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TMI Blog2008 (3) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... d supra, liability to pay is statutory, failure to remit in time entails penal action under the taxing statutes. Retention of Government money collected towards tax attracts penal action and therefore, there is no need to issue any show-cause notice and provide an opportunity of hearing before taking recourse to realise the dues. Having availed the waiver scheme, the petitioner ought not to have collected tax from the dealers and therefore, they are liable to remit the same to the Government. In view of the above,do not find that there is any abuse of the statutory provisions by the respondents to extract money from the assessee. In the result, the writ petition is dismissed. - W.P. No. 15797 of 2007VATLaws Copyright 2014 - - - Dated:- 7-3-2008 - MANIKUMAR S. , J. ORDER:- S. MANIKUMAR J. The petitioner has sought a writ of certiorarified mandamus to quash the order of the Deputy Commercial Tax Officer, Arokanam Village, Vellore District and consequently, direct the respondents to consider the petitioner's representation dated December 29, 2006 and February 8, 2007 and pass orders on the continuance of the waiver scheme of the deed of the agreement, dated July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not collect sales tax on local sales of cements for six years. The said waiver scheme commenced with effect from August 1, 2006 and continued till January 1, 2007, when the value added tax (VAT) was introduced in the State of Tamil Nadu by bringing into force the Tamil Nadu Value Added Tax Act, 2006. Since the exemption and waiver schemes generally militate against the efficient working of the VAT system by breaking the VAT chain, the value added tax, inter alia, provided a deeming provision in section 33 of the Act. It is the case of the petitioner that in the light of the aforesaid provision, the waiver scheme extended to the petitioner as per the deed of agreement dated July 12, 2006, automatically stood modified as deferral scheme. Since the VAT Act provided that the Government on an application from the industrial unit already availing remission of tax to pass orders for continuance of such remission for the unexpired portion or till the balance of amount of tax is remitted (whichever is earlier), the petitioner made an application to the respondents as early as on December 29, 2006, even before the Act was notified, pointing out the legal position and explained the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioner has further submitted that the impugned communication though termed as notice is in the nature of final order, where conclusion as to the alleged commission of grave offence has already been arrived at by the fourth respondent. According to the petitioner, no opportunity has been given to them and therefore, the impugned order is in violation of the principles of natural justice. The petitioner has further contended that in the absence of clear notification indicating the Government's policy on the treatment of existing waiver schemes, it was incumbent on the part of the authorities concerned to have given some guidelines to the industries to act in conformity with VAT Act. The petitioner has further submitted that on the failure of the authorities to discharge their duties in this regard, the petitioner was constrained to adopt a procedure which was reasonable in the given circumstances. The act of invoicing with effect from January 1, 2007, was also duly intimated to the authorities from time to time. Without taking any steps to clarify the position, on the representation dated December 29, 2006, the fourth respondent has taken a hasty decision in order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.88 April 3.79 Total 13.51 The fourth respondent has further submitted that the petitioner has collected tax for about 13.51 crores and as on the date of filing of the counteraffidavit the respondent was able to collect a sum of Rs. 4 crores towards the tax and the remaining amount of Rs. 9.4 crores is yet to be paid. The fourth respondent has submitted that the demand to pay the balance amount of tax is valid and permissible under the Act. In response to the above demand notice, the petitioner has sent a letter dated March 23, 2007, which reads as follows: 1. You will appreciate that we have sought clarifications from the department as well as SIPCOT as to the procedure to be adopted so as to ensure our availment granted by the Government, while at the same time also ensuring that our dealers pay VAT only on the value addition. 2.. The letters sent to your department as early as December 18, 2006, followed by several correspondences are yet to be replied. 3.. We would like to bring to your kind notice, the assurance given by department in the meeting convened on Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocus standi or right or authority to collect tax without amending eligibility certificate, for availing the benefit under section 33(1) of the VAT Act. The respondents have further submitted that the manufacturing unit who wants to remain in the waiver scheme under the VAT Act, if allowed to collect tax on the sale of finished products, then allowing its dealercustomers to claim full input tax credit is not compatible with the waiver scheme borne out of the industrial policy of the State of Tamil Nadu and the above acts would break the VAT chain. The respondents have further submitted that the Empowered Committee of State Finance Ministry has given following guidelines for the continuance of industrial incentives under the VAT legislation. Para 2.15 of the abovesaid guidelines dated January 17, 2005 deals with incentives and it reads as follows: Under the VAT system, the existing incentive scheme may be continued in the manner deemed appropriate by the States after ensuring that VAT chain is not affected. The empowered committee while allowing the States to decide their own policy for treatment of incentives had prescribed certain preconditions: (1) The quantum as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e abovementioned period and that the same is contrary to the provisions of the TNGST Act, terms of the agreement, eligibility certificate and the provisions of the VAT Act, 2006 and the contentions are summarised as follows: (a) It is evident that the writ petitioner has addressed letters to the Secretary to Government and Commissioner of Commercial Taxes expressing his intention to continue under waiver scheme under the Act. (b) While so, the petitioner collected tax from his customers-dealers and retained the amount in his hands. The petitioner has no right to adumbrate or accept having made an application to continue under waiver scheme the petitioner should not have collected tax from the customers during the period of waiver. (c) In nutshell, the dealers-customers of the writ petitioner have availed the full input tax credit and the bills of customer-dealer have to show that the petitioner has not followed the norms relating to the waiver scheme. Since there is no automatic conversion of claim of waiver into deferral in conformity with section 33(1) of the Act but at the same time the petitioner is expressing his intention to continue under waiver scheme. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confusion and lack of clarity as to the treatment of the dealers under the then Waiver Scheme. In all the letters, the petitioner has categorically intimated that as an interim arrangement, they have decided to separately show VAT collection in their invoices so as to avoid the VAT chain being snapped and to enable the customers to avail the input tax credits. According to him, if the respondents had issued a clarification as early as in the month of December, 2006 or in January, 2007, the present situation could have been averted and having put the petitioner in a such predicament, the respondents are not entitled to take advantage of their own default in responding to representations promptly. Placing reliance on the decision in Commissioner of Commercial Tax v. Swarn Rekha Cokes and Coals Pvt. Ltd. reported in [2004] 136 STC 57 (SC); [2004] 6 SCC 689, learned counsel for the petitioner submitted that section 33(1) of the TNVAT Act creates a legal fiction and while interpreting such a provision, the court must ascertain the purpose, for which, fiction is created and assume such facts and circumstances, which are incidental or inevitable corollaries to give effect to the legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate, dated May 15, 2006 and clauses 1 and 2 of the additional eligibility certificate, dated May 15, 2006 read with rule 48A of the TNGST Rules and rule 16(4) of the TNVAT Rules, the learned Special Government Pleader submitted that the dealers under the waiver scheme, having agreed to the terms and conditions of the agreement and the certificate of eligibility, cannot adopt an ad hoc procedure of their own and collect taxes contrary to the Rules and the agreement. Placing reliance on the decision of the honourable Special Tribunal in the case of V.V.K. Packaging Private Limited v. Assistant Commissioner (CT), Tuticorin [O. P. No. 669 of 2001, dated January 4, 2002], he submitted that the collection of tax amounts to violation and therefore, when the VAT chain has been broken by the petitioner by collecting the tax from the dealers, it is open to the Revenue to demand payment of tax due to the Government. He submitted that only under the deferral schemes, taxes are collected and since the petitioner has already elected to opt for waiver scheme, they ought not to have collected tax. By referring to the prayer made in the writ petition, the learned Special Government Pleader s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 305, Industries, dated May 22, 1989 2. G.O.Ms. No. 423, Industries, dated July 7, 1989 3. G.O.Ms. No. 563, Industries, dated August 19, 1989 4. G.O.Ms. No. 564, Industries, dated August 19, 1989 ORDER The Government in the order second read above declared 105 taluks of this State as industrially backward for the purposes of grant of interest-free sales tax loan, interest-free sales tax deferral, State capital subsidy, etc. 2.. With a view to correct regional imbalances in the industrialisation in the State by giving further incentives to more backward areas, the Government directed that 30 taluks, from among the 105 industrially backward taluks be declared as industrially most backward taluks. The names of 30 taluks are annexed to this order. 3.. The Government directed that the new industries to be set up in the 30 most backward taluks ordered in para 2 above and also in the three industrial complexes of State Industries Promotion Corporation of Tamil Nadu at Pudukottai, Cuddalore and Manamadurai be eligible apart from other existing concessions for full waiver of sales tax dues for a period of five years up to a ceiling of the total investment made in fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x deferral/waiver of expansion/diversification ordered in paras 3 and 4 above is subject to the sales tax payable on products manufactured by the capacity created by expansion/diversification units only. 6.. The industries in the most backward taluks and in the SIPCOT complexes at Cuddalore, Manamadurai and Pudukottai can opt either for the full waiver of sales tax for a period of five years ordered in para 3 above or for the deferral of sales tax for nine years as applicable to the industries in the backward taluks ordered in para 4(a) above. The option should be exercised along with the application to be submitted to the authority for issuing eligibility certificate. The option once exercised and accepted will be final and cannot be changed. 7.. The application for interest-free sales tax deferral should be filed before the General Manager, District Industries Centre concerned in the case of small-scale industries and before SIPCOT in the case of medium and major industries before the commencement of commercial production. 8.. The above scheme will be applicable to small, medium and major industries, as the case may be. The deferral/waiver period will commence from the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier scheme. 11.. The original project in a taluk may go in for expansion/diversification in the same taluk where the original project is located or in any other taluk and avail the interest-free sales tax deferral/waiver concession. However, this concession would be granted for one expansion/diversification only if carried out in the same taluk where the original project is located. 12.. Second-hand machinery will not be part of the investment eligible to the computation of deferral or waiver of sales tax. 13.. This order modifies all the previous orders available on the subject-matter, to the extent to which the scheme has been covered by this order. 14.. This order issued with the concurrence of Commercial Taxes and Religious Endowment and Finance Department vide their U.O. No. 20626/B2-90-1 dated May 2, 1990 and U.O. No. 2674/F9/P/90, dated May 7, 1990 respectively. /By order of the Governor/ M.M. Rajendran, Chief Secretary to Government. (emphasis(1) supplied) (1)Here italicised. The eligibility certificate, dated May 15, 2006 granted to the petitioner under IFST waiver scheme is extracted hereunder: Eligibility certificate under IFST Waiver Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les and sales tax waiver availed, from time to time, during the period of operation as defined in para 5. 7.. After expiry of the period of operation , as defined under para 5, the company shall immediately on further sales start remitting the applicable sales tax to the Commercial Taxes Department. 8.. The unit shall enter into an agreement with the Assistant Commissioner (Commercial Taxes) concerned as per terms and conditions stipulated by that department. 9.. Sales tax waiver benefit is subject to the sales tax payable on products manufactured by the capacity created by the Diversification scheme at Chitheri Village, Arakkonam, Vellore District only. 10.. The subject company has furnished the production/turnover details of its group companies vide its Letter dated May 3, 2006. The highest production/turnover of the company is given below: 11. The waiver scheme will be applicable to the unit/company only as long as it manufactures products for which the EC has been issued. If the unit/company fails to manufacture the product for which the EC has been issued or manufactures any other goods under the guise of the products for which the certificate has been issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department, dated December 13, 1992, directed the package of incentives for large industries, an industry set up anywhere in Tamil Nadu having an investment of Rs. 100 crores and below Rs. 200 crores will be eligible for a sales tax waiver for six years or deferral for 12 years subject to a ceiling of 100 per cent of the value of fixed assets. Whereas Tvl. Ultra Tech Cement Limited, Chitteri Village, Arakkonam 631 003, have applied for waiver of sales tax/surcharge/ additional surcharge/additional tax to the party of the first part and have also produced an eligibility certificate (No. 46/VI/W/D, dated May 15, 2006) issued by the Managing Director, State Industrial Promotion Corporation of Tamil Nadu (SIPCOT), Chennai. Now it is agreed between the parties as under: 1.. The tax/surcharge/additional surcharge/additional tax to be waived shall relate to the tax on the sale of the product, (i.e.) cement manufactured by the new unit in Tamil Nadu. 2.. The total amount of tax/surcharge/additional surcharge/additional tax to be waived shall not exceed the total investment made in the fixed assets of Rs. 10,198.84 lakhs. The party of the second part will be eligible for waiver of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xes Department is of the opinion that the unit is not manufacturing the product mentioned in the eligibility certificate, the Commercial Taxes Department shall have the right to cancel this agreement, demand and collect the entire amount of tax waived for all years covered by the scheme and the party of the second part is liable to pay the entire amount in one lump sum. 12.. Any sales tax that would become payable by the party of the second part, in case of default shall have priority over all other claims against the property of the said party of the second part and the same may, without prejudice to any other mode of collection be recovered as land revenue treating the Government dues as first charge. 13.. The total amount of tax to be waived shall not exceed the total investment made in fixed assets under expansion unit or the amount specified in the eligibility certificate issued by the SIPCOT, Chennai, whichever is lower. 14.. The party of the second part shall maintain true and correct accounts for the unit. In case, if any evasion of tax or suppression is noticed at a latter date, the taxes and penalty due on the suppressed turnover shall not be eligible to waiver. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy and it is intended for higher revenue growth. Section 31 empowers the Government to notify remission of tax and it reads as follows: 31. Power of Government to notify remission. The Government may, in such circumstances and subject to such conditions as may be prescribed, by notification, remit the whole or any part of the tax or penalty or interest or fee payable in respect of any period by any dealer under this Act. Section 32 deals with the power of the Government to notify deferred payment of tax and it reads as follows: (1) The Government may, in such circumstances and subject to such conditions as may be prescribed, by notification whether prospectively or retrospectively, defer the payment, by any industrial unit in the pipeline, of the whole or any part of the tax payable in respect of any period. Explanation. For the purpose of this sub-section, the term 'industrial unit in the pipeline' means an industry which, is registered as an industrial unit with an industrial agency of the State or Central Government or has obtained allotment of land or purchased land for the factory or has applied for finance from a financial institution for its activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accord, shows nothing but collection of tax under the Tamil Nadu VAT Act, 2006, which is a violation of the conditions of the eligibility certificate and waiver agreement, when the waiver scheme is in force. The impugned order further reads that in the absence of any material to prove that the petitioner had applied to SIPCOT, Chennai, to switch over from waiver to deferral scheme for the un-availed portion of waiver already granted under the TNGST Act, 1959, and since the petitioner had opted to avail the unavailed portion of waiver under the VAT Act, collection of tax, while availing the waiver is barred. The dealers who are purchasing cement from the petitioner concerned, would certainly claim input tax credit, since the petitioner is charging the VAT at 12 per cent in the invoices raised from January 1, 2007 onwards and as the petitioner have collected tax, retention of the same would amount to an offence and therefore, the petitioner has been directed to remit the Government money within three days from the date of receipt of the said notice. As per the policy of industrialisation, the Government with a view to encourage more industries in Tamil Nadu, have granted certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of operation, the company shall not collect sales tax on the sales of its manufactured products. 6.. The company shall submit periodical reports to the Commercial Taxes Department on the extent of sales and sales tax waiver availed, from time to time, during the period of operation as defined in para 5. 7.. After expiry of the period of operation , as defined under para 5, the company shall immediately on further sales, start remitting the applicable sales tax to the Commercial Taxes Department. 12.. Violation of any of the conditions in the eligibility certificate and the connected Government orders will result in withdrawal of waiver entirely. The eligibility certificate has been subsequently extended from August 1, 2006 to July 31, 2012 with the following conditions: (1) The period of operation of the Sales Tax Waiver Scheme shall be within the period of full availment of the eligible amount or six years period, whichever is earlier. During the period of operation, the company shall not collect the sales tax on the sale of its manufactured products. (2) The tax, surcharge and additional sales tax under the TNGST Act, 1959, to be waived shall relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and adaptations as are considered necessary to avoid arbitrary results and unusual situations. In the absence of any amendment, alteration or repudiation by Legislature or statutory notification, the Supreme Court held that by virtue of a deeming fiction created under sections 84 and 85 of the Bihar Reorganisation Act, 2000, the benefit of exemption from payment of tax on purchase of raw materials as provided under the industrial policy of the State of Bihar would be extended to the units in the new State of Jharkhand. Absolutely, there cannot be any quarrel over the proposition and scope of a deeming provision in an enactment. However, the facts of the Swarn Rekha's case [2004] 136 STC 57 (SC); [2004] 6 SCC 689 are not applicable to the case on hand. Liability to pay tax is statutory and waiver scheme is extended to the manufacturing units with an avowed object of industrialisation in some of the most backward areas. Section 33(1) of the Act states that on the introduction of the Tamil Nadu Value Added Tax Act, 2006, units under the waiver scheme by virtue of operation of the deeming provision under section 33(1) of the Act get converted to the deferral scheme for the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eming provision under section 33(1) of the TNVAT Act, too far, resulting in an anomalous position of snapping the VAT chain, altering the conditions of the scheme under which the Government has permitted the dealer to start new industries. The petitioner fully well aware of the policy of the Government and the rational in extending the benefit of deferral/waiver scheme to the new units or units expanding their activity in backward areas has entered into an agreement not to collect tax during the period of waiver. Rule 48A of the TNGST Rules and rule 16(4) of the TNVAT Rules, mandate that the dealer availing waiver should not collect tax on the finished product during waiver. The public purpose is industrialisation in backward areas and the concession given to the industries is waiver of payment of tax, that the manufacturers should not collect tax on the local sales of the furnished products on the total investment made on the fixed assets for a specific period. It is a settled legal position that while interpreting the statute, the rule of purposive construction has to be applied. Having regard to the policy of the Government of industrialisation and the concession given to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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