2006 (5) TMI 449 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the procedure followed by the Haryana Sales Tax Tribunal under section 57(3) of the Haryana Value Added Tax Act, 2003 (VAT Act).
2. Compliance with the conditions for tax exemption under Rule 28-A of the Haryana General Sales Tax Rules, 1975.
3. Impact of delay and laches in filing the writ petition.
4. Waiver and estoppel concerning procedural objections.

Issue-Wise Detailed Analysis:

1. Validity of the Procedure Followed by the Haryana Sales Tax Tribunal:
The core issue was whether the Haryana Sales Tax Tribunal adhered to the procedure mandated by section 57(3) of the VAT Act. The petitioner argued that the Tribunal violated the statutory procedure by not stating the points of difference between the two Members who initially heard the appeals. Instead, the matter was referred to a third Member, who independently decided the case, which was then endorsed by the Full Member Tribunal based on the majority view. The court noted that section 57(3) of the VAT Act requires that in case of a tie, the points of difference should be stated and referred to the Full Member Tribunal for a decision. The court found that this procedure was not followed, leading to a violation of the statutory mandate. Consequently, the Tribunal's order dated May 24, 2005, was set aside, and the Tribunal was directed to re-hear the appeals in accordance with the correct procedure.

2. Compliance with Conditions for Tax Exemption:
The petitioner's unit II was granted tax exemption under Rule 28-A of the Haryana General Sales Tax Rules, 1975, which required the unit to maintain production levels for five years post-exemption. However, due to a fire in 2001, unit II was destroyed, and production ceased. The petitioner claimed that the insurance compensation received was insufficient to restart unit II, so the funds were invested in the expanded unit, which maintained the overall production levels. The Deputy Excise and Taxation Commissioner (DETC) and subsequent appellate authorities held that this was a violation of Rule 28-A(11), leading to a demand for repayment of the tax exemption with interest. The Tribunal's Members were divided on whether the fire was a valid reason beyond the petitioner's control, with differing factual findings in their orders. The court did not express an opinion on the merits but directed the Tribunal to reconsider the matter, ensuring procedural compliance.

3. Impact of Delay and Laches in Filing the Writ Petition:
The State argued that the writ petition should be dismissed due to delay and laches, as it was filed nearly a year after the Tribunal's order. The petitioner countered that the delay was due to pursuing remedies under section 42 of the Act, which became impractical due to inconsistencies in the Tribunal's orders. The court accepted the petitioner's explanation, noting that the procedural irregularities in the Tribunal's handling of the case justified the delay. Thus, the delay was not considered fatal to the writ petition.

4. Waiver and Estoppel Concerning Procedural Objections:
The State contended that the petitioner waived the right to object to the procedural irregularities by not raising them during the Tribunal's hearings. The court rejected this argument, emphasizing that statutory procedures must be followed strictly, and there is no estoppel against a statute. It was held that the Tribunal's failure to follow the mandatory procedure under section 57(3) of the VAT Act caused prejudice to the petitioner, and thus, the procedural objections were valid.

Conclusion:
The writ petition was allowed, and the Tribunal's order dated May 24, 2005, was set aside. The Tribunal was directed to re-hear the appeals, adhering to the statutory procedure under section 57(3) of the VAT Act. The petitioner's application under section 42 of the Act was deemed infructuous. The court clarified that it did not express any opinion on the merits of the case, and the Tribunal should consider the matter afresh based on its merits. The petitioner was bound by the conditions for the entertainment of the appeals, and any payments made would abide by the Tribunal's final order. The writ petition was disposed of without costs.

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