TaxTMI 
TaxTMI 
2018 (10) TMI 1003
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....on, the Government of Gujarat framed a scheme under Notification dated 09.11.2001 under which, new industry, setting up its manufacturing unit in the district, would receive certain sales tax benefits. The benefit would be maximum upto the eligible investments which would include the cost of land, building, plant, machinery etc. Clause 4 of the Scheme pertained to Sales Tax Incentives. Clause 4.4 provided that the eligible unit would have option either to choose sales tax exemption or sales tax deferment. In case of a unit, whose eligible investment exceeded Rs. 100 crore, may also avail of a composite scheme which envisaged sales tax incentives partly in form of exemption and partly in form of deferment. Clause 4.2 laid down the benefits of sales tax exemption and provided that the eligible unit could purchase raw material, packing material etc. without payment of sales tax and further, all the products, manufactured by the unit including waste and scrap, would be exempt from payment of sales tax. Clause 4.3 pertained to sales tax deferment option and provided that the unit opting for sales tax deferment would collect sales tax on all its products, intermediatories, wastes and scr....
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....r short] was introduced replacing the Gujarat Sales Tax Act. Simultaneously, Gujarat Value Added Tax Rules, 2006 ['Rules of 2006' for short] were also brought into effect. To take care of the tax exemptions and deferments granted to the industrial units under the erstwhile sales tax statutes, Chapter IV-A was also added to the Rules of 2006 w.e.f. 01.04.2006. This chapter carries the heading "Continuation Of Tax Exemption To Industrial Units". Rules relevant for our purpose contained in the said chapter read as under: "18A. Continuation of tax exemption: (1) The exemption and deferment granted to the industrial units by the State Government under the earlier law and continued as such under the Government Notification, Finance Department No.(GHN-43)VAT-2006/S.5(2)(2)-TH, dated the 1st April,2006 shall be subject to the provisions of this Chapter. (2) Such Industrial units shall be entitled to tax incentives only for the balance amount and for the balance period of tax incentives as on the appointed day on the basis of the Certificate for Entitlement issued under this Chapter. (3) (a) The industrial unit eligible for tax incentives under th....
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....rule 18A shall be granted refund of the tax (excluding additional tax)paid on purchase of taxable goods. [Provided that where an eligible unit as defined in the entry 69 or 103 of the notification issued under sub-section (2) of section 49 of the Gujarat Sales Tax Act, 1969 is the textile unit and engaged in the manufacture of goods specified in Schedule I or the goods exempted from the whole of the tax by a notification issued under sub-section (2) of section 5, such eligible textile unit shall be granted refund of the tax paid to the registered dealer on purchases of taxable goods including the tax paid on the packing materials used in the packing of the goods so manufactured."] [(b) Subject to the provisions of section 11, the eligible unit shall- (i) not claim tax credit of the amount equivalent to the amount of refund granted under clause (a) of this sub-rule; (ii) claim tax credit of additional tax paid on purchase of taxable goods.] (c ) The eligible unit shall make an application for refund along with its return to the concerned Commercial Tax Officer and such Officer shall, as far as possible, grant refund subject to provisions ....
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....rm which was applicable in case of composite benefits. According to the petitioners this was done since the prescribed form did not contain any other place where such option would have been indicated. Be that as it may, the respondents were of the opinion that the petitioners could not change the option. Under letter dated 11.05.2006, the Deputy Commissioner of VAT called upon the petitioners and conveyed to the petitioners that it was not possible for the petitioners to change the option. In response to such letter, the petitioners made a detailed representation on 15.06.2006 contending inter alia that the entire scheme has been modified under the VAT Act and that therefore, a fresh option should be made available. It was pointed out that under the present circumstances, the tax remission scheme is more advantageous. 11. The authorities did not respond to this representation, instead, on 23.04.2007, Industries Commissioner issued the eligibility certificate of tax deferment for a total eligibility investment of Rs. 24.84 crores. The Sales Tax Department also issued a final eligibility certificate on 02.09.2018 in same terms. 12. The petitioners, however, pursued their reques....
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....d benefit and not any change in option from Sales Tax Deferment to Sales Tax Exemption under clause B of sub rule (3) of Rule 18A of the Rules. In view of the above Value Added Tax Rules, The Company cannot change its option from Sales Tax Deferment to Sales Tax Remission." 14. Appearing for the petitioners, learned counsel Mr. Manish Bhatt raised the following contentions: (i) Clause 4.4 of the said scheme is clear. It permits change of opinion till certificate is issued by the Sales Tax Department. In the present case, the petitioner was only granted provisional eligibility certificate. The request of the petitioners for change of opinion was made before final certificate was issued. The respondents therefore committed an error in refusing such a request. (ii) Under the said scheme, the State Level Committee was entrusted with the task of interpreting the provisions of the scheme as well as to resolve disputes arising therefrom. The Committee had opined that the request of the petitioners should be accepted. This was on the basis of opinion of the Law Department of the Government. The Government thereafter, could not have taken a different stand. The primacy ....
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....n before the certificate is issued by the Sales Tax department. In case of the petitioner, final eligibility certificate was not issued till the VAT Act was introduced making major changes in existing exemption schemes. The certificate issued by the department was a provisional eligibility certificate granting exemption upto a limit of 25% of the eligible investment of the petitioner. In terms of Clause 4.4 of the said Scheme, therefore, the choice of the petitioner to change the option was not yet lost. 18. Before the final eligibility certificate could be issued, the VAT Act was introduced. Along with the Act, the Rules were also activated. These Rules brought about major changes in the existing sales tax incentive schemes. We may examine the relevant Rules more minutely. As per sub-rule (1) of Rule 18A, the tax exemption and deferment granted to the industrial units would be subject to the provisions of the said Chapter IV. As per sub-rule (2) such units would be entitled to tax incentives only for the balance amount and for the balance period on the basis of certificate for entitlement issued under the said Chapter. Sub-Rule (3) of Rule 18A provided that the industrial unit ....
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....ges. Any person, who was already availing the benefits under the original scheme, had to apply in the prescribed format, if he wished to enjoy the benefits of tax incentives under the Rules of 2006. The Rules envisaged only two options viz. tax remission or tax deferment. This was in stark contrast to the provisions made in the said scheme which envisaged either tax exemption or tax deferment or even composite incentives to units which had eligible investment exceeding Rs. 100 crore. There is fundamental difference between tax exemption and tax remission. In the former, as per the provisions made in the said scheme, the eligible unit would pay no sales tax on the sale of its products. In turn, it would also not collect any such tax from the purchasers. In other words, looking to the special need for development of the area the Government agreed to forgo the tax component on the products manufactured by the unit. The tax component would thereby be available for the manufacturer to adjust its prices either to make the product cheaper and make its price more competitive or to retain the additional profit if its manufacturing cost in the remote area was higher than its competitors. Und....
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....er the Act. If the legislature's intention was not to give any option to the old optees surely language would have been more explicit. As noted, in absence of any clear provision providing that a unit enjoying tax exemption under the earlier scheme would automatically come within the fold of tax remission benefits under the Rules, there is no reason to presume that no option could be exercised. Further, if the legislature desired that there would be no further options of either of the two classes of units, language used would have been more explicit providing that the units availing tax deferment under the earlier law shall not be allowed to change the option. 24. In a case where, as held by us earlier, when the choice for changing the option for the petitioner [in terms of clause 4.4 of the scheme] had not yet been closed since final eligibility certificate was not yet issued, the introduction of the Rules of 2006 would not eliminate such option. We may recall, the Rules of 2006 brought about fundamental shift in the benefits available to such eligible units. The respondents therefore committed an error in not allowing the petitioner's request for change of option. 2....