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TMI Blog2012 (1) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. 2.2 On 26th January 2001, the State of Gujarat, the district of Kutch in particular, was hit hard by the devastating earthquake bringing the economic activities of the entire district to a standstill. The State Government vide its Resolution no. INC102009031, had promulgated the Scheme for the economic development of Kutch district encouraging the new industrial units to establish their units in the notified area of Kutch district, entitling them to various incentives including Sales Tax exemptions, or Sales Tax Deferment, or offering composite scheme under the provisions of Section 49 (2) of the Gujarat Sales Tax Act, 1969. Initially, the period of the Scheme was notified from 31st July 2001 to 31st October 2004, which was later on extended till 31st December 2005. 3. The petitioner no.1 proposed to establish an industry for manufacturing and trading of steel products at village Tuna of Taluka Anjar, DistrictKutch and had applied for registration with the Industries Commissioner, which was granted on 13th July 2005 and it had accordingly commenced its commercial production on 27th December 2005. 3.1 A provisional/ad hoc Eligibility Certificate for an investment in fixed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 26th December 2012, without verification of the assets at actual site. On the basis of certificate of Chartered Accountant, however, after detailed verification as per the government resolution by the team of officers the recommendation for the purpose of final eligibility certificate was made to the tune of Rs. 2873.10 lacs as the resolution dated 9th November 2001 clarifies the definition of eligible investment and ineligible investment. Considering those parameters this final eligibility certificate has been granted and therefore, there is no scope of interference in the conclusion arrived at by the authority which is authorised under the scheme to finalize this eligibility. 6. Rejoinder on behalf of the petitioner to the affidavit in reply is also brought on record, wherein it has challenged the decision of the respondent in finalizing the amount of investment eligible for the purpose of sales tax benefits. According to the petitioner, the reasons provided in the report are very vague, and substantial expenditures have been disallowed only on the ground of unpaid expenses while some investment have been disallowed on the ground of advanced payments incurred towards phase II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Rs. 5525 lacs and the total investment in fact was made upto 31st December 2005 is Rs. 4725 lacs and petitioner has thus almost exhausted the ceiling mentioned at the time of proposal. 8. It is also contended further that the petitioner company made application in the prescribed format on 16th September 2005 for the investment of Rs. 5685 lacs and on 15th December 2005, it has further bifurcated the said investment in Phase I and Phase II specifying the sum at Rs. 4572 lacs and Rs. 1705 lacs respectively for Phase I and Phase II. The company commenced the production with the captive power plant before 31st December 2005, and thus, the phasing of the project would mean single project in more than one components. In short, there is a categorical denial of pipeline case with specific emphasis that there is no registration of second unit [UnitII]. 9. Mr. Tanvish Bhatt, learned Counsel appearing with Ms. Gargi Vyas have made their submissions fervently in support of the petition. It is emphasized that all along the very objective of the scheme have been completely disregarded by the respondents while finalizing the Eligibility Certificate and as laudable objects would get frustrated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may provide under the scheme the same was to be held eligible for the benefit of sales tax exemption or sales tax differment. The scheme states thus 12.2 Clause 2 provides for operative period and states that the scheme shall come into force from 31st July 2001 and shall remain in force till 31st October, 2004. Time initially given was periodically extended and for making eligible expenditure, the cut off date is extended upto 31.12.2005. 12.3 The term 'Commercial Production' defined in clause 3.3 says that the date of first sale bill shall mean the date of commercial production. 12.4 It also further emerges from clause 3.6 that fixed capital investment are broadly divided under various heads like land, new constructions, other constructions, machineries etc. For the purpose of dispute before the Court, this clause would be relevant. 12.5 Clause 3.6 (b) is suggestive of office building, store building, and other such buildings meant for plants and machineries excluding those meant for residence of Director and guest house. 12.6 Clause 3.6 (c) permits investment in constructing compound walls, internal roads, bore wells, water tanks and other such constructions as are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he industrial unit shall have to furnish all the details to Industries Commissioner/General Manager, District Industries Center. The fixed assets will be inspected at the location." 13.2 Clause 8 provides for various conditions claiming exemptions and clause 9 pertains to State Level Committee and provides that the Committee shall resolve the issues of interpretation and disputes arising in relation to grant of benefit under the Scheme. 14. It can be seen from clauses of the Scheme that registration for setting up of new industrial undertaking was a must. Moreover, applicability of the scheme was till 31st December 2005. It is not in dispute that the petitioner proposed to set up an industry for manufacturing and trading steel products at village Tuna, Taluka Anjar. Registration of which was applied for with the Industries Commissioner and it was granted. While the sales tax registration was granted on 13th July 2005 and pursuant thereto, the petitioner commenced its commercial production on 27th December 2005. 15. The respondents granted provisional eligibility certificate of Rs. 3767.99 lacs as "eligible investment" for availing the tax benefits and Chartered Accountant of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of Rs. 3.54 lacs. It also got permission for use of the same for nonagricultural purpose from the competent authority or the total built up area of 142742 sq.mts. Of course here, the land development cost is not considered eligible for the purpose of incentive. The report mentions that the eligible land area can be worked out as 52575.36 sq mtrs. (51067.96X4 +1507.40 sq mtrs.) based on fourtimes of approved plan area. Hence, Rs. 1.82 lacs is considered eligible for the incentive. There appears to be no reason why the land development cost is not considered eligible for incentive. If one looks at the objective of the scheme, the land development for setting up of the industry is a vital component. However, while denying the amount spent on land development, it was expected of the Committee to specify the grounds on which remaining sum has been treated as ineligible for the purpose of tax benefits particularly when there is no dispute to the factum that the petitioner has spent a sum of Rs. 4.82 lacs for the development of the land. The objections with regard to not treating the entire amount eligible for the purpose of tax benefit were raised along with the request for reconsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the fact is not in dispute that the petitioner has already spent all these amounts. (C) Plant and Machinery : Under this head, the total amount disallowed is Rs. 16,49,30,000/=. The advanced payment made towards the machinery is not considered eligible for not having come to the site which is to the tune of Rs. 4103.70 lacs. This amount has been spent and machineries as per the say of the petitioner were at the Port. Amount of Rs. 628.84 lacs is held ineligible for being unpaid on 31st December 2005. This amount is admittedly paid after 31st December 2005 and the same is declared to be investment towards PhaseII. Thus, the only amount considered eligible is Rs. 2600.89 lacs which includes the plant and machinery and electrification. As can be noted from this report, the amount of Rs. 41,03,70,000/= is considered ineligible only on account of the fact that the advanced payment was made of this amount. And, the mode of payment was not provided to the team. It is pointed out by learned counsel that in subsequent correspondence made to the respondent, these details have already been provided and the petitioner is further ready to prove the mode of payment of both the sum of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as given upto 31st December 2005 which is extended upto 31st December 2006 and the first unit had already started functioning by 31st December 2005 and it had also started production within the stipulated period. 19. Clause V of the incentive scheme speaks of the pipeline units and it was necessary for getting such unit registered on or before 31st December 2004 with necessary application for investment with the bank or financial institutions and before 31st December 2004, the land also was required to be acquired for such pipeline unit before the said date and the investment of 50% of the investment of the total project ought to have been done before 31st December 2004. On having so done the time limit would get extended. Such time period was extended upto 31st May 2005 and from that to 31st December 2006, as per the notification dated 13th September 2004. However, the rest of the conditions continued to be the same. However, if the same undertaking is to be set up in two phases, no separate registration is required. There appears to be no separate registrations for forging steel and at the same time eligibility certificate reflects at serial no.6 mention of forging steel. And th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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