2010 (4) TMI 988 - HC - VAT and Sales Tax

Benchmark the base level production and sales of the assessment year 1995-96 fixed challenged - Held that - No hesitation in allowing the writ petitions thereby setting aside the orders passed by the second respondent herein that the second respondent shall go by the base year fixed under the eligibility certificate viz. the base production volume to base sales volume referable to the assessment year 1994-95 and cannot adopt a different assessment year as the base year for compliance. Consequently the order of the first respondent dated December 26 2007 demanding payment of tax for the assessment year 1996-97 to 1998-99 stands quashed.

Summary

Issues:
Challenge to order fixing benchmark for sales tax deferral based on assessment year 1995-96 instead of 1994-95.

Analysis:
The petitioner sought a writ of certiorari to quash an order by the first respondent fixing the base level production and sales benchmark as the assessment year 1995-96 instead of 1994-95. The petitioner expanded its unit and applied for interest-free sales tax benefits. The eligibility certificate granted specified a benchmark based on the assessment year 1994-95 for availing deferral benefits. The petitioner commenced commercial production in November 1995 and executed an agreement with the second respondent fixing the benchmark as per the eligibility certificate. However, the second respondent issued a notice in 2002, changing the benchmark to the assessment year 1995-96, leading to a demand for additional tax payments for subsequent years.

The court noted that the eligibility certificate clearly prescribed the assessment year 1994-95 as the benchmark for maintaining production and sales levels to avail of the sales tax deferral benefit. The court emphasized that the assessing authority had no jurisdiction to alter the benchmark specified in the eligibility certificate. Referring to the relevant government order, the court held that any changes to the base year should be made by the authority issuing the eligibility certificate, not the assessing authority. Therefore, the court set aside the orders demanding additional tax payments for the years 1996-97 to 1998-99, ruling that the change in benchmark by the second respondent was beyond their jurisdiction.

In conclusion, the court allowed the writ petitions, quashed the order demanding tax payments based on the assessment year 1995-96, and directed the second respondent to adhere to the base year fixed in the eligibility certificate, which was the assessment year 1994-95. The court emphasized that the assessing authority must respect the terms specified in the eligibility certificate and cannot unilaterally change the benchmark year for compliance purposes.