2001 (10) TMI 1106 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the condition imposed on the deferment certificate for tax benefits on an incremental basis.
2. Applicability of Rule 4 of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991.
3. Jurisdiction of the authority to impose conditions on tax deferment benefits.
4. Validity of proceedings initiated under the Punjab General Sales Tax Act, 1948.

Detailed Analysis:

1. Legality of the Condition Imposed on the Deferment Certificate:
The petitioner challenged the condition imposed on the deferment certificate, arguing that under Rule 2.5 read with Rule 6.3 of the Punjab Industrial Incentive Code, 1996, the condition of incremental deferment cannot be applied to the expanded portion of its unit. The petitioner contended that the rules under the Incentive Code are applicable to the expanded portion of its unit, and the authority lacked jurisdiction to impose such an arbitrary condition.

2. Applicability of Rule 4 of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991:
The respondents argued that Rule 4(3) and (4) of the 1991 Rules, framed under Section 27 read with Sections 10-A and 30-A of the 1948 Act, were applicable, and the petitioner could not get the benefit of deferment on total production. They maintained that the petitioner was granted deferment certificates based on incremental production.

3. Jurisdiction of the Authority to Impose Conditions on Tax Deferment Benefits:
The court referred to a previous judgment (C.W.P. No. 5726 of 2000 - M/s. Oswal Fats and Oils, Ludhiana v. State of Punjab) which analyzed the Industrial Policies of 1989 and 1996, and the 1991 Rules. It was held that the 1996 Policy made a clear departure from the 1989 Policy by omitting the concept of incremental production and introducing benefits based on additional fixed capital investment. The court concluded that the decision to grant benefits based on incremental production was ultra vires the 1996 Policy, the Incentive Code, 1996, and Rule 4-B(1)(ii) of the 1991 Rules.

4. Validity of Proceedings Initiated under the Punjab General Sales Tax Act, 1948:
The court held that the proceedings initiated under the 1948 Act were invalid because they were based on the erroneous assumption that the petitioner was entitled to the benefit of tax deferment on incremental production only. The court emphasized that the non obstante clause in Rule 4-B(1) overrides the provisions of Rule 4-A and Rule 4(3) and (4), and thus, the concept of incremental production could not be invoked for granting the benefit of sales tax deferment.

Conclusion:
The writ petition was allowed, and the condition imposed in the deferment certificate that the petitioner would be entitled to the benefit under the 1991 Rules on an incremental basis was declared illegal and quashed. The petitioner was entitled to the benefit of sales tax deferment on total production in terms of Rule 4-B of the 1991 Rules, and all consequential benefits were granted.