2009 (4) TMI 847 - HC - VAT and Sales Tax

Direction issued by the BIFR - on what basis the financial limit has been fixed and whether it finds place in the original scheme - Held that - We are of the considered opinion that the direction issued by the BIFR is in conformity with the original scheme and it has not travelled beyond the mandate of the original scheme. Be it placed on record, we have also asked Mr. Shukla as to which stand of the petitioner would dislodge the order. Except stating that they have not entered into production, the learned Deputy Advocate General for the State, could not enlighten us. It is demonstrable from the documents brought on record that the exemption was granted for rolling mill unit but nothing has been mentioned therein that it is for a particular place and correctly so. The directions issued by the BIFR and affirmed by the AAIFR are in consonance with the original scheme which was accepted by the State Government as a consenting party and, therefore, any deviancy thereof is neither just nor proper. When the original scheme did not fix any financial limit, the same could not have been incorporated in the notification. Thus, the orders passed by the BIFR and AAIFR are just and proper and there is no warrant of interference.

Summary

Issues Involved:
1. Establishment and operation of the rolling mill unit by the respondent.
2. Consent and hearing of the State Government in the BIFR's decision.
3. Validity of the monetary limit imposed in the tax exemption notification.
4. Applicability of VAT Act benefits to the respondent.
5. Compliance with the original sanctioned scheme.

Issue-wise Detailed Analysis:

1. Establishment and Operation of the Rolling Mill Unit:
The petitioner contended that the respondent did not establish any rolling mill and did not manufacture any rolling product, thus not qualifying for sales tax exemption. The BIFR's order dated May 17, 2007, directed the State Government to grant sales tax exemption to the respondent up to March 31, 2006, and VAT exemption from April 1, 2006, to January 31, 2012, without any monetary limit, as per the sanctioned scheme of 1996. The appellate authority, AAIFR, upheld this order, stating that the exemption applied to goods manufactured in the rolling mill unit, as specified in the notification dated February 1, 2003.

2. Consent and Hearing of the State Government:
The petitioner argued that the BIFR did not take consent from the State Government while granting the exemption and did not afford an opportunity of hearing, making the order unsustainable. The court noted that the State Government was a consenting party to the original scheme of 1996 and had not raised any objections at that time. The BIFR and AAIFR orders were found to be in line with the original scheme, which the State had agreed to.

3. Validity of the Monetary Limit Imposed in the Tax Exemption Notification:
The petitioner challenged the deletion of the maximum exemption cumulative of quantum of tax, which was fixed at Rs. 4.10 crores in the notification dated February 1, 2003. The court observed that the original scheme did not stipulate any monetary limit for the sales tax exemption. The AAIFR directed the issuance of a fresh notification providing for continuation of the relief under the VAT Act till January 31, 2012, without any monetary limit, as per the terms of the sanctioned scheme.

4. Applicability of VAT Act Benefits to the Respondent:
The petitioner contended that the BIFR erroneously extended the benefit of the VAT Act to the respondent. The court noted that Section 72 of the MPVAT Act, 2002, protects exemptions already granted under previous enactments. The AAIFR found that the BIFR's direction to grant VAT exemption was a reiteration of the terms entailed in the sanctioned scheme and was in line with the provisions of the MPVAT Act.

5. Compliance with the Original Sanctioned Scheme:
The petitioner argued that the BIFR's order was in derogation of the sanctioned scheme of 1996. The court found that the BIFR and AAIFR orders were in conformity with the original scheme, which did not fix any financial limit on the tax exemption. The State Government had initially agreed to the scheme, and any deviation from it was deemed unjust and improper. The directions issued by the BIFR and affirmed by the AAIFR were found to be just and proper, with no warrant for interference.

Conclusion:
The court dismissed the writ petition, upholding the BIFR and AAIFR orders. The directions issued were in consonance with the original sanctioned scheme, and the State Government's objections were found to be without merit. The respondent was entitled to the tax exemptions as per the original scheme, without any monetary limit, and the benefits under the VAT Act were to be extended accordingly.