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TMI Blog2013 (10) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... cancellation of the eligibility certificate. Need for such a measure was felt in 1982 itself & it lead to issuance of 5.7.1982 modification. Why State Government could not bring in such an amendment immediately after 1982 is not clear. If the measure of imposing ceiling on quantum of incentives was evolved in public interest, its advance notice to aspiring investors was possible & also must. But, even in 1982 modification, the Petitioner Units are given exemption equal to cent-percent capital investments made during the period of eligibility. The mode & manner of calculating quantum continued without any ceiling for all these Petitioners & they may have also expanded their projects by investing back the exemptions granted. Even otherwise, it is obvious that no SSI unit under 1979 Scheme would have surrendered & voluntarily subjected themselves to any ceiling and hence, if Government wanted really to remedy the mischief, bringing proper legislation at the earliest was the only solution. The legislation has been brought after majority of the units completed their eligibility period. A liability not in contemplation, has been fastened for past investments which were then eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . B. H. Dangre, Additional GP JUDGMENT (Per B. P. Dharmadhikari, J. ) Three different industries i.e. Small Scale Units (SSI) have filed these writ petitions for quashing and setting aside the amendment made to Section 41C of the Bombay Sales Tax Act, 1959 (hereinafter referred to as the Act), on the ground that it is ultra-vires the Articles 14 and 19(1)(g) of the Constitution of India. There was also a challenge to Section 41D of the said Act but during the course of hearing, it has been given up. 2. To state the challenge very briefly, the petitioners urge that Eligibility Certificates given to them under the Package Incentive Scheme of 1979 do not contain any ceiling on the quantum of benefits / incentives envisaged thereunder. By the impugned amendment effected in the year 1995, that ceiling on quantum has been added retrospectively taxes otherwise exempt with penalty are being claimed. 3. We have heard Shri M.G. Bhangde, learned Senior Advocate with Shri V.V. Bhangde, learned counsel for the petitioners and Mrs. Dangre, learned Additional Government Pleader for the respondents, on various dates. 4. During hearing, on 26.07.2013, affidavit has been filed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, as stipulated in their certificates, could not expire before 1995. The amendment with effect from 01.10.1995 has thus affected the petitioners only while other units enjoyed all benefits for the during the entire eligibility period without any ceeiling. 7. Edible oil companies already functioning in the State complained of hostile treatment to them because of more benefits conferred on new Oil companies under 1979 Scheme. They approached this Court and their grievance was upheld by this Court in the case of Olympic Oil Industries Ltd. vs. State of Maharashtra, reported at 1987 STC (65) 191. Because of this litigation, the applications of the petitioners remained pending for no fault on their part and have been disposed of belatedly. They also point out that there was heavy rush of applicants in last two days before closing date and Development Corporation of Vidarbha Limited, could not process all those applications due to administrative difficulties. Few complaints were made to Anti Corruption Bureau and officers of that Bureau seized some records for investigation. Ultimately, the records were returned and applications submitted by the petitioners and other units were then l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1C are in this background. She points out that the petitioners are covered under Part (I) as per clause 4.3 of 1979 Scheme. The said Scheme underwent significant changes on 05.07.1982 and as per those changes, the ceiling has also been imposed on small scale units under said Part (I). A small scale unit cannot, therefore, get total exemption exceeding 100% of fixed capital investment during the period of its eligibility. 1979 Scheme as amended on 05.07.1982 was in force when the petitioners' applications were considered. The provisions of Section 41C as amended are in consonance with this amendment to scheme and, therefore, the challenge to constitutionality of said section has to fail. 11. She has also invited our attention to Eligibility Certificates and Entitlement Certificates as issued to respective petitioners to urge that it contain stipulation about cost of unit and also a provision of review insofar as total period of eligibility is concerned. 12. The purpose of amendment to Section 41C of the Act is sought to be explained and justified by inviting our attention to reply filed in Writ Petition No. 853 of 1996. She contends that the petitioners were right from day one, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record as part of their reply in Writ Petition No. 853/1996. Shri M.G. Bhangde, learned Senior Counsel with Shri R.M. Bhangde, learned Counsel appearing for petitioners in his reply arguments pointed out that the amendment to 1979 Scheme has not been pleaded in defence and was relied upon only during the oral arguments. He asserts that entitlement and eligibility certificates issued to petitioners are under un-amended 1979 Scheme. He further points out that the Scheme as amended in the year 1982 restricts the incentive quantum to 100% of the fixed capital investment during the period of 7 years. According to him in case of petitioners, even this restriction was never implemented. Mrs. Dangre, learned Additional Government Pleader at this stage pointed out that the petition does not contain any specific statement in this respect, and has been filed only with apprehension that in future petitioners may exceed the ceiling imposed by Section 41C of which validity has been assailed. Whether during eligibility period, the ceiling could have or has actually been exceeded, has not been pleaded and is not on record. In view of these arguments, we place the matters for further consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1996 come into force on 8.6.1995. Its impact on 1979 sales tax incentive scheme as notified on 5.1.1980 in vogue from 1.8.1979 till 31.3.1983 needs evaluation. Earlier scheme ie 1976 scheme had expired on 31.7.1979. Before proceeding further, it will be appropriate to mention events material for deciding the controversy involved in present petitions. A--Petitioner M/s Vidarbha Winding Works in WP 846 of 1996 applied for eligibility certificate on 7.1.1983. Petitioner M/s Kailash Poly Industries in WP 854 of 1996 has also given the same date as date of its application. Petitioner M/s Chandrapur Vidyut Conductor Pvt. Ltd. in WP 853 of 1996 has applied for eligibility certificate on 30.12.1982. B-- The eligibility certificate of M/s Vidarbha Winding Works is dated 27.9.89 period of 7 years during which benefits of incentive scheme were available to it is from 16.11.1991 to 15.11.1998. Its capital cost noted therein is Rs. 3,40,000/ only. The eligibility certificates of M/s Kailash Poly Industries are dated 27.2.91 16.11.1992 for period of 9 years during which benefits of incentive scheme were available to it. The said period is from 25.7.1992 to 15.9.2000 capital cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatus conferred upon only one unit in Taluk or Panchayat Samiti, depending upon their location as per Clause 3. Petitioner unit does not fall in that category. Thus unlimited incentives are not envisaged under the original Scheme of 1979 only for Pioneer Units Medium/Large Scale Units. But then it also envisages cumulative sales tax incentive the cumulative Gross Fixed Capital Investment. It does not restrict the quantum of benefits available only to initial fixed capital investment. Clause 1.2 empowers the State Government to amend the Scheme after giving 6 months notice but then the commitments already made can not be affected by such an amendment. 18. Provisions of 1979 Scheme as on 7.1.1983:-- According to Respondents, Scheme itself comprehends within itself the applicability of amendments made to original scheme from time to time. Thus, date on which incentives were applied for determines the provisions applicable to the Petitioner unit. The scheme seen in Clause 5.10 of original scheme in relation to Medium/Large Scale Units has been extended to the Small Scale Units like Petitioners as per resolution dated 5.7.1982 after expiry of period of 6 months therefrom ie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility certificates issued to them did contain a provision for review to monitor the proportionate exhaustion of incentives qua the gross capital investment, the said stipulation was never implemented Petitioners were allowed to avail the incentives without any ceiling limit, has not been disputed by the Respondents. The entitlement of Petitioners to eligibility is not in dispute the only question is of their right to continue to enjoy the unlimited incentives for full period of 7 years or 9 years, as the case may be. In absence of amendment as done on 5.7.1982 wef 10.1. 1983, also their entailment to continue could not have come into dispute. Thus, this amendment to Scheme addition of S. 41C to Bombay Sales Tax Act are the grounds to justify denial of the full benefit period to them. Their eligibility has not been cancelled on any other ground it is not the defence that it ceased to be a SSI unit due to huge or unauthorized expansion of plant/unit. Respondents do not urge that the Units of Petitioners got transformed into either Medium Scale or Large Scale Units during this benefit period because of such investments. 20. It is in this background that the word commitment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermine the perspective to be adapted while appreciating such Schemes. 21. In Pepsico India Holdings (P) Ltd. v. State of Kerala, (2009) 13 SCC 55, at page 77 , Hon. Apex Court has observed : 53. An exemption notification and a notification withdrawing the benefit granted would, however, stand on different footings. For the said purpose, the industrial policy is required to be kept in mind. It must also be taken into consideration for the purpose of construing the exemption notification. In A.P. Steel Re- Rolling Mill Ltd. v. State of Kerala9 this Court held: (SCC pp. 741-42, paras 32 34- 35) 32. The general principles with regard to construction of exemption notification are not of much dispute. Generally, an exemption notification is to be construed strictly, but once it is found that the entrepreneur fulfils the conditions laid down therein, liberal construction would be made.* * * 34. A question as to whether, in a given situation, an entrepreneur was entitled to the benefit under an exemption notification or not, thus, would depend upon the facts of each case. A bare perusal of the Notification dated 6-2-1992 issued by the first respondent would show that the purpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een denied power supply by the Board in appropriate time, which has prevented the appellant from starting the commercial production by 31-12-1996. This being the position, and having regard to the gamut of the circumstances, starting from the government policy resolution and culminating in setting up of the factory by the appellant in Kerala and commencing the production of ferro alloys, though not by 31-12-1996, we are of the considered opinion that granting the concessional tariff for a period of three years instead of five years, as indicated in the policy resolution would meet the ends of justice and we, accordingly, so direct. Be it stated that the appellant has been enjoying the concessional tariff on the basis of interim orders of the court and, therefore, that should be taken into account and due adjustment would be made in computing the period of three years, for which we are directing for grant of concessional tariff. The impugned judgment of the Kerala High Court is set aside and these appeals are allowed to the extent indicated above. Following judgment of Hon. Apex Court may be relied upon to gather how such provisions in the Scheme need to be considered. In CST v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Scheme all ongoing additions within the prescribed time-limit of period of exemption were permitted. We find this logic exposition good even in present writ petitions. 23. Another Bench has taken similar view in 1997(I)Mah.L.J 395 -Perfect Foundries Pvt. Ltd. Ors. Vs. State of Maharashtra Ors. Package Scheme of Incentives came in force retrospectively from 1.8.1979 it comprised mainly of incentive qua Sales Tax, reliefs in electricity tariff, Octroi etc. By resolution dated 5.7.1986 scheme was modified and provided further reliefs in sales tax. Petitioner there was granted eligibility certificate on 19.9.82 for 7 years from 1.10.1982 to 30.9.1989 to avail the facility of deferral scheme of sales tax. Section 15A(1) of Bombay Sales Tax Act, 1959 on 1.4.59 was amended by State of Maharashtra providing for levy of Additional Tax in the case of dealers whose turnover exceeds Rs.10,00,000/- per year. Section 9 introduced from 13.7.1986 whereby turnover @ 1.25% in goods specified in schedule `C' thereof was payable by the dealer whose turnover on all sales exceeded Rs.12,00,000/- per year. Notice dated 8.3.88 was issued to petitioner by Sales Tax Officer for non payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the notification issued under section 41 and such unit shall surrender to the Commissioner, the Certificate of Entitlement, together with all declarations in Form 'BC', within fifteen days from the date of such cancellation. - S.41C(1) (a) (i) (A) above is the relevant part with which we are concerned here. It introduces a new concept viz. the approved gross fixed capital investment of such unit at the time of grant of the Eligibility Certificate . The eligibility certificates of Petitioners nowhere show the approved gross fixed capital investment of such unit at the time of grant of the Eligibility Certificate . It only mentions capital cost of project. Respondents have also not pointed out what this phraseology exactly implies. Perusal of original Scheme dated 5.1.1980, particularly its Clause 2.7 dealing with Gross Fixed Capital Investment shows how Gross Fixed Capital Investment is to be computed. It is Gross Fixed Capital Investment at the beginning of the year plus additions,if any, made to Gross Fixed Capital Investment during the year, less the original value to the unit of any Fixed Assets written off/disposed of/sold during the year. This Clause shows that in basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7234/13 in WP 846 of 1996 shows Sales Tax Department has found that said Petitioner has exhausted the ceiling available to it hence determined the tax liability of Petitioner at Rs. 16,77,547/- in 1995-96. In year 1996-97, Rs. 36 Lac approximately is assessed as tax with penalty, total demand is of Rs. 62,27,104/-. Petitioner is assessed in same manner for later years also. Respondents have not denied any of this. Thus, except for 14 units who got entailment eligibility certificates belatedly for no fault on their part, all other SSI Units completed their benefit period without any ceiling got exemptions for full eligibility period by computing the Gross Fixed Capital Investment as per sub-clause III of Clause 2.7 of 1979 Scheme. If the incentives of Petitioners alone are now confined initial year, it would be unjust treating them unequally. Most of the Units in all these three categories have already exhausted the full benefits for entire term as per original Scheme. SSI units like Petitioners enjoyed that benefit without any ceiling for whole period assured by the eligibility certificates. Petitioners are being subjected to ceiling only because of late processing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequential recoveries. This lead to revenue implication of Rs.500 Crores hence State came out with an over-riding legislation. substituted S/s. (1),(1A) (1B) of S. 93 retrospectively which fell for consideration in M/s. Jindal Poly Films. Thus the law envisaged, a Rule framed by the State Government for its implementation the authorities had acted in absence of such Rule but on the basis of the executive instructions and had denied the benefits. This implementation denial was found bad by the High Court that necessitated huge refunds to the units. State Government cured that lacuna of the absence of Rules prescribing the Ratio by the subsequent validating amendment. This has been upheld but then retrospective levy of penalty is found bad in M/s. Jindal Poly Films. Thus controversy addressed to was in relation to a remedial measure permitted by the legislature its faulty execution. The fault was removed by the validating legislation. Facts at hand are entirely different a liability not foreseen by the SSI units like Petitioners is being imposed retrospectively which upsets their calculations, proliferation, financial structuring prospects etc. looked into by such u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubts in interpretation cannot be upheld. In fact, the High Court did not elaborate as to how the impugned legislation is merely clarificatory. In that view of the matter, although we recognise the fact that the State has enormous powers in the matter of legislation, both prospectively and retrospectively, and can evolve its own policy, we do not think that in the present cases any material has been placed before the Court as to why the amendments were confined only to a period of eight years and not either before or subsequently and, therefore, we are of the view that the impugned provision, namely, Section 26 deserves to be quashed by striking down the words not being waste goods or scrap goods or by-products occurring in the said Section 26 of Maharashtra Act 9 of 1989 and the authorities concerned shall rework assessments as if that law had not been passed and give appropriate benefits according to law to the parties concerned. In unreported judgment of Division Bench of this Court dated 08.06.2011 in Writ Petition No. 842 of 2000, retrospecyve operation of Rule 31AA of BST Rules divesting the units established under 1988 Scheme of vested rights was held bad. But the Divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n eligible for exemption. Past investments may be expansions which catered to the development of underdeveloped area therefore, advanced the objective of State Government. Thus, such investments appropriation of incentives are now irreversible it is irrational to disallow the same demand taxes. It is strange to levy penalty for the same. We, therefore, see no justification in subjecting very few units to such legislation ie to S.41C(1)(a)(i)(A). Had the legislation been enacted immediately after 1982 all SSI units were subjected to it, a different perspective may have been required to be adopted. The present situation demands a liberal approach as observed by Hon. Apex Court (supra) the Government has itself come forward alluring industrial units to set up their industries . Since we do not see absence of power in State Legislature, it is not necessary to quash set aside said provision which may have outlived itself considering the fact that out of total possible 14, only three matters are before us. But then exposing Petitioners to such unforeseen liability prejudices their entire planning, projections future. We reiterate that it is not the case of the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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