Madras High Court
Tamilnadu Petroproducts Limited vs The Deputy Commissioner (Ct) on 26 April, 2012
Author: K.Chandru
Bench: K.Chandru
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 26.04.2012
CORAM
THE HONOURABLE MR.JUSTICE K.CHANDRU
W.P.Nos.22321 and 22322 of 2009
and
M.P.No.1 of 2009
Tamilnadu Petroproducts Limited,
represented by its Company Secretary
M.B.Ganesh
Manali Express Highway,
Manali, Chennai-600 068. .. Petitioner in both W.Ps
Vs.
1.The Deputy Commissioner (CT),
Fast Track Assessment Circle II,
PAPJM Building, Third Floor,
Greams Road, Chennai-600 006.
2.The State Industries Promotion
Corporation of Tamil Nadu Ltd.,
19A, Rukmani Lakshmipathy Road,
Egmore, Chennai-600 008.
3.The Assistant Commissioner (CT),
Zone XI,
Chennai-600 006.
4.The State of Tamil Nadu,
represented by the Secretary to Government,
Commercial Taxes &
Registration (B1) Department,
Fort St. George,
Chennai-600 009. .. Respondents
W.P.No.22321 of 2009 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records on the file of the first respondent herein in Rc.No.401/2008/A2, dated 29.9.2009 culminating in the Demand vide in Rc.No.401/2008/A2, dated 20.10.2009 and quash the proceedings dated 29.9.2009 as illegal and contrary to law.
W.P.No.22322 of 2009 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records on the files of the second respondent herein in the Eligibility Certificate No.8/X/D/D, dated 28.12.2009 and quash paragraph 5.3 of the said eligibility certificate issued by the second respondent as contrary to the scheme of deferral available to new industry, which is an independent diversification industry, apart from being ultra vires the notification No.II(1)/CTRE/157/91 (G.O.P.No.396), dated 10.9.1991 issued under Section 17-A of the Tamil Nadu General Sales Tax Act, 1959 and the notification No.II(1)/CTRE/210/92 (G.O.Ms.No.376), dated 27.10.1992 issued under Section 9(2) of the Central Sales Tax Act, 1956 read with Section 17-A of the Tamil Nadu General Sales Tax Act 1959.
For Petitioner : Mr.N.Prasad
For Respondents : Mr.Manoharan Sundaram, GA (T)
for RR1,3 and 4
Ms.Narmadha Sampath,
Standing Counsel for SIPCOT (R2)
- - - -
COMMON ORDER
The petitioner company is an Assessee under the Tamil Nadu General Sales Tax and is coming within the jurisdiction of the Deputy Commissioner (Commercial Tax), Fast Track Assessment Circle-II, Chennai.
2.The petitioner company had availed IFST Deferral scheme under diversification scheme. The scheme has been conceived by the State Government in order to promote industries in backward areas and referrable to the power exercisable by the State in terms of Section 17-A of the TNGST Act. Under the said provision, the State Government, subject to such conditions as may be prescribed, by notification issued, can defer the payment by any new industrial unit or sick unit or sick textile mill of the whole or any part of the tax payable in respect of any period. The condition specified includes the intended seekers of such concession to get the eligibility certificate from the State Industries Promotion Corporation of Tamil Nadu Limited (for short SIPCOT). The petitioner having availed the concession for deferring the payment of sales tax for the period from 1.3.1995 - 31.3.1995 to 1.4.2004 - 28.2.2005 for a period of 10 years, has to repay the tax in addition to the existing tax starting from 1.3.2005 31.3.2005 till 1.4.2014 31.3.2015. Paragraph 5.2 of the eligibility certificate obliges the petitioner company to enter into an agreement with the Assistant Commissioner (Commercial Taxes) concerned as per the terms and conditions stipulated by the department.
3.In the present case, the controversy arose out of paragraph 5.3 of the eligibility certificate which reads as follows :
"5.3.The company is eligible for deferral of sales tax only on the increased volume of production/sales. For the purpose of determining the increased volume of production, the base figure would be the highest of the volume of production/sale of the company in any one of the year during the last 3 years. Till reaching the volume of production/sale specified earlier the company would continue to pay tax and any liability in excess of the production/sale specified above alone will be eligible for deferment. The highest production/sales achieved by the company prior to the proposed expansion / diversification in the last 3 year is Linear Alkyl Benzene 85995 MT / Rs.34981.84 Lakhs for the year 1993-94."
4.After having availed the eligibility certificate, they had entered into an agreement with the Sales Tax department for manufacturing of Epichlorohydrin under diversification scheme for a period of 10 years. The eligibility certificate dated 28.12.1999 was rescheduled on 24.4.2000 issued by the Managing Director, SIPCOT rescheduling the deferral period from 01.04.2000 to 31.3.2010 with corresponding repayment period from 1.4.2010 to 31.3.2020. As noted already, as per the eligibility certificate, the petitioner company is eligible to get deferral sales tax only on the increased volume production / sales. For the purpose of determining the increased volume of production, the base production volume would be the highest volume of production or sale of the company in any one year during the last three years. Till reaching the volume of production / sale specified, the company will have to continue to pay the tax and any liability in excess of the production/ sale specified above alone will be eligible for deferment. The highest production / sale achieved by the company prior to the proposed expansion / diversification in the last three years is linear Alkyl Benzene was Rs.34981.84 lakhs for the year 1993-94. Accordingly, the revised eligibility certificate amended the stipulated BPV of 42999 MT and BSV Rs.17491 lakhs per half yearly basis. The company stated to enjoy deferral sales tax only on the increased volume of production. Till reaching the volume of production specified in the certificate, the company will have to pay tax and any liability in excess of production specified alone will be eligible for company.
5.But, however the petitioner company disregarding the conditions stipulated in the eligibility certificate had availed deferral scheme which reads as follows :
YEAR TNGST / VAT CST TOTAL 2000-01 4435021 1884311 6319332 2001-02 11856251 1382349 13238600 2002-03 11572911 6602117 18175028 2003-04 16888810 730435 17619245 2004-05 21203493 9141858 30345351 2005-06 31841161 10299489 42140650 2006-07 31707215 12189818 43897033 2007-08 27946138 4388008 32334146 2008-09 25451543 1978907 27430450 2009-2010 (Upto Aug 09) 7245475 947010 8192485 TOTAL 190148018 49544302 239692320 LESS : Paid on 30.03.09 21817865 Balance Rs 217874455
6.Therefore, the Deputy Commissioner, i.e., Assessment Officer had issued a notice to the petitioner to repay the unauthorised availment of deferral to an extent of Rs.21.79 crores. As seen from the table above, the petitioner in order to show their volume have included the Central Sales Tax within its turnover. The turnover indicated will not include the consignment sale, branch transfer and export sales effected by the petitioner company during the assessment year for availment of deferral in question. If these included figures are excluded, the result of BSV will be less than Rs.174.91 crores much less than 42999 MT for each half year. Therefore the company was not eligible to avail any IFST deferral facility since 2000-01. For the assessment year 2002-03, the total stock transfer was shown as Rs.362.03 crores. The export sale was at Rs.94.78 crores, thereby amounting to Rs.456.81 crores. These amounts cannot be included in the turnover. If these amounts were excluded for the year 2002-03, the petitioner is entitled to have turnover of Rs.273.50 crores which was much less than the agreed BSV which was Rs.349.82 crores. If the stock transfer and export sale were deducted from the BPV and BSV, the petitioner company had not maintained BPV in excess of BSV as stipulated in paragraph 5.3 of the eligibility certificate.
7.Even under G.O.Ms.No.500, Industries (MIG.II) Department, dated 14.5.1990 and G.O.Ms.No.119, Commercial Taxes and Religious Endowments Department, dated 13.4.1994, the company was eligible for deferral sales tax only on the increased volume of production. In fact in paragraph 3(v) of G.O.Ms.No.119, CTRE Department, dated 13.4.1994, it has been stipulated as follows :
"v)The Base Production Volume and the Base Sales Volume will have to be worked out and incorporated in the eligibility certificate at the time of issue by SIPCOT and District Industries Centres."
8.The commercial tax department sent a letter to the SIPCOT on 29.8.2008. In their letter, they have sought for a clarification which is as follows :
".....it is observed that the SIPCOT extended the deferral benefit to the diversification project viz. Epichloro Hydrine from the date of commencement of the deferral facility. For BPV, branch transfer / sales through agents shall be included. As tax receipts prior to expansion shall go down after expansion. BSV will be based on taxable sales. Both BPV and BSV shall be complied with. Therefore, the SIPCOT is requested to offer their remarks on the issue of this office, to decide the representation filed by Tvl.Tamilnadu Petroproducts Ltd."
9.Pursuant to the same, the SIPCOT had issued a letter dated 07.11.2008 which is as follows :
"The BPV and BSV mentioned in the EC issued by SIPCOT are the highest production and the highest sales turn over achieved by the company during the three years prior to diversification as per the Annual Report. The BSV includes the sales coming under TNGST as well as branch sales, transfers, inter-state sales, exports etc. For the purpose of availing concessions under the EC, the BPV and the sales made in excess of the BSV under Tamilnadu General Sales Tax should be taken into account, as the purpose is to protect the past revenue of the Government prior to expansion / diversification scheme."
10.In the light of this, the respondents took the stand that the petitioner company is not entitled to avail IFST deferral as it had not maintained BPV in excess of BSV. Though the petitioner tired to contend that they have diversification of products, it was the stand of the respondents that there was no interconnection between the existing unit and the diversification unit. The eligibility certificate was obtained by them under the expansion / diversification scheme. The manufacturing of Epicholorohydrin is a new industry was not correct.
11.The petitioner is challenging the communication, dated 20.10.2009 faced with a demand for making payment of deferral so far availed by them in violation of law and they were threatened with action to recover the entire amount of TNGST without further notice and the writ petitions came to be filed. The petitioner company conscious of the fact that they are the beneficiaries and circumscribed by the eligibility certificate issued by the SIPCOT, has chosen to challenge paragraph 5.3 of the eligibility certificate , dated 28.12.1999 after a period of 10 years. Though there was no order dated 28.12.2009 and there was only the eligibility certificate issued by the SIPCOT, dated 28.12.1999, yet in the writ petition's prayer, they have chosen to question the non existing order dated 28.12.2009.
12.In the first writ petition, they have sought to challenge the communication sent by the department, dated 29.9.2009 pursuant to the clarification issued by the SIPCOT. In the second writ petition, they have chosen to challenge paragraph 5.3 of the eligibility certificate dated 28.12.1999 (wrongly shown as 28.12.2009) may be to escape the attack that it was filed after 10 years. The petitioner has not explained as to why they have come forward to challenge the order after 10 years especially when at the instance of the Commercial Tax department, the SIPCOT had already clarified by a subsequent order dated 7.11.2008 and that order is not under challenge before this court.
13.both writ petitions were admitted on 02.11.2009. Pending the writ petition, this court had granted an interim stay for a period of four weeks. Subsequently, it was extended from time to time and finally on 23.12.2009 until further orders. On notice from this court, a common counter affidavit, dated 6.2.2012 was filed by the respondent Commercial Tax Department. The petitioner has filed a common reply affidavit, dated 22.2.2012.
14.Though elaborate arguments were addressed by citing several judgments, it is unnecessary to go into those decisions as they have no relevance to the case on hand. As rightly contended by Mr.Manoharan Sundaram, learned Government Advocate (Taxes) and Ms.Narmada Sampath, learned Standing Counsel for the SIPCOT, the petitioners are bound by the eligibility certificate for availing the benefit under the scheme. Having accepted the terms of the eligibility certificate which is the requirement under G.O.Ms.No.119, CTRE Department, dated 13.4.1994, after a period of 10 years, they cannot turn back and challenge the eligibility certificate which initially gave them power to enter into an agreement with CTRE Department. When the scheme is intended for providing incentive to set up industries in backward areas with a view to maximise the production so to as increase the infrastructures of the area as well as provide employment opportunities, the petitioner by including the branch transfer and sales as a part of the BSV are trying to hoodwink the department.
15.In this context, the learned Government Advocate relied upon a judgment of the Allahabad High Court in Ambika Steels Pvt. Ltd. Vs. State of Uttar Pradesh and others reported in (2008) 12 VST 390 (All) for the purpose of contending that if the notifications on a simple and plain reading are quite clear, unambiguous and to not admit of any doubt, the strict interpretation with regard to the interpretation of statutes is clearly attracted. In the said judgment, it was observed as follows:
"We, therefore, in nutshell do not agree with the contention of the petitioner that "turnover of sales" used in the notification does include stock transfer and transfer of goods from one branch to another...."
In the same case, the Allahabad High Court also warned the ingenious stock transfer being done as turnover sale to avoid paying tax and it was observed as follows:
"To our mind, the purpose was double fold and of mutual benefit. It was certainly not to give an opportunity to the tax payee to circumvent the payment of tax on base production by effecting with ingenuity stock transfers and the like."
16.The counsel also referred to a judgment of the Supreme Court in State of Haryana v. Liberty Enterprises reported in (2009) 14 SCC 310 = (2009) 22 VST 1(SC), wherein the Supreme Court had considered the similar question which arose under the Haryana General Sales Tax Rules, 1975 and while rendering findings it was observed in paragraphs 16, 17,22,23,24 and 28 as follows :
"16.At the outset, we may state that there is a vital difference between the scheme of deduction and a scheme for exemption. Even within the scheme of exemption there is a basic difference between the basis for computation of the quantum of benefit and the limit or ceiling to be placed on that quantum.
17. There is no dispute that but for exemption claimed, the assessee was a dealer, who was subject to incidence of sales tax under the 1973 Act. Its transactions were liable to be dealt with in accordance with the provisions of the Act relating to taxability. What was exempted under the Act and the Rules was payment of tax by a class of dealers who had been issued eligibility/exemption certificates. This is not in dispute.
22. Rule 28-A deals with computation of the quantum of tax incentive available to a dealer in whose favour eligibility certificate is issued. In order to regulate the exemption scheme the concept of notional sales tax liability stood incorporated vide Rule 28-A(2)(n) of the 1975 Rules.
23. The Department has placed heavy reliance on the proviso in Rule 28-A(4)(a), which has been quoted above. The said proviso states that in case of exemption, the benefit shall extend to tax on gross turnover and in case of deferment it shall extend to tax on the taxable turnover of the goods manufactured by the unit. We have quoted the definition of the word gross turnover which is defined to mean the aggregate of the amount of sales and purchases made by any dealer. The Department placed heavy reliance on this definition of the words gross turnover to say that it would include export sales, particularly, when Rule 28-A contains a proviso to the effect that in case of exemption, the benefit shall extend to tax on gross turnover. There is no dispute on this proposition.
24. However, in this case we are concerned with the limit to be placed on tax exemption/deferment and for calculating that limit/ceiling one has to take into account the notional sales tax liability of the unit. Therefore, one has to read the proviso in Rule 28-A(4) with Explanation 1 which states that for the purposes of arriving at the limit of tax exemption/deferment, the notional sales tax liability of the unit shall be taken into consideration. It is because of the said Explanation that notional sales tax liability has been defined in Rule 28-A(2)(n). Therefore, one has to go strictly by the definition of the words notional sales tax liability in the said Rule 28-A(2)(n) of the 1975 Rules.
28.For the aforestated reasons, we hold that export sales were not includible in the matter of calculation of notional sales tax liability during the period in question."
17.In the present case, the fact that the petitioner themselves have come forward to challenge paragraph 5.3 of the eligibility certificate (after 10 years) will show that they are bound by the eligibility certificate. Secondly, the delay in challenge was not explained to this court. Even further clarifications were issued by the SIPCOT reiterating their earlier stand. If the petitioner's contentions are accepted, it will go contrary to the incentive provided under the said scheme.
18.In the light of the above, there is no case made out to interfere with the impugned demand notice. There is no illegality in paragraph 5.3. of the eligibility certificate issued by the SIPCOT. Hence both writ petitions will stand dismissed. No costs. Consequently, connected miscellaneous petition stands closed.
26.04.2012 Index : Yes Internet : Yes vvk To
1.The Deputy Commissioner (CT), Fast Track Assessment Circle II, PAPJM Building, Third Floor, Greams Road, Chennai-600 006.
2.The State Industries Promotion Corporation of Tamil Nadu Ltd., 19A, Rukmani Lakshmipathy Road, Egmore, Chennai-600 008.
3.The Assistant Commissioner (CT), Zone XI, Chennai-600 006.
4.The Secretary to Government, The State of Tamil Nadu, Commercial Taxes & Registration (B1) Department, Fort St. George, Chennai-600 009.
K.CHANDRU, J.
vvk ORDER IN W.P.Nos.22321 and 22322 of 2009 26.04.2012