TMI Blog2016 (7) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... and contrary to law. - Decided in favor of assessee. - Writ Petition No. 3862 of 1996 - - - Dated:- 12-7-2016 - S. C. Dharmadhikari And Dr. Shalini Phansalkarjoshi, JJ. For the Petitioner : Mr. P. C. Joshi , Mr. N. B. Shah For the Respondent : Mr. V. A. Sonpal, Special Counsel JUDGMENT ( Per Dr. Shalini PhansalkarJoshi, J. ) 1. The challenge in this writ petition is to the Constitutional validity of Sections 41B of the Maharashtra Sales Tax Act, 1959 ('Act' for short), as also Rule 31AA of the Maharashtra Sales Tax Rules, 1959, as amended from time to time ('Rules' for short), to the extent of their retrospective application, from 01.01.1980. 2. The petitioners have also challenged the validity of assessment orders passed on 20.10.1995. However, challenge to the same is, subsequently, given up by learned counsel for the petitioners as the petitioners have already preferred the appeals against the said assessment orders before the competent appellate authority under the Act. The challenge raised in the petition to Constitutional validity of Section 41C of the Act is also subsequently not pressed into submission. 3. The basic dispute ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as which were least developed. The Village Dheku in Tal. Khalapur was covered under Group-C under the said Scheme. 7. The petitioners, with the sole object of availing the benefits of 1983 Scheme, established their Small Scale Industrial Unit at village Dheku, Tal. Khalapur for manufacturing iron and steel items like; MS Steel casting, rerolling of bars flats, angles and twisting of bars, channels etc. After satisfying itself about the full compliance of the procedure prescribed under the 1983 Scheme and also after satisfying about final effective steps taken by the petitioners, the 1st respondent Development Corporation of Kokan Ltd. entered into an agreement with the petitioners on 30.03.1989 and the Eligibility Certificate dated 17.03.1989 was issued to the petitioners under the said scheme for the period of 5 years from 01.04.1989 to 31.03.1994. 8. Consequent to the issue of Eligibility Certificate in favour of the petitioners, the 2nd respondent through his subordinate Deputy Commissioner of Sales Tax, issued a Certificate of Entitlement to the petitioners on 01.04.1989. As per the said Certificate of Entitlement, the petitioners were exempted from payment of sales tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the Commissioner to determine the cumulative quantum of benefits from 01.01.1980 onwards. Therefore according to learned counsel for petitioners, Section 41B is ultra vires to the other provisions of the Act. It is further urged that Rule 31AA is contrary to the other provisions of the Act also, especially Rules 41B 41D. By those rules, a unit in a developed area will suffer the reduction of set off by only 2% for the transfers of the manufactured goods to the branch situated outside the State of Maharashtra, whereas a unit in backward area under rule 31AA will have to suffer a greater degree by the addition of 6% to the benefits computed under other subrules. 11. Thus, it is submitted that the Rule 31AA is totally inconsistent and contrary to the Scheme of the Act as well as the Rules framed thereunder and suffers from the vice of diagonally opposing the provisions of the Act and Rules as well as the 1983 Scheme. It is urged that these newly inserted provisions place a unit like the petitioners to a worse position than the other similarly placed units in a developed area. It is also taking away the vested rights, acquired by the petitioners under the 1983 Scheme. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the entire scheme of the Act and Rules, and in particular Section 41B and Rule 31AA. 16. In the present case, it is not in dispute that the petitioners' industrial unit is covered under the 1983 Scheme. It is also undisputed that the petitioners have fulfilled all the conditions set out in the Eligibility Certificate and Entitlement Certificate and accordingly the sales and purchases of raw materials effected by the petitioners during the period specified in the certificate from 01.04.1989 to 31.03.1994 and upto the financial ceiling of ₹ 25,96,600/are totally exempt from payment of sales tax/purchase tax as per entry No. 136(2)(a) and 136(2)(b) of the Notification issued under Section 41 of the Act. 17. The only dispute is in relation to the calculation of the cumulative quantum of benefits received by the petitioners on the respective sales/purchases effected during the validity period of the certificate issued under the 1983 Scheme till reaching the financial ceiling provided under the Entitlement Certificate. Calculation of CQB, according to the petitioners, was required to be made as per para 2.11 of 1983 GR by considering the maximum tax that would have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e package scheme of incentives. (2) If it is found that the cumulative quantum of benefits so calculated in respect of any eligible unit has exceeded the relevant monetary ceiling where such ceiling is provided in the package scheme of incentives, then the Commissioner shall, require the dealer by order in writing to pay the tax, interest or penalty in respect of each relevant period and shall for the purpose of recovery of such tax, interest or penalty, serve on the dealer a notice: Provided that, no order under this section shall be passed without giving the dealer a reasonable opportunity of being heard. (3) The notice so issued, shall be deemed to be a notice issued under subsection (4) of section 38 and the relevant provisions of this Act shall apply to such notice as they apply to a notice issued under subsection (4) of section 38. Rule 31AA inserted to the Rules by Government notification dated March 24, 1995 with effect from March 24, 1995 (to the extent relevant) reads thus: 31AA. Calculation of the cumulative quantum of benefits. (1) The cumulative quantum of benefits received by a dealer (hereinafter referred to as, the said dealer ) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitlement and no regard was had or any deduction from the said turnover or full or partial exemption from payment of tax on any account of any sale made against any declaration or certificate prescribed under the Act, Rules or any notification issued under the Act or Rules: Provided that ..... Provided further that ...... Provided also that ..... (3) For the purpose of calculation of the cumulative quantum of benefits under the 1988 Package Scheme of Incentives, the provisions contained in subrule (2) shall apply mutatis mutandis with the qualification that the expression 'finished products' shall be deemed to include by-products and scrap products generated during the process of manufacture in the eligible unit of products specified in the eligibility certificate granted to the said dealer. (4) ..... (5) In this rule the expression 'raw materials' shall have the same meaning as assigned to it in the Explanation II appended to the said entry 136. 19. It is submission of learned counsel for the petitioners that the petitioners had set up the unit in the backward area based on the terms and conditions in the agreement includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not be entitled to get the benefit of that doctrine. Here, according to learned counsel for respondent Nos.2 3, Shri Sonpal, the provisions of Rule 31AA are merely clarificatory in the nature; they do not introduce any new rule of assessment; neither they affect the petitioners adversely. He has submitted that it is not the case of the petitioners that the State Legislature lacked the legislative competence to introduce Rule 31AA and retrospective effect given thereto. The only ground on which Rule 31AA is assailed is that it is arbitrary and violative of the Article 14 of the Constitution, which challenge is not substantiated at all. According to him, therefore, there cannot be any estoppel, much less promissory estoppel, against the statute as the legislature is empowered to levy different taxes for different periods and different classes. 23. Mr. Sonpal has further submitted that the words maximum rates of taxes specified under local sales tax law as applicable from time to time in para 2.11 of the 1983 GR clearly refers to the rates of taxes as set out to the Schedule in the Act. The exemption notifications do not redefine the maximum rate of taxes. Therefore, para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 41B and Rule 31AA by contending that the petitioners' vested right in computing the CQB as per para 2.11 of 1988 GR was prejudicially affected. It was urged that the petitioners cannot be divested retrospectively by introduction of such rules. The same line of argument, advanced in this case that, Rule 31AA is merely of the clarificatory nature and does not introduce any new method of CQB and, therefore, does not divest the petitioner therein of his vested rights, was advanced by the learned counsel for the Revenue and while dealing with this argument, it was held by Division Bench of this Court as follows: A plain reading of para 2.11 of the 1988 GR clearly shows that the quantum of benefits availed of by a unit covered under the 1988 scheme has to be calculated with reference to the tax that would have been payable by a unit if not covered under the 1988 Scheme on assessment at the maximum rates of tax specified under the local sales tax law as applicable from time to time. Sales tax/purchase tax are levied on sale/purchase of certain goods at the rates specified in the Schedule to the BST Act. Where the sales/purchases are covered under the partial/tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 only when partial exemption is granted under the sales tax law, the question of paying tax at the maximum rate arises. In these circumstances, it is not possible to accept the contention of the Commissioner that the expression computed at the maximum rates of tax in para 2.11 of 1988 GR refers to the rate of tax specified in the Schedule to the BST Act and not to the rate of tax payable under the sales tax law including the exemption provisions contained in the sales tax law. 33. As noted earlier, para 2.11 of the 1988 GR refers to the tax payable by a unit not covered under the 1988 Scheme at the maximum rate of tax specified under the local sales tax law. If a unit not cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng rule 31AA with effect from March 24, 1995. 27. It was further held that, 40. 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 March 24, 1995 for the first time provides for calculation of CQB by ignoring the exemption provisions contained in the BST Act/BST Rules, which is contrary to para 2.11 of the 1988 GR. Such a rule which purports to take away retrospectively the vested rights of the traders who have established their units in the backward areas based on para 2.11 of the 1988 GR must be held to be bad in law to the extent it is made applicable retrospectively. 41. It was contended on behalf of the Commissioner that the State Legislature has power to make laws with retrospective effect and accordingly section 41B of the BST Act inserted by the State Legislature and rule 31AA of the BST Rules which is laid before both the houses of the State Legislature would have the force of law. There can be no dispute that the State Legislature has power to make laws with retrospective effect, but if that law arbitrarily impairs or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption provisions contained under the sales tax law have to be ignored.' 30. In the end, it was concluded that, .......calculation of CQB availed of by a unit covered under the 1988 Scheme as per para 2.11 of the 1988 GR had to be made with reference to the tax payable by a unit not covered under the 1988 Scheme at the maximum rates of tax specified under the local sales tax, which includes the exemption provisions contained in the BST Act/BST Rules and, therefore, rule 31AA inserted to the BST Rules with effect from March 24, 1995 to the extent it provides that the calculation of CQB under the 1988 Scheme has to be made by ignoring the exemption provisions contained under the sales tax law is illegal and contrary to law. 31. The position of law, as elucidated and illustrated in the above said decision of the Division Bench, squarely covers and binds this Court also in the facts of the present case as they are identical to the facts of this reported decision, except for the fact that in the said decision the Court was dealing with the Package Scheme of 1988, whereas in this case, we are considering the Package Scheme of 1983 but as stated above, undisputedly bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion provisions, is bad in law. 33. In this respect we can also place reliance on the observations of the Supreme Court in the case of Suprabhat Steel Ltd. (supra) wherein the Supreme Court was called upon to consider the validity of the 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 submissions, held in para 7 as under : 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, it is true that issuance of such notifications entitles the industrial units to avail of the incentives and benefits declared by the State Government in its own industrial incentive policy. But in exercise of such power it would not be permissible for the State Government to deny any benefit which is otherwise available to an industrial unit under the incentive policy itself. The industrial incentive policy is issued by the State Government after such policy is approved by the cabinet itself. The issuance of the notification under section 7 of the Bihar Finance Act is by the State G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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