2007 (10) TMI 644 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Curtailment of Tax Incentives
2. Compliance with Scheme of Incentives
3. Delay in Installation and Sealing of Meters
4. Denial of Full Remission of Electricity Duty
5. Representation and Rejection by State Level Committee
6. Legal and Fundamental Rights Violation

Detailed Analysis:

1. Curtailment of Tax Incentives:
The petitioners challenged the order dated 13.09.2005 by the Commissioner of Tourism, Government of Gujarat, which curtailed the tax incentives initially granted under the New Package Scheme of Incentives for Tourism Projects 1995-2000. The petitioners argued that the order was contrary to the principles of Equity and Rule of Law, specifically Promissory Estoppel, as it reduced the tax incentives initially granted.

2. Compliance with Scheme of Incentives:
The petitioners contended that they met the criteria of the New Tourism Policy-1995, which granted tourism the status of an industry and provided a package of incentives, including tax holidays for newly set up and expanded tourism units. They were granted a temporary registration on 30.10.1998 and an eligibility certificate on 26.12.1998 for tax incentives up to Rs. 84.03 Lacs for the period from 01.12.1998 to 28.02.2003.

3. Delay in Installation and Sealing of Meters:
The petitioners installed three meters for the expanded area on 19.02.1999. However, due to delays by the Gujarat Electricity Board (GEB) in testing and sealing the meters, the remission of electricity duty was granted only from 12.01.2001 to 28.02.2003, instead of the full eligible period. The petitioners argued that this delay was not their fault and that the curtailment of the period resulted in a loss of around Rs. 18.53 Lacs.

4. Denial of Full Remission of Electricity Duty:
The petitioners argued that the Scheme of Incentives did not distinguish between new tourism units and expansions of existing units regarding tax exemptions. They claimed that the Notification dated 05.04.1997 did not limit the exemption from electricity duty to the expanded portion of the unit. The petitioners asserted that they were entitled to the full remission of electricity duty for the entire eligible period and amount.

5. Representation and Rejection by State Level Committee:
Despite making several representations, the petitioners' request for modification of the eligibility certificate and reallocation of incentives was rejected by the State Level Committee without any cogent reason. The petitioners had filed Special Civil Application No. 12326 of 2002, which was withdrawn after the court directed the competent authority to consider the representation in accordance with law. However, the State Level Committee rejected the petitioners' request again on 13.09.2005.

6. Legal and Fundamental Rights Violation:
The petitioners argued that the impugned order violated their fundamental rights under Articles 14 and 19 of the Constitution of India. They claimed that the order was against the rule of equity and contravened the provisions of the Scheme of Incentives. The petitioners asserted that they had acted in reliance on the promise of tax incentives and had made substantial investments, entitling them to enforce the promise against the respondents.

Judgment:
The court found considerable force in the petitioners' submissions. It noted that the State Government had declared the "New Tourism Policy - 1995," granting tourism the status of an industry with various incentives. The court observed that the petitioners had complied with the procedural requirements and that the delay in testing and sealing the meters was due to the GEB's laxity. The court held that the respondents were not justified in reducing the eligibility period and that the petitioners were entitled to the full sanctioned amount of electricity duty as a remission. The court directed the respondents to make good the loss of incentive amounting to Rs. 18.53 Lacs.

Conclusion:
The petition was allowed, and the respondents were directed to compensate the petitioners for the loss of incentive due to the curtailed period of electricity duty remission. The court emphasized that the petitioners were not at fault and had acted based on the assurances given by the respondent authorities.