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TMI Blog2011 (6) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... Energy Department, by a resolution dated May 6, 1986 framed a scheme known as "Special Incentive for Pioneer Unit-86" (hereinafter referred to as "the scheme"). The scheme was to come into operation with effect from April 1, 1986 and was to remain in force for a period of five years up to March 31, 1991. The petitioner was registered under the aforesaid beneficial scheme as an eligible unit for the purposes of obtaining the sales tax incentive under the said scheme. The petitioner was issued an eligibility certificate dated September 21, 1989 by the District Industries Centre granting benefit to it to the tune of Rs. 2,41,000. The product mentioned in the said certificate was cotton and cotton seeds. Pursuant thereto, the petitioner made an application dated September 26, 1989 before the Assistant Sales Tax Commissioner for granting it sales tax exemption certificate for cottonseeds. By a certificate dated March 14, 1990 the petitioner was granted sales tax exemption to the extent of Rs. 2,41,000 under entry 175 in respect of the cotton seeds only. 4. It is the case of the petitioner that in compliance with the sales tax exemption certificate issued by the respondent-authority, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chose to be governed by the regular provisions of the Act. It was submitted that since the petitioner had not claimed any exemption in respect of sale of cotton, the petitioner availed of the benefit of section 13 of the Act by submitting the prescribed form 17B in respect of such sales. Inviting the attention to the provisions of entry 175 of the concessions and incentives under section 49(2) of the Act, it was submitted that the breach alleged against the petitioner is in relation to condition 9 thereof. It was submitted that condition 9 of entry 175 would not be attracted in the facts of the present case inasmuch as the petitioner was not exempted as per sub-entry (3) of the said notification in relation to cotton and as such, there was no bar against the petitioner in claiming deduction under any certificate under sections 12 and 13 of the Act or other entries of the notification in relation to sales of cotton made by it. Inviting attention to the orders made by the revisional authority as well as the Tribunal, it was submitted that the revisional authority had specifically observed that the exemption certificate granted to the petitioner was proper. It was further submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner applied for eligibility which was granted in respect of both cotton as well as cotton seeds. In the second stage, the petitioner applied for sales tax exemption only in respect of one of the products, viz., cotton seeds. It was submitted that at the third stage of deciding the said application, the officer could either have granted exemption in respect of both the products, viz., cotton and cotton seeds or only in respect of one product as requested by the petitioner or could have asked him to apply for both. It was urged that rightly or wrongly the concerned officer granted exemption in respect of the cotton seeds alone. The certificate granting exemption in relation to the cotton seeds has not been touched either by the lower authorities or by the Tribunal and has not been set aside. According to the learned advocate for the petitioner, condition No. 9 applies only to sales which are wholly exempted, and it is only then that the disqualification applies. It was urged that only in cases where sales are wholly exempted that disqualification under condition No. 9 of entry 175 would apply. It was submitted that under the certificate in question it was only cotton seeds w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry No. 175 and hence, action was initiated under section 67 of the Act. Referring to the impugned order of the Tribunal, it was submitted that the Tribunal has rightly recorded that sale against form 17B or 20, as the case may be, defeats the spirit and purpose of the scheme and the same is in violation of the conditions of the tax exemption certificate. 8.1. Reiterating the reasoning adopted by the revisional authority as well as the Tribunal, the learned Assistant Government Pleader submitted that the impugned order passed by the Tribunal is just, legal and proper and does not warrant any interference by this court. 9. The Government of Gujarat in its Industries Mines and Energy Department has, by a Resolution No. INC-1086-706(2)I dated 6th May, 1986 introduced a scheme known as "The Sales Tax Incentives Scheme for Industries, 1986". The scheme was to come into operation with effect from April 1, 1986 and was to remain in force for a period of five years up to March 31, 1991. Under the said scheme, a new industrial unit has been defined to mean an industrial unit which commences commercial production during the operative period of the scheme. Under the scheme, the eligible un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtaining the eligibility certificate, has applied for the exemption certificate to the Commissioner of Sales Tax. Condition No. 9 of the said conditions which is relevant for the present purpose lays down that as sales of the specified manufacturer are wholly exempted as per sub-entry (3) of the said notification, deduction against any of the certificate under sections 12 and 13 or other entries of the notification issued under sub-section (2) of section 49 of the Act shall not be granted. Condition No. 10 lays down that the specified manufacturer shall be eligible for exemption from the tax to the extent of the monetary limits specified in annexure V. Condition No. 11 provides that when the limit of tax exemption specified in annexure V exceeds, then the subsequent purchases and sales of the specified manufacturer shall cease to be exempt against a declaration provided under the said entry. 13. The expression "specified manufacturer", for the purpose of entry 175 has been defined under clause (a) of annexure II as under: "(a) The expression 'specified manufacturer' means a person in the State of Gujarat who- (i) establishes the new industry on or after April 1, 1986 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41,000/based upon the capital investment made by it in setting up the said new industry. However, while making the application for exemption certificate to the Sales Tax Department, the petitioner applied for exemption in relation to the cottonseeds only. Under the Scheme, the goods manufactured by the specified manufacturer are wholly exempted from the payment of sales tax. However, since the petitioner had applied only in relation to cottonseeds, the Sales Tax Department issued a certificate granting sales tax exemption to the extent of Rs. 2,41,000/only in relation to the cottonseeds. Thus, the limit of Rs. 2,41,000/was accordingly computed only in relation to the sale of cottonseeds. 16. It is the case of the petitioner that since cotton was not exempted from the payment of sales tax, the petitioner availed of the benefit of section 13 of the Act by furnishing form 17B against the sale of cotton made by it. According to the petitioner, since the exemption certificate related to only cotton seeds and the petitioner had availed of the benefit of the Scheme only in relation to cotton seeds, the conditions laid down under entry 175 would not be attracted insofar as sales of cotton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in respect of both the products the exemption limit would have been exhausted earlier. By not availing of the benefit of exemption in relation to cotton, the petitioner is not in any manner prejudiced inasmuch as the petitioner is in a position to avail of the benefit of exemption from payment of sales tax in relation to the entire fixed capital investment made by it on the sale of cotton seed. The specified manufacturer who avails of the benefit under the Scheme is bound by the conditions laid down thereunder in relation to the goods manufactured in the new industrial unit set up by it. condition 9 prohibits a specified manufacturer from availing of deduction under any certificate under sections 12 and 13 or other entries of the notification issued under sub-section (2) of section 49 of the Act as sales of the specified manufacturer are wholly exempted as per sub-entry (3) of the notification. Thus, it is not as if the sale of cotton was not exempted from payment of sales tax under the scheme. The petitioner chose to avail of the exemption only qua the cotton seed. Thus, it was for the petitioner to opt for the product in relation to which the limit of sales tax exemption under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly pointed out by the learned advocate for the petitioner, apart from demanding sales tax in respect of the sale of cotton made by the petitioner, the petitioner has also been visited with penalty by the order dated September 16, 2002 made by the Assistant Sales Tax Commissioner. In the present case though the petitioner had been granted eligibility certificate in respect of both cotton and cotton seed, the petitioner, with a view to avail of benefit of section 13 of the Act, sought exemption under the scheme only qua cottonseeds. The concerned sales tax authority has also entertained the application made by the petitioner and granted exemption only qua cottonseeds. Thus, if on an interpretation of the provisions of the scheme it is found that there is a breach of condition 9 of entry 175, the petitioner cannot be attributed any mala fide intention or mens rea for committing such a breach inasmuch as in the light of the fact that exemption certificate was granted only qua cottonseed, the petitioner was entitled to entertain a bona fide belief that the conditions of the Scheme operate only qua the said product. In the circumstances, to the extent the penalty has been levied on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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