2004 (11) TMI 532 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Section 61(2)(d) of the Haryana Value Added Tax Act, 2003.
2. Entitlement to the deferment certificate under the VAT Act and VAT Rules.
3. Requirement of furnishing a 100% bank guarantee for availing tax deferment.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 61(2)(d) of the Haryana Value Added Tax Act, 2003:
The petitioner sought to declare the provisions of Section 61(2)(d) of the Haryana Value Added Tax Act, 2003, as ultra vires to the Constitution of India. However, it was noted that the learned counsel for the petitioner did not advance any argument on the question of the vires of Section 61(2)(d) of the VAT Act. Consequently, the court refrained from adjudicating upon this question.

2. Entitlement to the deferment certificate under the VAT Act and VAT Rules:
The petitioner invested significantly in setting up an industrial unit and availed sales tax exemptions under the Haryana General Sales Tax Act, 1973. Upon the enactment of the VAT Act and framing of the VAT Rules, the petitioner applied for converting the sales tax exemption to deferment of tax. The core question was whether the petitioner, who had already furnished a bank guarantee to the extent of 15% and surety for the remaining 85% of the amount, could be asked to furnish a bank guarantee for the entire amount for availing sales tax deferment.

The VAT Act and Rules provide that industrial units availing sales tax exemption under the 1973 Act could opt for deferment of tax. The petitioner submitted an application in form VAT-A5 within the prescribed period, requesting deferment. The officer in charge of the district is required to issue an entitlement certificate in form VAT-G14 within 15 days if the application is complete and correct. The unit availing deferment must furnish security for the full amount of deferred tax, which was not required under the 1975 Rules.

3. Requirement of furnishing a 100% bank guarantee for availing tax deferment:
The grievance was that the concerned authority demanded a 100% bank guarantee for converting the sales tax exemption to deferment. The petitioner had already furnished a bank guarantee equivalent to 15% and balance 85% in the form of surety bonds. The court observed that sub-rule (6) of rule 69 read with annexure R-1 does not mandate a 100% bank guarantee. The demand for a 100% bank guarantee was not justified as per the VAT Act and Rules.

The court concluded that the insistence on a 100% bank guarantee was not legally sustainable. Therefore, the writ petition was allowed, directing the Assessing Authority to issue the deferment certificate as per the petitioner's application dated June 2, 2003, within one month from the receipt/submission of the certified copy of the order.

Conclusion:
The court allowed the writ petition and directed the issuance of the deferment certificate without insisting on a 100% bank guarantee. The question of the constitutionality of Section 61(2)(d) was not adjudicated as no arguments were advanced on this issue.