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2016 (4) TMI 878 - MEGHALAYA HIGH COURT

2016 (4) TMI 878 - MEGHALAYA HIGH COURT - [2016] 89 VST 329 (Megh) - Whether the newly established petitioner industrial units having once enjoyed the tax exemption and also remission for seven years under the Meghalaya Industrial Policy of 1997 and the Meghalaya Industries (Tax Exemption) Scheme 2001 can claim benefits of tax remission for extended period under the new Scheme namely, the Meghalaya Industries (Tax Remission) Scheme 2006. - Held that:- none of the provisions of the Meghalaya .....

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n under the Meghalaya Industries (Tax Remission) Scheme 2006 on the strength of a fresh Eligibility Certificate beyond the validity period of the First Eligibility Certificate granted upon establishment as new industrial unit. The petitioner units are only entitled to get the benefits by way of alternative benefits in lieu of benefits being enjoyed under the existing Scheme in terms of part one of the definition of eligibility under the Meghalaya Industries (Tax Remission) Scheme 2006 and that t .....

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Goyal, Advocate Mr K Choudhury, Advocate Mr P Baruah, Advocate Mr L Islam, Advocate For the Respondents : Mr ND Chullai, Sr. Govt. Advocate Mr S Sen Gupta, Govt. Advocate JUDGMENT Uma Nath Singh, CJ One of two writ petitions, namely, WP(C) No.78/2014 (Meghalaya Bitchem Private Ltd. V. State of Meghalaya & Ors) has been filed, inter alia, with prayers to call for records, issue a Rule calling upon the respondents to show cause as to why a writ in the nature of Certiorari or a like one for set .....

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ons of the Companies Act, 1956, having its registered office situated at 9th Mile, Baridua, Byrnihat, Ri-Bhoi District, Meghalaya. The petitioner-company is represented by Shri Pabitra Mahanta, Assistant Manager, Finance, who is interested in the day-to-day affairs of the company. All the share holders of the company are the citizens of India and, as such, they claim to be entitled to all the rights and privileges as guaranteed by the Constitution of India and the laws framed thereunder from tim .....

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mpugned order of Assessment sought to be quashed is 21.1.2014. 5. The impugned orders of Assessment namely, dated 15.11.2013 in the case of WP(C)No. 78 of 2014 and dated 21.1.2014 impugned in WP(C)No. 79 of 2014 were passed by the Superintendent of Taxes, Ri-Bhoi District, Meghalaya, in purported exercise of powers under Section 9 of the Central Sales Tax Act, 1956, read with Section 45 of the Meghalaya Value Added Tax Act for the financial year ending on 31st March, 2013. In pursuance thereof, .....

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impugned orders of Assessment are passed beyond the jurisdiction of the authority who, while rejecting the entitlements of the petitioner-Companies to claim benefits of exemption, has raised the demand in clear violation of the Scheme of 2006, and also in derogation of the order dated 07-01.2008 and 08.09.2009, passed by the Director of Industries-cum-Member Secretary, Single Window Agency, Meghalaya, whereby he has accorded an ex-post facto approval to petitioner s industrial unit for (i) expa .....

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ts in the case of expansion of manufacturing capacity of the industrial units. The certificates of eligibility were also issued under the Meghalaya Industrial Policy, 1997 on 30.05.2011 to the petitioners, after taking into account the fact that the commercial production of the petitioner unit in WP(C)No. 78 of 2014 started on 25th March, 2005 and in WP(C)No. 79 of 2014 it commenced on 12.12.2004. Besides, the petitioner unit in WP(C)No. 78 of 2014 had undertaken further expansion w.e.f. 15.12.2 .....

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) Scheme, 2006. The words, on or before 30.04.2005 , used after Single Window Agency were omitted. The proviso added to clause 3(2)(b) and the note provided thereunder appearing in the Meghalaya Industries (Tax Remission) Scheme, 2006 were also deleted. The Notification amending clause 2 was to come into force with retrospective effect namely w.e.f. 16.10.2006 and deletion of the proviso and the note thereunder in clause 3(2)(b) was to come into force with immediate effect. 8. Learned counsel fo .....

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find out the eligibility of industrial units for grant of certificate of authorization to such units. Learned counsel for the petitioners also cited in support of his contentions the following judgments of Hon ble the Apex Court, namely, (i) (1988) 3 SCC 570 [Para 5](Assistant Commissioner of Commercial Taxes (Asst) Dharwar and Ors v. Dharmendra Trading Company and Ors); (ii) (2005) 6 SCC 292. 9. It is the submission of the petitioner that, under the Scheme of 2006, it is no where provided that .....

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provide for and consolidate the laws relating to levy of Value Added Tax on sales and purchases of goods within the State of Meghalaya. The said Act was published in the Gazette of Meghalaya Extraordinary No.25 dated 4.3.2005 vide Notification No.LL(B)53/2002/314. In exercise of powers conferred under sub-section(3) and (4) of Section 16 of the VAT Act, the Governor of Meghalaya was pleased to frame the Meghalaya Industries (Tax Remission) Scheme 2006 substituting the Meghalaya Industries (Sale .....

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he VAT chain which was in conformity with the provision of the Act. The petitioner companies, having commenced the production on 25.3.2005 and 12.12.2004 prior to the commencement of the VAT Act were found eligible under the Meghalaya Industries (Sales Tax Exemption) Scheme 2001 as per the eligibility criteria stated in the Industrial Policy of Meghalaya 1997. However, the said benefits were withdrawn by the Notification dated 16.10.2006 meaning thereby, the benefits granted earlier vide Notific .....

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olicy and Schemes in question. 11. It is contended on behalf of respondents that since the petitioner unit M/s Meghalaya Bitchem Pvt. Ltd in WP(C)No. 78 of 2014 started commercial production on 25.03.2005, it was entitled to get the benefit of tax exemption only for seven years irrespective of fresh authorisation with subsequent Eligibility Certificate granted to him. In an identical case the State Govt. of Meghalaya vide letter No. ERTS(T) 64/98/496 dated 20.12.2011 had clarified the position t .....

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y ended on 11.12.2011. This is also a submission that under the Notification dated 16.10.2006, there were two clauses, namely, (i) for providing alternative benefits in lieu of benefits being enjoyed by the eligible industrial units under the existing scheme without breaking the VAT chain and (ii) to provide alternative benefits to the industrial units in the pipeline which would have enjoyed the same benefits had the Act not come into force. In the instant case, since the petitioner units had a .....

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Policy. On reproduction, they would read as : OBJECTIVES OF POLICY With a view to take advantage of the liberalised economic scenario in the country, and also to keep pace with developments in the national industrial sector, Government of Meghalaya has decided to frame a new Industrial Policy. The Objectives of this new policy are as follows: - 1. Generate employment opportunities for the local people in the industries and allied sectors. 2. Develop human resources and bring about improvements i .....

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ndustries by utilising the resource base of the state thereby ensuring sustainable industrial growth but compatible with ecological imperatives and hence encourage positive efforts towards the regeneration of the environment. 6. Provide preference to local Entrepreneurship in setting up of large, medium and small scale units. 7. Promote local interests through joint ventures with external investors so as to facilitate technology transfer and capital flow by a package of suitable incentives. 8. E .....

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setting up of ancillary units for catering to the requirements of large and medium scale industries. 12. Identify sick units that can be made viable and provide a comprehensive package of assistance for their revival. 13. Promote and encourage high-value, low-volume products, in view of the transportation-bottlenecks in the State. 14. Encourage setting up of export-oriented, Agro based, Mineral-based, Horticultural based and Electronic units as thrust area . 14. It is noticeable that none of the .....

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al interest and local entrepreneurship. Further it is only need based with restriction so that the ecological balance is not disturbed and the purpose of the Policy is not defeated. 15. Under the Meghalaya Industrial Policy, 1997, the Government also issued the Meghalaya Incentives Scheme of 1997. This Scheme was to remain in operation for a period of five years commencing from 15th August, 1997 or till such time as the Government may deem fit. The State Government also reserved the right to mak .....

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or after 15th August 1997 and existing units undertaking expansion, modernization or diversification at the same local or at any other place in the State of Meghalaya were eligible for grant of incentives under the Meghalaya Incentives Scheme 1997 upon fulfilling certain conditions. Under this Scheme, there was a provision for sales tax exemption, vide Para 8, for large and medium scale industries for sale of finished products for a period of seven years from the date of commercial production. .....

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Exemption) Scheme 2001 and it was deemed to have come into force with effect from 12.08.1997. The period of exemption was available for seven years from the date of commercial production as reported and recorded by the Meghalaya Industrial Development Corporation. The exemption from payment of sales tax was on the sale of finished products within the State or in the course of inter-State trade or commerce which are otherwise taxable under the Meghalaya Sales Tax Act or the Meghalaya Finance Sale .....

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ndustrial unit to whom an Exemption Certificate in the form of Certificate of Authorization has been issued by the Commissioner of Taxes with prior approval of the Taxation Department in respect of sale of goods manufactured by such unit in the course of inter-State trade or commerce during the period of validity of the Certificate of Authorization subject to the condition that such sale to any person outside the State of Meghalaya is supported by proper documents of sale. Thereafter, the notifi .....

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ssued eligibility certificate under the Meghalaya Industrial Policy 1997 on 29.05.2006 by Managing Director, Meghalaya Industrial Development Corporation Ltd. who has recorded the date of commercial production of the Unit as 25.03.2005. The petitioner was granted certificate of authorisation on 16.03.2007. It appears that the certificate was issued retrospectively in respect of commercial production of the petitioner with validity period upto 31.03.2005. 17. In the case of petitioner, M/s Dyna R .....

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ment Corporation Ltd issued an Eligibility Certificate under the Meghalaya Industrial Policy, 1997, wherein it was mentioned that the petitioner company was eligible for claiming incentives as per Meghalaya Industrial Policy, 1997 which came into force with effect from 15.8.1997. The petitioner company was also issued a certificate of authorisation by its Assessing Officer in terms of the Meghalaya Industries (Sales Tax Exemption) Scheme, 2001. 18. Thereafter, the Department of Excise, Registrat .....

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sary to do so in the public interest, is pleased to direct that no tax under this Act shall be payable by any eligible industrial unit to whom an exemption certificate in the form of Certificate of Authorisation has been granted by the Commissioner of Taxes with the prior approval of Taxation department in respect of sale of goods manufactured by such unit in the course of inter-state Trade or Commerce to a registered dealer or the Government during period of validity of the Certificate of autho .....

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x Exemption) Scheme, 2001 as it superseded the Notification of 2001 and the benefits admissible under the said Notification of 2001 were only restricted to sales made in the course of Inter-State trade or commerce to registered dealers or Government only. Under the earlier Notification dated 12.4.2001 which was issued in exercise of powers under Sub-Section (5) of Section 8 and in pursuance to the Industrial Policy of 1997, the benefits of sales in the course of Inter-State trade or commerce wer .....

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ranted earlier under this Department s Notification No.ERTS(T)64/98/88, dt. 12.4.2001 which was superseded by Notification No.ERTS (T)64/98/211, dt. 5.9.2005, and to further direct in public interest that all industrial units eligible to 99% remission of VAT under para 3(2)(b) of the Meghalaya Industries (Tax Remission) Scheme, 2006 shall pay CST @ 1% provided the sale is made to a registered dealer outside the State or to the Government. Sales to others will attract normal rates of CST. Other i .....

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16.10.2006 was issued by the Governor as a part of the Scheme of 2006 whereby the Governor of Meghalaya withdrew the benefits of exemption from payment of Central Sales Tax granted earlier by the Department s Notification No.ERTS (T) 98/88 dated 12.4.2001 which was superseded by Notification No. ERTS(T) 64/98/211 dated 5.9.2005. The Notification No.ERTS(T) 64/98/314 dated 16.10.2006 was to come into force with immediate effect. Moreover, subsequent thereto, a corrigendum was issued by Notificati .....

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and substitute with the word This Notification shall be deemed to have come into force with effect from 1st October, 2006. Sd/- Principal Secretary to the Govt. of Meghalaya Excise, Registration, Taxation & Stamps Deptt. 21. Thus, petitioner being aggrieved by the Notification dated 16.10.2006 and Corrigendum dated 2.4.2007, filed writ petitions wherein the following directions were given by this Court : 1. The State respondents shall consider the grievances of the petitioner and take a deci .....

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ing tax on the inter-State sale made by the Company which was also challenged by way of petitions before this Court. In WP(C) No.113(SH) of 2007, vide order dated 13.8.2010, the Shillong Bench of the Gauhati High Court held that the State-respondents are barred by the doctrine of Promissory Estoppel from issuing the Notification No.ERTS(T)64/98/211 dated 5.9.2005 and thus, quashed the Notification as well as Assessment orders and Demand Notices issued pursuant thereto. 23. Now, the controversy a .....

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ovisions of the Meghalaya Industrial Policy of 1997; the Meghalaya Industries (Tax Exemption) Scheme 2001 and the Meghalaya Industries (Tax Remission) Scheme 2006 to say that the second time benefits of tax remission would be available to the petitioners. Moreover, the Govt. of Meghalaya vide letter No. ERTS(T)64/98/496 dated 20.12.2011 has already clarified that the petitioner industrial units would be eligible for sales tax incentives even in respect of expanded products only up to the date of .....

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on work was a clear promise to the petitioner that the company would be eligible for 99% remission of tax under the Scheme of 2006 seems to be based on a misunderstanding or misinterpretation of the terms and conditions of the approval granted by the Single Window Agency and would thus not attract the doctrine of promissory estoppels. In fact, the second Eligibility Certificates dated 30.05.2011 were issued to enable the petitioner units to claim the eligible incentives only as per the Meghalaya .....

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Tax Exemption) Scheme 2001, and thus, were granted and have enjoyed for seven years the benefits of tax exemption under the Meghalaya Industries (Tax Exemption) Scheme 2001 and subsequently remission under the Meghalaya Industries (Tax Remission) Scheme 2006 which substituted the Meghalaya Industries (Tax Exemption) Scheme 2001 for providing alternative benefits in lieu of benefits being enjoyed by the eligible industrial units under the existing Scheme without breaking the VAT chain. In fact th .....

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r an industrial unit other than a non eligible unit under the Industrial Policy approved by the Single Window Agency on or before 30.4.05 and having taken effective steps shall be treated as an eligible industrial unit. Thus, the petitioner industrial units came in the category which had commenced commercial production before the commencement of the Act and was already found eligible under the Meghalaya Industrial (Tax Exemption) Scheme 2001 as per eligibility criteria of the Meghalaya Industria .....

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be applicable in the facts of this case, for the reason that the petitioner units had been granted exemption under the Meghalaya Industrial Policy 1997 and the Meghalaya (Sales Tax Exemption) Scheme of 2001 for 7 (seven) years which they had already enjoyed. Moreover, the judgment does not deal with the issue involved herein, namely, as to whether a newly established Industrial unit having already availed the benefits of exemption and remission under the initial Eligibility Certificate and lett .....

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to a newly established industrial unit which has already enjoyed tax exemption under the First Eligibility Certificate. Moreover, the State has also reserved the right to amend the Meghalaya Industrial Policy 1997 and the Scheme issued thereunder. Further, the power to levy, collect, exempt or remit sales tax is conferred on the State Government by Acts of the State Legislature or the Parliament. Again, the power for carrying out the purpose of the Acts is vested on the sales tax authorities app .....

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x liability of a dealer and to grant exemption/remission under the Schemes notified by the State Government. Therefore, the contention of the petitioners, that it is the Directorate of Industries for small scale industries sector and the Meghalaya Industrial Development Corporation for medium and large units, that have the authority to decide the eligibility for the benefit of 99% remission of tax appears to be unfounded, not being in consonance with the provisions of Tax Exemption Scheme 2001; .....

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