1993 (3) TMI 328 - HC - VAT and Sales Tax

Summary

Issues:
1. Grant of eligibility certificate under Sales Tax Incentive Scheme for Industries, 1987.
2. Calculation and communication of sales tax exemption amount.
3. Refusal of extension of eligibility certificate and demand for excess tax payment.
4. Lack of opportunity of hearing before passing impugned orders.
5. Negligence of respondents in informing petitioner about sales tax exemption limit.

Analysis:
1. The petitioner established an industry and applied for an eligibility certificate under the Sales Tax Incentive Scheme for Industries, 1987. The petitioner's unit was recommended for the grant of the certificate, and it was subsequently renewed. However, the exact amount for which exemption was granted was not specified in the certificate. The petitioner repeatedly requested information on the total exemption amount but received no clear response from the authorities.

2. The respondents contended that the eligibility certificate was subject to a maximum exemption limit. The petitioner was found entitled to a benefit of 85% of a specific amount, which was less than the total exemption claimed by the petitioner. The respondents failed to communicate the exact exemption amount to the petitioner, leading to confusion and disputes regarding the tax liability beyond the exemption limit.

3. The petitioner's request for an extension of the eligibility certificate was denied as it had already exceeded the entitled exemption amount. The petitioner was directed to deposit the excess tax and warned of penalties for non-compliance. The petitioner sought details of deductions made from the fixed assets value but faced challenges in obtaining clear information from the respondents, impacting its tax obligations and financial planning.

4. The petitioner argued that the orders refusing extension and demanding excess tax payment were against the principles of natural justice as no opportunity of hearing was provided before passing the orders. The petitioner cited a legal precedent to support the claim of procedural fairness in administrative decisions affecting its tax liabilities.

5. The court found that the respondents had not adequately informed the petitioner about the total sales tax exemption granted, leading to confusion and inability to appeal or recover taxes from purchasers. The court noted the negligence of the respondents in communicating crucial information, causing prejudice to the petitioner. Consequently, the court allowed the writ petition, quashed the order demanding excess tax payment, and held the petitioner liable for sales tax only on goods sold after a specified date.

In conclusion, the judgment highlighted the importance of clear communication in tax exemption schemes, emphasized procedural fairness in administrative decisions, and addressed the consequences of negligence on the part of authorities in informing taxpayers about their obligations.