9911796707
TMI Blog2010 (3) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... le financial assistance to the potential entrepreneurs in the form of subsidies and post-production benefits was envisaged, the main thrust of the policy was on creating an environment conducive to the smooth setting up and successful functioning of industries. The said policies detailed in IPR 1992 offered several incentives to the new industries as well as for expansion/modernization/diversification of existing industrial units, with effect from August 1, 1992, including the incentive for exemption/deferment of sales tax. Para 7.4 of the IPR 1992 provided for sales tax incentive, which reads as under: "Exemption/deferment of sales tax on raw materials, spare parts, and finished products of small, medium, large scale and pioneer industrial units: New small, medium and large scale industrial units including pioneer units will be eligible for exemption of sales tax on raw materials, spare parts, and finished products for a period of five years subject to a ceiling of 100 per cent of fixed capital investment if the unit is located in Zone A, 75 per cent if located in Zone B and 60 per cent if located in Zone C. New medium and large industrial units may also opt to defer payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Zone A, 75 per cent in Zone B and 60 per cent in Zone C of the investment of the unit in plant and machinery, land, building and other equipment of a permanent nature. . . ." Similar notification vide S.R.O. No. 1094 of 1992, dated September 23, 1992, was issued by the State Government in the Finance Department providing for deferment of sales tax collected under the Central Sales Tax Act, (for short, "the CST Act"), for the same period, subject to the same limitations, conditions and exceptions governing such deferment as provided in the aforesaid notification vide S.R.O. No. 1093 of 1992 made under the OST Act. Pursuant to the incentives and benefits extended by the State of Orissa under IPR 1992, the petitioner-company set up a ferro alloys plant at Khadagprasad in the district of Dhenkanal, Orissa, for manufacturing 50,000 MT of ferro alloys with two furnaces of 13.25 MVA each and got itself registered under the OST Act and CST Act and was allotted registration Nos. DL-2999 and DLC-1252, respectively. The petitioner-company having established a large scale industrial unit in the district of Dhenkanal, which comes within Zone C, was eligible to opt for deferment of sales tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f (1) Carbon ferro chrome (of more than four per cent carbon) (2) Ferro silico manganese/ferro silicon. Subsequently from January 20, 2000, the unit started manufacturing and selling the above products on their own account." Pursuant to the aforesaid clarification, the Director of Industries, Orissa, issued necessary certificate in form E(92) to the petitioner-company, for availing of sales tax exemption/deferment under the IPR 1992, showing the date of commercial production on its own account and subsequent sale as January 20, 2000. In terms of such certificate in form E(92), the petitionercompany was issued with certificate of eligibility for sales tax deferment on finished product by the Director of Industries, Orissa, dated October 20, 2000, the relevant portion of which reads as under: "This unit has made first investment in fixed capital on or after August 1, 1992 and started production from October 1, 1997 as a conversion agent of TISCO Ltd. Subsequently from January 20, 2000 the unit started manufacturing and selling the above products on their own account. (3) The fixed capital investment of the unit as on the date of commercial production is Rs. 37,92,04,393. (6) This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nercompany filed first appeals before the Assistant Commissioner of Sales Tax, Cuttack II Range, Cuttack. The said appellate authority while allowing the appeals and reducing the tax demand on production of requisite form C, confirmed the deferment of tax allowed to the petitioner-company. While the matter stood thus, the Sales Tax Officer, Dhenkanal Circle, issued notice under rule 10 of the CST (O) Rules for reopening of the assessment for the years 2000-01 to 2003-04. Pursuant to such notice, the petitioner-company appeared before the said assessing officer and requested him to drop the proceedings. The Sales Tax Officer, Dhenkanal Circle, completed the reassessment proceedings under rule 12(8) of the CST (O) Rules, for the assessment years 2000-01, 2001-02, 2002-03 and 2003-04, disallowing the benefits of deferment of sales tax to the petitioner-company and demanding payment of tax for the entire period. The assessing officer, referring to the agreement entered with IPICOL in form B(92), came to hold as under: "This agreement has taken January 20, 2000 as the date of commercial production. But the notification dated September 23, 1992 as referred to earlier stipulates that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat such reassessment merely on the change of opinion of the assessing officer is not permissible in law. In this regard, it is submitted that as the said assessing officer had passed the original order of assessment, allowing deferment of sales tax, the impugned orders of reassessment disallowing such deferment amounts to review of his earlier orders of assessment, which is not permissible. Further the original assessment orders allowing the benefit of deferment of sales tax having been confirmed in appeals, the same were not available to be reopened, having merged with the appellate orders. The learned counsel for the petitioner further submitted that the entire deferred amount of sales tax has already been paid in full by the petitionercompany, after the expiry of period of deferment, as per the instalments prescribed in the schedule to the agreement entered into with IPICOL in form B(92). The learned counsel for the Revenue, with reference to the counteraffidavit, submits that the petitioner-company was admittedly issued with a certificate by the Director of Industries, Orissa, dated April 13, 1999, which clearly mentioned that the industrial unit commenced its commercial pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of M/s. TISCO Ltd., as per their agreement dated April 1, 1997 and that they have effected sale of their own product only with effect from January 20, 2000. In the said letter, it was further mentioned that the activities undertaken during the period from October 1, 1997 to January 19, 2000 were only processing of goods as a job-worker on receipt of job charges and that the unit started its own production and selling its product only with effect from January 20, 2000. Accordingly, the Director of Industries, Orissa, issued clarification in continuation to its earlier certificate dated April 13, 1999, clearly stating therein that the petitioner's industrial unit started production from October 1, 1997 as a conversion agent of M/s. TISCO Ltd., and subsequently from January 20, 2000, the industrial unit started manufacturing and selling its own product. On the basis of such clarification, the Director of Industries issued form E(92), as required under the IPR 1992, clearly specifying therein that the petitioner's industrial unit commenced its commercial activities on October 1, 1997 on conversion basis and started its own commercial production and sale with effect from Janua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which such incentives were granted. What was intended under the IPR 1992 was to provide sales tax incentives and benefits to industrial units in respect of their finished product and as the petitioner's industrial unit admittedly manufactured and sold its own product only from January 20, 2000, the same would be the date of commencement of commercial production of the industrial unit and the Director of Industries had rightly issued form E(92) and eligibility certificate, indicating therein January 20, 2000 to be the date from which the petitioner-unit commenced commercial production and sale of its own product. A Division Bench of this court in the case of Teleworks Private Limited v. Steel Authority of India Limited [1991] 81 STC 449, while dealing with a similar question with regard to the date from which an industrial unit is entitled to get exemption from sales tax under the IPR 1980, had observed that such exemption from sales tax being in the nature of incentive offered by the State Government, it was intended to be real and substantial. The relevant findings of this court reads as under (at page 453): ". . . The exemption from sales tax being in the nature of an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o commercial production. In other words, the moment the eligible unit issues the first sale voucher it would go into commercial production for the purpose of this rule and the application for exemption. . ." In the case of Vadilal Chemicals Ltd. v. State of Andhra Pradesh [2005] 142 STC 76, the Supreme Court while considering a similar question, observed that the exemption was granted with a view to give a fillip to the industries in the State. It was further observed that a liberal interpretation of the term "manufacture" should have been adopted by the State authorities, more particularly, when the State authorities had granted the certificate of eligibility after due consideration of the facts. The honourable court proceeded to hold as follows (at page 86): "Furthermore, under the incentive scheme in question, there was only one method of verifying the eligibility for the various incentives granted including sales tax exemption. The procedure was for the matter to be scrutinized and recommended by the State Level Committee and District Level Committee and the certification by the Department of Industries and Commerce by issuing an eligibility certificate. There was no other me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has been provided under rule 12(8) of the CST (O) Rules, which prescribes that such power of reassessment can be exercised to reopen a concluded assessment, only if the turnover of a dealer for any period has escaped assessment or the dealer has been under-assessed. Rule 12(8) of the CST (O) Rules reads as under: "If for any reason the turnover of a dealer for any period has escaped assessment or has been under-assessed, the Commissioner may, at any time within five years from the expiry of the year to which the period of assessment relates, call for a return after complying with the provisions of rule 10, assess the amount of tax due from the dealer and may also direct, in cases where such escapement or underassessment is due to the dealer having concealed particulars of his turnover or having without sufficient cause furnished incorrect particulars thereof, that the dealer shall pay, by way of penalty, in addition to the tax assessed under this sub-rule, a sum not exceeding one and a half times of the said tax so assessed: . . ." In the present case, admittedly there being no concealment of turnover by the petitioner-company or discovery of any material particular regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were completed on the basis of the April 12, 1996 circular. Merely because the Commissioner changes his view/opinion and according to him it was review of the earlier decision that cannot have any effect on any assessment which has been completed on the basis of the 1996 circular. That being so, the question of reopening the assessment by mere change of opinion is entirely impermissible." In a recent decision in the case of Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd. [2010] 320 ITR 561, (Civil Appeal Nos. 2009-2011 of 2003), decided on January 18, 2010, the Supreme Court while considering the question whether the assessing officer has the power to reassess merely on the change of his opinion, under the provisions of the Incometax Act, has proceeded to hold as under (page 564 of ITR): ". . . The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-conditions and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of 'change of opin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
