2006 (8) TMI 550 - HC - VAT and Sales Tax

Issues Involved:
1. Restriction of the period of sales tax benefits as per IPR, 1992 as an "EMD" unit.
2. Non-amendment of the eligibility certificate to account for the entire investment made by the petitioner on plant and machinery.
3. Non-grant of capital investment subsidy by the Government as per IPR, 1992.

Detailed Analysis:

1. Restriction of the Period of Sales Tax Benefits:
The petitioner, M/s. Tata Sponge Iron Ltd. (TSIL), challenged the restriction of the period of sales tax benefits to five years as per the eligibility certificate issued under the Industrial Policy Resolution, 1992 (IPR, 1992). The petitioner argued that under IPR, 1992, specifically clause 7.5, there was no stipulated period for availing sales tax benefits for expansion/modernisation/diversification (EMD) units. The petitioner contended that the absence of a time limit was a conscious decision by the government, distinguishing it from new industries under clause 7.4, which had a specified time frame for availing benefits.

The court observed that the IPR, 1992 and the corresponding Finance Department notification did not prescribe a period for availing sales tax benefits for EMD units. It was held that the operational guidelines issued by the Industries Department, which imposed a five-year limit, were beyond the scope of the IPR, 1992 and thus ultra vires. The court concluded that the stipulation of a five-year period in the eligibility certificate was without legal sanction and declared it invalid.

2. Non-Amendment of the Eligibility Certificate:
The petitioner sought the amendment of the eligibility certificate to include the total investment made on plant and machinery, which was initially assessed at Rs. 6,135.61 lakhs but later certified by a chartered accountant to be Rs. 70.48 crores. The Director of Industries had rejected this request, citing the absence of provisions in the operational guidelines to reassess the eligibility certificate after the commencement of production.

The court found that the IPR, 1992 did not limit the consideration of investments made only up to the date of commercial production. The only requirement was that the expansion must be based on a separate project report duly appraised by financial institutions. The court directed the Director of Industries to reconsider the petitioner's application for re-evaluation of its investment and amend the eligibility certificate accordingly.

3. Non-Grant of Capital Investment Subsidy:
The petitioner claimed entitlement to a capital investment subsidy of Rs. 20 lakhs under clause 5 of the IPR, 1992, which was denied on the grounds that the petitioner had already availed the maximum limit of subsidy under the earlier IPR, 1980.

The court noted that the IPR, 1992 did not contain any stipulation regarding a maximum limit of capital investment subsidy or any disqualification for units that had availed subsidies under previous policies. It held that the petitioner's entitlement to the subsidy under the IPR, 1992 was justified and directed the government to reconsider the application and release the due subsidy.

Conclusion:
The court allowed the writ application, directing the Director of Industries to:
1. Reconsider and amend the eligibility certificate to reflect the total investment made by the petitioner.
2. Issue a revised eligibility certificate without the five-year time limitation.
3. Reassess the petitioner's entitlement to sales tax incentives and direct the Sales Tax Officer to refund excess tax paid by the petitioner.
4. Reconsider and grant the capital investment subsidy due to the petitioner.

The court emphasized that the operational guidelines could not impose conditions not stipulated in the IPR, 1992 and that the benefits under the policy should be interpreted to advance the objective of industrial growth and investment in the state.

← Previous Next →