2010 (10) TMI 967 - HC - VAT and Sales Tax

Order dated February 11, 1991 and the minutes of the meeting dated November 22, 1991 and has further sought direction to the District Level Screening Committee to grant eligibility certificate to the petitioner-company under the Sales Tax Incentive Scheme for Industries, 1987 challenged Held that - Since the matter of evasion of tax was compounded on January 5, 1991, therefore, it could not be said that the petitionercompany had been penalised for avoidance or evasion of tax or any case of avoidance or evasion of tax was pending against it. The said compounding order dated January 5, 1991 was passed prior to the rejection of the application for the eligibility certificate on December 11, 1991. Therefore, the rejection of the application of the petitioner-company by invoking clause 7(e) is illegal. The issue of retrospective application of clause 7(e) of the notification dated May 23, 1987 is insignificant as per the aforesaid finding on the issue of compounding of tax evasion prior to the rejection of the eligibility certificate. In the result, the writ petition is allowed. The rejection order dated December 11, 1991, issued pursuant to the meeting dated November 22, 1991, is quashed and set aside. So far as denial of eligibility certificate to the petitioner-company is concerned, the case is remanded back to the District Level Committee with the direction to reconsider the case in the light of the aforesaid judgment, within a period of three months from the date of receipt of copy of this order

Summary

Issues:
Challenge to order and minutes of meeting, direction to grant eligibility certificate, retrospective application of clause 7(e) of notification dated May 28, 1991.

Analysis:
The petitioner challenged an order and meeting minutes while seeking an eligibility certificate under the Sales Tax Incentive Scheme for Industries, 1987. The petitioner, a manufacturer of vegetable oil, invested in expansion based on the Incentive Scheme announced by the State. However, a notification on May 28, 1991, inserted clause 7(e), disqualifying units penalized for tax evasion. The District Level Screening Committee rejected the petitioner's application citing tax evasion, despite the evasion case being compounded earlier. The respondents argued the rejection was valid due to the pending evasion case. The petitioner contended that the compounding before rejection nullified clause 7(e) consequences. The court referenced a judgment emphasizing that compounding tax evasion before rejection negates penalties. As the evasion was compounded before rejection, the application rejection invoking clause 7(e) was deemed illegal. The issue of clause 7(e) retrospective application was deemed insignificant due to the compounding preceding the rejection.

The court allowed the writ petition, quashing the rejection order and remanding the case to the District Level Committee for reconsideration within three months based on the judgment's findings.