2024 (5) TMI 1046 - HC - VAT and Sales Tax

Grant of sales tax exemption to the petitioner without imposing any condition in consonance with the Industrial Policy named Special Package of Incentives to Information Technology Industry 2000 - HELD THAT - A bare perusal of the record shows that after issuance of Special Package of Incentives for Information Technology Industry Policy dated 15.03.2000 the petitioner immediately took effective steps to get itself registered and was granted exemption Certificate on 26.09.2001 for a period of ten years i.e from 07.09.2000 to 06.09.2010. In Suprabhat Steel Ltd s case 1998 (11) TMI 530 - SUPREME COURT it has been observed that issuance of such notifications entitles the industrial units to avail of the incentives and benefits declared by the State Government in its own industrial incentive policy. But in exercise of such power it would not be permissible for the State Government to deny any benefit which is otherwise available to an industrial unit under the Incentive Policy itself. The Industrial Incentive policy is issued by the State Government after such Policy is approved by the Cabinet itself. Such notification is issued to carry out the objectives and the policy decisions taken in the Industrial Policy itself. If any notification issued by the government order in exercise of powers conferred in the Act is found to be repugnant to the Industrial Policy declared in a government resolution then the said notification must be held to be bad to that extent. As held by Hon ble Supreme Court in Suprabhat Steel Ltd s case the State Government cannot deny any benefit which is otherwise available to an Industrial Unit under the Incentive Policy itself and in the present case the benefit of exemption was available to the petitioner under the Special Package of Incentive for Information Technology Industry Policy . The condition imposed in Sub Para V of Rule 2 of Amendment Rules dated 16.09.2004 with respect to the date i.e 30.04.2000 by which effective steps are to be taken is struck down. Order dated 28.06.2002 withdrawing the exemption from payment of sales tax is quashed. Exemption Certificate granted to the petitioner on 26.09.2001 is ordered to be revived. The petition stands allowed.

Summary

Issues Involved:
1. Direction to grant sales tax exemption without conditions.
2. Quashing of condition in notification dated 16.09.2004.
3. Validity of withdrawal of sales tax exemption.
4. Compliance with Industrial Policy, 2000.

Issue-wise Detailed Analysis:

1. Direction to Grant Sales Tax Exemption Without Conditions:
The petitioner sought a direction for the respondents to grant sales tax exemption in accordance with the "Special Package of Incentives to Information Technology Industry, 2000" without imposing additional conditions. The petitioner was initially granted a Certificate of Registration on 20.09.2000 and applied for sales tax exemption on 12.07.2001. The exemption was certified on 30.07.2001 for 120 months as per the Notification dated 15.03.2000. However, the exemption was later withdrawn on 28.06.2002 on the grounds that the Excise & Taxation Department had not notified the policy for sales tax exemption.

2. Quashing of Condition in Notification Dated 16.09.2004:
The petitioner challenged the condition imposed in the Notification dated 16.09.2004, which restricted the exemption to units that had taken effective steps by 30th April 2000. The petitioner argued that this condition was unreasonable and not in consonance with the Industrial Policy, 2000. The court observed that the Special Package of Incentives was valid for two years from 15.03.2000 and granted exemption for ten years. The court found that the withdrawal of the exemption on 28.06.2002 was contrary to the Notification dated 26.04.2000, which allowed IT units to continue receiving sales tax exemption as per the Information Technology Policy.

3. Validity of Withdrawal of Sales Tax Exemption:
The withdrawal of the exemption on 28.06.2002 was based on the Excise & Taxation Department's failure to notify the IT Policy for sales tax exemption. The court noted that the withdrawal was challenged, and the writ petition was disposed of with the direction that the order of withdrawal would not be given effect until the rules were amended. The court found that the withdrawal was in violation of the Notification dated 26.04.2000, which allowed IT units to continue receiving sales tax exemption.

4. Compliance with Industrial Policy, 2000:
The court examined the compliance with the Industrial Policy, 2000, and found that the petitioner had taken effective steps to get registered and was granted an exemption certificate on 26.09.2001 for ten years. The court referred to the Supreme Court judgment in State of Bihar and Others vs. Suprabhat Steel Ltd and Others, which held that the State Government cannot deny benefits available under the Incentive Policy through subsequent notifications. The court concluded that the condition imposed in the Notification dated 16.09.2004 was repugnant to the Industrial Policy and therefore invalid.

Conclusion:
The court struck down the condition imposed in Sub Para V of Rule 2 of the Amendment Rules dated 16.09.2004, which required effective steps to be taken by 30.04.2000. The order dated 28.06.2002 withdrawing the sales tax exemption was quashed, and the exemption certificate granted on 26.09.2001 was revived. The petition was allowed, and all pending miscellaneous applications were disposed of.