2003 (11) TMI 570 - HC - VAT and Sales Tax

Issues Involved:
1. Entitlement to sales tax exemption under Industrial Policy Resolution, 1986.
2. Legality of the withdrawal of sales tax exemption.
3. Impact of subsequent notifications imposing tax.
4. Validity of the rejection of refund applications by the Sales Tax Officer.
5. Compliance with procedural requirements for refund claims.
6. Entitlement to interest on the refund amount.

Detailed Analysis:

1. Entitlement to Sales Tax Exemption under Industrial Policy Resolution, 1986:
The petitioner set up a re-rolling mill and commenced commercial production on October 2, 1987. Initially, the petitioner was allowed exemption from payment of sales tax on purchase of raw materials under the Industrial Policy Resolution, 1986, which provided a package of incentives including exemption from sales tax for five years from the date of commercial production.

2. Legality of the Withdrawal of Sales Tax Exemption:
The exemption was withdrawn by the Project Manager, District Industrial Centre, Rourkela, who believed the petitioner was entitled to incentives under the Industrial Policy Resolution, 1980, not 1986. However, a division bench of the court in O.J.C. No. 1712 of 1989 ruled that the petitioner was entitled to incentives under the Industrial Policy Resolution, 1986.

3. Impact of Subsequent Notifications Imposing Tax:
On December 22, 1989, a notification imposed tax on the sale of iron and steel materials at the first point with effect from January 1, 1990. This forced the petitioner to purchase tax-paid raw materials, negating the benefit of the exemption. The petitioner filed O.J.C. No. 8052 of 1992, and the court directed the Commissioner of Sales Tax and the Sales Tax Officer to determine the exact amount of refund due to the petitioner.

4. Validity of the Rejection of Refund Applications by the Sales Tax Officer:
The Sales Tax Officer rejected the refund applications on December 18, 1997. The petitioner contended that the rejection was in contempt of the court's earlier judgment. The Sales Tax Officer's reasons included that the petitioner was only entitled to exemption, not a refund, and that the petitioner had not paid any tax directly. The court found these reasons invalid, emphasizing that the petitioner had paid tax through the purchase price of tax-paid goods and was entitled to a refund.

5. Compliance with Procedural Requirements for Refund Claims:
The petitioner filed refund applications in form XII-A under rule 42-A, which pertains to inter-State trade, not applicable in this case. The court directed the petitioner to file fresh applications in form XII under rule 39, which deals with refunds of tax paid in excess.

6. Entitlement to Interest on the Refund Amount:
The petitioner claimed interest at 18% per annum from the date of the applications. However, the court ruled that since the applications were not submitted in the correct form, the petitioner would not be entitled to interest from the date of the applications. The court directed the Sales Tax Officer to refund the tax within 90 days from the date of fresh applications, failing which the petitioner would be entitled to interest as per section 14-C of the Orissa Sales Tax Act, 1947.

Conclusion:
The court quashed the order dated December 18, 1997, of the Sales Tax Officer and directed the petitioner to submit fresh applications for refund in the correct form. The Sales Tax Officer was instructed to compute and refund the tax within 90 days, with interest applicable if the refund was delayed. The writ petition was allowed without any order as to costs.

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