2004 (9) TMI 381 - SC - VAT and Sales Tax

Whether the subsequent notification should be read as a correction or an amendment of the scheme as originally notified Held that - Appeal allowed. It must be open to the State Government to recover sales tax dues as it is entitled to under the RST Act allowing the respondent-companies to only keep such benefits as had been already availed of by them up to January 7, 2000 and thereafter at the rates specified and according to the provisions of the scheme as modified by the corrigendum notification. However no interest or penalty will be charged from the respondent- companies by the appellants on the differential amounts for the period the matter was sub judice before this Court provided the respondent-companies pay the principal amount of sales tax within such time as may be specified by the appellants in this regard.

Issues Involved:
1. Interpretation of the exemption scheme.
2. Effect of the corrigendum on the scheme.
3. Classification and benefits of sick units under the scheme.
4. Legality and retrospective application of the corrigendum.
5. Rights accrued under the scheme prior to the corrigendum.
6. Public interest and rationality of the corrigendum.
7. Validity of the decisions by the Screening Committee.
8. Liability of the respondent-companies for sales tax post-corrigendum.

Detailed Analysis:

1. Interpretation of the exemption scheme:
The scheme, part of the New 4th Industrial Policy of Rajasthan, aimed to make the state a favored destination for industries by granting sales tax exemptions. The policy provided different incentives for various industries, with specific provisions for sick units. Sick units were classified into two categories: those that had not availed benefits previously and those that had.

2. Effect of the corrigendum on the scheme:
A corrigendum issued on September 30, 1999, amended the scheme by specifying that sick units would receive benefits on par with new units of the same kind of industry. This corrigendum aimed to clarify the original intent of the scheme, which was to treat sick units of a particular industry on par with new units of that industry.

3. Classification and benefits of sick units under the scheme:
The scheme classified industries into three categories for tax exemption purposes. Cement plants were placed in a separate category with a flat 25% exemption for 11 years. The respondents argued that their sick cement units should receive higher benefits under the general sick units' category, but the corrigendum clarified that sick cement units should be treated similarly to new cement units.

4. Legality and retrospective application of the corrigendum:
The respondents contended that the corrigendum amounted to an amendment and could not have retrospective effect. The court held that since the appellants did not seek to apply the corrigendum retrospectively, the issue of its retrospective application was academic. The corrigendum was intended to clarify the original scheme and was not an amendment.

5. Rights accrued under the scheme prior to the corrigendum:
The respondents claimed that their rights to tax benefits were crystallized from the date of certification of their applications under clause 4(h) of the scheme. The court held that the respondents had no vested right to the benefits as the scheme allowed for modification in public interest. The corrigendum did not affect the benefits already availed by the respondents before January 7, 2000.

6. Public interest and rationality of the corrigendum:
The court found that the industrial policy aimed to incentivize new entrepreneurs and that it would be irrational to grant higher benefits to sick units over new units. The corrigendum was issued to correct any ambiguity and align the scheme with the industrial policy, thus serving public interest and ensuring rationality.

7. Validity of the decisions by the Screening Committee:
The Screening Committee's decisions were final subject to the scheme's provisions. The court held that the Screening Committee's decision to treat sick cement units on par with new cement units was consistent with the corrigendum and the scheme.

8. Liability of the respondent-companies for sales tax post-corrigendum:
The court ruled that the respondent-companies were liable for sales tax based on the corrigendum from January 7, 2000. The primary liability to pay sales tax remained with the seller, and the companies could not claim relief based on the High Court's decision, which was not stayed by the Supreme Court. The companies were allowed to retain benefits availed before January 7, 2000, without interest or penalty on differential amounts, provided they paid the principal amount within the specified time.

Conclusion:
The appeals were allowed, the impugned decision was set aside, and the respondent-companies were required to comply with the scheme as modified by the corrigendum from January 7, 2000. The court emphasized the temporary and modifiable nature of the exemption scheme and upheld the State Government's authority to issue the corrigendum in public interest.

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