2018 (8) TMI 941 - HC - VAT and Sales Tax

Sales Tax incentive scheme - Package Scheme of Incentive - Eligibility Certificate - benefits sanctioned by the Government of Maharashtra under the 1993 scheme - reopening of assessment on account of change in opinion - Held that - The petitioner was entitled to utilize the benefits available under the 1993 Package Scheme between 1.09.1999 to 31.08.2013 or on the exhausting the monetary ceiling, whichever occurred earlier. According to the petitioner the Nashik plant availed the incentive s in the ratio/proposal prescribed in the entitlement certificate as also the circular and exhausted the monetary ceiling in the year 2008. As per the case of the petitioner it was assessed by the Assistant Commissioner of the Sales Tax for the Financial year 2006 2007 by order dated 29.03.2011 and the assessment order confirmed the deferment amount claimed by the petitioner. These orders passed by the Assistant Commissioner came to be rectified on 27.02.2012 and the petitioner preferred an appeal to the Deputy Commissioner of Sales Tax, Nashik Division. Section 41BB of the Bombay Sales Tax Act came to be inserted on 27.03.2001, introducing a provision of proportionate incentives to an eligible unit in certain contingencies which included a provision of making the incentives dependent on the turn over of sales and purchases to be arrived at by applying a ratio prescribed by the State Government to the total turnover of sales and purchases of the said unit in that year. By introduction of the said provision the benefits availed of by an eligible unit in contravention of subsection (1) was deemed to be withdrawn and such unit was liable for payment of tax in respect of turnover of sales and purchases in respect of the turnover and the benefit which was withdrawn was directed to be recovered as a tax. The said provision was introduced with a non obstante clause, giving effect to it inspite of existence of any provision contained in package Scheme of Incentives. By the Package Scheme of Incentives the State Government has granted a tax concession but there is no embargo to withdraw the said concession under the Package Scheme of Incentives of 1988 and 1993 which were formulated under the provisions of the Bombay Sales Tax Act - Once the validity of Section 93 has been upheld, the Petitioner cannot be permitted to argue that he was entitled to enjoy the benefits in terms of its eligibility and entitlement certificate. It was found by the Reviewing Authority that the Assessing officer had committed an error and since the provision of law which has been brought by amendment Act 2009 is to be implemented with retrospective effect, the Deputy Commissioner of Sales Tax has exercised the power of review and passed the impugned order. The exercise of the said power is in the larger interest of the revenue and hence cannot be said to be without jurisdiction or mala fide. This is not only a case of reopening of the assessment on account of change of opinion. Petition dismissed.

Issues Involved:
1. Retrospective amendment of Section 93 of the MVAT Act.
2. Proportionality of sales tax incentives under the Package Scheme of Incentives, 1993.
3. Application of the principle of promissory estoppel.
4. Jurisdiction and exercise of power under Section 25 of the MVAT Act.

Detailed Analysis:

1. Retrospective Amendment of Section 93 of the MVAT Act:
The petitioner challenged the retrospective amendment of Section 93 of the MVAT Act, which introduced a new mechanism for computing the quantum of incentives based on the increase in production capacity. The court noted that the amendment was upheld by both the Bombay High Court and the Supreme Court, confirming its validity with retrospective effect from April 1, 2005. The court emphasized that the legislature has the power to enact laws with retrospective effect, especially when it pertains to tax exemptions and incentives.

2. Proportionality of Sales Tax Incentives:
The petitioner argued that the original 1993 Package Scheme of Incentives did not contemplate the quantum of incentives to be based on the increase in production capacity. The court examined the amendments and the introduction of Section 93, which mandated that incentives be proportionate to the increase in production capacity or additional investment. The court found that the petitioner’s eligibility and entitlement certificates did not exempt them from the proportionality requirement introduced by the amendment. The court upheld the retrospective application of the proportionality principle, aligning with the legislative intent to ensure fair distribution of tax incentives.

3. Application of the Principle of Promissory Estoppel:
The petitioner invoked the principle of promissory estoppel, arguing that they had acted upon the original scheme’s promise and the state should be bound by it. The court rejected this argument, stating that promissory estoppel cannot be applied against legislative actions. The court cited precedents, including the case of Motilal Padampat Sugar Mills, to assert that the doctrine of promissory estoppel does not bind the legislature in exercising its legislative functions. The court emphasized that tax exemptions are concessions that can be withdrawn at any time by the government.

4. Jurisdiction and Exercise of Power under Section 25 of the MVAT Act:
The petitioner contested the jurisdiction of the Deputy Commissioner of Sales Tax to review the assessment orders. The court clarified that Section 25 of the MVAT Act empowers the Commissioner to review orders if they are found to be prejudicial to the interests of revenue. The court found that the Deputy Commissioner acted within his jurisdiction, as the original assessment orders had incorrectly classified the tax liabilities. The court upheld the review order, which recomputed the incentives based on the amended Section 93, ensuring compliance with the statutory provisions.

Conclusion:
The court dismissed the petitioner’s arguments, upholding the retrospective amendment of Section 93 of the MVAT Act and the proportionality of sales tax incentives. The principle of promissory estoppel was deemed inapplicable against legislative actions. The jurisdiction and exercise of review powers by the Deputy Commissioner under Section 25 of the MVAT Act were affirmed, ensuring the correct application of tax laws in line with the legislative amendments. The writ petition was dismissed without any order as to costs.

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