1999 (6) TMI 462 - AT - VAT and Sales Tax

Issues Involved:
1. Eligibility for sales tax deferral benefit transfer.
2. Compliance with agreement terms by KCP Mills.
3. Validity of the agreement between the petitioner and the Assistant Commissioner.
4. Legal authority and jurisdiction of the Assistant Commissioner.
5. Requirement of prior permission for asset transfer.

Detailed Analysis:

1. Eligibility for Sales Tax Deferral Benefit Transfer:
The petitioner, a company registered under the Companies Act, 1956, took over KCP Spinning Mills Private Limited, which was enjoying sales tax deferral benefits. The petitioner claimed that SIPCOT issued a "no objection certificate" for transferring the deferral benefit. However, the Commercial Tax Department required the petitioner to clear arrears of Rs. 7,28,123 for the years 1990-1991 and 1991-1992 before considering the transfer. The petitioner argued that they were entitled to the deferral benefit as per the agreement with the Assistant Commissioner (Commercial Taxes), Madurai West, dated August 31, 1994.

2. Compliance with Agreement Terms by KCP Mills:
The respondent contended that KCP Mills violated the terms of the agreement dated April 12, 1991, which prohibited the alienation or disposal of fixed assets without prior permission. The eligibility certificate issued by SIPCOT and the order of the Assistant Commissioner also contained similar clauses. The Tribunal found that KCP Mills did not apply for prior permission before transferring the concern to the petitioner, which constituted a violation of the agreement.

3. Validity of the Agreement Between the Petitioner and the Assistant Commissioner:
The Tribunal expressed doubts about the manner in which the agreement dated August 31, 1994, was executed between the petitioner and the Assistant Commissioner, Madurai West. The Tribunal noted that there was no eligibility certificate issued to the petitioner, and the agreement referred to the eligibility certificate issued to KCP Mills. The Tribunal concluded that any agreement based on an eligibility certificate not referable to the petitioner was ineffective and contrary to the scheme issued in G.O. Ms. No. 500, Industries, dated May 14, 1990.

4. Legal Authority and Jurisdiction of the Assistant Commissioner:
The Tribunal highlighted that the Assistant Commissioner, Madurai West, had no jurisdiction to enter into an agreement with the petitioner on August 31, 1994, without a proper eligibility certificate. The Tribunal emphasized that the eligibility certificate was a sine qua non for granting deferral benefits under G.O. Ms. No. 500, Industries, dated May 14, 1990. The Tribunal also noted that the Government was justified in stating that the sale of KCP Mills to the petitioner was without prior permission.

5. Requirement of Prior Permission for Asset Transfer:
The Tribunal observed that the eligibility certificate, sanction order, and agreement issued in favor of KCP Mills all prohibited the alienation of fixed assets without prior permission from the Government. The Tribunal rejected the petitioner's argument that subsequent information and request for ratification could satisfy the terms and conditions of the agreement. The Tribunal concluded that there was a clear breach of the agreement by KCP Mills and the petitioner by not obtaining prior permission for the transfer.

Conclusion:
The Tribunal dismissed the petitions, finding that the petitioner had no merit in their claims. The Tribunal vacated all interim orders and emphasized that the order should be punctually observed and carried into execution by all concerned. The Tribunal's decision was based on the legal infirmities in the execution of the agreement dated August 31, 1994, and the violation of the terms and conditions under which the deferral benefit was granted to KCP Mills.

← Previous Next →