TaxTMI 
TaxTMI 
2016 (10) TMI 1184
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....na General Sales Tax Rules, 1975 (for short, 'the Rules'), the petitioner applied for issuance of eligibility certificate for availing benefit of deferment of payment of tax. The eligibility certificate was issued to the petitioner on 20.1.2000. The period of eligibility was from 9.9.1997 to 8.9.2006. The total amount for which the petitioner could avail benefit of deferment of tax was Rs. 44.68 lacs. As per the provisions of Rule 28-B(12)(iv) of the Rules, the amount of sales tax deferred was to be paid after the expiry of seven years from the date it was due. 3. The State of Haryana notified a scheme for conversion of deferred sales tax into interest free loan on 16.12.1992 (hereinafter to be referred as 'the Scheme'). It provided for eligibility, procedure for claiming benefit, repayment of loan and power of recovery in case of default. As per the scheme, repayment of interest free loan was to be done after a period of five years. The loan was sanctioned to the petitioner on 31.3.2000. Immediately thereafter the amount due upto that date was paid to the Sales Tax Department and thereafter it was regularly paid after raising loan. As for the reasons beyond its ....
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....vokes the provisions of the Haryana Public Money Recovery Act for recovery of the loan, in case of default or delay in repayment of loan. For levy of interest and penalty, the provisions of the Act could be invoked. 6. The Scheme is an independent incentive scheme. The beneficiaries thereof have no concern with the provision of Rule 28-B of the Rules. The claim of the Sales Tax Department was satisfied, moment the amount of the tax was paid. There is no condition in the Scheme for a unit to remain in production as is envisaged in Rule 28-B (10) of the Rules. In support of his plea reliance was placed upon judgments of Hon'ble the Supreme Court in State of Punjab and others vs Atul Fasteners Limited (2007) 7 VST 278, India Carbon Limited vs State of Assam (1997) 106 STC 460, Union of India vs A. L. Rallia Ram (1964) 3 SCR 164 and judgment of this Court in LPA No. 412 of 2003 - State of Haryana etc. vs M/s Haryana Organics, decided on 3.3.2009. 7. On the other hand, learned counsel for the State submitted that as per eligibility certificate issued to the petitioner, he could avail of the benefit of deferment of payment of tax to the tune of Rs. 44.68 lacs. The period of ent....
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..... In response, learned counsel for the petitioner submitted that Clause 7 of the Scheme has been invoked 11 years after the petitioner had admittedly gone out of production and three years after the proceedings under the Act concluded wherein it was opined that the interest for the period, the tax had been paid to the Excise and Taxation Department, may be after raising loan from the Industries Department, no interest was leviable under the Act. 10. Heard learned counsel for the parties and perused the paper book. 11. Relevant paras of the interest free loan scheme are extracted below:- "HARYANA GOVERNMENT INDUSTRIES DEPARTMENT ORDER To give relief to industries, the Governor of Haryana is pleased to formulate a new scheme for conversion of deferred sales tax into interest free loan. The salient features of this scheme are as under:- OBJECTIVE With a view to promote industry at an accelerated pace, the State Government has formulated an industrial policy which provides a number of financial8 fiscal incentives to the new as well as existing entrepreneurs. One such incentive is the grant of sales tax exemption1 deferment. Under the existing policy/ Notificatio....
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....ible industrial units holding eligibility and entitlement certificates can avail themselves of the benefit of the scheme by opting to convert the tax deferred for the previous years into Interest Free Loan provided assessment under the Income Tax Act for those years has not been finalized. 3. PROCEDURE Industrial units opting for conversion of deferential amount of sales tax into Interest Free Loan shall give their option at the time of applying for grant / renewal of entitlement certificate to the concerned Deputy Excise and Taxation Commissioner. The option once exercised will be final. The Deputy Excise and Taxation Commissioner concerned shall forward the consent of the industrial unit alongwith a copy of the entitlement certificate to the General Manager District Industries Centre concerned and inform the unit about the same. Deputy Excise and Taxation Commissioner shall not (sic) for any bank guarantee/ personal sureties/ mortgage/ hypothecation of assets agreement etc. as provided in the scheme of Sales Tax Deferment of the Excise and Taxation Department from such entrepreneurs. The General Manager District Industries Centre will sanction the interest free loan equi....
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....ed for deferred payment of sales tax. 4. SECURITIES Eligible Industrial unit will furnish anyone of the following securities :- i) 1st charge / Pari-passu charge on the assets on which the deferred tax/loan is being secured; ii) 1st charge on the collectral assets having value equivalent to the loan amount. iii) 2nd charge in the case the unit is financed by the Central/Sales Financial Institutions. Nationalized/ Scheduled Bank provided sufficient margin is available on the assets. iv) 15% of the loan amount in the form of bank guarantee / and 85% in the form of personal sureties. 5. REPAYMENT The interest free loan in lieu of deferred amount of sales tax will be recoverable after a period of five years as provided by the Excise & Taxation Department in Rule 28- A of the Haryana General Sales Tax Act. The industrial unit has to deposit the amount on or before the due date in the Treasury under the head "6851- Loans for Village and Small Industries-Small Scale Industries Grant of Interest Free Loan in lieu of deferred Sales Tax." 6. POWER TO SANCTION General Manager of the District Industries centre of the concerned district will have full power to s....
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....ts validity and the unit shall be liable to payment of tax, interest or penalty under the Act as if no exemption/entitlement certificate had even been granted to it. (c) In case of sale/transfer of unit, balance amount of benefit of sales tax exemption/deferment shall be passed on to the purchaser/transferee if it continues with the same/higher level of production without disposing of any assets of the unit which would adversely affect manufacturing or production capacity of the unit for the remaining period subject to fulfilment of all the conditions of these rules : Provided that no order of withdrawal of the eligibility certificate shall be made without affording a reasonable opportunity of being heard to the affected unit;" 12. A perusal of the Scheme shows that it was framed with a view to give relief to the industries, which were already entitled to get the benefit of deferment of payment of sale tax. The amount of deferred sales tax was to be converted into interest free loan. In fact, the scheme was notified on 16.12.1992, much prior to even addition of Rule 28-B in the Rules, which was added vide amendment dated 18.5.1999. Vide this notification Rule 28- A was add....
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....and the extent of amount as mentioned in Sub-Rule 5 thereof. The benefit and time had relevance with the area where the industry was located. 15. As per Rule 28-B(10) of the Rules, the eligibility certificate granted to an industrial unit was liable to be withdrawn at any time during its currency by the appropriate screening committee in case it is found that the same was obtained by fraud, deceit, misrepresentation, mis-statement or concealment of material facts; or the unit had discontinued its business or closed down the same for a continuous period of six months except in certain specified circumstances or disposal or transfer of its assets by the unit adversely affecting its manufacturing capacity. 16. In case of withdrawal of eligibility certificate, exemption/ entitlement certificate is deemed to have been withdrawn from the first day of its validity and the unit was liable to pay interest and penalty under the Act as if no entitlement certificate had ever been granted. As per Rule 28-B (12)(iv) of the Rules, deferred amount of tax was to be paid after expiry of seven years from the date it was due. 17. In the case in hand, as the facts are on record, the validity o....
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.... unit was liable to pay tax, interest and penalty thereon, as if eligibility/ entitlement certificate was never issued. 19. As has already been noticed above, in terms of Section 43-B of the Income Tax Act, deductions on account of taxes were admissible in a particular year only if those were actually paid and not on accrual basis. As the amount of sale tax was not being paid by the units availing benefit of deferment of payment of tax, the amount was being added in their income resulting in levy of income tax. In these circumstances, coming to the aid of the units claiming such benefits, the State frame Scheme for converting the amount of deferred tax into interest free loan. As even the letter sanctioned by the Industries Department suggests that it was merely a book entry from one State department to another. The relevant lines being 'The expenditure so involved shall be credited under receipt Head "0049- Sales Tax- 800- Other Receipts," and debiting the same amount to the Major Head "6851- Loans for Village & Small Industries- 800- other loans, in lieu of deferred sales tax payment.' There was no third party involved. 20. A perusal of the Scheme shows that the ben....