TMI Blog2018 (11) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned counsel when he submits that Section 93 would come into effect only from 27th August 2009 and the units which have not already exhausted the monetary ceiling limits by the said date would continue to be governed by the amended Section 93 irrespective of the date of the eligibility or entitlement certificate. i.e. before 1st April 2005 or after 1st April 2005 or whether before 27th August 2009 or after 27th August 2009. The appellant who has already exhausted the ceiling limit on 27th August 2009 thus cannot be governed by Section 93(1) since its cumulative quantum benefits are already availed. If the assessment order is perused, it can be seen that the appellant has paid full tax on sales from 1st April 2009 i.e. after exhausting the Cumulative Quantum of Benefits in terms of the eligibility certificate in March 2009. The life of the certificate was till May 2011 but since the ceiling limit was exhausted by March 2009 from April 2009, the appellant unit becomes liable for payment of sales tax. The returns were filed by the appellant for the years 2005 -06 and he was also granted refund of ₹ 5,65,39,588/ on 4th February 2006 and 1st March 2006. However, subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. V.A. Sonpal, Special Counsel for the respondents. JUDGMENT (Per BHARATI H. DANGRE, J) 1. The Appellant Company has filed the present Appeal assailing the concurrent findings of the Maharashtra Sales Tax Tribunal and the Commissioner of Sales Tax, Pune Division. The present Appeal raised substantial questions of law and we deem it fit to admit the same on the following questions of law. (A) Whether in the facts and circumstances of the case, exemption from whole of tax under Serial No.1 of Notification No. VAT/1505/Cr 122/Taxation dated 1.4.2005 issued under Section 8(4) of Mah.VAT, 2003 is available for the entire turnover of Ratnagiri unit, despite of Chapter 14 of MVAT Act, 2002 as retrospectively amended/substituted by Mah.Act 22 of 2009 ? (B) Whether in the facts of the circumstances, Section 93 of MVAT Act, 2002 as amended by Act 22 of 2009 is applicable to turnover of Ratnagiri unit which has already exhausted the monetary ceiling limits of exemption before 28.08.2009 being the date of coming into force Maharashtra Act 22 of 2009 (C) Whether in the facts and circumstances of the case, in view of the validation and saving provision contained in Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates mentioned the production capacity as 1,30,000 metric tonnes. The said eligibility certificate expressly described the unit of the appellant as Pioneer Unit . In the year 1993, a new Package Scheme of Incentives substituted the existing Package Scheme of Incentives. The appellant made a further investment in its Ratnagiri unit to the tune of ₹ 208.89 crore in August 2002 and accordingly, the existing capacity of PVC Resins and extruded products like pipes, flared up from 1,30,000 metric tonnes to 2 lakh metric tonnes per annum. The appellant, accordingly, made an application for availment of necessary incentives in terms of 1993 Package Scheme of Incentives vide application dated 8th October 2002. Accordingly, on 10th February 2003, a fresh eligibility certificate was issued to the appellant in the capacity as Pioneer Unit by SICOM. The said certificate issued on 11th February 2003 was valid for 106 months i.e. from 1st August 2002 to 31st May 2011 and the eligibility certificate issued in favour of the appellant for additional fixed capital investment of ₹ 20889.76 lakhs for village Ranpar, District Ratnagiri was made subject to review/ monitoring every year. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed by the Assessing Authority for the disputed period 2005 06. In the assessment order, the Assessing Authority applied the provisions of Section 93 of the MVAT 2002 as retrospectively substituted by Maharashtra Act No.XXII of 2009 and only allowed the exemption to the extent of pro rata turnover of 35%. The assessing authority rejected the claim of 100% exemption without applying pro rata factor on the ground that the dealer has not produced any books of accounts and has not identified the goods manufactured by old and new units and there was no identification of goods. Resultantly, the appellant was assessed to VAT Tax at ₹ 6,07,82,694/ and the claim was verified and finally allowed at ₹ 10,30,85,904/ and it was held that the assessment had resulted in excess amount which was refunded to the dealer. For the remaining amount, a demand notice was served on the appellant. 5. Being aggrieved by the said assessment order, an appeal was preferred to the Appellate Authority i.e. the Joint Commissioner of Sales Tax (Appeals) II Pune City, assailing the order dated 22nd March 2013 passed by the Deputy Commissioner of Sales Tax, Pune for the period from 1st April 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was transferred to the Urse factory for use in the manufacturing of pipes. The learned counsel would submit that a further investment was made in the Ratnagiri unit in or around August 2002 to the tune of ₹ 208.89 crore and the date of commencement of commercial production of the unit was on or around 1st August 2002. According to Shri Sridharan, the additional investment of ₹ 208.89 crore itself qualified the said unit as a pioneer unit in terms of para 3.12 of the 1993 Scheme. It is the specific submission of the learned counsel that this investment was in addition to the original investment made in the year 1994, which itself qualified the Ratnagiri unit as Pioneer unit and he would submit that in terms of para 3/12(b) of the 1993 Scheme, threshold investment in Group (c) for a pioneer unit was ₹ 60 crore much less than ₹ 208.98 crore invested by the appellant. According to the learned senior counsel, the eligibility certificate issued on 10th February 2003 specifically stated that the appellant was a pioneer unit and on the basis of this eligibility certificate, Sales Tax Department issued entitlement certificate dated 10th February 2003 and both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax liability for all sales made from Ratnagiri unit from April 2009 without availing any exemption though the time limit for availing exemption was available till May 2011. 8. According to Shri Sridharan, the appellant paid the taxes from April 2009 onwards and if the principle of pro rata was to be followed from April 2005, then, the appellant could have easily exhausted the ceiling of incentives of ₹ 146 crore till May 2011, being the period of validity certificate of entitlement and if it was so, then no portion of the sanctioned limit of incentives would have lapsed due to expiry of time. In the circumstances, Shri Sridharan would submit that the assessment order dated 22nd February 2013 passed by the Assessing Authority for the disputed period 2005 06 which is based on applicability of the provisions of Section 93 of the MVAT Act, 2002, retrospectively as substituted by Maharashtra Act No.XXII of 2009, the Assessing Authority only allowed the exemption to the extent of pro rata turnover of 35%. The First Appellate Authority upheld the order passed by the Assessing Authority and confirmed the demand of ₹ 1,42,36,378/along with interest payable under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1st April 2005 to 31st March 2006 which was assailed in appeal before the First Appellate Authority being the Joint Commissioner of Sales Tax (Appeals) II, Pune City, which partly allowed the appeal. According to Shri Sonpal, the appellant was holding the entitlement certificate under the Package Scheme of Incentives 1988 (PSI) for ₹ 580.66 crore for the period commencing from 4th April 1994 to 3rd April 2005 and under the Package Scheme of Incentives 1993 (PSI) from 1st August 2002 to 31st May 2011 for ₹ 146.08 crore by way of exemption mode. Shri Sonpal would submit that the arguments which are canvassed before this Court in the Appeal are not raised before the Tribunal and he is highly critical about the manner in which new points have been raised in the appeal for the first time. Shri Sonpal would submit that the case of the appellant is based on the premise that no condition was imposed in the eligibility/entitlement certificate about restrictions on the incentives to be drawn for a year and therefore, the appellant continued to enjoy the incentives on 100% turnover of sales for the year 2005 06 and thereafter, but according to Shri Sonpal, the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal No.48/2000 dt.17 March 2001 by the learned counsel for the appellant is rebutted by Shri Sonpal by stating that it has lost its significance after the amendment to Section 93 and insertion of Section 93A by August 2009 Amendment and according to him, the said judgment did not distinguish between a pioneer or non pioneer unit. The submission of Shri Sonpal is that the reliance on circular dated 17th January 1998 is not justiciable in light of the amendment to the statute itself and the said circular cannot override the provision introduced by the Amending Act XXII of 2009. As regards the submission of the retro activity sought to be introduced by Section 5 of the Maharashtra Act No.XXII of 2009, the same is dubbed by Shri Sonpal as illogical, specious and irrational. According to him, the entitlement certificate or eligibility certificate, though do not contain any condition of proportionality, this argument is of no consequence in light of insertion of Section 93A which begins with a non obstante clause. Shri Sonpal would submit that in order to do away with the judgment of the Tribunal and the Bombay High Court in M/s.Pee Vee Textiles (supra), the Act itself was amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that any concession/exemption or deferral conferred can always be taken away by a statutory amendment and there is no estoppel against the statute. In such circumstances, he would pray for dismissal of the present appeal. 13. We have carefully perused the copy of the Appeal along with its annexures and considered the submissions advanced by the learned counsel for the respective parties. 14. Before adverting to the controversy involved in the present petition we would delve into the antecedent events which would be necessary to be referred to for an effective adjudication of the present Appeal. The existing regime of the Bombay Sales Tax Act, 1959, empowered the State Government under Section 41 to grant Tax exemption either in full or in part in public interest. The Package Scheme of Incentives are a reflection of the exercise of said powers conferred on the State Government. Section 41 read thus : Section 41 Exemptions Subject to such conditions as it may impose, the State Government may, if it is necessary so to do in the public interest, by notification in the Official Gazette, exempt any specified class of sales or purchases from payment of the whole or any part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital investment and in case of expansion, the additional fixed capital investment had to result in an increase of the existing installed capacity by at least 25%. The expression Sales Tax liability was assigned a definite connotation under the scheme to include sales tax/additional tax/turnover Tax payable by the eligible unit on the sale of finished products. The Sales Tax incentives under the scheme could be availed by way of exemption or by way of deferral which was admissible to a new unit/pioneer unit as also in the case of expansion or diversification of units set up in Groups B,C or D or No Industry Districts. An exemption was available in respect of Sales Tax payable under the Bombay Sales Tax Act, 1959 on the sale of finished products for the eligible unit. The quantum of sales tax incentives was prescribed under the said scheme and for eligible units undertaking expansion or diversification, the quantum was linked to a proportion of fixed capital investment and was limited to a stipulated period. 16. Under the 1993 Scheme, the incentives offered to the industrial units in areas were made available on the graded scales in ascending order. It would be apposite to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the prescribed date of 1st October 1993 in Group 'C' area for which atleast one financial effective step is taken after 1st October 1993. It is also pertinent to note that a new unit being set up with, or an existing unit undertaking in the same Taluka where the fixed capital investment exceeds 300 crore in Group B or 60 crore in Group 'C' is eligible for fresh exemption. Thus, by virtue of clause (b) of para 3.12 benefit is available to existing unit also and in this clause, there is no prescription of proportionate incentive in case unit is eligible for benefit. 13. The 1993 Scheme thus has to be looked at with two distinguishing features as against the benefits granted for acquisition of new fixed assets in terms of para 3.8(I)(c) and fixed capital investment made by a pioneer unit (more than 60 crore for Group 'C' area) in terms of quantum, period of incentives etc. In case of the former where the benefits are to be conferred on the basis of gross fixed capital investment, by virtue of clause (c) of para 3.8 (i),it is the proportionate incentive to be availed during the residual eligible period where such acquisition is not less than 25% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of commencement of section 12 of the Maharashtra Act 22 of 2001, only on that part of its turnover of sales or purchases as may be arrived at by applying the ratio as may be prescribed by the State Government to the total turnover of sales and purchases of the said unit in that year and different ratios may be prescribed for different classes of dealers and different schemes. (2) The benefits availed of by an Eligible Unit in contravention of sub section (1), if any, shall be and shall be deemed to have been withdrawn and such unit shall be liable to pay tax in respect of the turnover of sales and purchases in excess of the turnover arrived at under subsection (1) and accordingly any benefit which is withdrawn shall be arrears of tax as provided in subsection. (3) For recovery of arrears of tax as provided in subsection (2), the Commissioner shall require the unit, by order in writing, to pay the tax, interest and penalty on such turnover on which the benefits are not available and serve on the dealer notice of demand accordingly; Provided that, no order under this section shall be passed without giving the dealer a reasonable opportunity of being heard. Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to have been substituted by Maharashtra Act No.XXII of 2009 which reads thus : (1A) In case where the Eligible Unit has (a) maintained separate accounts of sales and purchase and is able to identify the sales and purchases pertaining to the increase in the production capacity or, as the case may be, the said eligible investment, then the portion of the turnover eligible for benefits will be decided solely on the basis of such identification; (b) not maintained separate accounts of sales and purchases and is not able to identify the sales and purchases in relation to increase in the production capacity or, as the case may be, the said eligible investment, then such benefits shall be calculated after applying the formula in sub clause (i) or, as the case may be, sub clause (ii) given as under : (i) in case where there is increase in production capacity, then for the Package Scheme of Incentives for 1998, or, as the case may be, Package Scheme of Incentives for 1993, the formula shall be as below : Eligible Turnover = Turnover x Increase in production capacity Total production capacity after such increase. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the exemption and passed on the benefit and therefore it was unreasonable since assessee was not able to collect the tax from the customer because of the exemption granted earlier. It was also urged that the said amendment was bad on account of the fact that the assessee would be liable to pay not only the tax but also interest and penalty which was held to be violative of Article 14 and 19(1)(g) of the Constitution. As against this the specific stand of the State Government was that the Package Scheme of Incentives, 1993 was specifically amended on 6.07.1994 and a conscious decision was taken not to provide for proportionality. The State Government also clarified that an enabling provision in form of Section 41BB was already introduced in the Bombay Sales Tax Act, 1959 in the year 2001 but the said provision was not invoked by framing the rules and infact the Sales Tax Department had attempted, by way of administrative decision to impose a norm of proportionality which came to be stuck down by this Court. On consideration of the gamut of the matter, the Division bench did not find favour with the challenge to the constitutional validity of the Maharashtra Act No.22 of 2009 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n between a pioneer unit and a non pioneer unit under the PSI 1993. It is the submission of the learned counsel for the appellant that the appellant had made a fixed capital investment of ₹ 329.5 crore while creating a new manufacturing factory at Village Ranpar, Post Gholap, District Ratnagiri for manufacturing of PVC Resins and PVC Pipes. This was done in the year 1994 by way of backward integration. It is to be noted that the dispute in the present appeal is in relation to the Ratnagiri factory of the appellant and for the period commencing from 1st April 2005 to 31st March 2006. The appellant obtained an eligibility certificate on 25th April 1994 which was granted under Part I of the 1988 Scheme of the Package Scheme of Incentives by SICOM for its Ratnagiri unit. By virtue of the said eligibility certificate, the appellant was eligible for maximum entitlement of sales tax incentive of ₹ 313 crores and this was to be availed by way of exemption. This certificate was valid for a period of 10 years. i.e. from 4th April 1994 to 3rd April 2004. The appellant was issued an entitlement certificate based on the said eligibility certificate which covered a production capacit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant as Pioneer unit. Further, the additional investment of ₹ 2.89 crore itself qualified the Ratnagiri factory as a pioneer unit in view of clause 3.12 of the 1993 Scheme since clause (b) covered a new unit being set up with or an existing unit undertaking in the said Taluka, the Fixed Capital Investment exceeding ₹ 300 crore in Group B or ₹ 60 crore in Group C . The investment of the appellant Company being more than 60 crore fell within clause (b) of clause 3.12 of the 1993 Scheme. The said unit at Ratnagiri was recognized as such by SICOM and the appellant was held eligible for availing maximum sales tax incentives of ₹ 146,08,17,000/ and the eligibility certificate was valid for the period commencing from 1st August 2002 to 31st May 2011. In terms of para 5.1(ii)(i) Group C of the policy, the appellant factory was eligible for benefit to the extent of 95% for the fixed capital investment by way of exemption. At the time of issuance of the said certificate, sales tax eligibility in terms of monetary ceiling came to be curtailed by SICOM based on para 3.8(1)(c) of the Amended 1993 Scheme. The certificate was subjected to changes made from time to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of which a scheme has been sanctioned under the 1993 Scheme or by virtue of the expansion to an existing unit, if it claims to make any additional investment outside the project scheme, then, it would be entitled to 75% of the entitlement and not 110%. The Division Bench further clarified that this does not mean that when the petitioner sets up a new unit under the 1993 Scheme and has an eligibility certificate as a pioneer unit under the PSI 1993, merely because it had an earlier unit, which had availed the benefit of another scheme, it will not be entitled to 110% incentive. The contention of the respondent that the petitioner unit was an existing unit, since it was set up earlier and availed of benefit under that scheme and therefore, it was entitled only for 75% of that admissible to a new unit, came to be rejected. We find that the ratio laid down by the Hon'ble Division Bench squarely applies to the appellant to the effect that the ceiling of entitlement in respect of a pioneer unit cannot be curtailed by applying the amended para 3.8(1)(i)(c) to restrict the benefit to 75% under that para. In such circumstances, the amended para do not govern the case and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e eligible for Sales Tax Incentives, which is equal to the higher of the following two percentages : (i) Increase in capacity X 100 (ii) New fixed capital investment X 100 Total gross fixed capital investment (old + new) 5. It means that a deemed expansion unit of 1993 Scheme will be eligible for Package Scheme Benefits to the extent of higher percentage as calculated by above two methods and riot on entire production of an eligible unit covered under such category . Perusal of the above circular referred to above deals with acquisition of new fixed assets and it clarifies the position as to whether any acquisition of new fixed asset outside the project can be considered for incentives other than special capital incentives where such acquisition is not less than 25% of the gross fixed capital investment at the end of previous Financial Year. It rather clarified that a separate eligibility/entitlement certificate will be issued for availing such benefits. It also clarified that under such a category, it is not necessary that there has to be an increase in production capacity. The circular clarifies the position in view of the representations that were received si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further ruled that the expansion units are entitled for incentives on entire production. This view was further affirmed by the Hon'ble Apex court when it dismissed the SLP filed by the State Sales Tax Department. However, it is to be noted that the MVAT Act came to be enacted in the year 2002 and it came into force in the State of Maharashtra from 1st April 2005 which repealed the Bombay Sales Tax Act. Section 93(1) of the said Enactment provided for proportionate incentives to a eligible unit in certain contingencies. Section 93(1) was substituted retrospectively with effect from 1st April 2005 by MVAT (Levy (Amendment and Validation Act) 2009, Maharashtra Act No.XXII of 2009. By virtue of the said amendment, notwithstanding anything contrary contained in any Package Scheme of Incentives, any eligible units to whom the eligibility certificate and certificate of entitlement have been granted at any point of time before or after the appointed date, it was held entitled to draw the benefits in any year only on that part of its turnover of sales or purchases as may be arrived at by applying the provisions of sub section (1A) to the total turnover of sales and purchase of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal of sub section (1) of Section 5 of Act No.XXII of 2009 validates all acts, proceedings or things done or taken by the State Government or any officer of the State Government in connection with the assessment, levy or collection of any such taxes and creates a deeming fiction that it has always been done in accordance with law. By virtue of this provision, the argument of learned senior counsel is that the certificate of entitlement granted in favour of the appellant is validated and in reference to that, his submission is that any action in relation to assessment/levy or collection of the tax under the provisions of MVAT Act before commencement of the amendment has been deemed to be valid and effective. He thus submits that the appellant was issued with a certificate of entitlement on 10th February 2003 by the Sales Tax Department in relation of assessment of sales tax and these certificates in result, stand validated by Section 5(1) of the Act No.XXII of 2009 and this certificate do not contain any condition for proportionate availment of incentive. Any order that is passed in contradiction to the said certificate, according to Shri Sridharan is deemed to be invalid. The effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate was till May 2011 but since the ceiling limit was exhausted by March 2009 from April 2009, the appellant unit becomes liable for payment of sales tax. The returns were filed by the appellant for the years 2005 06 and he was also granted refund of ₹ 5,65,39,588/ on 4th February 2006 and 1st March 2006. However, subsequently, the assessment order had been passed on 22nd March 2013 which raised a demand of tax of ₹ 1,42,36,378/ by partially recalling the refund already granted. This also includes the interest of ₹ 1,49,48,197/levied under Section 30(3) of the MVAT Act, 2002. The assessment order which was passed and impugned for the years 2005 06, the Assessing Authority invoked and applied the provisions of Section 93 of the MVAT Act, 2002 as retrospectively substituted by Maharashtra Act No.XXII of 2009 and only allowed the exemption to the extent of pro rata turnover of 35%. The First Appellate Authority maintained the said order and held that since in light of the retrospective amendment made to the MVAT Act, 2002, the appellant Company will have to pay net amount by way of tax of ₹ 48,50 crore in respect of the four years commencement from 1st Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the appellant is entitled to enjoy the benefits on pro rata basis. 26. The findings recorded by the First Appellate Authority as well as the Tribunal is amiss the legal position laid down by the Hon'ble High Court in ACC Ltd Vs. State of Maharashtra (supra), wherein it was categorically held that the expansion made by the existing pioneer unit which specified conditions under para 3.12(b) will not be hit by expansion under para 8.1(i)(c). The amendments made by Maharashtra Act No.XXII of 2009 will not apply to units whose Cumulative Quantum of Benefits have been fully utilized before expiry of the eligibility period even if the incentive is computed in terms of amended Section 93 of the MVAT Act, 2002. The amendment inserted by Act No.XXII of 2009 would only govern those units where the Cumulative Quantum of Benefits has not yet lapsed without full utilization and is in the process of being availed. The eligibility availed under Section 93(1) is computed for a particular year and if there is excess availment, then, the benefits can be withdrawn. The challenge to the constitutional validity of Act No.XXII of 2009 was rejected by a Division Bench of this court in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t part of the said judgment. In any case MRF's accrued right to exemption was not taken away or in any way affected by the amending notification SRO 38/98; which merely applied to those units which were established or expanded after 15.1.1998. If an industrial unit had been set up prior to 15.1.1998 and had also commenced commercial production prior to 15.1.1998 then the amending notification SRO 38/98 would have no retrospective application at all. The notification SRO 38/98 is prospective in operation which is evident by its mere reading as it specifically mentioned therein that: notification shall be deemed to have come into force with effect from the 1st day of January, 1998. The provisions of the Act or notification are always prospective in operation unless the express language renders it otherwise making it effective with retrospective effect. This Court in S.L. Srinivasa Jute Twine Mills (P) Ltd. Vs. Union of India Anr., 2006 (2) SCC 740 , has held that it is a settled principle of interpretation that: retrospective operation is not taken to be intended unless that intention is manifested by express words or necessary implication; there is a subordinat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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