2013 (3) TMI 136 - HC - VAT and Sales Tax

Benefit of Incentive Scheme 1987 notified u/s 4 of the Rajasthan Sales Tax Act, 1954 denied - as per department petitioner company had made more than 20% of its production as branch transfers of goods for sales outside the State of Rajasthan, namely thus breached the condition No.4 (e) of the said Incentive Scheme - Held that - The period during which such restriction could operate is obviously the period of the scheme itself or the period of incentive available to the petitioner unit for which the requisite eligibility certificate has been granted to it. The period for which the petitioner unit has been given EC in the present case is 20.01.1998 to 20.01.2005 whereas the operative period of incentive scheme itself ended on 31.03.1997 as per Clause (1) thereof since it made eligible investment in the State prior to 31.03.1997 or during the operative period of the Incentive Scheme itself. The scheme was in force for approximately ten years from 31.03.1987 to 31.03.1997 and after its initial period ended on 31.03.1995, it was extended for two years up to 31.03.1997. The State also came out with another incentive scheme known as Sales Tax Incentive Scheme, 1989, also the operative period of which was was 05.03.1987 to 3103.1998. The allegation against the petitioner company is that it made branch transfers of goods beyond 20% of its production capacity for the financial year 2005-06. Admittedly and indisputably, the period of eligibility certificate of the petitioner company ended on 20.01.2005. Thus, it was apparently a total misinterpretation and wrong application of Clause (ii) of Clause 4 (e) of the Incentive Scheme of 1987 by the respondent authorities, to initiate proceedings of recovery of the tax from the petitioner denying the benefit of Incentive Scheme for the past period of which it had already availed the exemption of incentive scheme under a validly granted Eligibility Certificate in its favour - in favour of assessee appellant.

Summary

Issues:
Challenge to assessment order and order denying benefit of Incentive Scheme, 1987 under Rajasthan Sales Tax Act, 1954.

Analysis:
The petitioner company challenged an assessment order and an order denying the benefit of Incentive Scheme, 1987 under the Rajasthan Sales Tax Act, 1954. The petitioner was granted an Eligibility Certificate under the scheme for the period 20.01.1998 to 20.01.2005 for eligible investments. The issue arose when the authorities initiated assessment proceedings against the petitioner after the incentive period ended, alleging a breach of condition under the scheme. The petitioner argued that the restriction on branch transfers beyond 20% of production capacity only applied during the scheme period and not thereafter. The petitioner contended that the authorities misinterpreted the clause, leading to the recovery of sales tax dues. The respondent argued that the petitioner should have pursued a regular appeal instead of a writ petition.

The court analyzed the Incentive Scheme, 1987, which exempted industrial units from tax on sales within the state based on eligible investments. The relevant clause stipulated conditions for availing benefits, including maintaining production levels and restricting branch transfers exceeding 20% of total production. The court noted that compliance with the restriction on branch transfers was only required during the period of the eligibility certificate. The court highlighted the difference between the two conditions, emphasizing that the restriction did not apply beyond the scheme period. The court found that the authorities' action against the petitioner was based on a misinterpretation of the clause, leading to erroneous demands for tax recovery.

The court rejected the argument regarding the availability of alternative remedies, noting that pursuing an appeal would have been futile given the authority of the Additional Commissioner. The court emphasized that the availability of alternative remedies is a rule of discretion, not a jurisdictional bar. Upon a purposive interpretation of the clause, the court found no breach by the petitioner and allowed the writ petition. The court quashed the orders raising demands and the order by the Additional Commissioner. All demands for tax, interest, and penalty related to the period in question were also quashed.