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TMI Blog2005 (8) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... of which is produced at annexure K to the writ petition, and on the promise that the real benefit under this notification is to some extent denied to the petitioner by the condition imposed therein, which condition is one linking the concession or benefit to payment or non-payment of the amount which was the average tax liability of the petitioner's sales turnover in existing units at the place, computed on the average of the last three years tax liability of the existing unit or the actual tax liability, whichever is higher. The petitioner-company has approached this court for the relief on the premise that the authorities purporting to implement the condition as envisaged in the proviso to clause (iv) of the condition in this notification have been demanding and collecting the tax at an amount higher than the actual liability on the part of the petitioner in respect of its earlier unit and such collection of the tax over and above the actual liability of the petitioner in respect of his existing unit is bad in law; that assuming for the purpose of arguments, the condition so provides, the condition is an illegal condition, the condition which is at variance with the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of years Ceiling Rs. I Developed(1) areas 4(6) 150% of value of fixed assets. 4(6) 100% of value of fixed assets. 4(6) 100% of value of fixed assets. II Developing areas 6(8) 150% of value of fixed assets. 6(8) 100% of value of fixed assets. 5(7) 100% of value of fixed assets. III Growth centres 7(8) 150% of value of fixed assets. 7(8) 100% of value of fixed assets. 6(8) 100% of value of fixed assets. Note: Figures in brackets indicate number of years for sales tax deferment in lieu of sales tax exemption if opted. The above benefits shall also be available for existing units which undertake an expansion project in a new location. However, tax payable on existing production in the existing location would continue without any change; . . . (d) Sales tax concession for existing units making new investments under expansion/diversification Industrial units in specified categories set up in developed areas, and the units set up in developing area including grown centres, under taking new industrial investments, for expansion/diversification (1)only the specified categories as in appendix II. shall be eligible for sales tax exemption/sales tax deferment--mutat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities have been demanding and collecting from the petitionerompany the amount of tax which is over and above the actual tax liability in respect of the existing units on the strength of the condition imposed under the exemption notification. It is this part of the action on the part of the authorities, which is complained of in the present writ petition and the relief sought for is in this context. The exemption notification that has been issued in favour of the petitioner under the provisions of section 19C of the Act is the one dated June 5, 2000. It is the proviso to the condition (iv) of this notification, which is objected to by the petitioner, and reads thus: "Provided that the existing industrial unit shall be liable to pay the taxes on the existing production of 'ordinary portland cement' manufactured and sold by the existing unit based on the average tax liability of three years prior to the commissioning of the new plant (Pozzuolana Portland Cement Plant) or based on the actual production of 'ordinary portland cement' after commissioning of the new plant, whichever is higher." Here again, the condition is one which in turn referred to and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petition is hit by laches; that there is nothing wrong with either the Government order dated September 5, 1998 or with the exemption notification dated June 5, 2000; that the condition imposed therein is the condition which the petitioner can avail of or not; that the condition is fully justified; that the petitioner even at the stage of setting up of its plant had been apprised of the condition; that it was a condition which was within the knowledge of the petitioner and the petitioner having accepted the condition and having availed of the tax concession in respect of its expanded unit, cannot now turn around and seek for annulment of the condition; that the petitioner having taken the benefit of exemption by accepting the condition and acting on such condition, is not entitled to turn around and now seek the relief that the condition is bad and binding on the petitioner; that the petitioner is estopped from seeking for the relief sought for; that the very premise for seeking relief is also fallacious inasmuch as the petitioner is basing the claim for relief on the premise that it is a new industrial unit, to which the condition in terms of the clause 5 of annexure II to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concessions, etc., to such units is as envisaged under the heading 5 of annexure II to this Government order, which has a main heading as Package of Incentives and Concessions 1996-2001, and a sub-heading for item No. 5, being sales tax concessions for new units, quoted earlier; that the concession given in respect of the sales tax liability of such new units or even in respect of the existing units as in the case of the petitioner under clause (d) of the subheading 5, it is not hedged by any conditions other than the stipulation that the existing production on this tax liability would continue as earlier and the concessions would be confined to the production in the new unit or in respect of the production out of the additional investment; that the petitioner had approached the Government seeking for permission to set up a new unit in terms of its application dated May 2, 1996 and such permission was granted in terms of the Government response dated February 26, 1997, a copy of which is produced at annexure C to the writ petition, and also indicated the incentives/concessions in respect of the sales tax liability, etc., in terms of para 3 of this Government order and the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing OPC grade) or the average quantum referred to above, whichever is higher (in other words, if the OPC production increases in the exiting plant, full ST on such production has to be paid. That it had been indicated that the liability was on the actual basis and not on any fictional basis, but nevertheless, the respondents had followed up the matter by issuing an exemption notification in terms of section 19C of the Act in respect of the petitioner's unit, as per the Government Notification No. FD 187 CSL 2000 (I), (II) and III dated June 5, 2000, a copy of at annexure K to the writ petition and here again had in terms of proviso to clause (iv) of the condition, as quoted earlier, imposed for availing the exemption, and such condition is again bad in law and not in consonance with the concessions and incentives in terms of the policy itself; that it is at variance with the conditions, as provided in respect of the new units as under heading 5 of annexure II to the Government Order; that the condition is bad, as one seeking to create a tax liability on a notional basis through an executive order and at variance with the actual tax liability of the petitioner and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibutable to the existing unit. In support of the submission, the learned Senior Counsel appearing for the petitioner has placed reliance on the decision of the Supreme Court in the case of State of Bihar v. Suprabhat Steel Ltd. [1999] 112 STC 258. Submission of the Senior Counsel is that the condition which the petitioner has objected to and challenged in this writ petition is akin to the conditions which had come to the adverse notice at the hands of the Supreme Court in the case of Suprabhat Steel Ltd. [1999] 112 STC 258; that the Supreme Court having held that the Government was not competent to impose such condition, which in fact had not been authorised or in consonance with the earlier policy notification and in the present case, such authorisation being not attributable to the extension of the incentives or benefit indicated under heading 5--Sales Tax Conces\sions--in annexure II to the Government Notification of the year 1996 and following the ruling of the Supreme Court in the case of Suprabhat Steel Ltd. [1999] 112 STC 258, the condition necessarily should be held to be obnoxious and read down as not one available to the Government, for enforcement or to bind the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of its existing units as though it is a liability equivalent to sales tax liability in respect past three years average liability and the petitioner had not questioned either levy or collection of such tax liability by filing an appeal or otherwise, it is always open to the petitioner to seek for a declaration that the collection itself was not authorised in law; that the petitioner had paid the tax due to a mistaken impression of law that the petitioner was liable, but in reality and as per the legal provision, the petitioner is not so liable and if the payment is due to a mistake, whether on fact or law, it is always open to the petitioner to seek for a suitable declaration and also seek for refund of such collection of tax, which was not authorised in law. In this regard, the learned Senior Counsel appearing for the petitioner has placed reliance on the decision of the Supreme Court in the case of Sales Tax Officer v. Kanhaiya Lal Makund Lal Saraf [1958] 9 STC 747 (SC); AIR 1959 SC 135. Learned Senior Counsel appearing for the petitioner submits that though the respondents have raised an objection that the writ petition should be dismissed due to delay and laches in so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the petitioner is that having regard to the certificate dated April 9, 2002 (vide annexure N) issued for the purpose of availing sales tax exemption, wherein it has been specifically indicated that M/s. ACC company is a newly established industry at Wadi, Gulbarga district, as found in the very first paragraph of this certificate, it is no more open to the respondents to contend that the petitioner's unit is not a new unit, as under heading 5 of the annexure II to the policy notification, but is covered under heading 7 of the policy notification. Learned Senior Counsel appearing for the petitioner has also sought to distinguish the decision of the Division Bench of the Madras High Court in the case of Tamil Nadu Newsprint & Papers Ltd. v. Commercial Tax Officer [2003] 129 STC 420, on the premise that a condition for availing sales tax concession while can be imposed as was in the case decided by the Madras High Court, in the case of petitioner, what is sought to be done by imposing the condition is to create an artificial liability in respect of the sales tax turnover of the production attributable to the existing unit and this is not permitted in law; that creating an arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial development, employment potential, etc." Elaborating the submissions, learned Additional Government Advocate, submits that the industrial policy for the years 1996-2001 itself has classified different categories of industries to which the sales tax concessions/ incentives are available; that the industries for such purpose are categorised into (a) tiny sector/village industry; (b) small-scale industry; (c) medium scale industry; (d) large industries; and (e) mega project; that even in terms of the definition of the mega project as per the very policy, the petitioner's expanded unit is a mega project and this was within the knowledge of the petitioner all along and therefore the petitioner cannot derive any benefit by drawing parallel to the benefit that had been extended under heading 5 in respect of new units and for the same reason, the ratio of the decision of the Supreme Court in the case of Suprabhat Steel Ltd. [1999] 112 STC 258 is not attracted. Learned Additional Government Advocate also submits that even the petitioner had understood that the expanded unit producing PPC in addition to its existing unit at Wadi was in the nature of the mega project; that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the same time the Government was also keen on sustaining its revenue from such units which had already enjoyed the benefit of concession and additional benefits were sought to be given only over and above the existing revenue levels in the sense the benefit was given only after fulfilling the revenue inflow from such units; that the condition was to ensure that the sales tax liability in respect of the dealer as a whole inclusive of existing unit and expanded unit was maintained to be not less than at the average of the last three years. With regard to the contention that the condition is bad in law and is violative of article 265 of the Constitution of India, as it is an executive order, through which tax is sought to be imposed in an artificial manner on the petitioner, the learned Government Advocate submits that this is not at all either the intention or result of the condition; that the condition only seeks to extend the benefit in respect of the production in the expanded unit on and after meeting the fixed tax liability worked out on the average of the last three years turnover in respect of the dealer and a condition of this nature cannot be understood as one creating a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viable unit and it will pay tax to the State at the full rates and such tax will keep on accruing year after year to the State. If the entrepreneurs are permitted to abandon their original units and go in for new units, immediately after availing the full benefits of incentives in the original unit, then there is a drain of revenue by way of incentives offered which is not in return for any anticipated economic benefit. Such a course will defeat the very purpose of the Government orders granting incentives to the industries set up in the State or the industries which undertake expansion of their production capacity. This aspect of the industrial policy has been considered by the Tamil Nadu High Court in its decision in the case of Tamil Nadu Newsprint & Papers Ltd. v. Commercial Tax Officer reported in [2003] 129 STC 420. The respondents seek to place reliance on the said decision in support of the aforementioned proposition. (c) When the original unit of the petitioner at Wadi was set up, it has availed various incentives and support from the Government of Karnataka and over the years the said unit has built up a viable infrastructure around it by way of railway terminals the ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tland cement plant) or based on the actual production of "ordinary portland cement" after commissioning of the new plant, whichever is higher (annexure K1) (c) direct the respondents to amend the exemption certificate dated April 9, 2002 in accordance therewith; (d) restrain the respondents from making any demand on the petitioners and/or recovering any amount on the basis of the above referred impugned conditions in prayers above as contained as in the G.O. No. CI 22 SPI 97 dated September 5, 1998 and Notification No. FD 187 CSL 2000(I) dated June 5, 2000; (e) direct the respondents to refund the additional tax collected as set out in annexure R hereto being the excess recovery together with interest thereon at the rate of 18 per cent from the respective dates of payment till refund to and realisation by the petitioner-company; (f) grant interim order to restrain the respondents from making any demand on the petitioners and/or recovering any amount on the basis of the impugned conditions contained in annexure D dated September 5, 1998 and notification vide annexure K1 dated June 5, 2000 as mentioned in prayer above. The relief is not with reference with any precise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particularly the letter dated April 9, 1997 (annexure B) from the petitioner addressed to the Principal Secretary to Government, Department of Industries and Commerce, leaves one with no doubt that the petitioner had also understood that the expanded unit is a mega project, as is indicated in last paragraph of this letter, which reads thus: You will appreciate that ACC has been a pioneer cement manufacturer which has been associated with the State for the last several decades and has contributed in a large way to its economic development. It is, at this juncture, proposing a further mega capital investment of around Rs. 520 crores which in due course of time with the contemplated phase-II expansion to this new unit is likely to be of the order of Rs. 1,000 crores, in preference to other States . . . . (emphasisHere italicised. is supplied) The contents of this letter also indicate that the petitioner was not content with the incentives and benefits as had been extended to its new unit as contemplated in respect of such units under heading 5, but had bargained hard for various benefits independent of the benefits indicated in respect of the units covered under heading 5 and this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rehensive manner. The condition occurs in the notification, which seeks to extend certain benefits and to what extent the benefit or concession can be extended, is a matter within the discretion of the Government and in the instant case also was the subject-matter of a bargain between the petitioner and the Government. The Government has extended the benefits with certain conditions. If the benefit can be worked out in understanding the condition in such a manner and the benefit can be sustained or retained that has to be done so like that only so that the petitioner does get the benefit. What in substance the condition imposed on the petitioner achieves is that the benefit or concession extended in respect of the production in the expanded unit of the petitioner will be available only when the overall production in the units of the petitioner exceeds the average sales tax liability of the petitioner for the past three years in respect of the existing unit. That means, if in respect of the production in the existing unit the sales tax liability is already at this level or even exceeds it, in respect of the production in the expanded unit, the concession can be availed of from its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax concession on the production in the expanded unit. Condition of this nature cannot be characterised as one either imposing a tax by itself or a condition by which the tax is imposed. Ultimately, even after fulfilling the condition, the petitioner stands to gain in the sense the petitioner gets the benefit in respect of the balance turnover in the expanded unit. Even otherwise, a condition of this nature can only be understood in such a manner, so that it not only saves the notification but also extends the benefit to the petitioner. As submitted on behalf of the respondents by the learned Government Advocate, if the condition is part of a package of incentive extended to the petitioner and the condition cannot be separated independently and if the condition is separated from the notification, the notification itself does not survive the independent by that is not for the benefit of the petitioner nor the object of extending the concession or benefit achieved. If the notification is understood as indicated above and thereby sustained, while the benefit/incentive is retained, the object of the policy notification is also achieved. In this view of the matter, there is no occasion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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