TMI Blog2017 (5) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... ving project cost exceeding ₹ 10 Crores. The aforesaid seems to be an inadvertent mistake in publication/typing - even the petitioners also understood that the assets acquired within a period of 18 months from the commencement of commercial production or till the Scheme ends on 31st December 2005 [whichever is earlier between the two] shall be considered eligible for the purpose of the incentive. - when the petitioners and all other Industrial Units/ Undertakings/Projects [105 in number] understood the Scheme, the manner in which the State Government had pleaded and all are treated equally and in case of all Industrial Undertakings/Projects, the assets acquired only upto 31st December 2005 are considered eligible for the purpose of incentive, the petitioners are not entitled to incentive on the assets acquired subsequently after commencement of commercial production or after 3.12.2005 - claim of petitioner rejected. Whether the petitioner-Company is entitled to Incentives/Sales Tax Exemption under the Scheme on the investment/expenditure incurred after 31st December 2005 with respect to Phase II project? - Held that: - only those Units/Industries/Projects which had not gon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impetus to the economic development and for creating better opportunities of employment and environment of Industrial Development, the respondent-State vide its Resolution dated 9th November 2001 announced a sales-tax incentive scheme known as, Incentive Scheme 2001 for Economic Development of Kutch District [hereinafter referred to as, the Scheme ] and thereby invited existing industrial undertakings and new industries to set-up industrial units in the said district by promising benefit of Sales-tax exemption or Sales-tax Deferment Eligibility Fixed Capital Investment under Section 49 [2] of the Gujarat Sales Tax Act, 1969. 2.2 That, the period of the Scheme was initially notified from 31st July 2001 to 31st October 2004 which came to be extended further by two Notifications dated 13th September 2004 and 7th January 2005 by which the applicability of the Scheme was extended upto 31st December 2005. 2.3 That, the petitioner no.1-Company is engaged in the manufacturing and trading of steel products. That, the petitioners applied for the benefit of Sales Tax exemption under the Scheme and proposed to establish an industry for manufacturing and trading steel products a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the petitioners approached this Court by filing Special Civil Application No. 5638 of 2011 challenging the decision of the respondent in granting the Eligibility Certificate to the tune of ₹ 28.73 Crores only and also prayed for appropriate direction to the respondents to consider its actual investment to the tune of ₹ 47.25 Crores and to grant the incentives/benefits accordingly. 2.4 That, by judgment and order dated 13th January 2012, Division Bench of this Court partly allowed the said Special Civil Application and thereby quashed and set-aside the Final Eligibility Certificate dated 22nd September 2009 by directing the respondents to consider the investment made in the fixed capital and held ineligible, other than those made under the head GEB deposit, second hand indigenous machinery and furniture, office equipments, etc ., on the basis of documents made available by the petitioner and those evidences to be further made available within four weeks of the said order. The Division Bench also directed the respondents to re-look at the request made for considering the investment made under Phase II of the Undertaking; particularly for production of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment in Phase-II would not qualify for such Eligibility Certificate. That thereafter, vide communication dated 30th July 2016, the respondent no. 4 communicated to the petitioners that the Final Eligibility Certificate granted was proper and no additional amount is required to be granted. 3. Feeling aggrieved and dissatisfied with the order/ communication dated 30th July 2016, the petitioners have preferred the present Special Civil Application praying for issuance of appropriate writ, order directing the concerned respondents to grant Final Eligibility Certificate to the tune of ₹ 94,49,84,000/= and to grant the benefit to the petitioner-Company in terms of subsequent Notification dated 28th July 2016. 4. At this stage, it is required to be noted that in the meantime, the petitioner-Company became sick industrial undertaking and applied before the BIFR on 31st March 2016. 5. Heard learned advocates appearing on behalf of the respective parties at length. 6. Shri S.N Soparkar, learned Senior Advocate appearing for the petitioners has vehemently submitted that the impugned order dated 30th July 2016 issued in terms of the Notification dated 28th July 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, and therefore, the petitioner- Company is entitled to the benefits of incentive/Sales Tax exemption on the Capital Investment made up to January 2011 ie. , ₹ 94.49 Crores. It is submitted that the respondents authorities are not justified in considering only the expenses of ₹ 47.25 Crores ie ., the investment made upto 31st December, 2005. For the said reasons, Shri S.N. Soparkar, learned senior advocate appearing on behalf of the petitioners has heavily relied upon Clause 3.8 of the Scheme (Gujarati version). 6.4 It is further submitted by Shri Soparkar, learned Sr. Advocate for the petitioners that the third part of Clause 3.8 is with respect to the Industrial Units investing more than ₹ 10 Crores is concerned, it is in two parts ie ., (i) for the period upto 31st December, 2005 or (ii) where the assets are acquired within a period of 18 months from the date of commencement of commercial production. It is submitted that in the first category ie ., in case of Small Industrial Units, the assets acquired upto the period of six months from the date of commencement of production, or till completion of the scheme (whichever is earlier between the two) shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment made in Phase II of the undertaking, particularly for production of forging steel. It is submitted that therefore, the impugned action of the respondents and the Final Eligibility Certificate issued considering investment eligible for incentive under the Scheme only upto 31st December 2005 is absolutely illegal and contrary to the Scheme, as amended from time to time and even contrary to the direction issued by this Court in Special Civil Applications No. 5638 of 2011 and 3817 of 2016. It is further submitted by Shri Soparkar, learned counsel for the petitioner that even otherwise, the respondents have erred in not considering the investment made on acquiring the assets on or before 31st December 2005 but the actual payment of which was made subsequently. It is submitted that sum of the amount on the investments made in land, building, plant machineries are denied either on the ground that part payment is made prior to 31st December 2005, but the same was not purchased; and/or on the ground that the entire plant and machinery etc., was purchased and/or acquired prior to 31st December 2005, but part payment was made after 31st December 2005. It is submitted that by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y relied upon the decision of the Supreme Court in the following cases : [1] R.B Jodha Mal Kuthiala v. CIT [1971] 82 ITR 57; [2] K.P Varghese v. ITO [1982] 131 ITR 597 [SC]; [3] Director of Enforcement vs. Deepak Maharaj AIR 1994 SC 1775;and [4] CWS [India] Limited v. CIT [1994] 208 ITR 649. 6.7 Making the above submissions and relying upon the aforestated decisions, it is requested to allow the present petition and grant reliefs, as prayed for. 7. The present petition is vehemently opposed by Shri Kamal B. Trivedi, learned Advocate General appearing for the State submitted that in the facts and circumstances of the case, the grant of benefit of incentives as well as Sales Tax exemption to the petitioner-Company on the Capital Investment incurred upto 27th December 2005 is absolutely just, proper and legal and in consonance with the Scheme. It is further submitted by Shri Kamal Trivedi, learned Advocate General that as such, the intention of the State by the Scheme was to grant incentives/Sales Tax exemption on the Capital Investment made and/or expenses incurred only upto 31.12.2005. It is submitted that however, in the printing, through oversight, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er further deliberations that the provision of units having project cost exceeding ₹ 10 Crores have been incorporated in the said Clause-3.8. It is submitted that though, the said provision was made by adding the words exceeding ₹ 10 Crores, unfortunately, the condition whichever is earlier between the two was inadvertently omitted to be mentioned. It is submitted that if one peruses the file, the intention of the State Government was that the Capital Investment incurred and paid during the year from the date of commencement of commercial production or till the currency of the Scheme, whichever is earlier , was to be taken into account for exceeding the benefit of incentive Scheme. It is submitted that thus, the intention on behalf of the State in Clause 3.8 of the Scheme is that the Capital Investment of the units, namely, Small Industrial Units, Medium Industrial Units and the Large Industrial Units and Units having project cost exceeding ₹ 10 Crores will be considered for the respective specified period from the date of commencement of the production or completion of the Scheme whichever is earlier. 7.3 It is further submitted by Shri Kamal Trivedi, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and consequently, they applied for provisional eligibility certificate as well as final eligibility certificate accordingly. 7.5 It is further submitted by Shri Kamal Trivedi, learned Advocate General that even the petitioners have not pleaded the case of promissory estoppel . It is submitted that it is not the case on behalf of the petitioners and so pleaded in the petition that at the time of making investment, even upto 30th April 2007, they considered Clause 3.8 and thereby considered that they shall be entitled to incentives/sales tax exemption on the investment made beyond the the period of 31.12.2005, and therefore, they made the investment. It is submitted that therefore, in the present case, there is no question of applying the principles of promissory estoppel . 7.6 Now so far as reliance placed upon the decision of Division Bench of this Court in case of Shaifali Rolls Limited Anr . [Supra] is concerned, it is vehemently submitted by Shri Kamal Trivedi, learned Advocate General that in the case before the Division Bench and as per the pleadings in the petition, the grievance made by the petitioner was with respect to the investment made upto 31st December 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is earlier of the two. It is submitted that therefore, the petitioner has rightly been denied the benefit of the Scheme on the investment/expenses incurred after 31st December 2005; though may be made within 18 months from the date of commencement of commercial production. 8. Now so far as submissions made on behalf of the petitioners that Phase-II of the Project can be said to be a pipeline project, and therefore, as per the subsequent decision, the period extended for pipeline projects ie ., 31st December 2007 can be made applicable to the pipeline project, and therefore, treating Phase-II project as a Pipeline project, the investment made upto 31st December 2007, the petitioner shall be eligible to get the incentives on such investment made upto 31st December 2007 is concerned, it is submitted that the aforesaid has no substance. It is submitted that even as per the policy, once the commercial production has started, there is no question of considering the Unit/Industry as a pipeline project. There is nothing like dividing the project phase-wise. It is submitted that what can be considered the pipeline project is very much clear. It is submitted that therefore, Phase-II o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 30th June 2017 ie., 18 months from the date of commencement of the commercial production ie. , 27th December 2005. 11.1 On the other hand, it is the case on behalf of the State that the Incentive/Sales-tax exemption is available only on the investment/ expenses incurred upto 31st December 2005 or within 18 months from the date of commencement of commercial production; whichever is earlier. 11.2 It is the case on behalf of the petitioners that in Clause 3.8 of the Scheme, the words, whichever is earlier between the two are not there in case of Industrial Units having the project cost exceeding ₹ 10 Crores, which words though are there in the case of Small Scale Industrial Units, Medium and Large Scale Industrial Units. Therefore, it is the case on behalf of the petitioners that in case of Industrial Units having project cost exceeding ₹ 10 Crores, the assets acquired within a period of 18 months from the date of commencement of the commercial production or till completion of the Scheme ie. , 31st December 2005, shall be considered eligible for the purpose of incentives. Therefore, it is the case on behalf of the petitioners that as the date of commencement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Incentives. However, in the Gujarati version of the Incentive Scheme, the expression whichever is earlier between the two is missing in case of Industrial Units having project cost exceeding ₹ 10 Crores. The aforesaid seems to be an inadvertent mistake in publication/typing. The aforesaid aspect has been explained in detail, while narrating the sequence which led to introduction of Incentive Scheme in paras 5 to 7 of the affidavit dated 6th December 2016 filed on behalf of the respondent no. 1, which read as under :- 5. In this behalf, as is discernible from the Government file, I clearly suggests that originally, the Incentive Scheme in question was intended to be extended to all the industrial units regardless of any distinction like Small, Medium and Large Scale Units vis-avis the project cost involved therein, with a categorical condition that the project cost, i.e . capital expenditure incurred and paid during the period of operation of the Incentive Scheme, would be taken into account. This clearly shows as to what was intended by the State Government. However, thereafter, in the initial draft of the Resolution, clause No. 3.8 thereof carried only Small Scale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the units having investment exceeding ₹ 10 crores, does not extend the benefit under the scheme for a longer period than the currency of the scheme i.e. beyond 31st December, 2005. It may be appreciated that the expression 'whichever is earlier' at the end of the said clause 3.8 is inadvertently omitted to be mentioned in view of the fact that the last underlined portion in clause 3.8 referred to above, relating to Units having project cost exceeding ₹ 10 crore was added later on, as a result of the further deliberation. It is pertinent to mentioned that none of the 105 projects like that of the petitioners have ever been given the benefits under the Incentive Scheme after the expiry of 31st December, 2005 even though the specified periods viz. 6 months, 1 year and 18 months, as the case may be from the date of commencement of commercial production in those cases, had spread over beyond the last date of the operation period of the said Incentive Scheme i.e . 31st December, 2005 (except pipe-line cases). 13. Nobody can be permitted to take undue advantage/ disadvantage of the beneficial Scheme due to inadvertent mistake in publication. 13.1 Even otherwise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the State Government. All the 105 projects which are beneficiaries of the Incentive Scheme 2001 applied for eligibility certificate and thereby claimed incentives on the assets acquired on or before 31st December 2005 only. None of the projects had claimed incentives on the assets acquired after 31st December 2005. At this stage, it is also required to be noted that even the petitioners also understood from the very beginning the Scheme in the manner as suggested by the State Government and they also understood that on the assets acquired within a period of 18 months from the date of commencement of commercial production or till the completion of the Scheme ie ., 31st December 2005 [whichever is earlier between the two], shall be considered eligible for the purpose of grant of incentive and that is how, when the petitioners applied for Provisional Eligibility Certificate, they considered assets acquired only upto 31st December 2005 amounting ₹ 47.25 Crores/Rs. 76.68 Crores. While submitting application for grant of Provisional Eligibility Certificate, the petitioners submitted a Certificate issued by Chartered Accountant with respect to the investment made upto 31st Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering Clause 3.8 that the assets acquired within a period of 18 months from the date of commencement of the commercial production shall also be considered eligible for incentive and therefore, they made investment subsequently. The petitioners have also not pleaded any estoppel or promissory estoppel . Under the circumstances, when the petitioners and all other Industrial Units/ Undertakings/Projects [105 in number] understood the Scheme, the manner in which the State Government had pleaded and all are treated equally and in case of all Industrial Undertakings/Projects, the assets acquired only upto 31st December 2005 are considered eligible for the purpose of incentive, the petitioners are not entitled to incentive on the assets acquired subsequently after commencement of commercial production or after 3.12.2005. 18. Now so far as reliance placed on the decisions of Division Bench of this Court in Special Civil Application No. 5638 of 2011 11768 of 2013 by the learned counsel for the petitioner is concerned, at the outset, it is required to be noted that in the case before the Division Bench, the controversy was with respect to investment/assets acquired upto 31st December ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months from the date of commencement of commercial production. Even the claim in the said petition was with respect to investment made prior to 31.12.2005 of ₹ 1,31,29,19,074/= ie. , on investment made prior to 31.12.2005. However, the eligible amount of Sales Tax Scheme recommended was only ₹ 63.04 Crores and the same was controversy before the Division Bench. Before the Division Bench, there was no dispute with respect to the investment made after 31st December 2005 but within 18 months from the date of commencement of commercial production. Under the circumstances also, the said decision shall not be applicable to the case on hand and/or the same shall not be of any assistance to the petitioners herein. 20. In view of the above and for the reasons aforestated, the present writ petition with respect to the claim of the petitioners that the Incentives Scheme/Sales Tax Exemption on the investment made/assets acquired after 31st December 2005, but payment made on or before 11th April 2007 ie ., within a period of 18 months from the date of commencement of the commercial production is hereby rejected . It is held that the petitioners are not entitled to claim the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its original claim as per Chartered Accountant certificate produced by the petitioner-Company, the petitioners have made actual investment of ₹ 47.25 Crores upto 31st December 2005. That out of the total investment made, the Inspecting team did not consider a sum of ₹ 18.52 Crores as eligible amount for the purpose of Sales-tax benefits. At this stage, it will be worthwhile to reproduce entire chart reflecting the total investment made as per the certificate issued by Chartered Accountant and the investment in the capital assets held to be eligible and the investment which is treated as ineligible amount for the purpose of Sales-tax benefit, taking note of different heads envisaged in which it is treated as ineligible by the State Inspecting Team : Sr No Investme nt as per CA Certificat e Unpaid Amount Paid Amount Ineligible Amount as per Team e 1 Land 4.82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son why the land development cost is not considered eligible for incentive. If one looks at the objective of the scheme, the land development for setting up of the industry is a vital component. However, while denying the amount spent on land development, it was expected of the Committee to specify the grounds on which remaining sum has been treated as ineligible for the purpose of tax benefits particularly when there is no dispute to the factum that the petitioner has spent a sum of ₹ 4.82 lacs for the development of the land. The objections with regard to not treating the entire amount eligible for the purpose of tax benefit were raised along with the request for reconsidering these amounts vide communication dated 3rd December 2009 and 1st December 2010. There also, it was insisted that the total ineligible amount is 39.20% of the total investment and this has been so done even though the remaining unpaid amount has already been paid to the suppliers. For the first time as can be reflected from Annexure R2 as also from the contents of the additional affidavit, that vide communication dated 23rd January 2011 sent to the respondent on 28th January 2011, the petitioner had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 628.84 lacs is held ineligible for being unpaid on 31st December 2005. This amount is admittedly paid after 31st December 2005 and the same is declared to be investment towards Phase-II. Thus, the only amount considered eligible is ₹ 2600.89 lacs which includes the plant and machinery and electrification. As can be noted from this report, the amount of ₹ 41,03,70,000/= is considered ineligible only on account of the fact that the advanced payment was made of this amount. And, the mode of payment was not provided to the team. It is pointed out by learned counsel that in subsequent correspondence made to the respondent, these details have already been provided and the petitioner is further ready to prove the mode of payment of both the sum of ₹ 41,03,70,000/and ₹ 34.78 lacs. 16. From the above discussion, it can be noted that there is a considerable amount of investment which is treated as ineligible on account of non-availability of details of mode of payment. Moreover, the land development also the cost is not considered eligible for the purpose of incentive. And again towards the plant and machinery, a huge amount of ₹ 1299.69 lacs i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferring the payment, making the outstanding against acquisition of such capital investment, as borrowed capital for the purpose of capital investment in the new industry by the petitioner. 22.4 To the aforesaid, it was the case on behalf of the State that only those assets which are acquired and paid during the operative period of the Scheme shall be eligible for the Sales-tax exemption/incentives under the Scheme. The words acquired and paid refers to actual payment made to the supplier for acquisition of fixed assets for the purpose of computing the capital investment as pre-requisite for its inclusion in the fixed capital investment. 22.5 While considering the aforestated issue and negating the stand of the State, it is held by this Court in the case of Vishal Lines Private Limited [Supra] that all the assets which are acquired prior to the relevant date shall be included while making computation of the capital assets. While holding so, the Division Bench has observed and held as under :- In our opinion, no distinction can be made on the basis where from the credit comes for the acquisition of the eligible assets or on the ground whether the liability is met from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al price paid by him for land which shall be the capital investment and not the value of the land on the date on which it has been brought by way of investment in the New Industry/Expansion or Diversification. So also any assets brought into new industrial unit, expansion or diversification, as the case may be. If the assessee has not been subjected to any liability towards its acquisition because he may have acquired it by dint of succession, gift or any other form in which he does not have to pay the price for it, notwithstanding that the same forms part of the capital structure of the undertaking, for the purpose of eligible fixed capital investment for quantifying the limit of benefit under Entry 175 or for deferment under the Resolution dt. 6th May 1986 the same cannot be considered as part of eligible fixed capital investment. Giving any other meaning to the words 'acquired and paid', in our opinion, would render the scheme unworkable and expose the scheme to the vice of being suffering with hostile discrimination, there being no rational object for such classification appearing from the scheme or the provisions of the notification. 23. Applying the ratio of the j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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