2016 (5) TMI 1236 - HC - VAT and Sales Tax

Re-assessment proceedings - Imposition of tax - Period prior to 2013 - Period after 2013, petitioner himself started paying tax - claiming exemption from tax on sales effected under SEZ policy announced by the State of M.P. - Held that - by considering the law laid down by the Apex Court in the case of Assistant Collector of Central Excise, Chandan Nagar Vs. Dunlop India Ltd. and others 1984 (11) TMI 63 - SUPREME Court , as the huge amount of more than ₹ 98.18 crores is dues against the petitioner, the petitioner is directed to pay 10 % of the total amount within a period of four weeks from today and furnish Bank Guarantee for the remaining dues within a period of six weeks from today. - Stay granted partly.

Summary

Issues involved:
Assessment of tax exemption claims for sales made by an industrial unit in a Special Economic Zone (SEZ) under various state acts, validity of stay orders granted, application for vacating stay, liability to pay tax under State Law, amount of tax dues, balance of convenience, public interest, and legal precedents cited.

Analysis:

1. Assessment of Tax Exemption Claims: The petitioner company established an industrial unit in an SEZ and claimed non-taxable sales under SEZ policy for the financial years 2004-05, 2005-06, and 2006-07. Authorities initiated assessment proceedings and levied tax, which was later exempted under the Indore SEZ Act, 2003. However, reassessment proceedings were initiated for subsequent periods, and tax was levied on sales to dealers in Domestic Tariff Area (DTA).

2. Validity of Stay Orders: The petitioner challenged assessment orders through writ petitions, and stay was granted in 2014. The matter was listed for final hearing, and the petitioner continued paying tax under State Laws from March 2013. The State contended that the interim relief caused a significant loss of revenue, leading to an application for vacating the stay.

3. Application for Vacating Stay: The State filed an application to vacate the stay, citing a substantial amount of tax dues (?98.18 crores) owed by the petitioner. The State argued that the petitioner's liability under State Law necessitated tax payment, supported by legal precedents emphasizing the importance of tax compliance and public interest.

4. Liability to Pay Tax under State Law: The State asserted that the petitioner's payment of additional duties indicated liability under State Law, and the petitioner's initiation of tax payments post-2013 supported this claim. The petitioner argued that any dues to the State could be adjusted against payments made to the Union Government, ensuring no loss to the State.

5. Balance of Convenience and Legal Precedents: The legal counsels presented arguments based on legal precedents, including the necessity of tax payments for public interest and the importance of maintaining a balance between the parties' interests. The court considered the arguments and directed the petitioner to pay a portion of the total amount and furnish a Bank Guarantee for the remaining dues within specified timelines.

6. Final Hearing and Directions: The court allowed the applications for vacating stay in part, directing the matter for final hearing in an expedited manner in July 2016. The court's decision aimed to address the tax dues issue while ensuring a fair balance between the parties' interests.

This detailed analysis covers the various issues addressed in the judgment, including the assessment of tax exemption claims, validity of stay orders, liability under State Law, balance of convenience, legal precedents cited, and the court's directions for further proceedings.