2018 (10) TMI 1958 - HC - VAT and Sales Tax

Liability to pay sales tax under the Kerala Value Added Tax Act, 2003 - only reason to deny the benefit of CST concession is that corresponding notification has not been issued - HELD THAT - In the present case, the 3rd respondent alone has filed a counter affidavit. Government in either of the departments did not file any counter affidavit. Therefore it has to be presumed that the contentions advanced by petitioners are admitted. Ext.P9 policy was formulated and published in the year 2008, much after the Finance Act was enacted. As the policy is not so far withdrawn, it can be concluded that the benefits ordered therein are liable to be granted. The proclamation of Ext.P9 policy decision in 2008, specifically intended for the Special Economic Zone, is not disputed; it is not modified or withdrawn so far, as evident from Ext.P12 letter as well as the counter affidavit. The reason for denying the benefit conferred/declared in clause 6 of Ext.P9 policy, is the absence of a corresponding notification incorporating the same, by Government - The judgment of the apex court in LLOYD ELECTRIC AND ENGINEERING LIMITED VERSUS STATE OF HIMACHAL PRADESH AND OTHERS 2015 (9) TMI 370 - SUPREME COURT is in respect of an issue which is more or less similar to the issue arising in this case, where it was held that the Government cannot speak in two voices and that Government Departments are bound to implement Government policy. Even though the learned Government Pleader argued that the remedy of the petitioners is not under Article 226 of the Constitution of India, when the orders of assessment are already issued the said contention cannot be accepted as none of the statutory authorities can consider the claim of the petitioners against the Government to implement the policy. It is declared that the petitioners would be entitled to the benefit of exemption declared in Ext.P9 policy, as provided in Clause 6 thereof - Petition disposed off.

Summary

Issues:
Applicability of exemption under Kerala Value Added Tax Act, 2003 to a Private Limited Company and its Managing Director situated in a Special Economic Zone.

Analysis:
The petitioners, a Private Limited Company and its Managing Director, sought a declaration that they are not liable to pay sales tax under the Kerala Value Added Tax Act, 2003 (VAT Act). The petitioners' unit, engaged in manufacturing electrical control systems in a Special Economic Zone, had been enjoying exemption from sales tax under the KGST Act, 1963. However, the VAT Act came into force in 2005, replacing the KGST Act. The petitioners believed they were eligible for exemption until 2011-12 based on a policy that exempted industrial enterprises in SEZs from tax for ten years. Despite the policy, no notification was issued granting the exemption, leading to assessment orders imposing sales tax on the petitioners.

The petitioners argued that the Government was bound to grant them the exemption promised in the policy. They relied on judgments emphasizing that once a benefit is announced, the Government must implement it, even if there is a delay in issuing the necessary notifications. The Government contended that the notifications providing the exemption under the KGST Act ceased to exist with the enactment of the VAT Act, and the policy could not be implemented without a corresponding notification under the VAT Act.

The Court noted that the Government had not filed a counter affidavit, and the policy in question had not been withdrawn. It held that the benefits ordered in the policy should be granted as per the declaration. The Court emphasized that the Government could not deny the benefit declared in the policy merely due to the absence of a notification. Referring to previous judgments, the Court reiterated that Government Departments are obligated to implement Government policies and cannot speak in two voices.

The Court ruled that the petitioners were entitled to the benefit of the exemption declared in the policy, clarifying that other aspects of the assessment orders were not considered in this judgment. It rejected the argument that the remedy for the petitioners was not under Article 226 of the Constitution, stating that statutory authorities could not address the petitioners' claim against the Government for policy implementation.

In conclusion, the Court declared that the petitioners should receive the exemption as per the policy, emphasizing the importance of implementing Government policies and honoring promises made to promote entrepreneurship and economic development.