2003 (7) TMI 672 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to sales tax exemption under Notifications S.O. Nos. 478 and 479 dated December 22, 1995.
2. Validity of lease agreements and ownership of the land and buildings.
3. Interpretation of the Industrial Policy, 1995 and related notifications.
4. Jurisdiction of the High Court under Article 226 of the Constitution of India.
5. Adjustment of taxes paid pending adjudication.

Detailed Analysis:

1. Entitlement to Sales Tax Exemption:
The primary issue was whether Tata Cummins Limited (TCL) was entitled to the benefit of sales tax exemption under Notifications S.O. Nos. 478 and 479. TCL argued that it met the conditions of the notifications, claiming exclusive ownership of the building and a valid lease from TELCO, its joint venture partner. The State of Jharkhand contended that TCL did not meet the conditions as there was no registered lease in favor of TCL.

2. Validity of Lease Agreements and Ownership:
TCL's factory was built on land sub-leased by TELCO from TISCO. However, the lease from TISCO to TELCO had expired, and no formal lease was executed between TELCO and TCL. The Deputy Commissioner of Commercial Taxes rejected TCL's claim for exemption on the grounds that TCL lacked a valid lease. The Joint Commissioner of Commercial Taxes also concluded that TCL had neither legal title nor ownership over the land and did not comply with the conditions of the notifications.

3. Interpretation of the Industrial Policy, 1995 and Related Notifications:
The notifications required that the industrial unit be installed in a building exclusively owned by the proprietor or on land/building leased for a minimum of 15 years. TCL argued that it was the exclusive owner of the building and that TELCO's leasehold interest should suffice. The court interpreted the notifications to mean that TCL's exclusive ownership of the building was sufficient for exemption, without requiring ownership of the land.

4. Jurisdiction of the High Court under Article 226:
The State argued that TCL had an alternative remedy under Section 46 of the Bihar Finance Act, 1981, and the High Court should not exercise jurisdiction. The court noted that the alternative remedy was not a statutory right for TCL and decided to exercise its jurisdiction under Article 226, considering the need for a timely resolution.

5. Adjustment of Taxes Paid Pending Adjudication:
TCL had paid Rs. 54.5 crores towards the tax demand but withheld Rs. 42 crores. The Supreme Court had ordered that if TCL's claim was rejected, it would pay the withheld amount with interest. Since the court upheld TCL's claim, it directed that the amount paid should be adjusted against future tax liabilities instead of being refunded.

Conclusion:
The court allowed the writ petition, quashing the Joint Commissioner's order and holding that TCL was entitled to the benefit of the Industrial Policy, 1995, and the notifications. The amount of Rs. 54.5 crores paid by TCL was directed to be adjusted towards future sales tax liabilities.