2019 (8) TMI 416 - HC - VAT and Sales Tax

Benefit of Composition Scheme - Civil Works Contractors - sale of immovable property in construction scheme - deemed sale or not - HELD THAT - What needs to be emphasized is that the State and/or its agencies/instrumentalities cannot give largesse to any person according to the sweet will and whims of the officers of the State. Every action/decision of the State and/or its agencies/instrumentalities to give largesse or confer benefit must be founded on a sound, transparent, discernible and well defined policy, which shall be made known to the public by publication in the Official Gazette and other recognized modes of publicity and such policy must be implemented/executed by adopting a non-discriminatory and non-arbitrary method irrespective of the class or category of persons proposed to be benefitted by the policy. The inmplimentation of scheme by the State and its agencies/instrumentalities should always be done in a fair and equitable manner and the element of favoritism or nepotism shall not influence the exercise of discretion, if any, conferred upon the particular functionary or officer of the State. It is clear that the action of the authority denying the benefit of the scheme to the writ applicant in question is totally arbitory and the benefit is required to be given to the writ applicant - petition allowed.

Issues Involved:
1. Eligibility for the benefit of the composition scheme.
2. Timing of the application and payment under the scheme.
3. Interpretation of the scheme's provisions regarding pending assessments and appeals.
4. Allegations of arbitrary and unreasonable administrative action.

Issue-Wise Analysis:

1. Eligibility for the Benefit of the Composition Scheme:
The petitioner, a Civil Works Contractor registered under the Companies Act, 1956, and the Gujarat Value Added Tax Act, 2003, sought the benefit of a composition scheme introduced by the Government of Gujarat via a resolution dated 14/10/2014. This scheme allowed works contractors to pay tax on eligible turnover at a flat rate of 0.6%. The petitioner applied for this benefit on 09/04/2015 and paid the required taxes for the years 2009-10 and 2010-11. However, the application was rejected by the Commercial Tax Officer on the grounds that assessments for these years had already been framed before the payment of taxes under the scheme.

2. Timing of the Application and Payment under the Scheme:
The petitioner argued that Clause 10 of the scheme allowed the benefit to be availed even if an "appeal" was pending, implying that the benefit could also be availed if an "assessment" had been framed. The petitioner’s application was rejected because the assessment had been framed before the payment of taxes. The respondent contended that the petitioner did not claim any benefit under the scheme before the assessment and that the taxes were deposited after the scheme's initial period had expired. However, the scheme was subsequently extended, and the court found that the petitioner had applied within the operative period of the scheme.

3. Interpretation of the Scheme's Provisions Regarding Pending Assessments and Appeals:
The court noted that Clause 10 of the scheme allowed the benefit to be availed even in cases where an appeal was pending, which implied that the benefit could also be availed if an assessment had been framed. The court found that the rejection of the petitioner’s application on the ground that the assessment had been framed was incorrect. The scheme also provided that the benefit could be availed in cases where assessment, reassessment, or revision was in progress, and the subsequent extension of the scheme applied retrospectively.

4. Allegations of Arbitrary and Unreasonable Administrative Action:
The court emphasized that the discretion of a statutory body must be exercised according to law and not arbitrarily. It cited several precedents affirming that statutory powers must be used for public purposes and within clearly defined limits. The court found that the respondent authority’s interpretation of the scheme was incorrect and that the rejection of the petitioner’s application was arbitrary and unreasonable. The court held that the petitioner was entitled to the benefits of the scheme as the scheme had been extended with retrospective effect.

Conclusion:
The court allowed the petition, quashing the impugned order dated 04/07/2018 and directing the respondent authority to grant the benefits of the composition scheme to the petitioner within four weeks. The court underscored the principles of non-arbitrariness and fairness in administrative actions, reiterating that statutory powers must be exercised within the limits of the law and for public purposes.

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