2017 (4) TMI 74 - HC - VAT and Sales Tax

Benefit of Sales tax incentive scheme - for Phase-I Project the petitioner has been granted the Incentive Scheme under the Government Resolution dated 11.09.1995 treating it as premier unit. However, for Phase-II Project the petitioner has been denied the Sales Tax incentive under the Government Resolution dated 11.09.1995 on the ground that for Phase-II Project the unit is based on natural gas which can be said to be local mineral resources for which permit / license is required under the Mineral Rules or Act and therefore, for the Phase-II, the petitioner is ineligible to get the incentive benefit as per Clause 9(c) of the Annexure-B to the Incentive Scheme - whether for its Phase-II Project the petitioner is entitled to the benefit of Incentive Scheme under the Government Resolution dated 11.09.1995 more particularly as a premier unit or not? Held that - while considering the question posed in the present petition, it is required to be considered whether natural gas / gas used by the petitioner in its Phase-II Project can be said to be local mineral resources for which permit / license is required under any Rules or Mineral Act,At this stage it is required to be noted that the raw material used in Phase-II of Gandhar Complex was gas and ethylene. The gas was procured from GAIL which supplied it to the petitioner through pipeline. In light of the aforesaid facts it is required to be considered whether the gas used can be said to be local mineral resource for which any license or permit under any Mineral Act or Rules is required. Natural gas cannot be said to be mineral/local mineral resource for which any permit/license is required under any of the provisions of the Mines and Mineral Act or Rules, the impugned decision to deny the benefit of the Sales Tax incentive under the Government Resolution dated 11.09.1995 to the petitioner for Phase-II Project cannot be sustained and the same deserves to be quashed and set aside and the matter is required to be remanded to the State Government for its fresh decision in light of the observations made hereinabove and to grant the benefit of the Incentive Scheme to the petitioner for Phase-II Project of Gandhar Complex if all other conditions of the Government Resolution dated 11.09.1995 are satisfied. Petition allowed by way of remand.

Issues Involved:
1. Eligibility for Tax Exemption under the Incentive Scheme for Phase-II of Gandhar Complex.
2. Applicability and interpretation of Clause 9(c) of Annexure-B to the Incentive Scheme.
3. Classification of natural gas as a local mineral resource.
4. Doctrine of legitimate expectation and principle of promissory estoppel.
5. Alleged discrimination between public sector and private sector under the Incentive Scheme.

Detailed Analysis:

1. Eligibility for Tax Exemption under the Incentive Scheme for Phase-II of Gandhar Complex:
The petitioners sought to quash the decision declaring Phase-II of Gandhar Complex ineligible for Tax Exemption under the "Capital Investment Incentive to Premier/Prestigious Units Scheme, 1995-2000" (Incentive Scheme). The petitioners argued that the decision was arbitrary and based on a misinterpretation of the scheme, particularly Clause 9(c) of Annexure-B. They contended that Phase-II of Gandhar Complex should be eligible for the same benefits as Phase-I, which had been granted exemption earlier.

2. Applicability and interpretation of Clause 9(c) of Annexure-B to the Incentive Scheme:
Clause 9(c) of Annexure-B to the Incentive Scheme states that units based on local mineral resources requiring permits or licenses under any Mineral Rules or Act are not eligible for the incentive. The petitioners argued that natural gas, used in Phase-II, does not fall under this category as it is not a local mineral resource requiring permits or licenses under any Mineral Act or Rules. The court agreed, citing the Supreme Court's decision in Association of Natural Gas & Others vs. Union of India & Others, which held that natural gas in raw and liquefied form is a petroleum product and part of mineral oil resources, not requiring permits under the Mineral Act or Rules.

3. Classification of natural gas as a local mineral resource:
The court examined whether natural gas used in Phase-II could be considered a local mineral resource. It referred to the Mines and Minerals (Development and Regulation) Act, 1957, which excludes mineral oils (including natural gas and petroleum) from the definition of minerals. Therefore, natural gas used by the petitioner in Phase-II could not be classified as a local mineral resource requiring permits or licenses under the Mineral Act or Rules. The court concluded that the decision to deny the benefit of the Incentive Scheme based on this classification was incorrect.

4. Doctrine of legitimate expectation and principle of promissory estoppel:
The petitioners argued that the denial of tax exemption for Phase-II violated the doctrine of legitimate expectation and the principle of promissory estoppel, as the respondents had previously considered granting the benefit for Phase-II. The court found merit in this argument, noting that the respondents' decision was inconsistent with their earlier actions and assurances.

5. Alleged discrimination between public sector and private sector under the Incentive Scheme:
The petitioners contended that Clause 9(c) of Annexure-B was discriminatory and violated Article 14 of the Constitution of India, as it created an arbitrary distinction between public sector and private sector undertakings. The court did not find it necessary to rule on this issue, given its findings on the other points.

Conclusion:
The court quashed the respondents' decision rejecting the petitioners' claim for tax exemption under the Incentive Scheme for Phase-II of Gandhar Complex. It directed the respondents to reconsider the petitioners' case in light of the court's observations and grant the benefit if all other conditions of the Government Resolution dated 11.09.1995 are satisfied. The respondents were instructed to take this decision within three months. The rule was made absolute to this extent, with no order as to costs.

← Previous Next →