TMI Blog2011 (6) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... it Petition is to the Constitutional validity of Section 41B of the Bombay Sales Tax Act, 1959 ( BST Act for short) as also the constitutional validity of Rule 31AA of the Bombay Sales Tax Rules, 1959 ( BST Rules for short) to the extent that the said provisions are made applicable retrospectively from 1st January 1980. The petitioners have also challenged the validity of the assessment orders passed on 2nd August 1999, 3rd August 1999 and 6th August 1999 for the period 1994 1995,19951996 and 19961997 respectively. However, Mr.Joshi, learned counsel appearing on behalf of the petitioners has not pressed the challenge to the said assessment orders as the petitioners have filed appeals against the said assessment orders before the Appellate Authority constituted under the BST Act and that the said appeals are pending. 2. The basic dispute raised in this Writ Petition is, when a unit is established as per the Government Resolution dated 30th September 1988 ( 1988 GR for short) which provides for a mechanism to calculate the notional sales tax liability of a unit covered under the 1988 Package Scheme of Incentives ( 1988 Scheme for short), whether a different mechanism for cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Incentives introduced in the year 1964 was amended from timetotime. The amended Schemes are commonly known as the 1969 Scheme, 1976 Scheme, 1979 Scheme, 1983 Scheme and 1988 Scheme. In the present case, we are concerned with the 1988 Scheme. 6. The 1988 Package Scheme of Incentives announced by the State Government as per 1988 GR was to remain in operation for a period of five years from 1st October 1988 to 30th September 1993. The units established under the 1988 Scheme could either opt for exemption from payment of tax for the period specified therein and upto the specified financial limit or opt for deferred payment of tax. 7. The petitioners, with a view to avail the exemption method prescribed under the 1988 Scheme, decided to set up a unit to manufacture electrical goods at Village Mahim, Taluka Palghar, District Thane. Accordingly, the petitioner No.1 applied for and obtained an eligibility certificate dated 3rd January 1992 from the implementing agency, namely, the Development Corporation of Konkan Limited valid for seven years from 3rd January 1992 to 2nd January 1999, with a financial ceiling of Rs.22,64,971/which was increased to Rs.26,87,800/by a corrigendum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the generation of electricity, sales tax / purchase tax was payable at 4% or at 6% as per the notification issued under Section 41 of the BST Act. 11. However, in respect of the units established in a backward area, as per the package scheme of incentives framed by the State Government total exemption was granted up to the specified period and upto a specified amount of tax. In the case of a unit established under the 1988 Scheme to manufacture electrical goods, total exemption was granted as per Notification entry 136(2)(a) and (b) under Section 41 of the BST Act. The said entry 136(2)(a) of the Notification provides that sale by a registered dealer, being an Industrial Unit set up in the developing regions of the State of Maharashtra and certificated by the relevant Regional Development Corporation as an eligible unit under the 1988 Scheme falling under the Package Scheme of Incentives and to whom a Certificate of Entitlement has been granted would be exempt from the whole of the sales tax. Similarly, Entry 136(2)(b) of the Notification issued under Section 41 of the BST Act provides that sales of any goods being raw materials by a registered dealer to a registered dealer r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate. 15. Calculation of CQB, according to the petitioners was liable to be made as per para 2.11 of the 1988 GR by considering the maximum tax that would have been payable under the BST Act / BST Rules including the exemption provisions contained therein, if the petitioner s unit was not covered under the 1988 Scheme. According to the Commissioner, the calculation of CQB was liable to be made as per para 2.11 of the 1988 GR read with Section 41B and Rule 31AA by considering maximum rate of tax levied under the Schedule to the BST Act by ignoring the exemption provisions contained therein. 16. Para 2.11 of the Government Resolution dated 30th September 1988 reads thus : 2.11 Notional Sales Tax Liability :(a) Sales Tax / purchase tax / additional tax that would have been payable by the Eligible Unit on the purchases of raw materials and sales tax / turnover tax / additional tax that would have been payable by the Eligible Unit on the sales of finished products / byproducts / scrap goods of the Eligible Unit under the Local Sales Tax Law but for an exemption under the 1988 Scheme and computed at the maximum rates of tax specified under the Local Sales Tax Law as applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en granted by the Commissioner under entry 136 of the Schedule to the notification issued under section 41 shall be calculated by the Commissioner in respect of any period commencing on or after the 1st January 1980 in the manner prescribed herein. (2) The cumulative quantum of benefits received by the said dealer to whom the said certificate has been granted under the 1979 Package Scheme of Incentives including the amended 1979 Package Scheme of Incentives and the 1983 Package Scheme of Incentives shall be the aggregate of the following sums, that is to say,(a) a sum equal to the amount of purchase tax which would have been payable on the purchases of raw materials to the Government by the said dealer under any of the provisions of the Act and the amount of additional tax in relation to such purchase tax which would have been payable to the Government if the exemption granted under the said entry was not available; (b) a sum equal to the amount of sales tax which would have been payable by a selling dealer not holding a Certificate of Entitlement on the sale of raw materials to the said dealer if the set off under rule 42AC is not admissible to the said dealer in respect of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1988 GR. Since Section 41B read with Rule 31AA seeks to introduce a different method of calculating the CQB, it amounts to taking away the rights vested in the petitioners under the 1988 GR and, therefore, the provisions of Section 41B read with Rule 31AA must be held to be bad in law to the extent they are in conflict with para 2.11 of the 1988 GR. 20. Mr.Joshi submitted that in the case of petitioners, the CQB as per para 2.11 of the 1988 GR was liable to be calculated on the basis of the maximum sales tax / purchase tax that would have been payable if the petitioner s unit was not covered under the 1988 Scheme. If the petitioner s unit was not covered under the 1988 Scheme, then on purchase of raw materials and sale of electrical goods to undertakings engaged in the generation / distribution of electrical energy, the petitioners would have been liable to pay purchase tax / sales tax at 6% or 4% as the case may be as per the Notification issued under Section 41 of the BST Act and was liable to pay purchase tax / sales tax at 10% when sales were made to others. The submission is that as per para 2.11 of the 1988 GR, the notional sales tax liability computed cannot exceed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be at 4% or 6% when sold to undertakings engaged in the generation / distribution of the electrical energy and at 10% when sold to others. The expression maximum rate of tax in para 2.11 of the 1988 GR refers to the maximum rates of tax that would have been payable by the Unit if not covered under the 1988 Scheme as per the exemption Notification issued under the BST Act and is not referable to the tax levied under the Schedule to the BST Act. Accordingly, Mr.Joshi submitted that petition be allowed by granting the reliefs claimed in the petition. 23. Mr.Sonpal, learned counsel appearing on behalf of the Commissioner, on the other hand, submitted that the Writ Petition filed to challenge the validity of Rule 31AA suffers from gross delay and laches as Rule 31AA came into force with effect from 24th March 1995, whereas the Writ Petition is filed belatedly in the year 2000. He submitted that Rule 31AA is in consonance with para 2.11 of the 1988 GR, as is evident from the fact that even before the insertion of Rule 31AA, para 2.11 was interpreted in consonance with Rule 31AA and assessment orders were passed for the period 199192, 199293 and 199394 on 6th January 1995 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m rates specified under the sales tax law and, therefore, Rule 31AA which incorporates the provisions contained in para 2.11 cannot be said to be manifestly arbitrary and consequently, the challenge to Rule 31AA cannot be sustained. 27. It is further contended on behalf of the Commissioner that by a Circular No.9 of 1990 dated 12th April 1990, the Commissioner of Sales Tax in the light of the clarification dated 26th March 1990 issued by the Industries, Energy and Labour Department had clearly brought to the notice of the persons in the trade, that the rate of tax to be applied for calculating the notional sales tax liability would be the rate shown in the Schedule appended to the BST Act and not the rate as reduced by any notification issued under Section 41 of the BST Act. Therefore, it is not open to the petitioners belatedly in the year 2000 to contend that the CQB has to be calculated at the rate specified in the exemption notification. 28. We have carefully considered the rival submissions. The question to be considered in the present case is, whether under para 2.11 of the 1988 GR, the CQB was liable to be calculated by ignoring the exemption provisions contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t referable to the rate of tax specified in the schedule to the BST Act, but is referable to the maximum rate of tax payable in view of the exemption provisions contained under local sales tax law. By using the wider expression local sales tax law , it is amply made clear in para 2.11 that it is the tax which is actually payable by a unit not covered under the 1988 Scheme should be the basis for calculating the CQB availed by a unit covered under the 1988 Scheme. Para 2.11 of the 1988 GR cannot be construed to mean that the computation of tax has to be made by ignoring the exemption provisions contained in the BST Act / BST Rules. When a notification issued under Section 41 of the BST Act grants partial exemption, then the tax payable pursuant to the notification is the maximum rate of tax payable on sale / purchase of goods referred to in the notification. There is nothing in para 2.11 to suggest that the tax payable by a unit in the light of notification issued under Section 41 of the BST Act should not be treated as the maximum rate of tax payable under local sales tax law. As noted earlier, the schedule to the BST Act does not prescribe maximum / minimum rate of tax. It is onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would have to be held that Rule 31AA inserted with effect from 24th March 1995 to the extent it directs the Commissioner to compute the CQB by ignoring the exemption provisions is bad in law. The reason being that the petitioners had established a unit in the backward area on the assurance contained in the 1988 GR to the effect that the CQB would be computed at the maximum rates specified under the local sales tax law and not at the rate specified in the schedule to the BST Act. The said terms and conditions which forms the basis for entering into a contract between the State Government and the petitioners could not be altered retrospectively by introducing Rule 31AA with effect from 24th March 1995. 35. In the case of Suprabhat Steel Limited (supra), the Apex Court was called upon to consider the validity of a notification issued by the State Government which was repugnant to the industrial policy approved by the State Government. The Apex Court on consideration of the rival contentions held (see para 7) thus : 7. Coming to the second question, namely, the issuance of notification by the State Government in exercise of power under section 7 of the Bihar Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entertained. 38. It is true that the Assessing Officer in his assessment orders for the period from 199192 to 199394 as also the Commissioner in Circular No.9 of 1990 dated 12th April 1990 on the basis of the clarification issued by the Industries, Energy and Labour Department have held that under para 2.11 of 1988 GR, the CQB has to be calculated by ignoring the exemption granted under the BST Act / BST Rules. In our opinion, the aforesaid interpretations are contrary to the plain language of para 2.11 in the 1988 GR and hence the said interpretation given in the assessment orders and the circular must be held to be contrary to the 1988 GR. If the assessments for 199192 to 199394 have attained finality then the consequences for those years would be as per the assessments, but the same would not affect the assessments which are pending before the adjudicating authority or the appellate authority. 39. The argument advanced on behalf of the Commissioner that Rule 31AA is in consonance with para 2.11 of 1988 GR is also not acceptable, because, in our opinion, Rule 31AA introduced with effect from 24th March 1995 for the first time provides for calculation of CQB by ignoring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wise available to an industrial unit under the incentive policy itself must be declared to be bad in law. In the present case, giving retrospective effect to Rule 31AA prejudicially affects the interests of the units established under the 1988 Scheme and, therefore, Rule 31AA to the extent it seeks to apply retrospectively so as to divest the vested rights of the units covered under the 1988 Scheme must be held to be bad in law. We do not consider it necessary to deal with various other decisions relied upon by the Counsel for the Commissioner as all those decisions are distinguishable on facts / have no relevance to the facts of the present case. 43. Before concluding, we may note that the package scheme of incentives were issued by the State Government from timetotime with total exemption for the period specified therein, so as to attract establishment of units in the backward areas of the State. When the package scheme of incentives itself was to operate based on the exemption granted under the sales tax law, it is difficult to envisage that in calculating the CQB, the scheme intended to ignore the exemptions available under the sales tax law. In any event, as noted above t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
