2003 (10) TMI 618 - HC - VAT and Sales Tax

Issues Involved:
1. Amendment of the eligibility certificate.
2. Entitlement to sales tax exemption.
3. Compliance with the Industrial Policy.
4. Jurisdiction and authority of the Sales Tax Officer.
5. Validity of the amended certificate.
6. Retrospective application of amendments.
7. Legal principles governing the amendment of certificates.

Issue-wise Detailed Analysis:

1. Amendment of the Eligibility Certificate:
The petitioner, a cement manufacturer, sought to amend the petition after being aggrieved by an order from the Commissioner for Industrial Development and Director of Industries and Commerce, a decision taken at the 74th State Level Committee Meeting, and a demand notice. The petitioner challenged these through a writ of certiorari and sought a writ of mandamus to direct the respondents to continue granting benefits per the original certificate.

2. Entitlement to Sales Tax Exemption:
The petitioner argued that the eligibility certificate issued under the new Industrial Policy provided them with sales tax exemption on the sale of cement. The petitioner had invested in a captive power plant due to power shortages, which was recommended by the General Manager, District Industries Centre. The eligibility certificate did not limit the exemption to additional capacity created by the investment. However, the Deputy Commissioner of Commercial Taxes rejected the sales tax exemption claim, leading to provisional assessment orders against the petitioner.

3. Compliance with the Industrial Policy:
The State Government's Industrial Policy aimed to accelerate industrial development by offering incentives, including sales tax exemptions. The policy allowed for exemptions on investments in captive power plants. The petitioner argued that the investment in the captive power plant was to meet power shortages and not to create additional capacity, thus qualifying for the exemption.

4. Jurisdiction and Authority of the Sales Tax Officer:
The Sales Tax Officer initially rejected the petitioner's claim for sales tax exemption, which was contested in court. A division Bench ruled that the sales tax authorities could not question the correctness of the eligibility certificate issued by the Director of Industries and Commerce. The court directed that any factual errors in the certificate could be corrected after notice and hearing.

5. Validity of the Amended Certificate:
The State Level Committee amended the eligibility certificate, limiting the tax exemption to additional production capacity, which the petitioner contested. The court found that the amendment introduced substantial changes and was not merely a correction of factual errors. The amendment altered the original rights under the certificate and was thus unsustainable.

6. Retrospective Application of Amendments:
The court noted that the committee's decision to amend the certificate retrospectively was factually and legally incorrect. The division Bench had set aside the single Judge's order, and the committee's reliance on the single Judge's findings was misplaced. The court emphasized that amendments should not retrospectively alter the benefits initially granted.

7. Legal Principles Governing the Amendment of Certificates:
The court referred to the Supreme Court's judgment in Birla Jute Industries, which held that reviewing a certificate long after its term had expired was unjustifiable. The court highlighted that incentives and concessions should be granted on sound principles and exceptional cases, such as factual errors, as pointed out in Wipro's case. The committee's failure to adhere to these principles led to the setting aside of the amended certificate.

Conclusion:
The petition was allowed, and the impugned orders were set aside. The court ordered the refund of any payments made by the petitioner and emphasized the need for adherence to legal principles in granting and amending certificates. The court refrained from imposing costs due to the drought situation faced by the State.

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