2015 (3) TMI 695 - HC - VAT and Sales Tax

Constitutional validity of Government notification dated 1.10.2012 - Whether Notification illegal, unlawful and violative of Article 14 of the Constitution - Held that - Principal policy changes made by the Government from time to time. Right from the year 1981, the whole purpose of the Government scheme is to provide subsidy of sales tax or VAT, as the case may be, to small fishermen on purchase of high speed diesel. This would necessarily create two price regimes. Small fishermen would purchase diesel at subsidized rate and rest of the consumers would pay the price inclusive of the VAT component. To block the pilferage from time to time, various provisions were made. In the year 2003, it was noticed that the existing scheme of supplying diesel to the cooperatives of fishermen which were recognized and which were operating petrol pumps was not working out quite satisfactorily. In the year 2003, therefore, a major change was introduced. All petrol pumps were allowed to sell such diesel to the fishermen, but the subsidy was made directly to the fishermen concerned. In the year 2012, further major changes have been made. While reverting back to the original scheme of allowing only GFCCA and recognized fishermen cooperatives to sell such subsidized diesel, the scheme for reimbursement of VAT subsidy directly to the fishermen is maintained. While doing so, various stringent provisions have been made to ensure that such subsidy is not frittered away. Subsidy is made available to those fishermen who have mechanized boats of less than 20 meters in length. Such boats are registered and enjoy current fishing license. At the time of sale of diesel, various details have to be noted down. Such details included, time, date and quantity of sale, total VAT component, etc. Diesel would be sold only on the proof of sorties that the boat would make for fishing. All these provisions are aimed at controlling and reducing the misuse of subsidy. - Government has not committed an error in issuing the impugned notification. The task of selling such high speed diesel to the fishermen cooperatives cannot be stated to create hostile discrimination. With a dual purpose of encouraging fishermen cooperatives and to keep some semblance of control over various details required to be noted down at the time of supply of such diesel, if the diesel cards are to be issued only through such recognized cooperatives, the petitioner who does not fall in such categories cannot complain. The petitioner s right to sell petroleum products is not taken away. The petitioner would continue to operate its petrol pump, of course, with a limitation of not being able to supply subsidized diesel to the fishermen. - When the petitioner is not forming the class of persons who can quality for such recognition, at the hands of the petitioner, we are not interested in examining such a challenge. - Decided against assessee.

Summary

Issues:
Challenge to Government notification dated 1.10.2012 as illegal, unlawful, and violative of Article 14 of the Constitution.

Detailed Analysis:

1. Background of the Petitioner's Business:
The petitioner, a partnership firm running a petrol pump in Okha town since 1966, challenged a Government notification dated 1.10.2012. The notification pertained to the waiver of value-added tax on diesel for small fishermen with mechanized boats less than 20 meters in length.

2. Evolution of Government Policies:
Over the years, the Government introduced changes to the scheme for providing subsidies on high-speed diesel to fishermen. Notably, in 2003, a significant shift occurred where subsidies were directed to fishermen instead of distributors. The 2012 notification reverted to the original scheme, limiting the subsidy to fishermen with boats over 20 meters, with stringent requirements for registration and documentation.

3. Validity of the Notification:
The petitioner's counsel argued that the restrictions imposed by the 2012 notification were unreasonable and discriminatory, affecting the petitioner's business negatively. However, the Court observed that the Government's policy changes aimed to prevent misuse of subsidies and maintain control over the distribution of subsidized diesel to fishermen.

4. Discrimination and Policy Rationale:
The Court analyzed the policy changes made by the Government and concluded that the classification of allowing only recognized cooperatives to sell subsidized diesel did not amount to hostile discrimination. The stringent provisions were deemed necessary to prevent misuse of subsidies and ensure accountability in the distribution process.

5. Dismissal of the Petition:
Ultimately, the Court held that the Government did not err in issuing the impugned notification. The petitioner's right to sell petroleum products was not infringed, although they were restricted from supplying subsidized diesel to fishermen. The Court dismissed the petition, finding no merit in the petitioner's arguments against the notification.

6. Recognition of Cooperatives and Guidelines:
The petitioner raised concerns about the lack of guidelines for granting recognition to cooperatives. However, since the petitioner did not fall within the category eligible for recognition, the Court did not delve into examining this challenge, further solidifying the dismissal of the petition.

In conclusion, the High Court upheld the Government notification dated 1.10.2012, emphasizing the policy rationale behind the subsidy scheme for fishermen and dismissing the petitioner's challenge against the notification as lacking merit.