2023 (6) TMI 755 - HC - VAT and Sales Tax

Disbursal of subsidies/incentives under a Scheme floated by the State of West Bengal being The West Bengal State Support for Industries Scheme 2008 - promotion of large and medium scale industries in the background regions of the State - no liability to pay VAT - HELD THAT - It transpires from the records that the Scheme in question was floated for the purposes of extending certain additional financial support for promotion of large and medium scale industries in the background regions of the State as mentioned in the very first paragraph of the Notification dated February 28 2011 which contains the Scheme. In the said Gazette Notification clause 16 is one of the modes of payment but not an eligibility criterion. Eligibility criteria for incentive under the Scheme are stipulated in clause 6 of the Scheme. There is nothing in the said clause to indicate that the payment of VAT to the State is a necessary pre-requisite for getting benefit of the Scheme. An empirical statement generated from the data base of the Commercial Tax Department on the basis of the quarterly returns filed for each of the four quarters of the consecutive financial years reflects the tax payment behaviour of the dealer in the light of which the Additional Commissioner opined that the present case be treated not as an EOU dealer but as a situation where the applicant dealer is not in a position to fully/partly adjust VAT payable with the sanctioned amount of capital and interest subsidies as per the T C Terms and Conditions of the WBISS 2008 Scheme. There is no scope of the petitioners being liable to pay any further VAT dues under the Scheme. Hence as the petitioners are otherwise eligible to get the benefit of the Scheme and have already being admitted to be so twice once for the subsidy under the Scheme and once for the interest subsidy by the respondent Authorities themselves there is no impediment on the part of the respondent Authorities at all in disbursing the entire subsidy to the petitioners including the interest subsidies as already sanctioned. Petition allowed on contest thereby directing the respondent Authorities to immediately disburse the entire amount of the subsidy which the petitioners are entitled to get under the West Bengal State Support for Industries Scheme 2008 as amended up to December 31 2010 to the petitioners within an outer limit of three months from date.

Summary

Issues:
The judgment involves the entitlement of subsidies/incentives under a Scheme, non-disbursement of subsidies to the petitioners, dispute regarding VAT payment as a pre-requisite for subsidy benefits, interpretation of eligibility criteria under the Scheme, and the obligation of respondent Authorities to disburse subsidies.

Entitlement of Subsidies/Incentives:
The petitioners claimed entitlement to subsidies under The West Bengal State Support for Industries Scheme, 2008. Although the petitioners were granted sanction for the subsidy in 2011, the subsidies were never disbursed to them. The petitioners argued that they were eligible for subsidies as per the Scheme, and the respondent Authorities had confirmed the reduction of VAT payability to nil for the petitioners.

VAT Payment as a Pre-requisite:
The respondent Authorities contended that payment of VAT is essential for receiving the subsidy benefits. They argued that since the petitioners never paid VAT to the State of West Bengal, they were not entitled to the benefits under the Scheme. The respondent Authorities relied on the mention of VAT payment in clause 16 of the Scheme to support their argument.

Interpretation of Eligibility Criteria:
The Court analyzed the Scheme and noted that clause 6 specifies the eligibility criteria for incentives, while clause 16 pertains to the mode of payment. It was observed that clause 6.10 governed the petitioners, stating that subsidy on Fixed Capital Investment shall be paid in ten equal annual instalments, with any balance entitlement at the end of the 9th year to be paid in the 10th year.

Obligation to Disburse Subsidies:
Based on the communication from the Additional Commissioner of Commercial Taxes, West Bengal, which indicated the nil VAT payability for the petitioners, the Court held that there was no impediment for the respondent Authorities to disburse the entire subsidy to the petitioners. The judgment directed the respondent Authorities to disburse the subsidies within three months, failing which interest at 12% per annum would be payable to the petitioners.

This summary provides a detailed overview of the judgment, highlighting the key issues involved and the Court's analysis and decision on each issue.