cement units, giving the similar incentives to such units, on furnishing the following specific undertaking:- "3. That the company shall have to give an undertaking in writing to the effect that it will deposit the benefit availed by it exceeding 25% of its tax liability, in case the judgment of the Rajasthan High Court in the matter of M/s Binani Cement is modified as per any order, judgment etc. issued by the Supreme Court of India." 8. An undertaking in terms of Clause-3 of the Notification dated 22.2.2002 was given by the petitioner-Company on 19.3.2002 unequivocally to repay the additional benefit claimed in case of public contingency mentioned therein. The undertaking given by Shri N.P.Ghuwalewala on 19th March, 2002 is quoted below:- "Whereas, the Board for Infrastructure Development & Investment (BIDI) in its meeting held on 10th January....
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....ompany under The Sick Industrial Companies (Special Provisions) Act, 1985, on which by order dated 20.6.2001, the Board for Industrial Financial Re-construction (BIFR) commenced proceedings for revival of the Company. A scheme for revival of ACRL, a sick company, was sanctioned by the BIFR vide its order dated 7.1.2004, having considered the cut-off date as 30.6.2002. The BIFR appointed ICICI Bank as Monitoring Agency, to monitor the progress of the implementation of the Sanctioned Scheme-2004 (SS-04), which provided the merger & amalgamation of the sick company with M/s Gujarat Ambuja Cement Limited (GACL); the employees of the ACRL have to be taken over by the GACL; cement unit of ACRL to function as a division of GACL; GACL to contribute Rs. 217.50 crores towards rehabilitation of ACRL division and also to undertake and to arrange for fresh borrowings of Rs. 170 crores to be utilized for retiring the old debts; and reliefs and concession from the Government of Rajasthan (GOR) and Rajasthan State Electricity Board (RSEB). The cost of the Scheme provided for internal accruals at Rs. 5543 lacs, borrowings for repayments to Banks based on the corporate guarantee/comfort letter issue....
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....d be monitored by the company. The GOR would also consider granting reliefs in terms of para (s) 7.1.(ii) and 7.1(v) of the SS-04. iii) The Special Director, appointed by the Board on the company's 'Board of Directors' (BOD), if any, would stand discharged with immediate effect. iv) The company would complete the necessary formalities with the concerned ROC, as may be required." 12. It is to be noted from the order of BIFR dated 20.11.2006 that the merger became effective on 1.6.2004, after which the sick company (ACRL) lost its identity. The provisions of SS-O4 were substantially implemented by the concerned agencies and also by the Government of Rajasthan. The BIFR consequently discharged the sick company-M/s ACRL from the purview of SICA and issued orders that the unimplemented provisions of SS-O4 for the unexpired period of scheme, would remain in full force and would continue to be implemented by the concerned agencies and which could be monitored by the company. The Government of Rajasthan would consider granting of reliefs in terms of Paras 7.1(ii) and 7.1 (v) of the SS-O4. Para 7.1(ii) of SS-O4, quoted ....
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....4.2006 for a period of six years for deferment of VAT. An amended Eligibility Certificate was issued to the petitioner-Company on 21.6.2006 granting the tax deferment benefit, on which the petitioner-Company started recovering the full amount of RST and CST from its customers and deferred payment of portion thereof to the Tax authorities in terms of the Notification dated 31st March, 2006 read with amended Eligibility Certificate dated 21.6.2006. 16. The State Government issued a Notification dated 9.3.2007, giving option to the assessees to whom tax deferment benefit was granted, permitting them to pay the present discounted value of the deferred amount, computed, as set out in the Notification, in full and final settlement of the total deferred amount payable by the assessee. This Notification was subsequently amended on 24.8.2007, whereby the computation of the value of the deferred amount was amended/modified. 17. The petitioner-Company wrote to the Director, Commercial Taxes Department on 3.9.2009 giving full particulars of the prepayment, which was to be made by the petitioner-Company under the Notification for tax deferment benefit, which was amended on 24.8.2007. Since no....
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.... cement units so as to avoid any ambiguity in determination of appropriate provision for applicability to new cement units to seek exemption, which left no doubt that what is specific has to be seen in contradistinction with the other items/entries. The provision more specific than the other on the same subject would prevail and therefore, against items 1, 4, 6 and 7, which deal with units of all industries and not only cement, item 1E restricted to only cement units would be a specific and special entry and thus would override the general provision. 19. The Supreme Court held that M/s Binani Cements was eligible in Item 1E as a large new cement unit in accordance with its FCI being above Rs. 5/- crores. The judgment of the Rajasthan High Court was set aside and the appeal filed by the Revenue was allowed. 20. On 21.2.2014 and 24.2.2014, notices were issued by the Assistant Commissioner, Commercial Taxes demanding the differential amount under RST Act for the years 2001-2002 to 2005- 2006 and under the VAT Act for the years 2006-07 to 2008-09, on which the Writ Petitions No.1563/2014 and 1564/2014 were filed challenging the demand notices. The writ petitions were disposed of on 2....
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....ly meaningless. The petitioner-Company's position after the sanction of the rehabilitation scheme was to be governed only with reference to the rehabilitation scheme and not the Notification dated 22.2.2002 and the undertaking dated 19.3.2002. The petitioner-Company was thus not liable to pay the differential amount of sales tax exemption to the extent of 50% to the State Government. The petitioner made its position clear by writing letters to the Chief Secretary of the Government of Rajasthan and the Chief Minister of Rajasthan, to which no replies were given. No objections were raised by the State Government nor it filed any appeal against the order of the BIFR dated 27.5.2004, even after the specific information given to it that by the reason of BIFR order, the undertaking given by the petitioner- Company had become infructuous. The State of Rajasthan by a silence and acquiescence to the petitioner's letters dated 15.6.2005 and 7.7.2005 effectively put the petitioner-Company in a position whereby during the relevant periods, it was absolutely disabled from recovering the deferred amount and making it impossible for the petitioner-Company, by raising demand on 7.4.2014, t....
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....of the Notification dated 9th March, 2007 for deferment of the tax specifically and categorically provides that on the making of prepayments in terms of the Notification, the liability of the dealer shall stand discharged and consequently, the Company is not liable to make any payment and is discharged from all its liabilities. 29. It is submitted that the interest by the tax authorities can be demanded strictly in conformity with the provisions of the statute. If the statute does not clearly or expressly authorize for raising the demand of interest, then no interest can be demanded, even if it is considered to be equitable to pay interest. Reliance has been placed on the decisions of the Supreme Court in VVS Sugars V/s Govt. of A.P. & ors. (1994(4) SCC 192), India Carbon Ltd. & ors. V/s State of Assam (1997(6) SCC 479) and Maruti Wire Industries Pvt. Ltd. V/s S.T.O. Ist Circle, Mattancherry and ors. ((2001)3 SCC 735). 30. It is submitted that the only statutory provisions relating to interest are provided in Section 58 of the Act and 55 of the Act of 2003. Both sections permit demand of interest to be raised if it is crystallized tax demand and thereafter, the demanded amount ha....
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.... allowing SLP by the Supreme Court vide judgment dated 19.2.2014, the undertaking given by the petitioner-Company came into force and that the contention of the petitioner-Company that it may be allowed exemption, despite the judgment of the Supreme Court dated 19.2.2014, will result into reverse discrimination. Reliance has been placed on the judgments in Duncan Industries Ltd. V/s Union of India (2006(3) SCC 129), Shyam Telelink Limited V/s Union of India (2010 (10) SCC 165), City Montessori School V/s State of UP (2009 (14) SCC 253) and New Bihar Biri Leaves Co. V/s State of Bihar (1981(1) SCC 537) in which it was held that a person cannot question the terms of an agreement after unconditionally accepting the terms and acting and thereby benefitting from the same. The maxim "qui appriobat non reprobat" (one who approbates cannot reprobate) embodied in the English common law, has been accepted in India. It is akin to the doctrine of benefits and burdens, which at its most basic level postulates that a person taking advantage under an instrument, which both grants a benefit and imposes a burden, cannot take the former without complying with the latter. 34. It is submitted by the ....
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....r a period upto 30th June, 2008 effective from the cut off date. The State Government was only required to consider for such relief. No such relief was actually granted. 37. The Company by its letter dated 7.4.2004 had approached the BIFR for modifications stating that the State Government had already issued Notification dated 24.10.2003 and therefore, there was no need for a consideration from the cut off date upto 30.6.2008 and hence, Clause-7.1(ii) be modified. It was further submitted that in view of the letter dated 12.11.2003, the consideration would be only for a period after what had already been notified since the letter cannot be a modification of a statutory Notification. There was no mention in the request for modification regarding M/s Binani linkage. By the amendment, directed by the BIFR, issued without giving notice to the State Government, there was no change. The amendment only clarified the amending facts situation by way of a corrigendum dated 27.5.2004. The State Government had already given consent by the Notification dated 24.10.2003 and the letter dated 12.11.2003 and thus, the amendment was not necessary. 38. It is submitted that the deferment Notificatio....
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....period shall be equal to the extent of the percentage of deferment of tax in the year immediately preceding such extension." 41. In view of Clause (6) of the Notification dated 31.3.2006, the extent of the deferment permissible in any year was dependent upon the extent of the incentive available in the preceding year i.e. in the assessment year 2006-07. The Notification providing for deferment under Clause (6) thus was dependent upon and created a linkage between the incentive Notification dated 22.2.2002 and the deferment Notification dated 31.3.2006. The petitioner itself relied upon the Notification dated 22.2.2002 and on that basis, he filed application in Form-A, which specifically referred to the Notification dated 22.2.2002. In the Notification dated 22.2.2002 (clause-3 thereof), the incentive available to the petitioner gets reduced from 75% to 25% for the year 2005-06. The extent of deferment legally permissible for the year 2006-07 was thus 25% in terms of Clause (6) of the Notification dated 31.3.2006. The extent of deferment was thus legally available to the petitioner under the Notification dated 31.3.2006 would also be 25%. 42. The petitioner was availing the benefi....
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....itioner-Company. The petitioner- Company was given fully credit of the pre-payment Notification in respect of deferment legally available and hence, the liability of Rs. 38.43 crores (which could be legally deferred at 25%) was settled at Rs. 23.10 crores. So far as the balance amount of Rs. 46.21 crores, a credit of the same was given to the petitioner- Company in the years 2006-07 and 2007-08 against the principal and interest payments due from the petitioner for the said orders. The demand raised for the years 2006-07 is only in respect of the interest for the delayed payment, while the demand for the years 2007-08 and 2008-09 is in respect of the remaining principal amount and interest. 46. On the question of payment of interest, it is submitted by learned counsel appearing for the State that the tax under section 20(1) of the Act of 2003 is payable periodically. If the payment is not made on monthly/quarterly basis, the same carries interest, which is payable under section 20(4) of the Act of 2003 and in case of any delay, the amount of interest under sub-section (1) of Section 55 shall also be paid alongwith the amount of tax. Sections 20 and 55 of the Act of 2003 provide as....
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....ted 29.3.1997 with effect from 27.3.1997 shall stand restored indisputably....". Thus, once the original exemption upto 25% is restored, the differential tax has to be repaid by the petitioner- Company without any loss to the exchequer. The entire benefit has to be restored, on which the petitioner is liable to pay interest. It is submitted that time value of the amount retained is a benefit availed by the petitioner-Company and which ought to be restored to the State. 48. It is further submitted that if the tax is allowed to be retained for the period from 22.2.2002 till 7.4.2014, which is the date of the order by which the demand has been raised, it would make the Notification dated 22.2.2002 into a deferment without interest, which was not the purport and colour of the Notification. It would amount to unjust enrichment for the petitioner at the expense of the State. The creditor has to be restituted to the entire extent that differential or short fall will be due. Unless the differential is paid, justice would not be done to the creditor. It only encourages non-compliance and litigation. The petitioner- Company is not only disgorging all the benefits but making the creditor who....
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....the deferment period from 2006-07 to 2008-09 (VAT). We also do not find force in the submission that the demand of interest is not legally justified. The reasons for arriving at such conclusion are given as below. 52. The petitioner-Company is a large scale cement unit, which had made a claim as "prestigious unit" under the Incentive Scheme of 1989. It was allowed the benefit as "large scale cement unit", for which the benefit was available before and after the amendment dated 10.12.1996 to the extent of 25% of the sales tax liability vide Eligibility Certificate issued to it. The benefit was granted as predecessor of the petitioner-unit had commenced commercial production before the amendment dated 10.12.1996 for a period of 11 years. The benefit was availed to the extent of 25% of the sales tax liability from 27.3.1997 to 21.2.2002. The predecessor Company was issued the Eligibility Certificate under the Incentive Scheme of 1989. The Company had filed the review petition, which was rejected on which it approached the Tax Board, which remanded the matter on 29.3.2000 and on such remand, the review petition was rejected on 9.10.2001. The predecessor Company did not challenge the o....
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....e Supreme Court. The matter pending before the Supreme Court was finally decided on 19.2.2014, in which it was held that M/s Binani Cements was not entitled to the RST exemption beyond 25% and on which proceedings were initiated against the petitioner-Company. 56. It is not denied nor any argument was raised in which the petitioner may have distinguished its case on merits, from the case of M/s Binani Cements decided by the Hon'ble Supreme Court on 19.2.2014. The undertaking became effective as soon as the Supreme Court decided the matter on 19.2.2014 and that any benefit retained by the petitioner, if allowed to be retained, would result into reverse discrimination, whereas M/s Binani Cements would be able to claim incentive only to the extent of 25%, the petitioner despite its undertaking would get incentive of 75%. 57. In Shyam Telelink Limited V/s Union of India (supra), it was held by the Supreme Court that the terms of the undertaking after it was unconditionally accepted, cannot be altered, as a person seeking exemption on an undertaking, which is agreement, cannot be allowed to reprobate. The doctrine of benefits and burdens postulates that a person taking advantage u....
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....ion. The amendment was nothing more than recording the then prevailing factual situation. 61. Any amendment in the Sanctioned Scheme-04 could be made only by giving notice to the concerned parties. The record of the BIFR appended to the writ petitions, does not show that any notices were issued or that the matter was deliberated upon for grant of any further incentive by way of modification. Since the modification was only clarificatory in nature and reflected the prevailing factual stand with regard to the period of incentive, no notice was necessary nor any deliberation was made by the BIFR before amending the scheme. The amendment did not give any benefit to the petitioner Company beyond the benefit which was already granted. 62. We further find that on 20.11.2006, an order was issued by the BIFR closing the proceedings and which refers to the previous proceedings including the order dated 27.5.2004. The final directions issued by the BIFR clearly provided that the GOR will also consider granting reliefs in terms of Paras 7.1(ii) and 7.1(v) of the SS-04. The reliefs in terms of Para 7.1(ii) were already granted and the facts and situation were reflected in the amended order of....
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....y back 50% of the exemption amount in the event the judgment of the Rajasthan High Court in M/s Binani Cements was amended by the Hon'ble Supreme Court. As found by us in the preceding paragraphs, the Sanctioned Scheme- 04 did not provide for any such exemption to the extent of 75% of the sales tax payable and to take away the Binani linkage or Binani effect on the Notification dated 22.2.2002. The question of pendency of the Appeal filed by the State of Rajasthan against the judgment of the Rajasthan High Court providing 75% exemption to M/s Binani Cements and the undertaking given by the petitioner, in pursuance to the Notification dated 22.2.2002, which clearly provided for giving such undertaking and exemption was dependent on such undertaking, was neither discussed nor considered by the BIFR. Further, in our view, in any case, the BIFR could not have relieved the petitioner Company from its obligations under the Notification dated 22.2.2002 and the undertaking given by the petitioner-Company, which had to come into force only if the judgment of the Rajasthan High Court was modified by the Supreme Court. The BIFR could not foreseen the fact nor it could have granted any rel....
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....be returned back to the State, and in respect of the said amount, the benefit of pre-payment was not available. 67. We find justification in the contention of the State that no pre-payment in respect of the amount which was already delayed was available. The amount already delayed could not be further postponed by a period of seven years, on which the petitioner claimed for early re-payment. The claim is thus not permissible. 68. In respect of payment of Rs. 69.31 crores, it is stated that by virtue of order dated 7.4.2014 and subsequent order dated 13.6.2014, the State has given full credit of the entire amount to the petitioner and the demand now being raised is after giving credit to the petitioner. We are satisfied from the details of the calculations provided to us that the petitioner was given full credit of the pre-payment Notification in respect of the deferred tax legally permissible and available and thus, the liability of Rs. 38.43 crores (which could be legally deferred at 25%) has been settled at Rs. 23.10 crores. For the balance amount of Rs. 46.21 crores, a credit of the same was given to the petitioner-Company in the years 2006-07 and 2007-08 against the principal....
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....udgment of Hon'ble Supreme Court dated 19.2.2014 in M/s Binani Cement's case and in terms of the undertaking given by it to the State Government. Any other view will amount to grant of unjust benefit to the petitioner-Company at the expense of the State. The petitioner must restitute and recompensate the State Government in terms of its undertaking which was not diluted, modified or affected in any manner by the order of BIFR or the scheme for deferment of tax. The restitution must be from the date when the petitioner was liable to pay. The principles "unjust enrichment, restitution and compound interest" have been explained in Indian Council for Enviro-Legal Action Vs. Respondent: Union of India (UOI) and Ors. (supra) as follows:- "The other important principles which need elucidation are regarding unjust enrichment, restitution and compound interest 143. Dr. Arun Mohan, Senior Advocate of this Court in a recently published book with the title "Justice, Courts and Delays" analytically, lucidly while taking in view pragmatic realities elucidated concepts of unjust enrichment, restitution and compound interest. 144.....
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....sp; 1. Can a party who does not comply with the court order be permitted to retain the benefits of his own wrong of noncompliance? 2. Whether the successful party be not compensated by way of restitution for deprivation of its legitimate dues for more than fourteen years? and 3. Whether the court should not remove all incentives for not complying with the judgment of the court? Answering these questions will necessitate analysis of certain concepts. 149. It is settled principle of law that no one can take advantage of his own wrong. Unless courts disgorge all benefits that a party availed by obstruction or delays or noncompliance, there will always be incentive for non compliance, and parties are ingenious enough to come up with all kinds of pleas and other tactics to achieve their end because they know that in the end the benefit will remain with them. 150. Whatever benefits a person has had or could have had by not complying with the judgment must being disgorged and paid to the judgment creditor and not, allowed to be retained by the j....
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.... prevent a man from retaining the money of, or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution." 155. Lord Denning also stated in Nelson v. Larholt as under: (KB p.343) "..It is no longer appropriate, however, to draw a distinction between law and equity. Principles have now to be stated in the light of their combined effect. Nor is it necessary to canvass the niceties of the old forms of action. Remedies now depend on the substance of the right, not on whether they can be fitted into a particular frame-work. The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases where the court orders restitution if the justice of the case so requires." 156. The above principle has been accepted in India. This Court in several cases has applied the doctrine of unjust enrichment. Restitution and comp....
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....d if retention of the benefit would be unjust. Unjust enrichment of a person occurs when he has and retains money or benefits which in justice and equity belong to another. 160. While the term 'restitution' was considered by the Supreme Court in South-Eastern Coalfields and other cases excerpted later, the term 'unjust enrichment' came to be considered in Sahakari Khand Udyog Mandal Ltd. v. Commissioner of Central Excise and Customs. This Court said: (Sahakari Khand case, SCC p.748, para 31. "31....'Unjust enrichment' means retention of a benefit by a person that is unjust or inequitable. 'Unjust enrichment' occurs when a person retains money or benefits which in justice, equity and good conscience, belong to someone else." 161. The terms 'unjust enrichment' and 'restitution' are like the two shades of green - one leaning towards yellow and the other towards blue. With restitution, so long as the deprivation of the other has not been fully compensated for, injustice to that extent remains. Which label is appropriate under which circumstances would depe....