2016 (4) TMI 878 - HC - VAT and Sales Tax

Whether the newly established petitioner industrial units having once enjoyed the tax exemption and also remission for seven years under the Meghalaya Industrial Policy of 1997 and the Meghalaya Industries (Tax Exemption) Scheme 2001 can claim benefits of tax remission for extended period under the new Scheme namely, the Meghalaya Industries (Tax Remission) Scheme 2006. Held that - none of the provisions of the Meghalaya Industrial Policy, 1997; the Meghalaya Industries (Tax Exemption) Scheme 2001 or the Meghalaya Industries (Tax Remission) Scheme 2006 provides that a new industrial unit set up under the Meghalaya Industrial Policy 1997 having already enjoyed tax exemption and remission under the Meghalaya Industries (Tax Remission) Scheme 2006 for a period of seven years under the initial Eligibility Certificate, upon undertaking expansion or modernization, can legitimately claim fresh benefits of tax remission under the Meghalaya Industries (Tax Remission) Scheme 2006 on the strength of a fresh Eligibility Certificate beyond the validity period of the First Eligibility Certificate granted upon establishment as new industrial unit. The petitioner units are only entitled to get the benefits by way of alternative benefits in lieu of benefits being enjoyed under the existing Scheme in terms of part one of the definition of eligibility under the Meghalaya Industries (Tax Remission) Scheme 2006 and that too, for the remainder period of First Eligibility Certificate of seven years which they have already enjoyed. Besides, the Directorate of Industries and the Meghalaya Industrial Development Corporation have not been empowered under the Meghalaya Value Added Tax Act to levy and assess the tax liability of any dealer. - Decided against the petitioner

Issues Involved:
1. Validity of the impugned orders of assessment dated 15.11.2013 and 21.01.2014.
2. Entitlement to tax remission under the Meghalaya Industries (Tax Remission) Scheme, 2006.
3. Applicability of the doctrine of promissory estoppel.
4. Authority of the Directorate of Industries and the Meghalaya Industrial Development Corporation under the Meghalaya Value Added Tax Act, 2003.

Detailed Analysis:

1. Validity of the Impugned Orders of Assessment:
The impugned orders of assessment dated 15.11.2013 and 21.01.2014 were issued by the Superintendent of Taxes, Ri-Bhoi District, Meghalaya. These orders rejected the claims of the petitioner companies for 99% remission of tax payable under the Meghalaya Industries (Tax Remission Scheme), 2006. The rejection was based on the ground that the Scheme does not provide for an extension of the eligibility period for new industrial units that have undergone expansion, modernization, and diversification. The petitioner companies argued that the orders were beyond the jurisdiction of the authority and violated the Scheme of 2006 and previous orders by the Director of Industries.

2. Entitlement to Tax Remission under the Meghalaya Industries (Tax Remission) Scheme, 2006:
The petitioners contended that the benefits provided under the Industrial Policy of 1997 could not be taken away by the Department of Taxation. They argued that there was no restriction on granting benefits again upon the expansion of the unit. However, the court found that the Meghalaya Industrial Policy of 1997 and the Meghalaya Industries (Tax Exemption) Scheme, 2001 provided tax exemption for a period of seven years from the date of commercial production. The petitioners had already availed these benefits. The Meghalaya Industries (Tax Remission) Scheme, 2006, which substituted the previous Scheme, did not provide for a second-time benefit of tax remission for units that had already enjoyed the exemption for seven years.

3. Applicability of the Doctrine of Promissory Estoppel:
The petitioners argued that the Single Window Agency's clearance for undertaking expansion work was a promise that the company would be eligible for 99% remission of tax under the Scheme of 2006. However, the court held that this argument was based on a misunderstanding or misinterpretation of the terms and conditions of the approval granted by the Single Window Agency. The doctrine of promissory estoppel was not applicable in this case.

4. Authority of the Directorate of Industries and the Meghalaya Industrial Development Corporation under the Meghalaya Value Added Tax Act, 2003:
The court clarified that the power to levy, collect, exempt, or remit sales tax is conferred on the State Government by Acts of the State Legislature or the Parliament. The Directorate of Industries and the Meghalaya Industrial Development Corporation are not empowered under the Meghalaya Value Added Tax Act to levy and assess the tax liability of any dealer. The assessment and granting of tax exemption/remission fall within the jurisdiction of the sales tax authorities appointed under the relevant Sales Tax Acts.

Conclusion:
The court concluded that the petitioner units, having commenced commercial production before the commencement of the VAT Act and having already enjoyed the benefits of tax exemption for seven years, were not entitled to claim the benefits of tax remission for an extended period under the Meghalaya Industries (Tax Remission) Scheme, 2006. The writ petitions were dismissed with no order as to costs.

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