2005 (8) TMI 652 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the condition imposed in the Government Notification dated June 5, 2000.
2. Whether the condition is at variance with the Industrial Policy (1996-2001).
3. Legality of the tax liability condition under Article 265 of the Constitution of India.
4. Petitioner's entitlement to the relief sought, including refund of excess tax collected.
5. Applicability of the policy for new units versus mega projects.

Issue-wise Detailed Analysis:

1. Validity of the Condition Imposed in the Government Notification dated June 5, 2000:
The petitioner challenged the proviso to clause (iv) of the condition in the Government Notification dated June 5, 2000, which required the existing industrial unit to pay taxes based on the average tax liability of three years prior to the commissioning of the new plant or actual production, whichever is higher. The petitioner argued that this condition was illegal and at variance with the exemption and concession granted under the Industrial Policy (1996-2001).

2. Whether the Condition is at Variance with the Industrial Policy (1996-2001):
The petitioner contended that the condition imposed was not in consonance with the Industrial Policy (1996-2001) and the Government Order dated March 15, 1996, which provided for sales tax concessions for new units. The petitioner argued that the policy did not authorize such a condition and that it should be declared null and void. The court, however, noted that the policy distinguished between different categories of industries, including mega projects, and that the petitioner's expanded unit fell under the category of a mega project. Therefore, the condition imposed was consistent with the specific incentives package for mega projects.

3. Legality of the Tax Liability Condition under Article 265 of the Constitution of India:
The petitioner claimed that the condition imposed an artificial tax liability, which was violative of Article 265 of the Constitution of India. The court examined the condition in the context of the overall tax liability of the petitioner and found that the condition did not create a separate levy but was a part of the package of incentives extended to the petitioner. The court held that the condition was not violative of Article 265 as it did not impose a tax but was a prerequisite for availing the tax concession.

4. Petitioner's Entitlement to the Relief Sought, Including Refund of Excess Tax Collected:
The petitioner sought a declaration that the condition was illegal, a refund of the excess tax collected, and an amendment to the exemption certificate. The court noted that the relief sought was more in the nature of a declaratory relief and that the petitioner had not placed sufficient material or particulars regarding the assessment orders or the tax paid. Consequently, the court dismissed the petition without issuing the rule, as the petitioner failed to establish the illegality of the condition or the entitlement to a refund.

5. Applicability of the Policy for New Units versus Mega Projects:
The respondents argued that the petitioner's expanded unit was a mega project and, therefore, the incentives and conditions applicable to mega projects, as outlined in the Government Order dated September 5, 1998, and the notification dated June 5, 2000, were applicable. The court agreed with the respondents, noting that the petitioner had understood and accepted the classification of its expanded unit as a mega project and had bargained for specific incentives accordingly. The court held that the petitioner could not claim benefits under the policy for new units when it was covered under the policy for mega projects.

Conclusion:
The court dismissed the writ petition, upholding the validity of the condition imposed in the Government Notification dated June 5, 2000, and the Government Order dated September 5, 1998. The court found that the condition was consistent with the incentives package for mega projects and did not violate Article 265 of the Constitution of India. The petitioner was not entitled to the relief sought, including the refund of excess tax collected.

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