2015 (3) TMI 476 - HC - VAT and Sales Tax

Exemption in terms of the Industrial Policy, 1989 - Denial of exemption certificate - business carried on by it was in the negative list - Held that - Whereas the petitioner has claimed the impugned order to be wrong and not binding and praying for quashing of the said order had sought mandate against respondents No.1 and 3 for granting sales tax exemption, the respondents have asserted validity and legality of the impugned order urging that the petition was frivolous. It is claimed that neither doctrine of equitable estoppel nor of legitimate expectations come to the rescue of the petitioner. - Merely because 'expelling and crushing' units were not in the negative list of the Industries Department, is not a fact which could entitle the petitioner for issuance of exemption certificate by the Department of Excise and Taxation as the matter was governed by the Punjab General Sales Tax Act, 1948. The Excise and Taxation Department was not to automatically follow decision taken by the Industries Department. Petitioner could claim exemption from the payment of sales tax only on the basis of exemption certificate to be issued by the Excise and Taxation Department which was then to be attached along with e-return under Rule 3(2) of the 1991 Rules. When the unit of the petitioner was on the negative list in terms of the 1991 Rules and was not eligible for the grant of sales tax exemption, claim of the petitioner that it had satisfied all the requirements, is misleading. Perusal of paper book reveals that the application of the petitioner for grant of exemption from sales tax was not lying pending but had remained actively under consideration of the respondents all through but the petitioner itself had rather been postponing such proceedings as it had not been producing account books despite having been asked to do so and had all through making endeavour for bringing the unit within the provisions of the 1991 Rules. Even the case of the petitioner was not considered favourably in the meetings held on 10.12.1993 (Annexure R-6) and on 31.3.1995 (Annexure R-7). In the meeting of 31.3.1995, the Department of Excise and Taxation had declined to accept the claim of the petitioner for sales tax exemption noticing that even the notification of 23.5.1991 of the Industries Department had already been withdrawn by the said department itself on 21.3.1994. It is, thus, noticed that at no stage, there was any representation made by the respondents acting upon which the petitioner could have been taken in for installing its unit. Rather, it is clear that unit of the petitioner was continuing on the negative list and was not entitled for grant of exemption certificate under the 1991 Rules. In this backdrop of facts and circumstances, even the doctrine of legitimate expectations does not enure for the petitioner. Consequently, the respondents were right in rejecting claim of the petitioner for sales tax exemption under the 1991 Rules vide order dated 3.7.1998 - impugned order of 3.7.1998 (Annexure P-35) is also appealable one under Section 20 of the Punjab General Sales Tax Act, 1948, whereas in the writ petition, the petitioner has specifically mentioned that no efficacious remedy of appeal is available against the impugned order - petition, being without any merit - Decided against assessee.

Summary

Issues:
1. Grant of sales tax exemption under the Industrial Policy, 1989.
2. Validity of the order declining the exemption certificate.
3. Application of the doctrine of equitable estoppel.
4. Allegations of inordinate delay and harm caused.
5. Impact on profitability and financial difficulties faced.
6. Contestation by respondents regarding the eligibility for exemption.
7. Interpretation of relevant rules and notifications.
8. Claim of exemption under the Punjab General Sales Tax Act, 1948.
9. Consideration of legitimate expectations doctrine.
10. Availability of appeal against the impugned order.

Analysis:
1. The petitioner challenged the order declining the grant of sales tax exemption under the Industrial Policy, 1989. The petitioner sought a writ of mandamus to quash the order and direct the authorities to provide the exemption. The Industrial Policy aimed to attract industrialists for industrial development and employment generation. An amendment in 1991 removed 'expelling and crushing' from the negative list, affecting the petitioner's eligibility for incentives.

2. The petitioner faced financial harm due to the delay in processing the exemption application. Non-issuance of the certificate impacted profitability, leading to financial difficulties and defaulting on loans. The prolonged inaction by authorities caused significant losses and forced the petitioner to seek legal recourse. The petitioner alleged arbitrary and discriminatory behavior violating constitutional provisions.

3. The respondents contested the petition, arguing that the petitioner was not automatically entitled to exemption based on the Industries Department's decisions. The Excise and Taxation Department's rules governed the exemption process under the Punjab General Sales Tax Act, 1948. The respondents highlighted discrepancies in the petitioner's compliance with the exemption requirements.

4. The judgment emphasized that the petitioner's eligibility for exemption relied on the Excise and Taxation Department's certificate, not just the Industries Department's decisions. The petitioner failed to meet the necessary criteria for exemption, and meetings held to consider the case did not favor the petitioner. The doctrine of legitimate expectations did not apply in this context, and the petitioner's claim was deemed misleading.

5. The court dismissed the petition, stating that the impugned order was valid and appealable under the Punjab General Sales Tax Act, 1948. The judgment concluded that the petition lacked merit based on the facts and circumstances presented, upholding the decision to reject the petitioner's claim for sales tax exemption under the 1991 Rules.