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TMI Blog2013 (9) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... the deferral of tax payment as concession that was obtained by the petitioner is now sought to be revised. The eligibility certificate followed by an agreement reached between the parties cannot be reopened at the instance of the petitioner that too sitting under Article 226 of the Constitution. In different circumstances, the common sense meaning of certain products can mean different things and difference places especially in the context of deferral scheme. ITC Batrachalam Vs. State of A.P. [2001 (3) TMI 873 - SUPREME COURT OF INDIA] - When matters are interconnected, it is the duty of the counsel to bring it to the notice of the court the pendency of other matters in relation to the same subject - Even otherwise the court merely directed the respondents to reconsider the question as to whether the steel scrap produced by the petitioner industry will qualify to be the product so as to enjoy the eligibility certificate. Under Section 4-A of the U.P. Trade Tax Act, a soft drink company claimed eligibility certificate for deferral payment. The eligibility certificate defined the financial limit for fixed capital investment for availing deferrals. The question arose whether b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 has been filed. On behalf of the third respondent SIPCOT, a common counter affidavit dated 8.2.2012 has also been filed. 6. The case of the petitioner company was that they have set up a factory at SIPCOT Industrial Park, Irungattukottai. During the production in the factory, steel scrap emerges marketable by-product while manufacturing assembly and sub assembly of sheet metal components which are automobile parts. The State Government had issued a Government Order in G.O.Ms.No.500, Industries Department, dated 14.5.1990 and declared the most backward Taluks in Tamil Nadu and also incentive scheme for industries located which included interest free sales tax for which liberalization has been made. In paragraph 4 of the said G.O., salient features of the scheme were set out and the list of backward taluks were mentioned in the annexure. 7. Subsequently, the Government had issued G.O.Ms.No.92, CTRE Department, dated 22.2.1991 under Section 17-A of the Tamil Nadu General Sales Tax Act, 1959 by which number of backward taluks were increased to 75 as annexed to the G.O. It was stated that new industries situated in those taluks on the sale of product manufactured by the unite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctures any other goods under the guise of the products of which the certificate has been issued or if the Commercial Tax Dept., is of the opinion that the unit/company is not manufacturing the product for which the E.C has been issued, the E.C issued shall stand cancelled. The Commercial Tax Dept., shall have the right to demand and collect the tax assessed for all the years covered by the scheme and the unit/company is liable to pay the same in one lump sum. 8. They have also entered into an agreement with the Commercial Tax Department, dated 25.2.2002. It is necessary to refer to several clauses from the agreement as it will have a bearing on this case and they are as follows: 1.Total deferral amount eligible: ₹ 1521.17 lakhs, (Rupees One thousand five hundred twenty one lakhs and seventeen thousand only). ............. NOW THEREFORE IT IS AGREED between the parties as under: The Sales Tax due on the Sale of the products manufactured by them in their OWN FACTORY shall be deemed to have been paid to the Assessment Authority and an identical amount shall be treated as Government Loan. a) In the case of new industries, it shall be for the full tax, subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any irregularity on our part in the availment of deferral on the sale of iron and steel scraps. ..... ...We wish to submit the scrap emerges as a marketable by-product in our industrial activity. There are industrial consumers ready and willing to buy our scrap. We further submit that even the Tamil Nadu legislature has considered scrap to be a distinct product and has brought about the taxability of scrap under a distinct heading under Item 56 of Part B of the First Schedule, taxable at the rate of 4%. This would show that even the law recognises scrap as a distinct marketable commodity. Their queries are as follows: (i) that suitable clarification may be issued by your good office to the effect that scrap sold by us is also entitled for the benefit of deferral of sales tax under Eligibility Certificate in No.304/IX/D/N, dated 10.04.2001 pursuant to G.O.P.No.92, dated 22.02.1991; and (ii) that suitable clarification may be issued by your good office to the concerned assessing authorities to the effect that our current Eligibility Certificate is adequate to cover the scrap, particularly having regard to the ruling of the Hon'ble Madras High Court. 11.The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generated only out of manufacturing activity and hence it forms part and parcel of production activity only though it is a by-product. Basically deferral facility was extended to the manufacturing unit those situated in the back ward area irrespective of the product they manufacture. Hence as the deferral facility is not product based and can be extended to manufacturing activity thereby occurrence of any product be it main product or by-product. Considering the above fact, we request you to extend the deferral facility even for the sale of scrap as the scrap is generated only out of manufacturing activity only. 16.However, the first respondent by an assessment order dated 31.3.2006 had refused to grant deferral facility for the sale of scrap and made the following remarks in the assessment order which is as follows : Regarding the claim of deferral facility for the sales of scrap amounting to ₹ 14,06,35,035/- their contention was not acceptable since there is no manufactured goods is involved. Hence this turnover of ₹ 14,06,35,035/- will be treated as not covered by deferral scheme. 17. Though the petitioner is entitled to file an appeal to the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.17 lakhs. The term used initial will have to have the meaning that the deferral of sales tax fixed is with respect to initial gross fixed assets and that will increase the value of the fixed assets. No additional amount can be claimed as deferral. The petitioner had not claimed any additional deferral above the ceiling fixed by the department. It is not the case that the petitioner exceeds the ceiling fixed by the SIPCOT. It is only the question of whether the scrap emerged at every stage in the course of manufacturing activities as by-product in the petitioner unit will also be covered for entitled for deferral of sales tax. 22 .Mr. N. Prasad, learned counsel for the petitioner referred to an order of the State Government in G.O.Ms.No.500, Industries Department, dated 14.5.1990 and contended that deferral incentive was given for encouraging more industries in Tamil Nadu. Therefore, the concession was extended and the petitioner has located the unit in one such area identified by the State. In paragraph 5 of the order, it is very clear that it is subject to sales tax payable on products manufactured by the capacity created by expansion or diversification of units. Likewise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of his order..... (Emphasis added) 24. Even after the direction, the contention raised by the third respondent SIPCOT as projected by Ms. Narmada Sampath was that there is no warrant for expanding the scope of the eligibility certificate. Once it is allowed, it may give rise to several chain reactions. 25. In the common counter affidavit filed by the Sales Tax authorities, in paragraph 6, it was averred as follows: 6. It is submitted that the State Industries Promotion Corporation of Tamilnadu (SIPCOT), the third respondent herein, has fixed the deferral sales tax amount of ₹ 1521.17 lakhs with reference to 100% value of Initial Gross Fixed Assets of ₹ 1521.17 lakhs as specified in conditions 4.2 of the Eligibility Certificate. The expression initial in condition 4.2 of the Eligibility Certificate is important since this expression 'initial' means that the deferral of sales tax fixed is with respect to initial gross fixed assets and by increasing the value of fixed assets no additional amount could be claimed as sales tax deferral. Accordingly assessment order was passed in TNGST 1662041, for the assessment years 2001-02, 2002-03 and 2003-04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can mean different things and difference places especially in the context of deferral scheme. 28. Under Section 4-A of the U.P. Trade Tax Act, a soft drink company claimed eligibility certificate for deferral payment. The eligibility certificate defined the financial limit for fixed capital investment for availing deferrals. The question arose whether bottles and crates which hold them will also be eligible to come under the fixed capital came to be considered by the Supreme Court in Commissioner of Trade Tax, Uttar Pradesh Vs. Varun Beverages Limited reported in (2011) 11 SCC 308. After referring to a judgment of the Supreme Court in State of Bihar Vs. Steel City Beverages Ltd. reported in (1999) 1 SCC 10, wherein the Supreme Court has held that exemption scheme will have to be construed liberally and in that context, while construing the meaning of the term plant and machinery, the Supreme Court agreed that bottles for which investments were made were eligible to be counted for fixed capital investment, but at the same time, crates were excluded. It is necessary to refer to the following passage found in paragraph 21 of the judgment which reads as follows: 21........we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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