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2014 (6) TMI 829 - HC - VAT and Sales TaxGrant of loan equal to VAT / CST - whether amount to Refund of VAT - fiscal incentives to the Tata Motors Limited for Nano project - Resolution passed to grant loan equivalent to amount of VAT Paid - Whether the Government Resolution dated 1st January, 2009, providing for a loan equal to the gross value of VAT and Central Sales Tax payable to the State Government, amounts to refund of tax, which could be termed as contrary to law or against the public interest - Held that:- A bare perusal of the preamble would indicate the object and the intention behind passing of such resolution. The Government of Gujarat took notice of the fact that the auto sector in the States like Maharashtra, Tamil Nadu and at the outskirts of the State of Delhi has been doing very well over a period of time and all the three States have been dominating in the auto sector. On the other hand, the State of Gujarat has only one such project. Although the State of Gujarat has a strong engineering base and there are number of engineering units in the MSME sector, yet the same are engaged in the supply of auto components as OEMs to the auto manufacturers. The Government of Gujarat noticed that no major industry had been set up in the State during the recent past. As the respondent No.3, Tata Motors Limited is a leading vehicle manufacturing company and has extensive sales network through out the territory of India, the Government of Gujarat found that the investment by the respondent No.3, Tata Motors Limited would provide the State with opportunities for infrastructure development, growth of allied industries and development of the local economy, by providing employment opportunities for skilled and unskilled workers. This appears to be the main objective behind the issuance of the Resolution dated 1st January, 2009. Loan advanced in the instant case by the Government in favour of the respondent No.3 is with a view to encourage the establishment of the automobile industries in the State as a part of its industrialization policy and the establishment of the project in question has encouraged establishment of other industries like Ford India Private Limited and Maruti Suzuki India Limited. - The quantum of VAT and Central Sales Tax recovered is only a measure for determining the quantum of loan to be advanced. We have noticed that the maximum amount of loan, which can be advanced on an year to year basis is made dependent on the sales effected by the respondent No.3. The respondent No.1 State of Gujarat instead of giving a lump-sum loan, has made the entitlement of loan dependent upon the performance of the respondent No.3. No legal bar under any of the provisions of the Motor Vehicles Act, 1988, in transferring a vehicle to a distribution and logistic company so that such a company can in turn transfer the vehicle to the dealers in other parts of the country. We are of the view that this itself would not make the vehicle a secondhand vehicle in the hands of the ultimate purchaser - it appears that the TML Distribution Company Limited was incorporated in March, 2008 as a wholly owned subsidiary with a view to look after the outbound logistic needs of the respondent No.3. It is evident that the said distribution and logistic company was established even before the impugned Resolution dated 1st January, 2009 was passed. The object, according to the respondent No.3 of establishing such a distribution company, is to improve the service levels in respect of logistics and distribution and reduction in chain costs in the longer run. It has been brought to our notice that not only the respondent No.3, but various other companies have also such distribution companies. Amount of loan paid by the Government to the respondent No.3 does not amount to refund of tax. As observed by the Supreme Court itself in Amrit Banaspati Co.Ltd. (supra), that exemption from tax to encourage industrialization should not be confused with refund of tax. In the same manner, deferment of tax to encourage industrialization should not be confused with refund of tax. The amount in the present case paid by the Government to the respondent No.3 is a loan and not refund of tax. There is a fine distinction between the two. - No merit in PIL - Decided against assessee.
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