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2015 (1) TMI 501 - HC - VAT and Sales TaxExemption from tax @ 25% or 75% RST - Duty demand along with interest - demand raised, by way of enforcement of the undertaking given by the petitioner-Company, pursuant to the Notification dated 22.2.2002 - A Rajasthan Sales Tax New Incentive Scheme for Industries, 1989 To remove imbalance between different units, Govt. issued special Notification dated 22.2.2002 in exercise of the powers vested under section 15 of the Act whereby 75% exemption was allowed subject to an undertaking in writing to the effect that it will deposit the benefit availed by it exceeding 25% of its tax liability, in case order of Rajasthan HC is modified by the Supreme Court. Assessee filed the undertaking and agreed to pay without demur or loss to exchequer. Supreme Court vide order 19.2.2014, held that RST exemption beyond 25% was not allowable and proceedings in terms of undertaking were initiated against assessee. One company ACRL was declared sick and BIFR passed revival order which provided merger of sick company with assessee on various terms and condition but the Sanctioned Scheme did not relieve the Company of effect of undertaking. The State Government was only required to consider for such relief which was not granted. Further, assessee was availing tax deferment benefit whereby it was recovering full amount of RST and CST from its customers but making deferred payment to exchequer per scheme. State Government by Notification dated 9.3.2007, gave option to the assessees to pay the present discounted value of the deferred amount in full and final settlement of the total deferred amount. Assessee informed revenue with full particulars and no objection was received, made prepayment and after informing revenue discontinued making payment of installments of deferred tax. Held that - The matter pending before the Supreme Court was finally decided on 19.2.2014, in which it was held that M/s Binani Cements was not entitled to the RST exemption beyond 25% and on which proceedings were initiated against the petitioner-Company. The undertaking became effective as soon as the Supreme Court decided the matter on 19.2.2014 and that any benefit retained by the petitioner, if allowed to be retained, would result into reverse discrimination, whereas M/s Binani Cements would be able to claim incentive only to the extent of 25%, the petitioner despite its undertaking would get incentive of 75%. - terms of the undertaking after it was unconditionally accepted, cannot be altered, as a person seeking exemption on an undertaking, which is agreement, cannot be allowed to reprobate. The doctrine of benefits and burdens postulates that a person taking advantage under an instrument which both grants a benefit and imposes a burden, cannot take the former without complying with the latter. A person cannot approbate and reprobate or accept and reject the same instrument. The only issued before the BIFR was the period of incentive. The question of relieving the Company of its undertaking linking it with the case of M/s Binani Cements, which was pending in the Supreme Court, was not the subject matter, which was either discussed or considered by the BIFR, nor, in our opinion, the BIFR could have de-linked the petitioner Company from the case of M/s Binani Cements and relieved it from the liability in case the matter was decided by the Supreme Court against M/s Binani Cements. - The rehabilitation scheme (SS-04) sanctioned by the BIFR on 7.1.2004 did not provide for sales tax incentive beyond 25% nor there was any clause in the SS-04, which may have relieved the petitioner-Company from Binani effect. BIFR under section 19 of the Sick Industrial Companies (Special Provisions) Act, 1985 read with Regulation 33, does not have any power to direct, in the absence of specific consent, the State Government to grant any incentive, which is not a part of the policy of the State Government. In view of the decision of the Supreme Court in S tate of U.P. v . UPTRON Employees Union, CMD ((2006) 5 SCC 319), no direction can be given by the BIFR directing any State to grant or not to grant any incentive or to relieve the petitioner of any statutory liability. Question of pendency of the Appeal filed by the State of Rajasthan against the judgment of the Rajasthan High Court providing 75% exemption to M/s Binani Cements and the undertaking given by the petitioner, in pursuance to the Notification dated 22.2.2002, which clearly provided for giving such undertaking and exemption was dependent on such undertaking, was neither discussed nor considered by the BIFR. Further, in our view, in any case, the BIFR could not have relieved the petitioner Company from its obligations under the Notification dated 22.2.2002 and the undertaking given by the petitioner-Company, which had to come into force only if the judgment of the Rajasthan High Court was modified by the Supreme Court. The BIFR could not foreseen the fact nor it could have granted any relief, which may have come into force on any unforeseeable event in future. The petitioner Company was availing the deferment of 75% in view of the Notification dated 22.2.2002, which on account of the reversal of the judgment of the Rajasthan High Court by the Hon ble Supreme Court, was reduced to 25% and thus, the legal entitlement for deferment under the Notification dated 31.3.2006 was reduced to 25% for the years 2006-07 to 2008- 09. The petitioner had availed additional benefit of 50%, which was not permissible as an effect of the judgment of Hon ble Supreme Court in the matter of M/s Binani Cements. This amount was even otherwise required to be paid to the State in the relevant years on monthly or quarterly basis under section 20(1) of the Act of 2003. - no pre-payment in respect of the amount which was already delayed was available. The amount already delayed could not be further postponed by a period of seven years, on which the petitioner claimed for early re-payment. The claim is thus not permissible. The liability in the present case arose in terms of Section 20(4) read with Section 55(1) (a) and (c) for the delay in payment within the time specified under the Act from the day immediately succeeding the date specified for such payment and ending with the day on which such payment is made. The petitioner-Company was liable to pay the interest on the excess of the incentive in terms of the undertaking given by it to return the benefit actually availed and to pay without demur the loss to the revenue. The judgment of Hon ble Supreme Court in M/s Binani Cements, with which the petitioner s case is linked by undertaking, restored the Eligibility Certificate dated 29.3.1997 with effect from 27.3.1997 and thus, once the original exemption to the extent of 25% was restored, the differential tax has to be paid/disgorged by the petitioner without any loss to the exchequer. The entire benefit had to be restored and on which the petitioner was required to pay interest on the amount withheld by it. The petitioner must restore the amount retained by it as a benefit, after the judgment of Hon ble Supreme Court dated 19.2.2014 in M/s Binani Cement s case and in terms of the undertaking given by it to the State Government. Any other view will amount to grant of unjust benefit to the petitioner-Company at the expense of the State. The petitioner must restitute and recompensate the State Government in terms of its undertaking which was not diluted, modified or affected in any manner by the order of BIFR or the scheme for deferment of tax. The restitution must be from the date when the petitioner was liable to pay. A perusal of the impugned order would show that the primary issue to be decided, namely, the effect of the Notification dated 22.2.2002 was discussed and considered and by which the competent authority found that the extent of the benefit available to the petitioner-Company would be limited only to 25% i.e. the change in the percentage of incentive, which has consequential effect on the extent of deferment under the Notification dated 31.3.2006, by virtue of Clause (6) and as such, the adjudication with regard to the percentage of incentive available to the petitioner-Company was made in the impugned order. The petitioner-Company is clearly, in view of the undertaking given by it on 19.3.2002, in terms of Clause (3) of the Notification dated 22.2.2002, is not entitled to any relief from this Court. - Decided against Petitioner.
Issues Involved:
1. Enforceability of the undertaking given by the petitioner-company. 2. Jurisdiction and authority of the demand notice. 3. Validity of the Notification dated 22.2.2002. 4. Impact of the BIFR sanctioned scheme on the undertaking. 5. Applicability of deferment benefits under the Rajasthan Value Added Tax Act, 2003. 6. Demand for interest on the differential tax amount. Detailed Analysis: 1. Enforceability of the Undertaking Given by the Petitioner-Company: The petitioner-company, a large-scale cement unit, had given an undertaking on 19.3.2002 to repay the additional benefit claimed if the Supreme Court modified the Rajasthan High Court's judgment in the M/s Binani Cement case. This undertaking was linked to a Notification dated 22.2.2002, which provided a 75% tax exemption to the petitioner-company, similar to M/s Binani Cement. The Supreme Court's decision on 19.2.2014, which limited M/s Binani Cement's exemption to 25%, triggered the enforceability of the undertaking. The court held that the petitioner-company must honor the undertaking and repay the differential tax amount exceeding the 25% exemption. 2. Jurisdiction and Authority of the Demand Notice: The petitioner-company challenged the demand notice dated 7.4.2014, claiming it was without jurisdiction and authority. The court found that the demand notice was valid and within the jurisdiction of the Commercial Taxes Department, as it was issued following the Supreme Court's decision and the terms of the undertaking given by the petitioner-company. 3. Validity of the Notification Dated 22.2.2002: The petitioner-company contended that the Notification dated 22.2.2002, under which the undertaking was given, was not enforceable. The court upheld the validity of the Notification, stating that it was issued to maintain parity with M/s Binani Cement and was legally binding on the petitioner-company, which had voluntarily accepted its terms. 4. Impact of the BIFR Sanctioned Scheme on the Undertaking: The petitioner-company argued that the BIFR's sanctioned scheme (SS-04) for its revival, which provided for a 75% tax exemption, rendered the undertaking infructuous. The court rejected this argument, noting that the BIFR's scheme did not relieve the petitioner-company from the conditions of the Notification dated 22.2.2002 or the undertaking. The BIFR's order did not de-link the petitioner-company from the M/s Binani Cement case or modify the undertaking's terms. 5. Applicability of Deferment Benefits Under the Rajasthan Value Added Tax Act, 2003: The petitioner-company claimed that the deferment benefits granted under the Rajasthan Value Added Tax Act, 2003, should not be subject to the undertaking. The court held that the deferment benefits were linked to the Notification dated 22.2.2002, and the extent of deferment was limited to the percentage of incentive available in the preceding year. Consequently, the deferment benefit for the petitioner-company was reduced to 25% following the Supreme Court's decision. 6. Demand for Interest on the Differential Tax Amount: The petitioner-company contested the demand for interest on the differential tax amount. The court ruled that interest was payable on the excess tax retained by the petitioner-company, as per Sections 20 and 55 of the Rajasthan Value Added Tax Act, 2003. The interest was calculated from the date the tax was due until the date of payment, in line with the principles of restitution and unjust enrichment. Conclusion: The court dismissed the writ petitions filed by the petitioner-company, upholding the enforceability of the undertaking, the validity of the Notification dated 22.2.2002, and the demand for differential tax and interest. The petitioner-company was directed to comply with the terms of the undertaking and pay the differential tax amount along with the applicable interest. The court emphasized the principles of unjust enrichment and restitution, ensuring that the State was compensated for the delayed tax payments.
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