TMI Blog2018 (10) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... . Such a unit could opt for a composite scheme of sales tax exemption and deferment in parts. Clause 4.4 of the Scheme provided that the option would have to be exercised by unit at the time of making the application for the benefits. However, such option could be changed once before the certificate is issued by the Sales Tax Department. This clause thus clearly envisaged one time change of option before the certificate is issued by the Sales Tax department - In case of the petitioner, final eligibility certificate was not issued till the VAT Act was introduced making major changes in existing exemption schemes. The certificate issued by the department was a provisional eligibility certificate granting exemption upto a limit of 25% of the eligible investment of the petitioner. In terms of Clause 4.4 of the said Scheme, therefore, the choice of the petitioner to change the option was not yet lost. In absence of any clear provision providing that a unit enjoying tax exemption under the earlier scheme would automatically come within the fold of tax remission benefits under the Rules, there is no reason to presume that no option could be exercised. Further, if the legislature des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause 4 of the Scheme pertained to Sales Tax Incentives. Clause 4.4 provided that the eligible unit would have option either to choose sales tax exemption or sales tax deferment. In case of a unit, whose eligible investment exceeded ₹ 100 crore, may also avail of a composite scheme which envisaged sales tax incentives partly in form of exemption and partly in form of deferment. Clause 4.2 laid down the benefits of sales tax exemption and provided that the eligible unit could purchase raw material, packing material etc. without payment of sales tax and further, all the products, manufactured by the unit including waste and scrap, would be exempt from payment of sales tax. Clause 4.3 pertained to sales tax deferment option and provided that the unit opting for sales tax deferment would collect sales tax on all its products, intermediatories, wastes and scrap but would deposit the same in the Government revenue at a differed point of time in six yearly installments. 3. Clause 4.4 provided that at the time of applying, the eligible unit would have to opt whether to be covered by the exemption scheme or the tax deferment scheme. However, if the unit desired to change such optio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added to the Rules of 2006 w.e.f. 01.04.2006. This chapter carries the heading Continuation Of Tax Exemption To Industrial Units . Rules relevant for our purpose contained in the said chapter read as under: 18A. Continuation of tax exemption: ( 1) The exemption and deferment granted to the industrial units by the State Government under the earlier law and continued as such under the Government Notification, Finance Department No.(GHN-43)VAT-2006/S.5(2)(2)-TH, dated the 1st April,2006 shall be subject to the provisions of this Chapter. ( 2) Such Industrial units shall be entitled to tax incentives only for the balance amount and for the balance period of tax incentives as on the appointed day on the basis of the Certificate for Entitlement issued under this Chapter. ( 3) (a) The industrial unit eligible for tax incentives under the earlier law was desires to avail of tax incentives shall apply in Form-109 to the Commissioner within thirty days from the date of coming into force of these rules. ( b) The industrial unit who has obtained the Eligibility Certificate from the Industries and Mines Department, Government of Gujarat after coming into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture of goods specified in Schedule I or the goods exempted from the whole of the tax by a notification issued under sub-section (2) of section 5, such eligible textile unit shall be granted refund of the tax paid to the registered dealer on purchases of taxable goods including the tax paid on the packing materials used in the packing of the goods so manufactured. ] [( b) Subject to the provisions of section 11, the eligible unit shall- ( i) not claim tax credit of the amount equivalent to the amount of refund granted under clause (a) of this sub-rule; ( ii) claim tax credit of additional tax paid on purchase of taxable goods.] ( c ) The eligible unit shall make an application for refund along with its return to the concerned Commercial Tax Officer and such Officer shall, as far as possible, grant refund subject to provisions of section 40, within one months after the receipt of the application for refund. ( d) The refund under this rule shall not be admissible unless the eligible unit furnishes the copies of tax invoices of the purchases for which refund thereof is claimed. (2) The eligible unit availing benefit of tax remission shall not be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deputy Commissioner of VAT called upon the petitioners and conveyed to the petitioners that it was not possible for the petitioners to change the option. In response to such letter, the petitioners made a detailed representation on 15.06.2006 contending inter alia that the entire scheme has been modified under the VAT Act and that therefore, a fresh option should be made available. It was pointed out that under the present circumstances, the tax remission scheme is more advantageous. 11. The authorities did not respond to this representation, instead, on 23.04.2007, Industries Commissioner issued the eligibility certificate of tax deferment for a total eligibility investment of ₹ 24.84 crores. The Sales Tax Department also issued a final eligibility certificate on 02.09.2018 in same terms. 12. The petitioners, however, pursued their request for change of option. They made a further representation dated 07.05.2009 to the State Level Committee under the said scheme and requested that in terms of Clause 4.4 of the scheme, change of option may be allowed. It appears that the State Level Committee, looking to the provisions of the Scheme and the Rules made in Chapter IV-A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Bhatt raised the following contentions: ( i) Clause 4.4 of the said scheme is clear. It permits change of opinion till certificate is issued by the Sales Tax Department. In the present case, the petitioner was only granted provisional eligibility certificate. The request of the petitioners for change of opinion was made before final certificate was issued. The respondents therefore committed an error in refusing such a request. ( ii) Under the said scheme, the State Level Committee was entrusted with the task of interpreting the provisions of the scheme as well as to resolve disputes arising therefrom. The Committee had opined that the request of the petitioners should be accepted. This was on the basis of opinion of the Law Department of the Government. The Government thereafter, could not have taken a different stand. The primacy given to the Committee under the scheme could not be taken away. In this context, reliance was placed on the decision of Supreme Court in case of M/s. Vadilal Chemicals Ltd vs. State of Andhra Pradesh and ors reported in AIR 2005 SC 3073. ( iii) It was lastly contended that even under the Rules of 2006, there was no prohibition fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25% of the eligible investment of the petitioner. In terms of Clause 4.4 of the said Scheme, therefore, the choice of the petitioner to change the option was not yet lost. 18. Before the final eligibility certificate could be issued, the VAT Act was introduced. Along with the Act, the Rules were also activated. These Rules brought about major changes in the existing sales tax incentive schemes. We may examine the relevant Rules more minutely. As per sub-rule (1) of Rule 18A, the tax exemption and deferment granted to the industrial units would be subject to the provisions of the said Chapter IV. As per sub-rule (2) such units would be entitled to tax incentives only for the balance amount and for the balance period on the basis of certificate for entitlement issued under the said Chapter. Sub-Rule (3) of Rule 18A provided that the industrial unit eligible for tax incentive under the earlier law who desired to avail of tax incentives shall apply in Form 109 to the Commissioner within specified time. Clause (c) of subrule (3) provided that the eligible units availing composite benefit under the earlier law shall give option either for tax remission or for tax deferment. The option ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme which envisaged either tax exemption or tax deferment or even composite incentives to units which had eligible investment exceeding ₹ 100 crore. There is fundamental difference between tax exemption and tax remission. In the former, as per the provisions made in the said scheme, the eligible unit would pay no sales tax on the sale of its products. In turn, it would also not collect any such tax from the purchasers. In other words, looking to the special need for development of the area the Government agreed to forgo the tax component on the products manufactured by the unit. The tax component would thereby be available for the manufacturer to adjust its prices either to make the product cheaper and make its price more competitive or to retain the additional profit if its manufacturing cost in the remote area was higher than its competitors. Under tax remission scheme, unit would be required to collect tax on its sales and the same would be remitted by the Government. This did not leave the option to the manufacture not to collect the tax at all. Enjoyment of such incentives was also subject to fulfillment of conditions contained in Rule 18D. 23. There is nothing in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, there is no reason to presume that no option could be exercised. Further, if the legislature desired that there would be no further options of either of the two classes of units, language used would have been more explicit providing that the units availing tax deferment under the earlier law shall not be allowed to change the option. 24. In a case where, as held by us earlier, when the choice for changing the option for the petitioner [in terms of clause 4.4 of the scheme] had not yet been closed since final eligibility certificate was not yet issued, the introduction of the Rules of 2006 would not eliminate such option. We may recall, the Rules of 2006 brought about fundamental shift in the benefits available to such eligible units. The respondents therefore committed an error in not allowing the petitioner's request for change of option. 25. However, we do not accept the contention of the counsel for the petitioners that the recommendations or the opinion of the State Level Committee were final and binding on the Government. As noted, with the introduction of the VAT Act and the Rules framed thereunder, the entire scheme stood substituted by the statutory provisions. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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