2005 (7) TMI 353 - SC - VAT and Sales Tax

Liability to pay purchase tax on the royalty paid by the respondents Whether the exemptions claimed were available in the factual background needed factual adjudication and, therefore, the High Court should not have entertained the writ petition? Held that - Appeal dismissed.

Summary

Issues Involved:
1. Liability to pay purchase tax on the royalty paid.
2. Eligibility for sales tax exemption and deferment.
3. Jurisdiction of the High Court under Article 226 of the Constitution of India.
4. Compliance with statutory requirements and submission of declaration forms.
5. Validity of registration and classification as a "Prestigious Cement Unit."

Detailed Analysis:

1. Liability to Pay Purchase Tax on the Royalty Paid:
The High Court held that the levy of purchase tax on the royalty paid is not legally sustainable. The Supreme Court referenced the decision in State of Orissa v. Titaghur Paper Mills Co. Ltd. which clarified that "royalty" is not a term used for the price of goods sold but is a payment reserved by the grantor of a patent, lease of a mine, or similar right. The Court concluded that royalty is a return to the lessor and does not constitute a sale price, thus not attracting purchase tax.

2. Eligibility for Sales Tax Exemption and Deferment:
The Supreme Court examined the eligibility criteria for sales tax exemption under various notifications issued by the Himachal Pradesh Government. It was noted that Gujarat Ambuja Cement Ltd. (GACL) was registered as a "Prestigious Unit" and later as a "Prestigious Cement Unit," fulfilling conditions such as fixed capital investment and employment criteria. The Court confirmed that GACL was entitled to sales tax exemption from the date of commencement of commercial production (September 26, 1995), as per the notifications and the certificate issued by the Director of Industries.

3. Jurisdiction of the High Court under Article 226 of the Constitution of India:
The appellant-State argued that the High Court should not have entertained the writ petitions under Article 226 when alternative remedies were available. The Supreme Court reiterated that the rule of exclusion of writ jurisdiction by the availability of alternative remedies is discretionary and not mandatory. The High Court had valid reasons for entertaining the writ petitions, including allegations of political vendetta and bias, making the alternative remedy ineffective.

4. Compliance with Statutory Requirements and Submission of Declaration Forms:
The appellant-State contended that GACL did not comply with statutory requirements, particularly regarding the submission of declaration forms. The Supreme Court noted that under Rule 12(7) of the Central Sales Tax (Registration and Turnover) Rules, 1957, declaration forms can be filed at a subsequent point of time and not necessarily with the returns. The Court directed the assessing officer to grant an opportunity to GACL to rectify any defects in the declaration forms, emphasizing that the requirement to file forms with returns is directory, not mandatory.

5. Validity of Registration and Classification as a "Prestigious Cement Unit":
The Supreme Court affirmed that GACL's registration with the Empowered Committee on January 13, 1993, remained valid even after subsequent notifications. The Court dismissed the appellant-State's claim that new registration was required post-December 1, 1994. The registration and subsequent extensions were found to be in order, and GACL was correctly classified as a "Prestigious Cement Unit," making it eligible for the incentives.

Conclusion:
The appeals were dismissed, affirming the High Court's decision that GACL was entitled to sales tax exemptions and that the levy of purchase tax on royalty was not sustainable. The Supreme Court upheld the High Court's jurisdiction under Article 226 and directed the assessing officer to allow GACL to rectify defects in the declaration forms. The registration and classification of GACL as a "Prestigious Cement Unit" were validated, entitling it to the claimed benefits.