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M/s. Ultratech Cement Limited Versus State of Gujarat And Ors.

2017 (12) TMI 455 - DELHI HIGH COURT

Rehabilitation by giving financial assistance - whether the sanctioned scheme in this case was binding on the States of Gujarat and Maharashtra as far as UCILís claim for refund of VAT/Sales Tax and electricity duty in terms of clauses 12.1 and 12.2 - Held that:- As is evident from Section 19(4) of SICA, it is in the absence of consent by any person, the Board may adopt such other measures including the winding up of the sick industrial company as it may deem fit. Likewise, the Maharashtra State .....

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te, or contrary to its object is an untenable proposition. To admit of this eventuality is to countenance any order of BIFR contrary to the law as it can be challenged in an appeal. There is nothing to indicate to why the BIFR thought it fit to reject the State of Gujaratís objections, to the proposed scheme. - In the circumstances mentioned above, this Court is of the opinion that the sanctioned scheme was not binding on both the States for want of consent on part of the State authorities r .....

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of the opinion that the petitionerís grievance was to be redressed by it, within reasonable time of the denial of exemption, i.e. within one or two years of the sanction for the BIFR scheme. By not seeking recourse, firstly by pursuing with the State authorities for notifications or directions, to grant the needed exemption, on the one hand, and proceeding to recover VAT and other levies on the other, after the duration of the scheme, the petitioner has approached the Court after an inordinate .....

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, Ms. Varsha Banerjee and Sh. Kunal Godhwani, Advocates. Respondents Through: Sh. Preetesh Kapur, Sh. Satya Brata Panda, Ms. Hemantika Wahi and Ms. Puja Singh, Advocates, for State of Gujarat. Ms. Rama Ahluwalia, Advocate, for Respondent No.6. MR. JUSTICE S. RAVINDRA BHAT 1. The present Writ Petition challenges an order of the Appellate Authority for Industrial and Financial Reconstruction ( AAIFR ) constituted under provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, (he .....

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revival of the sick company, Narmada Cement Company Ltd. ( NCCL ) known as SS-06 by its order dated 15.05.2006. The revival scheme, inter alia, provided merger of NCCL with a healthy company namely Ultratech Cement Ltd ( UCL ), i.e. the appellant with effect from 01.10.2005. Accumulated losses of NCCL were erased a result of the merger. The petitioner s net worth, positive prior to the merger, remained so after the merger and continued to be so during the entire period of the scheme. In other w .....

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to exemption from payment of VAT duties which are the subject matter of this appeal are as follows- 12.1 From the State Govt of Gujarat b) To exempt the Transferred Units from payments of VAT/Sales Tax payable for a period of seven years from the appointed date. …… d) To exempt the transferred unit from payment of Electricity Duty , Cess and any other levy on the power generated/purchases and consumed by the said units for a period of seven years from the appointed date. 12.2. From .....

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concerned State Governments for the entire period of the scheme. The scheme period ended and the petitioner was also discharged from the purview of SICA. The petitioner filed a miscellaneous application (M.A. No 122) before BIFR on 23.03.2012 seeking directions, for the refund of ₹ 233.30 crores and ₹ 38.71 crores collected towards VAT and Electricity Duty respectively for the period October 2005 to March 2011 as it was exempted from payment of such tax and duty from 01.10.2005 to 3 .....

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to charge/claim VAT and Electricity Duty from the applicant till 30.09.2012, i.e. till the expiry of the period of 7 years from the appointed date. 5. The BIFR dismissed the application by its impugned order dated 11.03.2013. It held that the petitioner should not have collected and deposited VAT/Sales Tax and could have written in the tax invoices that their unit was exempted from VAT/Sales Tax, which the petitioner did not do. BIFR also said that the petitioner company did not avail the exemp .....

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richment as held by the Supreme Court of India in Mafatlal Industries v. Union of India 1997 (5) SCC 536 that if the burden of a duty/tax is passed on to the customers, the claimant cannot seek refund under any allowed/granted exemption and the person who bears the burden of tax can only claim such refund, and if such person does not come forward for refund, it is just appropriate that such amount is retained by the government. 6. In the light of the above, BIFR was of the view that the company .....

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ders. Furthermore, it was reasoned that exemption from payment of taxes and duties under the scheme were incorporated without the consent of Gujarat by ignoring the specific objections raised by it. And hence the sanctioned scheme is not binding on it. The sanctioned scheme only provided for exemption of payment of Sales Tax/VAT and electricity duties and was not a refund. Refund of taxes already collected and paid to the State was different from exemption from its payment. A refund claim was a .....

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ed it to collect and retain the taxes for its own use and having deposited the taxes with the State, it is entitled to its refund which will not amount to undue enrichment as the scheme has an overriding effect over other laws by virtue of Section 32(1) of SICA. The scheme, it was contended, was binding on the Respondents as it was not challenged by them. The other grievance was that BIFR in its order has considered issues relating to VAT/Sales Tax only and has not dealt with the issue of Electr .....

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ctions to the relevant provisions of the rehabilitation scheme. This does not fall under the category of deemed consent as such. Section 19(4) of SICA provided that in the absence of consent by any person, the Board may adopt such other measures including winding-up of the sick industrial company as it might deem fit. AAIFR was of the view that the BIFR could not override or completely ignore the requirement of consent required under Section 19(2) of SICA as such a proposition would render that .....

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reliefs and concessions from Gujarat was without jurisdiction and unenforceable. It was held, however, that the Government of Maharashtra did not file any objection to the rehabilitation scheme and is deemed to have consented to the reliefs and concessions of the sanctioned scheme and was thus binding upon it. 9. AAIFR was of the view that the Petitioner did not avail the exemption granted to it in the scheme voluntarily for a period of six years after the scheme was sanctioned and it cannot se .....

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sions of the sanctioned scheme in consonance with the state policy from the period 23.03.2012 to 30.09.2012. However, it did not do so. 10. The AAIFR additionally held that the objective of SICA is to revive a sick industrial company in the larger public interest. As there was no sick company after sanctioning of the merger scheme on 15.05.2006, permitting the refund of taxes already collected and paid to the State would be contrary to the public interest. AAIFR held that the reliefs and concess .....

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he proposition advanced by the petitioner made the VAT scheme dysfunctional, because if A were permitted to retain the tax collected by it from B on the ground that it was exempted from payment of such taxes, then the presumption that the input tax in respect of consumer B had already been deposited with the State will not be correct. Therefore, the consumer B would not be entitled for a set-off on its input tax. On the other hand, if A does not collect VAT/Sales Tax and does not pay anything to .....

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full VAT from B and compensates A to the extent of input taxes paid by it. Thus, there is no loss to the public exchequer and the person A benefits not only by getting the reimbursement/credit for its input taxes but also gets the flexibility in pricing of its products in the market as it does not contain any element of VAT/Sales Tax. 12. The petitioner company had failed to produce evidence on the discussions/proceedings before BIFR or meetings of Operating Agency as part of preparation of san .....

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e has to prevail. Therefore, the sanctioned scheme does not permit the petitioner company to collect taxes and retain it for its own use. And having collected taxes and paid to the State, it is not entitled for any refund. The said provisions only permit UCL not to collect taxes from its purchasers and not pay any taxes to the State on its sales. And in such circumstances, it is permitted to seek reimbursement of input taxes or equivalent tax credit from the State on its purchase. 13. AAIFR reli .....

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mpted from the test of reasonableness and constitutional validity. The non-obstante cause of Section 32(1) of SICA certainly cannot be said to have an overriding; effect over these principles. The prayer of refund sought by the appellant herein, is clearly contrary to constitutional scheme of things as propounded by the Hon'ble Supreme Court in the cases cited above. It also fails to meet the test of reasonableness as the appellant has failed to produce any evidence, whatsoever, to suggest t .....

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option is. to accept the established practices and policies, as submitted by the respondents and supported by credible legal provisions and pronouncements. We, accordingly, reject the contention of the appellant and hold that refund of taxes, collected and paid by the appellant to the concerned States is not legally permissible.'' Parties contentions 14. It is argued by the petitioner that AAIFR and BIFR, while passing the impugned order failed to take into consideration the applicabilit .....

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as envisaged in the sanctioned scheme and on legitimate expectation that parties would perform their part of the obligations. Gujarat was aware about the provisions of the sanctioned scheme and is guilty of willful disobedience. It never filed appeal against the sanctioned scheme despite communicating its intention to the Petitioner. AAIFR s letter of 30.11.2011 establishes the fact that no appeal was filed against BIFR s order dated 15.05.2006 sanctioning the scheme. Further, Gujarat did not pu .....

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Section 19(2) of SICA relates to consent for reliefs and concession within its statutory framework, however, Section 32(1) duly empowers and gives adequate authority to BIFR to pass appropriate directions overriding the provisions of any other Statute. It was submitted that AAIFR s conclusion that refund of taxes and duties claimed by the petitioner are not part of the sanctioned scheme is legally untenable. The present case is not a case of refund as concluded by AAIFR. The present case is a c .....

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ity which has the jurisdiction to implement as well as monitor the progress of the scheme. Sections 18(8), 18(9), 18(10) and 18(10) of SICA arm BIFR with authority to ensure implementation. Consequently anything pertaining to the sanctioned scheme formulated by BIFR falls within exclusive jurisdiction of BIFR it is the sole authority, which can make appropriate directions and order for its implementation. Section 26 categorically bars jurisdiction of other Civil Courts on matters falling within .....

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ing the terms of the sanctioned scheme as final and binding on parties in terms of Sections 18(8), 19(3) and 32 of SICA refund of tax collected by the Government in violation of the terms of the sanctioned scheme was directed. It was submitted that the settled legal position is that in cases where there is no liability to pay the tax and tax has been paid, retained, the same is eligible for refund by the State as retention of the same would be unjust and wrongful on part of the State. 18. Counse .....

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s of the Scheme, UCL was not exempted from collection of Sales Tax/VAT but only exempted from its obligations for payment of Sales Tax/VAT. Exemption from payment of Sales Tax/VAT has a different connotation from Exemption from collection of Sales Tax/VAT . The present case is of exemption from payment of Sales Tax/VAT. Mr. Ahmadi submitted that payment of VAT and Electricity Duty comes within the purview of financial assistance under Section 19(1) of SICA. Delhi High Court in Lords Chloro v. BH .....

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s. 19. It was contended that the aspect of VAT/Sales Tax paid by consumer is not of material significance as consumer pays a consolidated amount for purchase of goods. The consumer pays consideration of goods and tax thereon in composite manner and not separately. The Supreme Court decision in George Oakes Pvt. Ltd. v. State of Madras AIR 1962 SC 1037 recognizing the principle of liability for payment of indirect tax is on the dealer irrespective of whether the same is realized from the ultimate .....

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e constitutional mandate as alleged. UCL was under an obligation to collect tax on sale of goods and in terms of reliefs envisaged in the sanctioned scheme was legally entitled to retain the differential amount. It was highlighted that even in the absence of a sanctioned scheme under SICA, a State is empowered to grant similar reliefs for promoting industrialization through the Scheme for Deferment of Sales Tax, non-payment of Sales Tax/VAT at the stage of purchase of raw materials and sale of f .....

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napplicable to it declaring it to be void ab initio. 20. It was submitted that the present case is not one of unjust enrichment as there was a duly sanctioned BIFR scheme, binding on all concerned. SICA was enacted to give effect to the policy of the State towards securing principles enshrined in Article 39 (b) & (c) of the Constitution of India. Learned senior counsel argued that the unjust enrichment cannot be presumed merely because the burden of the tax has been passed on. It was argued .....

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en sanctioned, it becomes sacrosanct and in absence of any appeal followed by the order of the Competent Authority/Court against the same, it becomes final and binding on the parties to the scheme. Reliance is placed on ACC Ltd. v. Assistant Commissioner, Commercial Taxes (2011) 46 VST 244 (Cal) by the Calcutta High Court, which held in Section 32 of SICA overrides all State law, viz., Sales Tax laws enacted under Entry 54 of List II of the Seventh Schedule. The claim for Sales Tax exemption, al .....

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ount has already been realized the same should be refunded with interest at the rate of 12% per annum from the date of receipt till the date of return. It is argued, in addition, that BIFR s role is adjudicatory, although it is also tasked with the duty of providing an overall solution to the problem of sickness. It can thus direct some party or all parties to make sacrifices. 22. Counsel contests AAIFR s finding that once the scheme was sanctioned by the BIFR, no further approval was required b .....

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e sanctioned scheme. UCL duly approached BIFR during subsistence of the scheme period and sought for directions to implement the remaining part of the operative period of the scheme. The provisions of the State VAT laws and Electricity Duty laws are inapplicable as the BIFR and AAIFR are the sole authority having jurisdiction to order refund of amount collected by Respondents contrary to the provisions of the sanctioned scheme. 23. Mr. Ahmadi argued that the respondents could not contend that th .....

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on. It was also urged that in the absence of any appeal (to the sanctioned scheme), the legal consequence of the order cannot be escaped. Counsel relied on Dakshin Gujarat Bij Company v Amardeep Association 2014 SCC Online Guj 6761; Marshall Sons and Co. (India) Limited v. Income Tax Officer 223 ITR 809 (SC) and Tayyabhai M. Bagaswarwalla & Anr v. Hind Rubber Industries (P) Ltd Ors (1997) 3 SCC 443. Learned counsel furthermore argued that the relief of refund is consequential and is not barr .....

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provide the concessions as sought. Although the objections were on record before BIFR, it erroneously stated that Gujarat Government consented to the DRS and assumed jurisdiction over it to give relief and concessions. It is stated that these facts were duly noted and recorded by BIFR in its order and summary record of proceedings dated 27.09.2012. Counsel argues that Section 19 of SICA mandates that consent or deemed consent of the State Government is necessary. Consequently, a scheme involvin .....

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present case, the said jurisdictional fact was missing. Counsel submitted that it is settled law that when a jurisdictional fact is wrongly or erroneously assumed by a Court, when in fact it does not exist, the assumption of jurisdiction would be bad in law and any orders passed would be null and void. Such an order can be challenged in any proceedings without preferring appeal against the same. 25. It is argued that the application for modification of the sanctioned scheme remained pending bef .....

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ations to it or the BIFR may direct the OA to prepare a fresh scheme. It is also pointed out that Section 18(9) of SICA confers BIFR with the power to remove difficulties in giving effect to the sanctioned scheme. This power could, therefore, be used to modify the scheme appropriately. It is argued that Section 32 only provides that the provisions of the Act shall prevail over other provisions of the law. In the present case, however, the scheme was contrary to the provisions of the Act itself s .....

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g. There is a difference between exemption from tax, to encourage industrialization and refund of tax. The two are completely different. A sick company may be granted exemption to improve its competiveness and encourage industrialization. However, refund of tax cannot be granted when the tax has been paid and the company is running profitably. The sanctioned scheme only spoke of exemption. Therefore, if UCL felt aggrieved, it ought to have approached the BIFR at the earliest opportunity, seeking .....

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dy and applied to the tax authorities who rejected the application. Hence, the only remedy available was to appeal before the competent forum. No application for "refund" would lie before the BIFR or AAIFR. 27. Counsel for the State of Gujarat argues that the State s VAT laws and the Gujarat Electricity taxation laws contain provisions for refund of tax. It was imperative on the part of UCL to pursue any claim of "refund" of VAT or Electricity Duty in terms of those, since th .....

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n the scheme of the VAT Act and Electricity law would continue to bind the Appellant. 28. Both respondents point out that Section 18(12) of SICA confers power upon the BIFR to periodically monitor the implementation of the sanctioned scheme. However, UCL chose not to approach the BIFR for 6 years. UCL was aware of State Government s objections to the scheme. However, it remained silent and did not seek any remedies. It is urged that the principle of unjust enrichment as enunciated by the Supreme .....

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er, UCL was discharged from the purview of SICA in 2007. Therefore, there was absolutely no requirement to refund the duly collected taxes and duties. SICA aims to help only in rehabilitating a sick company. 29. The State of Maharashtra argued that till 24.10.2011, its Sales Tax Department was not aware of any Rehabilitation Scheme sanctioned by BIFR. The department was not party to the summary proceedings dated 15.05.2008. The copy of the summary proceedings was not endorsed to the department. .....

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statute.The exemption/concession claimed by the company had not been reflected in returns filed by the Company for more than 6 years. UCL claimed refund worth ₹ 11.90 crores towards VAT liability for the period October 2005 to March 2011, whereas in its intimation letter dated 05.10.2011, received by the department on 24.10.2011, it claimed to have paid VAT to the tune of ₹ 20.20 crores for the financial year 2010-2011. The intimation reveals that the company had collected VAT from c .....

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nt from the sample copy of Sale Registers for 01.12.2005 to 31.12.2005 and from copy of sample tax invoices issued by the company. The company collected taxes throughout the relief period of 7 years as seen from sample bills for each financial year. This showed that UCL volunteered to forego the exemptions granted by BIFR. If UCL had any concern, it should have approached BIFR and not collected VAT separately from the customers. The tax thus collected cannot be claimed as refund. 30. Learned cou .....

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dealer to collect taxes. If the BIFR upholds the requests made by the company in the MA. It would have amounted to a direct violation of the principle of unjust enrichment as enunciated by the Supreme Court in a number of cases, notably in the Mafatlal Industries (supra), since refund of the amount would amount to unjust enrichment of the dealer. Analysis and Conclusions 32. The issues that arise for consideration in the present writ petition, is whether the sanctioned scheme in this case was b .....

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financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices from the Central Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority (any Government, bank, institution or other authority required by a scheme to provide for such financial assistance being hereafter in this section referred to as the person required by the scheme to provide financial a .....

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eme the consent referred to in sub-section (2) is given by every person required by the scheme to provide financial assistance, the Board may, as soon as may be, sanction the scheme and on and from the date of such sanction the scheme shall be binding on all concerned. (4) Where in respect of any scheme consent under sub-section (2) is not given by any person required by the scheme to provide financial assistance, the Board may adopt such other measures, including the winding up of the sick indu .....

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is not given by any person required by the scheme to provide financial assistance, the BIFR may adopt such other measures, including winding-up of the sick industrial company as it may deem fit. It mentions that the consent is deemed in instances where no consent is received within the time stipulated by the Board. Thus, a positive approval is necessary by the authorities envisaged in the scheme for the scheme to be binding on them. That provision clarifies that the rehabilitation scheme cannot .....

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stance. Since the scheme providing for exemption from payment of VAT/Sales Tax has been sanctioned in violation of the mandatory provision of Section 19(2) of SICA, the same is void and without jurisdiction and, therefore, not binding on the Government of Gujarat. 36. The High Court of Delhi in Union of India v. Cimmco Ltd. 2015 (193) Com Cases 289 determined the scope of Sections 18 and 19 of SICA. The relevant paragraphs are quoted below- As regards the first two questions, the Court notes tha .....

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blic financial institution or State level institution or any institution or other authority , the BIFR does not have the authority to bind these entities by its orders and thus modify the obligations and rights owed between the sick company and these entities. However, the scheme for rehabilitation may- in the interests of ensuring that the sick company returns to a profitable state as soon as possible- envisage financial assistance by way of loans, advances or guarantees or reliefs or concessio .....

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n 19, which states that the DRS is to be circulated in order to obtain consent. Once consent is obtained, however, the provision becomes binding for the period of the sanctioned scheme. Crucially in this regard, Section 19(2) categorically provides that if no consent is received within such period or further period, it shall be deemed that consent has been given. 37. The Punjab and Haryana High Court, in State of Haryana v. AAIFR (2009) 22 VST 210 (P&H) held as follows- 14. Question for cons .....

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ther measures, the power of BIFR is circumscribed by the statutory provisions and cannot be held to be plenary. A statute has to be read as a whole and no provisions of a statute can be ignored. Section 19(3) envisages consent for framing a scheme covered under section 19(1) of SICA, which may contemplate giving of financial assistance. In absence of such consent, the only course open to BIFR is to frame a scheme under section 18(4) by including measures specified in section 18(1) or other measu .....

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administrative authority can act arbitrarily and pass an order affecting a party without considering the view by ignoring altogether objections of the petitioner state. No doubt, Section 32 of the SICA contains a non-obstante clause; even the said provision cannot empower BIFR to act arbitrarily or to go contrary to the statutory scheme. The operation of non-obstante clause will be limited to making a provision of the SICA operative in case of conflict. The Act itself contemplates an order stip .....

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objections of the parties whose consent is required under Section 19(2). It was also submitted that if the State of Gujarat s contention that it did not have to file an appeal challenging provisions of the sanctioned scheme is accepted, then Section 25 of SICA (which provides for appeal against order of BIFR by any aggrieved person) would become redundant. 39. The State of Maharashtra s arguments are, however, convincing; they are that till 24.10.2011 its Sales Tax Department was not aware of an .....

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40. It a matter of record that the State of Maharashtra till 24.10.2011 was unaware of any rehabilitation scheme sanctioned by BIFR and that it was only then that UCL had furnished a copy of summary record of proceedings of hearings held on 15.05.2006 before BIFR. The Sales Tax Department was not a party to the summary proceedings dated 15.05.2006 and the copy of those summary proceedings was never endorsed to it. Clearly, the State being the authority to decide about granting financial assistan .....

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rescribed time as envisaged under the statute. 41. This Court further observes that under Section 19, BIFR read with Regulation 33 does not have any power to direct, in the absence of specific consent, the State Government to grant any incentive, which is not part of the policy of the State Government. In view of the decision of the Supreme Court in State of UP v UPTRON Employees Union (2006) 5 SCC 319, no direction can be given by the BIFR directing any State to grant or not to grant any incent .....

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cy of the State Government. In view of the decision of the Supreme Court in State of U.P. v. UPTRON Employees' Union, CMD ((2006) 5 SCC319, no direction can be given by the BIFR directing any State to grant or not to grant any incentive or to relieve the petitioner of any statutory liability. 64. We do not find any weight in the submission made on behalf of the petitioner-Company that the Sanctioned Scheme-04 by itself granted to the petitioner the benefit of 75% wholly independently of the .....

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e order of the BIFR before the AIFR, which alone had the authority of law to amend or modify the scheme. 42. It is thus apparent that without the consent of the States, the condition to waive, or exempt VAT incidence, for the duration of the sanctioned scheme was not binding on them. This court further notes that the judgment of the Supreme Court in Director General of Income Tax v GTC Industries 2016 (12) SCC 62 is an authority on the point that even though the revenue may not object to a schem .....

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y and continued to earn them for the duration of the scheme s operation. 43. VAT is levied on sale of goods of every description. It is collected at each stage in chain when value is added to the goods. The tax is centered around the basic concept of set-off for the tax paid earlier (input tax credit). This input tax credit for any period means setting-off the amount of input tax by a registered dealer against the amount of his output tax. The structure and world of VAT along with input tax cred .....

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he dealer is allowed to postpone the payment of tax on sales. These are based on entitlement certificates granted under Section 89 of MVAT Act, 2005. In the case of exemption, the company does not collect tax from consumers on sale of exempt goods, and is governed by a notification dated 01.04.2005. Here, the exempt company does not collect tax from sale to consumers of exempt goods; there is no obligation to pay tax. The scheme- it is explained, is such that if the dealer is exempt from payment .....

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le 79 (1) of MVAT Rules. Rule 79 (2) of MVAT prescribes that, If the unit is holding an Entitlement Certificate for exemption from payment of tax under the 1979, 1983, 1988 or 1993 Package Scheme of Incentives or as the case may be, under the Power Generation Promotion Policy 1998, then, it shall also be entitled to claim refund of tax equal in amount calculated for the purpose of reduction from set-off under Rule 53, if the said dealer was not holding the Certificate of Entitlement. The Maharas .....

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to the exempted company is to the extent of exemption granted concerning VAT. The benefits to the exempted unit by non-levy of VAT are of cost advantage to withstand competition vis-à-vis dealers not having exemption benefits. 45. The State of Gujarat s position is that the Draft Rehabilitation Scheme in 2006 was objected to by it before BIFR, by its communication- dated 07.04.2006. However, the BIFR failed to consider them although they were on record. This fact was noted and recorded b .....

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d from Gujarat Govt. in SS-06. The Bench observed that the objections filed by Govt. of Gujarat, were apparently not considered when the Board sanctioned the SS06 on 25.05.2006, whereas the same are available in the Bench file. Bench was informed that review application of GOG dated 12.10.2006 is also available on record and has apparently remained unheard and undecided. Therefore, the Bench considered it even more necessary that opportunity is provided to Government of Gujarat for filing reply .....

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file a reply to the review application of Govt. of Gujarat, which is already available with the company. The bench agreed to the request of the company and issued following directions. …… ….. ….. 46. The State of Gujarat cites Section 19 to say that without consent, there cannot be any sanction. It also submits that it moved an application for Modification of the sanctioned scheme. That application remained pending before the BIFR. Finally, the said application for mo .....

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and deposited the tax with the Government; (c) On purchase side (on inputs), it has paid tax on inputs, and has, thereafter, taken the benefit of Input Tax Credit. Furthermore, no refund or remission was claimed in the tax regime. Apparently in the State of Gujarat too, the petitioner UCL did not seek exemption under Section 5 (2) of the VAT Act. It is also apparent that here too, the regime and VAT provisions are such that an exempt unit cannot collect taxes from the buyers. 47. In the present .....

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ent case, at least as far as VAT is concerned, the matter is complex, because the petitioner UCL collected VAT from third parties, i.e. those who entered into transactions with it, that were subject to VAT levy. On the basis of such sales (including input sales VAT paid by UCL) credit of VAT levy was secured: at both ends, i.e. the seller and the downstream buyer. Thus, an input credit chain formed which led to completed assessments. The refund of levy in such circumstances would be a windfall t .....

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at if granted, it would result in aggrandizement of the petitioner, is substantial and justified. 48. Exemption from tax to encourage industrialization cannot be equated with refund of tax. They are two different legal and distinct concepts. An exemption is a concession allowed to a class or individual from general burden for valid and justifiable reason. The underlying intention of exemption is to incentivize production and economic activity. VAT is an indirect tax passed on to the consumer. If .....

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ce with law is not justified. Refund is directed only when the amount collected is excessive, or there is no levy or for wrongful collection. In all such cases, a fault must be located within the revenue before the courts order refund. The Supreme Court in Amrit Banaspati (supra), observed as follows: … Exemption from tax to encourage industrialization should not be confused with refund of tax. They are two different legal and distinct concepts. An exemption is a concession allowed to a c .....

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me its teething period by selling its products at comparatively cheaper rate as compared to others. Therefore, both the manufacture, and consumer gain, one by concession of non-levy and other by non-payment. Such provisions in an Act or Notification or orders issued by Government are neither illegal not against public policy. But refund of tax is made in consequence of excess payment of it or its realisation illegally or contrary to the provisions of law. A provision or agreement to refund tax d .....

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n agreement or even a notification or order permitting refund of sales tax which was due shall be contrary to the statute. To illustrate it the appellant claimed refund of sales tax paid by it to the State Government of sale made by it of its finished products. But the tax paid is not an amount spent by the appellant but realised on sale by it. What is deposited under this head is tax which is otherwise due under provisions of the Act. Return of refund of its or its equivalent, irrespective of f .....

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ement by virtue of the directions issued by this Court in the Order dated 18.11.2002. In view of the law laid down by this Court in Amrit Banaspati (supra) the company cannot be permitted to retain the amount collected from the customers. This would amount unjust enrichment. Therefore, a direction is required to be issued that the amount deposited by the company with the bank pursuant to the orders of this Court be released to the appellant State. On the other hand, Mr. Parshad has submitted tha .....

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Mr. Parshad reiterated that the Company had made bona fide efforts, but was unable to deposit the amount due to its Rs.sickness'. On the one hand the revised rehabilitation package is kept under consideration, on the other the appellants seeks the vacation of the order dated 18.11.2002. The application, according to the learned senior counsel, deserves outright dismissal. 79. We have considered the submissions made by the learned counsel. It would be not possible to accept the submissions o .....

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It is to enable the industry to compete in the market. On the other hand, refund of tax is made only when it has been realized illegally or contrary to the provisions of law. Tax lawfully levied and realized cannot be refunded. In view of the settled position of the law, we decline to accept the suggestion made by Mr. Parshad. 80. Direction is, therefore, issued that the amount deposited by the company in the designated account opened and operated pursuant to the order of this Court dated 18.11 .....

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application. By that time the tenure of the scheme had ended. The petitioner did not seek remission or exemption; rather it was a demand for refund. 51. This Court concurs with the view of the AAIFR that since it is not in dispute that the Government of Gujarat did not give its consent in terms of Section 19(2) above and instead filed its objections to the relevant provisions of the rehabilitation scheme, there was no question of deemed consent. As is evident from Section 19(4) of SICA, it is i .....

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gainst the order of BIFR (under Section 25 of SICA), the BIFR can ignore the mandate of Section 19(2) of SICA and sanction a scheme in the absence of consent without intimation to any state, or contrary to its object is an untenable proposition. To admit of this eventuality is to countenance any order of BIFR contrary to the law as it can be challenged in an appeal. There is nothing to indicate to why the BIFR thought it fit to reject the State of Gujarat s objections, to the proposed scheme. 52 .....

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ome time to make its net worth positive, to frame a suitable scheme for its reconstruction, revival or rehabilitation, to determine on the precise provisions in the scheme for this purpose or to decide to wind up the company, the decision of the BIFR on all these issues is, subject to certain exceptions, binding on the company and all concerned parties like promoters, shareholders, employees, creditors, financial agencies and the like. Section 32 goes to the extent of clothing the scheme with su .....

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companies as quickly as possible and to salvage the productive assets and realize the amounts due to the banks and financial institutions from the nonviable sick companies through their liquidation. Adequate guidelines have also been provided to BIFR through various provisions of the Act, particularly Sections 17, 18 and 20.The important aspect to notice is that the overriding effect of the Act, scheme or rules made thereunder would be there only when there is anything inconsistent in the said .....

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