TaxTMI 
TaxTMI 
2018 (11) TMI 342
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....02 as retrospectively amended/substituted by Mah.Act 22 of 2009 ? (B) Whether in the facts of the circumstances, Section 93 of MVAT Act, 2002 as amended by Act 22 of 2009 is applicable to turnover of Ratnagiri unit which has already exhausted the monetary ceiling limits of exemption before 28.08.2009 being the date of coming into force Maharashtra Act 22 of 2009 (C) Whether in the facts and circumstances of the case, in view of the validation and saving provision contained in Section 5 of Maharashtra Act 22 of 2009, full exemption is available for entire turnover of Ratnagiri unit, particularly when the eligibility certificate/certificate of entitlement both dated 10.02.2003 did not contain any condition of proportionality for availing of incentives under 1993 Scheme? On the appeal being admitted, we have heard Shri Sridharan learned Senior Advocate appearing for the appellant and Mr.Sonpal appearing for the respondents and have taken up the matter for final hearing by consent of the parties. 2. The Appellant is a Company incorporated under the provisions of Companies Act and is having its registered office in Pune. The appellant Company is engaged in the manufacturing of PVC P....
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....dingly, on 10th February 2003, a fresh eligibility certificate was issued to the appellant in the capacity as Pioneer Unit by SICOM. The said certificate issued on 11th February 2003 was valid for 106 months i.e. from 1st August 2002 to 31st May 2011 and the eligibility certificate issued in favour of the appellant for additional fixed capital investment of Rs. 20889.76 lakhs for village Ranpar, District Ratnagiri was made subject to review/ monitoring every year. Certain conditions were stipulated in the said eligibility certificate which included the condition of automatic curtailment of the eligibility certificate from the point of time when the total sales tax incentives admissible under the Scheme are availed of, or exceed the limits as specific in the 1993 Package Scheme of Incentives i.e. on attaining 69.93% of the gross value of Fixed Capital Investment actually made subject to a ceiling of Rs. 20889.70 lakhs i.e. Rs. 14,608.17 lakhs or from the date from which the certificate of entitlement is either cancelled or revoked, whichever event occurred earlier. 4. The certificate of Entitlement issued in favour of the appellant on 21st October 2002 by SICOM did not incorporate ....
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....,30,85,904/­ and it was held that the assessment had resulted in excess amount which was refunded to the dealer. For the remaining amount, a demand notice was served on the appellant. 5. Being aggrieved by the said assessment order, an appeal was preferred to the Appellate Authority i.e. the Joint Commissioner of Sales Tax (Appeals) II Pune City, assailing the order dated 22nd March 2013 passed by the Deputy Commissioner of Sales Tax, Pune for the period from 1st April 2005 to 31st March 2006. The First Appellate Authority, by an order dated 29th September 2015, upheld the order of the Assessment Authority and confirmed the demand raised therein. Being aggrieved, the appellant preferred a Second Appeal before the Maharashtra Sales Tax Tribunal, Mumbai and the Tribunal by an order dated 27th February 2017 confirmed the order passed by the First Appellate Authority. Being aggrieved by the said order, the appellant has approached this Court with a grievance that the amended Section 93 of the Value Added Tax Act is not applicable to an eligible unit availing incentives by way of 'exemption' and it can apply to units availing deferment or interest­free loan. The claim ....
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.... of para 3/12(b) of the 1993 Scheme, threshold investment in Group (c) for a pioneer unit was Rs. 60 crore much less than Rs. 208.98 crore invested by the appellant. According to the learned senior counsel, the eligibility certificate issued on 10th February 2003 specifically stated that the appellant was a pioneer unit and on the basis of this eligibility certificate, Sales Tax Department issued entitlement certificate dated 10th February 2003 and both the certificates would conclusively establish that the new investment at Ratnagiri was recognized as a Pioneer Unit by SICOM. In terms of the said certificate, according to the learned senior counsel, the appellant was eligible for availing maximum sales tax incentives of Rs. 146,08,17,000 and the validity period of the eligibility certificate was from 1st August 2002 to 31st August 2011 and the commercial production commenced on 1st August 2002. Shri Sridharan would submit that in terms of para 5.1(ii)(i) Group C, the appellant was eligible for benefit to the extent of 95% of the Fixed Capital Investment and the incentive amount in terms of the eligibility certificate was worked out at Rs. 146.08 crore. He would submit that after ....
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....rity for the disputed period 2005­06 which is based on applicability of the provisions of Section 93 of the MVAT Act, 2002, retrospectively as substituted by Maharashtra Act No.XXII of 2009, the Assessing Authority only allowed the exemption to the extent of pro­rata turnover of 35%. The First Appellate Authority upheld the order passed by the Assessing Authority and confirmed the demand of Rs. 1,42,36,378/along with interest payable under Section 50(3). This order was further confirmed by the Tribunal and the subject matter of the present appeal. 9. Shri Sridharan would invite the attention of the Court to the series of judgments delivered by this Court and the position of law which has been ultimately settled by the Hon'ble Apex Court in relation to the retrospective amendment made by Maharashtra Act No.XXIX of 2009 to Section 93 of the MVAT Act, 2002. His precise submission is that the appellant's unit being a pioneer unit, is not governed by the said amendment. Another submission of the learned senior counsel is that the validation provision contained in Section 5(1) of the Maharashtra Act No.XXII of 2009, validates and affirms an eligibility certificate/certif....
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....h new points have been raised in the appeal for the first time. Shri Sonpal would submit that the case of the appellant is based on the premise that no condition was imposed in the eligibility/entitlement certificate about restrictions on the incentives to be drawn for a year and therefore, the appellant continued to enjoy the incentives on 100% turnover of sales for the year 2005­06 and thereafter, but according to Shri Sonpal, the assessment for the year 200506 was taken up and an order was passed by the Assessing Authority on 22nd February 2013 and the incentives to be availed for the Financial Year were restricted to the percentage of sales turnover as per formulae prescribed in section 93(1A) of the MVAT Act which was made applicable from 1st April 2005. The submission of Shri Sonpal is that Section 93(1A) was inserted in August 2009 with retrospective effect from 1st April 2005. Shri Sonpal would submit that the argument of the learned counsel for the appellant that the restriction and curtailment of incentives under Section 93(1A) is not applicable to the appellant is entirely misconceived. He would submit that on plain reading of the Package Scheme of Incentives, no pro....
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...., specious and irrational. According to him, the entitlement certificate or eligibility certificate, though do not contain any condition of proportionality, this argument is of no consequence in light of insertion of Section 93A which begins with a non­obstante clause. Shri Sonpal would submit that in order to do away with the judgment of the Tribunal and the Bombay High Court in M/s.Pee Vee Textiles (supra), the Act itself was amended and Section 5 of the Maharashtra Act No.XXII of 2009 saved and validated any assessment, review, levy or collection of tax in respect of sales or purchases effected by a dealer or person and this section, according to him, refers to validation. 12. Shri Sonpal would also further submit that the appellant was issued an eligibility certificate and entitlement certificate under PSI 1988 and 1993 in the year 1994 and 2003 respectively prior to the appointed date i.e. 1st April 2005. According to Shri Sonpal, in view of the amended section, as per clause (a) in respect of the units to whom certificates are issued, prior to appointed date, i.e. 1st April 2005, Section 93 will apply from the appointed date. Hence, according to him, to interpret that it....
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....blic interest. The Package Scheme of Incentives are a reflection of the exercise of said powers conferred on the State Government. Section 41 read thus :­ "Section 41­Exemptions­Subject to such conditions as it may impose, the State Government may, if it is necessary so to do in the public interest, by notification in the Official Gazette, exempt any specified class of sales or purchases from payment of the whole or any part of any tax payable under the provisions of this Act (any notification issued under this section may be issued so as to be retrospective to any date not earlier than the 1st January 1960." 15. The State Government to encourage the dispersal of the industries to the less developed areas of the State is empowered to make provision for grant of incentives on Sales Tax to the eligible units either by way of exemption or deferral of Sales Tax payable on the finished products. The Package Scheme of Incentives was introduced for the first time by the Government of Maharashtra and was known as Package Scheme of Incentives, 1964 so as to encourage dispersal of the industries to less developed areas of the State. The quantum of sales tax incentives was sprea....
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....finished products for the eligible unit. The quantum of sales tax incentives was prescribed under the said scheme and for eligible units undertaking expansion or diversification, the quantum was linked to a proportion of fixed capital investment and was limited to a stipulated period. 16. Under the 1993 Scheme, the incentives offered to the industrial units in areas were made available on the graded scales in ascending order. It would be apposite to refer to para 3.8.I(c) of the 1993 Scheme dealing with expansion is necessarily to be referred to and is reproduced below : 3.8 Gross Fixed Capital Investment (I) Gross Fixed Capital Investment shall means and include, the case of: (i) New Fixed Assets ­ The value of New Fixed Assets Acquired at site and paid for; Explanation - (a) (b) (c) Any acquisition of new Fixed Assets outside the project scheme accepted by the Implementing Agency can be considered for the purposes of proportionate incentives during the residual eligible period provided such acquisition is not less than 25% of the Gross Fixed Capital Investment at the end of the previous financial year of the Eligible Unit" Para 3.8(I)(c) contemplates benefits to ....
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....neer unit (more than 60 crore for Group 'C' area) in terms of quantum, period of incentives etc. In case of the former where the benefits are to be conferred on the basis of gross fixed capital investment, by virtue of clause (c) of para 3.8 (i),it is the proportionate incentive to be availed during the residual eligible period where such acquisition is not less than 25% of the gross fixed capital investment at the end of the previous financial year of the eligible unit, whereas in case of the later, i.e. the Pioneer unit covered by clause 3.12, no such restriction in terms of the quantum or period of incentives is applicable. 14. Clause 3.8 of the 1993 Scheme came to be amended by issuing a Government Resolution dated 6th July 1994 and the word "proportionate" came to be deleted. As a necessary consequence, an acquisition of new fixed asset outside the project scheme accepted by Implementing Agency was liable to be considered for incentives other than special capital incentive, if the acquisition was not less than 25% of the gross fixed capital investment. However, for the purpose of sales tax benefits, the quantum of entitlement was limited to 75% of that which is admiss....
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....tax as provided in subsection (2), the Commissioner shall require the unit, by order in writing, to pay the tax, interest and penalty on such turnover on which the benefits are not available and serve on the dealer notice of demand accordingly; Provided that, no order under this section shall be passed without giving the dealer a reasonable opportunity of being heard. Explanation­ For the purposes of the provisions contained in Section 41BA and 41BB the terms "Existing Unit, Eligible Unit, implementing agency, Eligibility Certificate and Certificate of Entitlement" shall have the same meaning as provided in the relevant Package Scheme of Incentives." 16. It is noted that the MVAT Act, 2002 came to be enacted by the State legislature and it came into force in the State of Maharashtra from 1.04.2005, which repealed the Bombay Sales Tax Act. Section 8(4) of the said act empowered the Government to provide for exemption for payment of whole of tax in respect of class or classes or sales of goods effected by unit holding as defined in Section 88 to whom the incentives are granted under the Package Scheme of Incentives, by way of exemption of payment of Tax. Chapter­XIV of the....
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....under :­ (i) in case where there is increase in production capacity, then for the Package Scheme of Incentives for 1998, or, as the case may be, Package Scheme of Incentives for 1993, the formula shall be as below :­ Eligible Turnover =Turnover x Increase in production capacity Total production capacity after such increase. (ii) in case where there is no increase in production capacity, then for the Package Scheme of Incentives for 1993, the formula shall be as below :­ Eligible Turnover =Turnover x New Fixed Capital Investment Total gross fixed capital investments (1B) When the eligible turnover comprises of multiple finished products, then­ (a) the production capacity of each of the finished products shall be separately considered in determining the corresponding eligible turnover, and (b) eligible turnove....
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....on 6.07.1994 and a conscious decision was taken not to provide for proportionality. The State Government also clarified that an enabling provision in form of Section 41BB was already introduced in the Bombay Sales Tax Act, 1959 in the year 2001 but the said provision was not invoked by framing the rules and infact the Sales Tax Department had attempted, by way of administrative decision to impose a norm of proportionality which came to be stuck down by this Court. On consideration of the gamut of the matter, the Division bench did not find favour with the challenge to the constitutional validity of the Maharashtra Act No.22 of 2009 and arrived at a conclusion that the legislature has not transgressed the limitations on its constitutional powers while enacting the validating legislation. However, as far as sub­section (2) of Section 93 of the Enactment was concerned which proposed to include a penalty and interest, it was held to be operating harshly and to that extent it was directed to operate prospectively. Thus, it was in the year 2013 that this Court had already tested the validity of the Maharashtra Value Tax (Levy and Amendment) Act, 2009 and has upheld the same which val....
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.... from 1st April 2005 to 31st March 2006. The appellant obtained an eligibility certificate on 25th April 1994 which was granted under Part I of the 1988 Scheme of the Package Scheme of Incentives by SICOM for its Ratnagiri unit. By virtue of the said eligibility certificate, the appellant was eligible for maximum entitlement of sales tax incentive of Rs. 313 crores and this was to be availed by way of exemption. This certificate was valid for a period of 10 years. i.e. from 4th April 1994 to 3rd April 2004. The appellant was issued an entitlement certificate based on the said eligibility certificate which covered a production capacity of 1,30,000 metric tonnes. Perusal of the eligibility certificate issued on 21st April 1994 described the unit as a "Pioneer unit" and the maximum entitlement of sales tax incentive was not to exceed Rs. 313,03,07,000/­. The caption of the said certificate dated 21st October 2002 read as "eligibility certificate for new unit for sales tax incentive under Part I of 1988 scheme" as notified under Government of Maharashtra resolution dated 30th September 1988. In terms of the 1988 scheme, the Ratnagiri unit is the pioneer unit in terms of para 3.1(ii....
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....appellant was held eligible for availing maximum sales tax incentives of Rs. 146,08,17,000/­ and the eligibility certificate was valid for the period commencing from 1st August 2002 to 31st May 2011. In terms of para 5.1(ii)(i) Group C of the policy, the appellant factory was eligible for benefit to the extent of 95% for the fixed capital investment by way of exemption. At the time of issuance of the said certificate, sales tax eligibility in terms of monetary ceiling came to be curtailed by SICOM based on para 3.8(1)(c) of the Amended 1993 Scheme. The certificate was subjected to changes made from time to time. 21. An issue about the restriction of the benefit of 75% under para 3.8(1)(i)(c) of the 1993 Scheme was subject matter of a writ petition before this Court in case of ACC Limited Vs. State of Maharashtra (supra). The Division Bench of this Court in Writ Petition No.290 of 2001 was called upon to decide an issue whether the eligibility certificate granted in favour of ACC Limited was entitled to Sales Tax Incentives by way of exemption to the extent of 110% of the capital investment in the project. The claim of the petitioner that it was a pioneer unit and the issue was....
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....the respondent that the petitioner unit was an existing unit, since it was set up earlier and availed of benefit under that scheme and therefore, it was entitled only for 75% of that admissible to a new unit, came to be rejected. We find that the ratio laid down by the Hon'ble Division Bench squarely applies to the appellant to the effect that the ceiling of entitlement in respect of a pioneer unit cannot be curtailed by applying the amended para 3.8(1)(i)(c) to restrict the benefit to 75% under that para. In such circumstances, the amended para do not govern the case and therefore, cannot restrict the benefits availed by the appellant. 22. In any case, the appellant availed a fresh eligibility and entitlement certificate on 21st October 2002/10th February 2003 and in the said certificate, the SICOM has not incorporated any condition to the effect that the availment of benefit would be proportionate to the increase in production capacity additional investment. The certificates have been issued after issuance of circular dated 17th January 1998 on which Mr.Sonpal places heavy reliance. The Commissioner of Sales Tax who had issued a Trade circular regarding units covered under t....
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....uisition of new fixed asset outside the project can be considered for incentives other than special capital incentives where such acquisition is not less than 25% of the gross fixed capital investment at the end of previous Financial Year. It rather clarified that a separate eligibility/entitlement certificate will be issued for availing such benefits. It also clarified that under such a category, it is not necessary that there has to be an increase in production capacity. The circular clarifies the position in view of the representations that were received since there was some doubt about the manner of calculating the sales tax incentives in cases of units covered under the category of deemed expansion of 1993 scheme. A clarification was issued in para 4 and it was conclusively declared that a deemed expansion unit of 1993 Scheme will also be eligible for the Package scheme benefits to the extent of the higher percentage as calculated by the method prescribed in clause (4) and not on the entire production of eligibility certificate covered under such category. Thus, by virtue of the said trade circular, no restriction was imposed on the pioneer unit who were covered by para 3.12 (....
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....d Validation Act) 2009, Maharashtra Act No.XXII of 2009. By virtue of the said amendment, notwithstanding anything contrary contained in any Package Scheme of Incentives, any eligible units to whom the eligibility certificate and certificate of entitlement have been granted at any point of time before or after the appointed date, it was held entitled to draw the benefits in any year only on that part of its turnover of sales or purchases as may be arrived at by applying the provisions of sub­section (1A) to the total turnover of sales and purchase of the said unit in that year. The constitutional validity of the retrospective amendment of the said section came to be upheld by the Division Bench of this Court in case of M/s. Jindal Poly films Ltd Vs. State of Maharashtra 2013 SCC Online 672, and Division Bench of this Court categorically held that the legislative intent was to allow the benefits only on a proportionate portion of the turnover and therefore, anything contained in the Package Scheme of Incentives would stand overruled by the said section. The Hon'ble Apex Court in case of Eurotex Industries and Exports Ltd Vs. State of Maharashtra & Anr. 2017 (6) SCALE 124 has....
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....AT Act before commencement of the amendment has been deemed to be valid and effective. He thus submits that the appellant was issued with a certificate of entitlement on 10th February 2003 by the Sales Tax Department in relation of assessment of sales tax and these certificates in result, stand validated by Section 5(1) of the Act No.XXII of 2009 and this certificate do not contain any condition for proportionate availment of incentive. Any order that is passed in contradiction to the said certificate, according to Shri Sridharan is deemed to be invalid. The effective date of the amending Act No.XXII of 2009 is 27th August 2009. it is not disputed that the appellant has already exhausted its Cumulative Quantum of Benefits in the month of March 2009 itself. The certificate of entitlement comes to an end either on its cancellation or on availing the benefits before or after the appointed date exceeding the monetary ceiling limit fixed for the eligibility unit. Since the appellant has already exhausted its limit in March 2009, the certificate issued in favour of the appellant stands automatically cancelled and the dealer ceases to be the eligible unit in terms of Section 90. If the ap....
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....was passed and impugned for the years 2005­06, the Assessing Authority invoked and applied the provisions of Section 93 of the MVAT Act, 2002 as retrospectively substituted by Maharashtra Act No.XXII of 2009 and only allowed the exemption to the extent of pro­rata turnover of 35%. The First Appellate Authority maintained the said order and held that since in light of the retrospective amendment made to the MVAT Act, 2002, the appellant Company will have to pay net amount by way of tax of Rs. 48,50 crore in respect of the four years commencement from 1st April 2005 to 31st March 2009 along with interest and penalty. The Appellate Authority held that the dealer has taken full benefit of entitlement certificate for existing unit and is liable for pro­rata applicable for extension unit. The appellate authority noted that the State Government is empowered to grant exemption by virtue of Section 8 of the Bombay Sales Tax Act and Package Scheme of Incentives was an order conferring certain benefits and though it did not contain any restrictions and conditions like the pro­rata restriction, the statute MVAT Act, 2002 has settled in and restricted the benefits on pro­rat....
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....y of the eligibility period even if the incentive is computed in terms of amended Section 93 of the MVAT Act, 2002. The amendment inserted by Act No.XXII of 2009 would only govern those units where the Cumulative Quantum of Benefits has not yet lapsed without full utilization and is in the process of being availed. The eligibility availed under Section 93(1) is computed for a particular year and if there is excess availment, then, the benefits can be withdrawn. The challenge to the constitutional validity of Act No.XXII of 2009 was rejected by a Division Bench of this court in case of Jindal Poly Films (supra) which is upheld by the Hon'ble Apex Court and thus, upholding the retrospectivity of the said amending enactment. The amendment of Section 93(1) being retrospective in the sense would make the provision applicable to the unit set up before the date of the said amendment, but in respect of sales which are made by such unit on or after 27th August 2009. Since the appellant has already exhausted the benefits of exemption before 27th August 2009, the appellant cannot be deprived of the said benefits in light of Section 93A which was inserted with effect from 27th April 2009.....