Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases VAT and Sales Tax VAT and Sales Tax + SC VAT and Sales Tax - 2016 (2) TMI SC This

  • Login
  • Cases Cited
  • Referred In
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2016 (2) TMI 436 - SC - VAT and Sales Tax


Issues Involved:

1. Tax exemption and deferment under the Bihar Finance Act, 1981.
2. Impact of the Bihar Reorganisation Act, 2000.
3. Classification of HR and CR products for tax exemption.
4. Validity and withdrawal of tax exemption notifications.
5. Constitutional validity of Section 95(3)(ii) and Section 96(3) of the JVAT Act.
6. Interpretation of deferment policy under the JVAT Act.
7. Imposition of interest and penalty for delayed tax payment.

Issue-wise Detailed Analysis:

1. Tax Exemption and Deferment under the Bihar Finance Act, 1981:

The State of Bihar formulated an industrial policy on 22.12.1995 to promote industrial growth, offering tax exemptions to units commencing production between 01.09.1995 and 31.08.2000. The policy aimed to attract investors by providing an eight-year sales tax exemption on the sale and purchase of materials. The 1st respondent, M/s. Tata Steel Limited, sought confirmation from the State of Bihar for sales tax exemption to set up a cold rolling mill in Jamshedpur, which was granted after due deliberation.

2. Impact of the Bihar Reorganisation Act, 2000:

Post the Bihar Reorganisation Act, 2000, Jamshedpur became part of Jharkhand. The Governor of Jharkhand, through a notification on 15.12.2000, extended the applicability of the 1981 Act to the entire state of Jharkhand. On 21.12.2000, Jharkhand issued an exemption certificate for the 1st respondent's new unit, exempting it from purchase and sales tax.

3. Classification of HR and CR Products for Tax Exemption:

The Joint Commissioner, after proper enquiry, concluded that HR and CR products are commercially different, thus entitling the 1st respondent to tax exemption. However, the Commissioner of Commercial Taxes, Jharkhand, initiated a suo motu revision, concluding that HR and CR products must be treated as the same commodity, thus denying the exemption.

4. Validity and Withdrawal of Tax Exemption Notifications:

The 1st respondent challenged the Commissioner's order, and the High Court of Jharkhand remanded the matter for further examination. The Supreme Court, in Tata Iron & Steel Co. Ltd. v. State of Jharkhand, set aside the High Court's order, restoring the exemption certificate granted by the Joint Commissioner. The 1st respondent availed the exemption until 31.03.2006, after which the Jharkhand Value Added Tax Act, 2005, came into force, withdrawing the exemption through notifications issued on 30.03.2006.

5. Constitutional Validity of Section 95(3)(ii) and Section 96(3) of the JVAT Act:

The 1st respondent challenged the constitutional validity of Section 95(3)(ii) and Section 96(3) of the JVAT Act, which converted tax exemption to deferment. The High Court upheld the enforceability of the doctrine of promissory estoppel, quashing the impugned notifications and directing the State to allow deferment of tax.

6. Interpretation of Deferment Policy under the JVAT Act:

The Supreme Court interpreted the deferment policy, stating that the repayment of deferred tax must be completed within 13 years from the date of start of deferment. The Court emphasized that the language of the notification must be given its clear meaning, avoiding any absurd interpretation. The repayment schedule must end on 31.08.2013, within a span of 5 years from the expiration of the eligibility period.

7. Imposition of Interest and Penalty for Delayed Tax Payment:

The Supreme Court directed that the 1st respondent should pay 12% interest per annum on the deferred tax amount, considering the special features of the case and the nature of litigation. The penalty provisions under Rule 66 of the JVAT Rules were deemed inapplicable.

Conclusion:

The Supreme Court disposed of the appeal, directing the 1st respondent to pay the deferred tax amount with 12% interest per annum, and quashed the imposition of penalties. The interpretation of the deferment policy was clarified to ensure compliance with the stipulated repayment schedule.

 

 

 

 

Quick Updates:Latest Updates