2000 (3) TMI 1067 - AT - VAT and Sales Tax

Issues Involved:
1. Eligibility for deferral of sales tax.
2. Interpretation of the eligibility certificate and agreement terms.
3. Compliance with base production and sales volume conditions.
4. Validity of the notice dated September 9, 1999.

Issue-wise Detailed Analysis:

1. Eligibility for deferral of sales tax:
The petitioner, engaged in manufacturing goods like labels, printed advertisement materials, etc., sought an eligibility certificate for availing deferment of interest-free sales tax under a scheme introduced by the government. The second respondent issued an eligibility certificate specifying the period of eligibility from March 10, 1996, to February 28, 2001, with a maximum deferral amount of Rs. 332.66 lakhs. The deferral was applicable only on the increased volume of production/sales, with the base figure being the highest volume of production/sales in the last three years, specifically 1041.27 metric tonnes and Rs. 822.61 lakhs for the year 1995-96. The petitioner entered into an agreement on September 8, 1997, for deemed payment of deferred sales tax.

2. Interpretation of the eligibility certificate and agreement terms:
The eligibility certificate and agreement specified that the petitioner must continue paying sales tax up to the base volume of production/sales (Rs. 59.14 lakhs). Any tax liability exceeding this amount was eligible for deferral. The petitioner contended that it was sufficient to achieve either the total gross production or total sales volume to avail of the deferral facility, arguing that the tax liability should not be tied to the sales volume.

3. Compliance with base production and sales volume conditions:
The first respondent issued a notice on September 9, 1999, alleging that the petitioner violated the terms of the agreement and eligibility certificate, resulting in short payment for the assessment years 1997-98, 1998-99, and 1999-2000. The petitioner was directed to pay the shortfall of Rs. 80.68 lakhs within seven days, failing which action would be taken under para 16 of the agreement, including cancellation of the agreement. The respondents argued that both the base production volume and base sales volume must be reached before the petitioner could claim deferral of sales tax, as per the eligibility certificate and agreement.

4. Validity of the notice dated September 9, 1999:
The Tribunal emphasized that the purpose of the government orders and eligibility certificates was to support industries by providing concessions during their early stages. The Tribunal referred to a previous ruling, which stated that both base production volume and base sales volume must be reached before deferral of sales tax could be claimed. The Tribunal found that the terms of the eligibility certificate and agreement clearly required the petitioner to pay tax up to the base sales volume before availing of the deferral facility. The Tribunal rejected the petitioner's argument that achieving either condition was sufficient. The impugned notice dated September 9, 1999, was deemed valid and in accordance with the eligibility certificate and agreement.

Conclusion:
The Tribunal concluded that the petitioner must comply with the terms of the eligibility certificate and agreement, which required paying tax up to the base sales volume before availing of the deferral facility. The notice dated September 9, 1999, was upheld as valid, and the original petition was dismissed. The Tribunal emphasized the importance of adhering to the agreement unless legally modified.

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