TMI Blog2016 (10) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... ,396/- was availed of by the petitioner upto 30.6.2000. Thereafter, the plant and machinery was partly sold and partly it was leased out. From 30.6.2000, the unit is not in production. As the petitioner violated the conditions of eligibility certificate, the matter was put up in 92nd meeting of the Higher Level Screening Committee on 16.2.2006 and finding violation of the conditions laid down in Rule 28-B of the Rules, the committee decided to withdraw the eligibility certificate. As a consequence, the petitioner became liable to pay the entire amount of tax, interest and penalty in terms of Rule 28-B (10)(b) of the Rules, as if the benefit of deferment of tax/ exemption was not available to the petitioner. The benefit of interest free loan could be availed of only by an industrial unit in whose favour eligibility/ entitlement certificate had been issued in terms of the incentive scheme as notified on 17.5.1989 (Rule 28-A of the Rules), however, it is not in dispute that the Scheme was made applicable even to the beneficiaries under Rule 28-B of the Rules. In case a unit is not in possession of the eligibility certificate, he could not claim the benefit of interest free loan un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fault. 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 control, the petitioner could not continue in business, in terms of conditions laid down in Rule 28-B of the Rules, the eligibility certificate granted to the petitioner was withdrawn in the meeting of the Higher Level Screening Committee held on 16.2.2006. The order was conveyed to the petitioner vide letter dated 6.7.2006. However, by that time, entire amount of tax had already been paid to the Excise and Taxation Department and even the interest free loan had also been returned to the Industries Department. As a consequent of withdrawal of eligibility certificate, the assessing authority vide order dated 28.6.2006, calculated the interest due from the petitioner. The amount was determined at ₹ 36,79,875/-. Aggrieved against the order, the petitioner preferred appeal. The Joint Excise Taxation Commissioner (Appeals), Faridabad, vide order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 44.68 lacs. The period of entitlement was from 9.9.1997 to 8.9.2006. During the currency, the petitioner availed benefit to the tune of ₹ 43,90,396/- and thereafter partly sold the plant and partly it was leased out. As per the record, there was no production from 30.6.2000. She further referred to condition nos. 3, 5 and 6, as contained in the eligibility certificate, which provide for the period the unit is to remain in production and further the liability to pay interest. The reference was also made to Rule 28-B(10)(a) and (b) of the Rules providing for certain conditions under which the eligibility certificate granted to a unit could be withdrawn. Rule 28-B(12)(iv) of the Rules was also referred to submit that the payment of deferred amount was to be made after expiry of a period of seven years. In addition, while referring to Clauses 5 and 7 of the Scheme, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/ Notification of the Excise and Taxation Department, an industrial unit is eligible for tax exemption/ deferment as under :- Small scale Medium Scale/ Large Scale Time Limit Zone A : Comprising centrally and state identified backward areas. 150% of fixed capital investment 125% of fixed capital investment but not exceeding ₹ 6 crores. 9 years. Zone B : Comprising centrally areas, other than zones A C. 125% of fixed investment 100% of fixed capital investment but not exceeding ₹ 4.5 crores. 7 years. Zone C : omprising Faridabad, Ballabgarh Complex Administration. 100% of fixed capital i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 equivalent to the estimated tax liabilities of the year, if it is being issued for the first year. For subsequent years, the loan will be sanctioned after taking into account the difference in the actual and the estimated tax liability of the previous year, the total entitlement and the period, as indicated in the eligibility certificate. This process wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 sanction loan in lieu of amount of deferred tax to the extent the eligibility entitlement certificate has been issued in favour of the industrial units. 7. POWER TO RECOVER THE LOAN General Manager of the District Industries Centre of the concerned district will be fully empowered to recover loan in the case of default as arrears of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 added in the Rules effective from 1.4.1987 to 31.3.1997. The need to frame the scheme arose on account of provisions of Section 43-B of the Income Tax Act, whereby the unpaid sales tax was treated as income of the assessee. With the framing of the scheme, entire amount of deferment of tax was converted into interest free loan to be adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittee 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 of the eligibility certificate of the petitioner was from 9.9.1997 to 8.9.2006. The total amount of admissible benefit to the petitioner was ₹ 44.68 lacs, out of which ₹ 43,90,396/- was availed of by the petitioner upto 30.6.2000. Thereafter, the plant and machinery was partly sold and partly it was leased out. From 30.6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual 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 benefit of interest free loan could be availed of only by an industrial unit in whose favour eligibility/ entitlement certificate had been issued in terms of the incentive scheme as notified on 17.5.1989 (Rule 28-A of the Rules), however, it is not in dispute that the Scheme was made applicable even to the beneficiaries under R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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