9911796707
TMI Blog2000 (12) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... started on March 31, 1999. The General Manager, District Industries Centre, Ludhiana issued eligibility certificate dated June 25, 1999 (annexure P6) to the petitioner entitling it to seek deferment of sales tax to the extent of Rs. 17.12 crores for a period extending over 7 years from March 31, 1999. After getting the eligibility certificate, the petitioner submitted application dated June 29, 1999 (annexure P7) to the Assistant Excise and Taxation Commissioner, Ward-IV, Ludhiana (respondent No. 3) for grant of exemption certificate for sales tax deferment under the Industrial Incentive Code, 1996. For the next one year, a lot of correspondence was exchanged between the petitioner and the respondents on the modalities of sales tax deferment. While the petitioner took the stand that it was entitled to the benefit of sales tax deferment on the total production, the department was of the opinion that the benefit of sales tax deferment was available only on incremental production in terms of rule 4(3) and (4) of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 (hereinafter referred to as "the 1991 Rules") and not on the total production. Ultimately, certificate, ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive Code, 1996"), section 10-A of the 1948 Act and rule 4-B of the 1991 Rules. The petitioner has further averred that after having induced it to undertake expansion by making huge fixed capital investment in the light of the 1996 Policy, the State Government and its functionaries cannot dilute or truncate the benefits promised at the time of promulgation of the policy. 6.. In the written statement filed on behalf of the respondents, an objection has been raised to the maintainability of the writ petition on the ground of the petitioner's failure to avail the alternative remedy of appeal under section 20 of the 1948 Act. On merits, it has been averred that the petitioner has been granted incentive in the form of deferment of tax on incremental production in terms of rule 4(4) of the 1991 Rules. The respondents have relied on the decision, annexure R1, taken in the meeting of the Officers Committee on Fiscal Management held under the Chairmanship of the Chief Secretary, Punjab, on January 27, 2000 to maintain status quo in the matter of incentives based on incremental production. They have also relied on form T-I filed by the petitioner's representative for grant of benefit under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der it necessary and proper to notice the salient features of the two industrial policies, the provisions contained in the rules framed by the State Government for implementation of those policies and the provisions of the 1948 Act and the 1991 Rules. 10.. The 1989 Policy was framed by the Government of Punjab to achieve the objective of providing conducive industrial environment, strengthening of infrastructure, identifying thrust areas, developing skills and encouraging entrepreneurship, for accelerating the rate of industrial development and generating employment opportunities, particularly for the educated unemployed rural youths. The package of incentives proposed to be given under the 1989 Policy was designed to attract the industries in the thrust area, like highlytechnology and agro based sectors. For the purpose of implementing the scheme of incentives set out in the 1989 Policy, the President of India (at the relevant time, the State was under the President's rule) framed the rules called as Punjab Industrial Incentives Code under the Industrial Policy, 1989 (hereinafter described as "Incentive Code, 1989"). The same were notified vide Notification No. 4/15/89/41 Bill/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption/deferment for expansion/modernisation/ diversification. These incentives will be admissible to the following: (a) Units undergoing expansion: (b) Units undergoing modernisation: (c) Units undergoing diversification. ................................ Rules 2.1, 2.2, 3.7, 3.10, 3.12, 6, 6.2 (relevant portion) of Incentive Code, 1989: 2.. Commencement and applicability. 2.1. These Rules shall come into force with effect from the 1st day of April, 1989. 2.2. These Rules shall be applicable to such of the units which come into production for the first time on or after the date of notification of the rules except in the case of generating set subsidy, eligibility criteria for which have been laid down in rule 12 below. 3.7. 'Expansion' and/or 'Modernisation' in relation to industrial unit shall mean additional fixed capital investment of not less than 25 per cent over and above its existing fixed capital investment, resulting in at least 25 per cent increase in the existing installed capacity. 3.10. 'Fixed capital investment' means actual investments made on land, building, machinery and plant, by a new unit or additional fixed capital investment made by a un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MODIFICATIONS IN THE PACKAGE OF INCENTIVES, 1992. (iv) To make available additional working capital funds, units shall be given the option of deferment of sales tax or exemption. The period of deferment and financial limit shall, however, remain the same as for exemption. (v) The amount of sales tax collected and retained by the units under this scheme shall be made repayable in three equal annual instalments after 10 or 7 years from the date of commencement of benefit as per applicability. .................. (vii) To encourage the growth of existing industrial units, benefit of investment, incentive and sales tax concession shall be allowed on expansion, provided the fixed capital investment (FCI) is increased at least by 50 per cent or the installed capacity as recorded in the industrial licence/certificate of the Department of Industry is increased minimum by 50 per cent. .................. Rules 2.5, 6.3(II) of Incentive Code, 1996: 2.5 Expansion means at least 50 per cent increase in the fixed capital investment or a minimum of 50 per cent increase in the installed capacity as recorded in the industrial licence/certificate of Department of Industries. .......... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng out the purposes of this Act. (2) ..................................... 30-A. Power to exempt certain class of industries.-The State Government may, if satisfied that it is necessary or expedient so to do in the interest of industrial development of the State, exempt such class of industries from the payment of tax, for such period and subject to such conditions, as may be prescribed: Provided that in the case of industries which came into production for the first time on or after the first day of April, 1989, or wherein modernisation, expansion or diversification has been carried out in accordance with the Industrial Policy, 1989, the Government may exempt such industries from the payment of tax with effect from the first day of April, 1989, subject to such conditions as may be prescribed: Provided further that in the case of industries which came into production for the first time after the 24th day of June, 1991, or wherein expansion, modernisation or diversification has been carried out in accordance with the Electronics Policy, 1991, the Government may exempt such industries from the payment of tax with effect from the 24th day of June, 1991, subject to such condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the five per cent capital investproduction starts. of the fixed ment subject to capital investa maximum of ment. four and a half crores of rupees. 3. 'C' One hundred Ninety per cent Sixty months from per cent of of the fixed capithe date the prothe fixed capital investment duction starts. tal investment. subject to a maximum of three crores of rupees. ............................................... ----------------------------------------------------------------------------------- Provided that the electronic units which came into production on or after the 24th day of June, 1991 shall be eligible for deferment of and exemption from the liability to pay tax under the Act for a period of ten years from the date of their coming into production for the first time, in the State of Punjab. Note.-The period specified in sub-rule (1) for availing the benefit of deferment of, or exemption from the liability to pay tax shall be reckoned from the date of commencement of production by a unit or the date of publication of this notification in the Official Gazette whichever is later. (3) The units undergoing expansion or modernisation shall be entitled to the benefit under sub-ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y availed of any of the incentives, partially or fully, under the Industrial Policy of 1989. 4-B. (1) Notwithstanding anything contained in rule 4-A and subject to the provisions of sub-rule (2), the following clauses shall be inserted, namely: (i) Group of industries which are set-up in 'A' category area on or after the first day of April, 1996, and the goods produced by them shall be eligible for the grant of benefit, at their option, of deferment or exemption from the liability to pay tax under the Act, for a period of ten years commencing from the date of production for the first time in the State of Punjab, subject to the condition that the total amount of tax deferred or exempted shall not exceed three hundred per cent of their fixed capital investment: Provided that the units and goods specified in annexure II-D shall be eligible for incentives which are available to the units located in 'A' category area, irrespective of the area throughout the State of Punjab. (ii) Group of industries which are setup in 'B' category area on or after the first day of April, 1996 and the goods produced by them shall be eligible for the grant of benefit, at their option, of deferment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Incentive Code, 1989. For this purpose expansion and/or modernisation part of the existing industry was considered as an independent identity by virtue of rule 6.2(4) of Incentive Code, 1989. Under that rule, the industrial unit was required to obtain separate sales tax registration certificate for the additional capacity and incremental production resulting from such expansion/modernisation. This was also unequivocally reflected in the 1991 Rules which were brought into force with effect from April 1, 1989 and made applicable to the units which came into production on or after 1st April, 1989. Rule 4(3) and (4) read with explanation appearing below rule 4(4) provided for grant of benefit under sub-rule (1) thereof on the basis of incremental production. Later on, rule 1(3) was amended vide Notification No. G.S.R. 65/P.A. 46/48 dated September 21, 1992 and again vide Notification No. GSR/ 97 dated May 22, 1997 with effect from April 1, 1996 so as to make it applicable to the units which came into production on or after 1st day of October, 1992 and 1st day of April, 1996 respectively. Rule 4-A which begins with a non obstante clause was also inserted vide notification dated Sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the 1989 Policy and the Incentive Code, 1989, the same was replaced by the concept of giving benefit in the form of sales tax deferment on the fixed capital investment under the 1996 Policy read with the Incentive Code, 1996. The use of expression "notwithstanding anything contained in any other provisions of these rules" in rule 4-A(1) is clearly indicative of the intention of the rule-making authority not to invoke the concept of incremental production for grant of benefit of the incentives under the Package of 1992. The use of expression "notwithstanding anything contained in rule 4-A and subject to the provision of sub-rule (2)" in rule 4-B and the language of clauses (i)(a) and (ii) of sub-rule (1) of rule 4-B show that the benefit of exemption to the industries set up in "A" category area and "B" category area on or after 1st day of April, 1996 was made relatable to the fixed capital investment and not on the basis of incremental production. Therefore, the decision taken by the respondents to grant benefit of sales tax deferment to the petitioner by applying the concept of incremental production is liable to be declared ultra vires to the scheme of the 1996 Policy, the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. In General Insurance Corporation v. Commissioner of Income-tax [1999] 240 ITR 139; (1999) 8 SCC 60, a Division Bench of the Supreme Court considered the question as to whether the amount set apart by General Insurance Corporation for redemption of preference shares can be added back for computing profits and gains of business. The facts of that case show that the appellantCorporation was formed as a Government company under the General Insurance Business (Nationalisation) Act, 1972. It carries on general insurance business in India. At the time of nationalisation, the then existing private companies which were carrying on the business of general insurance merged together in four subsidiaries of the appellant-Corporation. The Central Government contributed to the capital of the appellant in the form of preference shares and equity shares for the purpose of paying compensation to the shareholders and the management of the merged companies. The preference shares were to be redeemed in such time as the Board of Directors of the appellant-Corporation might deem fit. In profit and loss account for assessment year 1977-78, the appellant-assessee made a debit entry of a certain am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to give section 44 of Income-tax Act such an effect. Nor does rule 2(2)(a) of the GIB Rules have an overriding effect on the provisions of the Income-tax Act. The two provisions contained in the two enactments have thus different purposes to achieve. The rule of harmonious construction would there sustain neither what the Income-tax Officer did nor the view of the law taken by the High Court." (Underlining is ours). 17.. By applying the propositions laid down in the aforementioned decisions to the facts of this case, we hold that non obstante clause contained not in rule 4-B(1) overrides the provisions contained only in rule 4-A, but also in rule 4(3) and (4) of the 1991 Rules and, therefore, the concept of incremental production cannot be invoked Here italicised. for granting benefit of sales tax deferment to an industrial unit, like the petitioner which undertook expansion after April 1, 1996. 18.. The argument of the learned Deputy Advocate-General that rule 4(3) and (4) should be read as part of rule 4-B because the non obstante clause contained in sub-rule (1) of rule 4-B is worded differently than the non obstante clause used in rule 4-A appears to be attractive in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een got manufactured by him on the powerloom belonging to a co-operative society in pursuance of the agreement entered into with it. The Excise authorities rejected the plea of the appellant on the ground that the exemption under the notifications could be claimed only qua the cotton fabrics manufactured by the co-operative society for itself. While rejecting the plea of the department, their Lordships observed as under: "It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the tax-payer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different but that is not the case here. In this connection we may refer to the observations of Lord Watson in Salomon v. Solomon and Co. 1897 AC 22 at page 38: Intention of the Legislature is a common but very slippery phrase, which, popularly unders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory notification. This cannot be done. The earlier schemes specifically provided that 'traditional industries' were outside their purview. The language of the notification, which is a piece of subsequent legislation, is silent about this. This is itself indicative of a legislative intent to widen the scope of relief and grant exemption to traditional industries as well. For granting a certificate that the applicant is eligible for exemption under the notification, the Director has to look to the conditions set out in the notification and nowhere else. Moreover, it appears from the earlier schemes that the concept of 'traditional industries' is a vague one. Therefore, it is not permissible to restrict the scope of the notification in the manner suggested." 23.. In Gujarat State Fertilizers Co. v. Collector of Central Excise (1997) 4 SCC 140 a division Bench of the Supreme Court considered the appellant's claim for levy of concessional rate of excise duty on naphtha and total exemption from excise duty on ammonia by virtue of exemption Notification Nos. 75 of 1984 dated March 1, 1984 and 40 of 1985 dated March 13, 1985 respectively issued under rule 8(1) of the Central Excise R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of the petitioner deserves to be examined from yet another angle. Section 10-A of the 1948 Act, which begins with non obstante clause, empowers the State Government to defer payment of tax due from any class of industries in the interest of industrial development. Such deferment would be for the specified period and subject to such conditions as may be prescribed by the Government. Notification dated June 1, 1996 prescribes the period and the conditions subject to which the benefit of deferment can be granted. Rule 4-B(1) also begins with non obstante clause. Therefore, the provisions of rule 4-A will have to be read subject to the provisions of rule 4-B and the latter cannot destroy or whittle down the benefit of deferment incentive available under notification dated June 1, 1996. If rule 4(3) and (4) are read as part of the 1996 Policy and the Incentive Code, 1996, then it would result in restricting the benefit of deferment available under the 1996 Policy and this would be contrary to the policy approved by the Council of Ministers. 25.. We are further of the view that the decision taken in the Officers Committee constituted by the Government to oversee implementation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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