2017 (3) TMI 1343 - HC - VAT and Sales Tax

Benefit of Sales-tax exemption or Sales-tax Deferment Eligibility Fixed Capital Investment - Section 49 2 of the Gujarat Sales Tax Act, 1969 - extension of the period of Sales Tax Eligibility Certificate for a further period of five years for un-utilized amount of ₹ 57.82 Crores out of ₹ 188.15 Crores, and to consider the expenses of ₹ 257.55 Crores which were incurred and paid upto 12th April 2007 instead of ₹ 213.58 Crores, being the period of eighteen months from the date of commencement of commercial production ie., 12th October 2005 - whether the petitioner-Company is entitled to incentive/ sales tax exemption under the Scheme on investment/expenditure incurred after 31st December 2005, but within a period of 18 months from the date of commencement of commercial production? Held that - it is required to be noted that in case of Small Scale Industrial Units, Medium and Large scale Industrial Units, the assets acquired upto the period of six months or within 1 year from the date of commencement of commercial production or till the date of completion of the said Scheme ie., 31st December 2005; whichever is earlier between the two, shall be considered eligible for the purpose of Incentives. However, in the Gujarati version of the Incentive Scheme, the expression whichever is earlier between the two is missing in case of Industrial Units having project cost exceeding ₹ 10 Crores. The aforesaid seems to be an inadvertent mistake in publication/typing - Nobody can be permitted to take undue advantage/ disadvantage of the beneficial Scheme due to inadvertent mistake in publication. In case of Industrial Units having project cost exceeding ₹ 10 Crores, it is mentioned that the assets acquired within a period of 18 months form the date of commencement of production, or till the completion of the said Scheme, shall be considered eligible for the purpose of incentives. Therefore, the submissions made on behalf of the petitioners that the assets acquired upto 11th April 2007 are required to be considered eligible for the purpose of incentive; if is accepted, in that case, the words/expressions till the completion of the said Scheme shall be meaningless. When the petitioners and all other Industrial Units/ Undertakings/Projects 105 in number understood the Scheme, the manner in which the State Government had pleaded and all are treated equally and in case of all Industrial Undertakings/Projects, the assets acquired only upto 31st December 2005 are considered eligible for the purpose of incentive, the petitioners are not entitled to incentive on the assets acquired subsequently after commencement of commercial production or after 31st December 2005. The present writ petition with respect to claim of the petitioners for incentive/sales tax exemption on the investment made/assets acquired after 31.12.2005, but made on or before 11.04.2007 ie., within a period of 18 months from the date of commencement of commercial production ie., ₹ 257.55 Crores is hereby rejected. It is held that the petitioners are not entitled to the incentive/sales tax exemption on the total expenses/investment of ₹ 257.55 crores as claimed and are entitled for incentive/sales tax exemption on the investment made/assets acquired upto the date of commencement of commercial production ie., 12th October 2005. Petition dismissed - decided against petitioner.

Issues Involved:
1. Extension of Sales Tax Eligibility Certificate period.
2. Consideration of expenses for tax exemption benefits under the Incentive Scheme 2001.

Issue-wise Detailed Analysis:

1. Extension of Sales Tax Eligibility Certificate Period:
The petitioner initially sought an extension of the Sales Tax Eligibility Certificate for an additional five years to cover an unutilized amount of ?57.82 Crores out of ?188.15 Crores. However, due to subsequent developments, this cause no longer survives. The court noted that the prayer for extending the period of the Sales Tax Eligibility Certificate had become infructuous due to a subsequent decision by the State Government.

2. Consideration of Expenses for Tax Exemption Benefits:
The core issue was whether the petitioner-company was entitled to tax exemption benefits on investments made after December 31, 2005, but before April 12, 2007, within 18 months from the commencement of commercial production on October 12, 2005.

Petitioner's Arguments:
- The petitioner argued that under Clause 3.8 of the Incentive Scheme 2001, they were entitled to tax exemptions on expenses incurred up to April 11, 2007, as these were within 18 months from the commencement of commercial production.
- They highlighted that the Scheme did not include the phrase "whichever is earlier between the two" for industrial units with project costs exceeding ?10 Crores, unlike for small and medium industrial units.
- The petitioner relied on the Gujarati version of Clause 3.8 and previous judgments, asserting that the assets acquired within 18 months from the commencement of production should be eligible for incentives.

State's Arguments:
- The State contended that the Scheme's intention was to grant incentives only for investments made up to December 31, 2005, or within 18 months from the commencement of production, whichever was earlier.
- It was argued that the omission of the phrase "whichever is earlier between the two" in the Gujarati version was an inadvertent mistake, and the English version, which included the phrase, should be considered.
- The State emphasized that none of the 105 similar industrial undertakings had been granted benefits for investments made after December 31, 2005, and that the petitioner's understanding of the Scheme was initially aligned with this interpretation.

Court's Analysis:
- The court observed that the Scheme's intention was clear and unambiguous: to consider assets acquired up to December 31, 2005, or within 18 months from the commencement of commercial production, whichever was earlier.
- The court noted that the petitioner's initial applications for provisional and final eligibility certificates were based on investments made up to December 31, 2005, and no grievance was raised at that time.
- The court found that the petitioner's subsequent claim for incentives on investments made after December 31, 2005, was an afterthought and aimed at taking undue advantage of the inadvertent omission in the Gujarati version of the Scheme.

Conclusion:
The court held that the petitioner was not entitled to incentives or sales tax exemptions on investments made after December 31, 2005, but within 18 months from the commencement of commercial production. The petition was dismissed, and the court affirmed that the petitioner was only entitled to incentives on investments made up to December 31, 2005. The court also rejected the petitioner's request to continue the ad interim relief granted earlier.

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