1999 (11) TMI 858 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility and conditions for Interest-Free Sales Tax Deferral (IFST) benefit.
2. Interpretation of base production and sale volumes for IFST eligibility.
3. Whether the expanded unit can be treated as a separate and independent unit.
4. Payment of sales tax in monthly installments.
5. Requirement to enter into a revised agreement.

Detailed Analysis:

1. Eligibility and Conditions for IFST Benefit:
The petitioner-company, a cement manufacturer, sought IFST benefits under G.O. Ms. No. 500 dated May 14, 1990, for its expanded unit in Alathiyur. The eligibility certificate issued on February 4, 1998, allowed deferral of sales tax up to Rs. 237.54 crores, interest-free for twelve years, from May 1, 1997, to April 30, 2009. The benefit was contingent on increased production/sale volumes and compliance with various Government orders, including G.O. Ms. No. 119 dated April 13, 1994.

2. Interpretation of Base Production and Sale Volumes for IFST Eligibility:
The petitioner contended that tax up to the base level of Rs. 2,373.74 lakhs could be paid in 12 monthly installments and that deferral benefits should apply upon reaching the production base level without needing to meet the sale value of Rs. 13,454.71 lakhs. The Tribunal rejected this, stating that the eligibility for deferral benefits arises only when both the base production and sale volumes are reached, as per G.O. Ms. No. 119 dated April 13, 1994. The eligibility certificate and agreement clearly stipulated that deferral is applicable only on the increased volume of production/sale.

3. Whether the Expanded Unit Can Be Treated as a Separate and Independent Unit:
The petitioner sought to treat the expanded unit as independent, citing a judgment in Thiru Arooran Sugars Limited v. State Industries Promotion Corporation of Tamil Nadu Ltd. The Tribunal found this inapplicable, noting that the petitioner had applied for IFST deferral as an expanded unit and had not sought total waiver. The request to treat the expanded unit independently was contrary to the Government Orders and was thus rejected.

4. Payment of Sales Tax in Monthly Installments:
The petitioner argued for the ability to pay the base tax in 12 monthly installments. The Tribunal dismissed this claim, emphasizing that the eligibility certificate and agreement required continuous tax payment until the base production and sale volumes were reached. The Tribunal stated that past practices of tax officers do not entitle the petitioner to such installment payments.

5. Requirement to Enter into a Revised Agreement:
The petitioner challenged the demand to enter into a revised agreement regarding the date the deferral benefit commences. The Tribunal upheld the requirement, clarifying that the eligibility for deferral benefits depends on meeting both base production and sale volumes, as per the eligibility certificate and G.O. Ms. No. 119 dated April 13, 1994. The revised agreement was intended to avoid disputes and ensure clarity.

Conclusion:
The Tribunal dismissed both petitions, affirming that the petitioner must comply with the conditions stipulated in the eligibility certificate and Government Orders. The petitioner was not entitled to treat the expanded unit as independent, pay base tax in installments, or claim deferral benefits without meeting both production and sale volume criteria. The Tribunal emphasized adherence to the eligibility certificate, agreement, and relevant Government Orders.