2014 (6) TMI 689 - HC - VAT and Sales Tax

Benefit of exemption to the petitioner unit to the extent of 200% instead of 100% of its fixed capital investment - exemption under the Notification Nos. T.T.-2-1711/xI-9(460)/94-U.P. Act 15-48 Order 96 dated 19.7.1996 and T.T.-2-1712 dated 19.7.1996 - Held that - There is nothing to suggest that Industrial Policy has been approved by the Cabinet of the State Government. However, it does not provide exemption to the extent of 200% on the capital investment in a case where the unit has made an additional investment of ₹ 50 crores or more. It only provides that in order to attract large industrial units to the State Government, it is proposed to provide special incentive to such units. This incentive shall be in addition to the ones listed in the policy. This attraction would be in the form of concessions/incentive with reference to land or its value, trade tax etc. This facility shall be given on a case to case basis to the units which have an investment of more than ₹ 50 crore. It shall be dependent on the benefit that will accrue to the State as a consequence of setting up of such unit. Decisions shall be taken on the basis of location of the unit, employment potential and the possibilities of down stream projects, apart from the contribution to the general economic development of that area. From the aforesaid, it is clear that it was only a proposal and the facility would be provided on a case to case basis depending upon various circumstances. It does not provide exemption itself. Having regard to such policy, the State Government issued notification providing exemption. Such exemption cannot be said to be, not in consonance with the Industrial Policy inasmuch as it is always open to the State Government while issuing the notification relating to exemption to examine that how much exemption is to be granted. The U.P. Industrial Policy, 1994 on which much emphasis has been placed is not an Industrial Policy, issued by the State Government and approved by the Cabinet itself. Under the said policy, no specific exemption has been provided. A Special Incentive to Large Industrial Unit has only been proposed to be granted on a case to case basis depending upon various factors inasmuch as there is nothing in the Industrial Policy which provides 200% exemption in additional capital investment making ₹ 50 crores additional investment and the same has been taken away by the notification - Decided against assessee.

Summary

Issues Involved:
1. Entitlement to 200% tax exemption on fixed capital investment.
2. Conformity of Notification dated 19.7.1996 with the Industrial Policy of 1994.
3. Validity of the Eligibility Certificate issued on 17.6.1999.
4. Timeliness and laches in filing the writ petition.
5. Authority of the court to mandate changes in tax exemption policies.

Issue-wise Detailed Analysis:

1. Entitlement to 200% Tax Exemption on Fixed Capital Investment:
The petitioner sought a writ of mandamus directing the respondents to grant a 200% tax exemption on its fixed capital investment instead of the 100% provided. The petitioner argued that the Notification dated 19.7.1996 was not in conformity with the Industrial Policy of 1994, which allegedly provided for a 200% exemption for large industrial units with investments over Rs. 50 crores. However, the court found that the petitioner had initially applied for and was granted a 100% exemption under the said notification. The court held that the petitioner could not claim a 200% exemption after availing the 100% exemption for more than eight years.

2. Conformity of Notification Dated 19.7.1996 with the Industrial Policy of 1994:
The petitioner contended that the Notification dated 19.7.1996 should be modified to align with the Industrial Policy of 1994, which purportedly provided special incentives to large industrial units. The court examined the policy and found that it did not explicitly provide for a 200% exemption. Instead, it proposed special incentives on a case-to-case basis, depending on various factors such as the unit's location, employment potential, and contribution to economic development. The court concluded that the notification was not repugnant to the Industrial Policy.

3. Validity of the Eligibility Certificate Issued on 17.6.1999:
The petitioner was issued an Eligibility Certificate on 17.6.1999, granting a 100% exemption on its capital investment of Rs. 96,41,67,155/- for the period from 13.2.1998 to 12.2.2006. The petitioner did not initially contest the 100% exemption and continued to avail it. The court found that the petitioner had accepted the terms of the Eligibility Certificate and could not subsequently claim a higher exemption.

4. Timeliness and Laches in Filing the Writ Petition:
The court noted that the petitioner filed the writ petition on 23.10.2007, long after the period of exemption had expired on 22.2.2007. The court held that the petition was highly belated and barred by laches, as the petitioner had raised the claim for a 200% exemption only after availing the 100% exemption for over eight years.

5. Authority of the Court to Mandate Changes in Tax Exemption Policies:
The court emphasized that Section 4-A of the U.P. Trade Tax Act provides exemptions based on notifications issued by the State Government. The court stated that it could not issue a mandamus to the State Government to provide more exemption than what was stipulated in the notification. The court held that it was within the State Government's discretion to determine the extent of tax exemptions, and the court could not mandate a 200% exemption when the notification provided for a 100% exemption.

Conclusion:
The court dismissed the writ petition, finding no merit in the petitioner's claims. The court held that the petitioner was not entitled to a 200% tax exemption, the Notification dated 19.7.1996 was not repugnant to the Industrial Policy of 1994, and the petition was barred by laches. The court also affirmed that it could not mandate changes in the State Government's tax exemption policies.