Adani Ports And Special Economic Zone ... vs State Of Gujarat & on 29 December, 2016

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Gujarat High Court

Adani Ports And Special Economic Zone ... vs State Of Gujarat & on 29 December, 2016

Bench: Abhilasha Kumari

                  C/SCA/12733/2016                                             ORDER




                  IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                       SPECIAL CIVIL APPLICATION NO. 12733 of 2016

         ==========================================================
           ADANI PORTS AND SPECIAL ECONOMIC ZONE LIMITED....Petitioner(s)
                                     Versus
                      STATE OF GUJARAT & 1....Respondent(s)
         ==========================================================
         Appearance:
         MR MIHIR JOSHI, SENIOR ADVOCATE WITH MR SANDEEP SINGHI, ADVOCATE AND
         MR PRANJAL BUCH FOR SINGHI & CO, ADVOCATE for the Petitioner(s) No. 1
         MR KAMAL B. TRIVEDI, ADVOCATE GENERAL WITH MS SANGITA VISHEN , ASSISTANT
         GOVERNMENT PLEADER for the RESPONDENT(s) No. 1-2
         ==========================================================

          CORAM: HONOURABLE SMT. JUSTICE ABHILASHA KUMARI

                                     Date : 29/12/2016


                                      ORAL ORDER

1. The issue arising for determination in the petition is, whether the demand for the payment of Conversion Tax under Section 67A of the Gujarat Land Revenue Code, 1879 ("the Code"), made by the respondent State Government upon the petitioner in relation to lands allotted to it for the purpose of developing a Special Economic Zone ("SEZ") is legally justified or contrary to the provisions of Section 67A of the Code, or not?

Page 1 of 25 HC-NIC Page 1 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER

2. The above issue has been addressed by Mr.Mihir Joshi, learned Senior Counsel with Mr.Pranjal Buch, learned advocate for Singhi and Company on behalf of the petitioner and Mr.Kamal B. Trivedi, learned Advocate General, with Ms.Sangita Vishen, Assistant Government Pleader, on behalf of the respondent State Government, at length, by making elaborate and detailed submissions.

3. Mr.Mihir Joshi, learned Senior Advocate for the petitioner has first drawn the attention of the Court to the order dated 18.10.2006, allotting the land to the petitioner for the purpose of developing a SEZ. He has submitted that a perusal of the said order would make it clear that the land of the State Government has been allotted for setting up a SEZ, specifically for an industrial purpose, subject to certain conditions. The allotment of land has not been made to the petitioner for agricultural purposes but specifically for industrial purposes. This is clear from Condition No.5 of the allotment order which specifies that the land is granted Page 2 of 25 HC-NIC Page 2 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER for industrial purposes and cannot be used for any other purpose unless permission is granted by the State Government. The petitioner is using the land for industrial purposes and has not converted the use of land to any other purpose. Laying emphasis on the aspect that the land has been granted for industrial purposes, which constitutes nonagricultural use and that it is assessed for nonagricultural use, learned Senior Counsel has referred to Conditions Nos.8, 12, 13 and 14 of the allotment order, which refer to construction on the land. It is submitted that the recitals in the order of allotment and the conditions attached leave no manner of doubt that the land is granted for industrial purposes, specifically to set up an SEZ, which constitutes nonagricultural use. The land was never given as agricultural land to the petitioner and it has never been agricultural land in the hands of the petitioner.

4. Referring to Section 67A of the Code, learned Senior Counsel for the petitioner submits that this provision provides for the payment of Page 3 of 25 HC-NIC Page 3 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER conversion charge for use of the land. For the taxable event to occur, the first requirement as per subsection (1) of Section 67A is that the land has to be `assessed' or `held' for the purpose of agriculture by the occupant of the land. This requirement is not fulfilled as the petitioner has never held the land for the purpose of agriculture. Insofar as assessment is concerned, Condition No.12 of the allotment order clearly stipulates that the land is to be assessed as nonagricultural land. The first requirement for the levy of tax, therefore, is not fulfilled in the case of the petitioner. It is further submitted that the second requirement for the taxable event to take place flows from clause (a) of subsection (1) of Section 67, which specifies that the land should have been permitted or deemed to have been permitted, under Section 65, to be used for any other purpose. It is submitted that Section 65 of the Code provides for the use to which an occupant of the land held for agricultural purposes may put his land to and the procedure to be followed Page 4 of 25 HC-NIC Page 4 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER by the Collector, when such permission for change of user is asked for. The proviso to this Section contains a deeming provision to the effect that if the Collector fails to inform the applicant of his decision on the application within three months, permission shall be deemed to have been granted. It is submitted that this provision does not apply in the case of the petitioner, therefore, the second requirement for the levy of conversion tax as per Section 67A is not met.

5. Referring to subsection (3) of Section 67A, Mr.Mihir Joshi, learned Senior Advocate would submit that the conversion tax under this provision would become payable only if the requirements of Section 67A that constitute the taxable event, are fulfilled. In the present case, as the petitioner was never granted land for agricultural purposes and has never sought to convert it into nonagricultural land, the provisions of Section 67A are not at all attracted. It is emphasised by learned Senior Counsel for the petitioner that it is clear from Page 5 of 25 HC-NIC Page 5 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER the allotment order that the land has been granted to the petitioner for industrial purposes in order to setup a SEZ and there is no conversion of the land for any other purpose. The basic requirements of Section 67A are not met with in the case of the petitioner and Section 67A is, therefore not applicable. The demand of conversion tax by the State Government is, therefore, exfacie illegal.

6. It is further contended that nowhere in the order of allotment is there any condition or stipulation that the petitioner is liable to pay conversion tax. Neither is there any such stipulation in the Sanad. The order of allotment of the Sanad cannot be sought to be varied on the basis of an audit objection raised by the Accountant General, Ahmedabad. The levy and demand of conversion tax from the petitioner under Section 67A is unjustified as the said provision does not apply to the case of the petitioner. Several representations have been made to the State Government by the petitioner but instead of withdrawing the mistaken demand, Page 6 of 25 HC-NIC Page 6 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER the respondents haver created a charge on the lands alloted to the petitioner.

7. It is submitted that as the levy and demand of conversion tax is unlawful and unjustified, the petition may be admitted and interim relief may be granted to the petitioner.

8. In support of his submissions, learned Senior Counsel for the petitioner has relied upon a judgment of this Court (Coram: Bela M. Trivedi, J.) dated 24.06.2016 passed in the case of Kantilal Ramswarup Shah v. Secretary Revenue Department (Appeals) And Others (Special Civil Application No.13504 of 2016), wherein it is held as below:

"5. In the instant case, it is not disputed that the land in question was allotted to the petitioner in the year 1996 by the Collector, by executing the lease deed under the provisions contained in the Gujarat Mines and Mineral Rules, 1966. It is also not disputed that there was no condition in the original lease deed executed in the year 1996 as well as in the lease deed renewed in the year 2001 to the Page 7 of 25 HC-NIC Page 7 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER effect that the petitioner was liable to pay the conversion tax as contemplated under Section 67A of the Code. On the contrary, as transpiring from the conditions mentioned in the lease deed (AnnexureA), granting of the said land was not to be construed as bar of any of the Rules i.e. 67, 68, 69 and 70 of the Gujarat Land Revenue Rules. The learned AGP has failed to point out as to under which provision of Section 67A, the Collector had called upon the petitioner to pay the conversion tax. When the land was allotted to the petitioner by the competent Authority under the Gujarat Mines and Mineral Rules, 1966 for specific purpose of removing black trap stones, there was no question of the petitioner applying to the Collector for using the land for non agricultural purpose, which would entail payment of conversion tax under Section 67A of the Code. The learned AGP has fairly submitted that as such there was no condition imposed in the lease deed for the payment of conversion tax at the time of allotment of land in the year 1996 and even while renewing the said lease in the year 2001."

9. The submissions advanced on behalf of the petitioner have been opposed by Mr.Kamal B. Page 8 of 25 HC-NIC Page 8 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER Trivedi, learned Advocate General, by submitting that the liability to pay conversion tax is on the conversion of the purpose of the land. Where and when the conversion takes place is a secondary issue. The liability arises as soon as the conversion takes place. The land can be said to have been held and assessed for agricultural purposes even at the ends of the State Government. What is to be seen is what land is given and not for what purpose it is given. It is submitted that the liability to pay conversion tax does not depend upon any express conditions incorporated in the allotment order. Elaborating further on this aspect, learned Advocate General submits that the lands in question are Government lands which have been described as "Sarkari Padtar" in the revenue record. This does not mean that the land ceases to be agricultural land. The lands allotted to the petitioner were "lands assessed" or "lands held for agricultural purposes" at the material time.

10. Referring to Section 37 of the Code, learned Page 9 of 25 HC-NIC Page 9 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER Advocate General submitted that all lands belong to the State Government. However, it is lawful for the Collector to dispose of certain lands with permission from the State Government, which gives the power of allotment. Reference has also been made to Section 48 of the Code which pertains to the manner of assessment and alteration of assessment. Referring to sub section (2) of Section 48, it is submitted that this provision refers to land assessed for use for any purpose as permitted or deemed to have been permitted under Section 65 or Section 65A, to be used for any other purpose. Since the lands allotted to the petitioner were essentially agricultural lands as they were capable of being cultivated even if they were lying fallow, they are also deemed to have been assessed as per Section 48(2). As the State Government is the owner of the land, no express assessment is required to be carried out as it would not recover assessment charges from itself. On the logic of this explanation, learned Advocate General submitted that the Page 10 of 25 HC-NIC Page 10 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER requirement of Section 67A(1) that the land is required to be "assessed" and "held" for the purpose of agriculture is fulfilled. It is contended that Section 67A(1) does not say in whose hands it is to be assessed or held for agricultural purposes. As the land has been allotted to the petitioner for nonagricultural purpose, the demand of conversion tax is legal and justified and Section 67A is applicable to the case of the petitioner.

11. Learned Advocate General has also taken the Court through the provisions of Sections 62, 65, and 65A of the Code. It is further submitted that the Sanad has mistakenly been granted to the petitioner under Section 133 of the Code, in Schedule H, whereas it ought to have been issued under Rule 87 of the Gujarat Land Revenue Rules, 1972, under Form M, which provides for the payment of conversion tax. It is submitted that the levy of conversion tax flows from a cumulative reading of Sections 37, 65, 67A of the Code read with Rule 87. There is no requirement for any specific condition to be Page 11 of 25 HC-NIC Page 11 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER inserted for the demand of conversion tax in the allotment order. The liability arises from a harmonious reading of the provisions of the statute and the petitioner is liable to pay conversion tax.

12. In support of this submission, reliance has been placed upon J. Kumaradasan Nair And Another v. Iric Sohan And Others - (2009)12 SCC 175 and MIG Cricket Club v. Abhinav Sahakar Education Society And Others - (2011)9 SCC 97.

13. Learned Advocate General has further submitted that there has been an infraction in procedural formality while issuing the allotment orders and Sanad to the petitioner which cannot wash away the charge or levy of conversion tax. The tax is on the conversion of the land and not a procedural formality. It only remains to be seen whether the conversion has taken place as per the taxing procedure, or not. In support of this submission, reliance has been placed upon a judgment of the Supreme Court in the case of Madhu Silica Private Limited and Ors. v. State Page 12 of 25 HC-NIC Page 12 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER of Gujarat and Ors. (1992)85 STC 258 (Guj.).

14. In support of his submission regarding the underlying objective of Sections 48 and 67A of the Code, learned Advocate General has relied upon Hindustan Brown Boveri Ltd. v. Ashok Chavla, Collector of Baroda & Ors. 1998(1) GLR 336.

15. Learned Advocate General has referred to the Government Resolution dated 06.06.2003, which consolidates all previous Resolutions and Circulars laying down the provisions for the grant of Government lands for nonagricultural purposes wherein Condition No.37 clearly provides that when the lands are granted for nonagricultural purposes, all the Collectors should invariably incorporate the conditions in the grant order to the effect that applicant and/or the owner should obtain permission for nonagricultural use and that conversion tax would be payable as per the provisions of Section 67A of the Code. It is submitted that the Collector, while issuing the allotment order Page 13 of 25 HC-NIC Page 13 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER to the petitioner, has not followed this Circular, but has incorporated Condition No.8, to the effect that construction work should be completed and use thereof should commence within two years from the date of the allotment order. It is submitted that for all practical purposes, this is an order granting nonagricultural permission to the petitioner and if it is so read, tax would be leviable.

16. Learned Advocate General has further submitted that the petitioner has an alternative remedy as it has challenged the order of the Collector, therefore, the Court may relegate it to avail of such remedy. It is submitted that even against the mutation of entry of charge in the revenue record, the petitioner has an alternative remedy.

17. On the basis of the above submissions, learned Advocate General has contended that the petition may be rejected at this stage, or, if the Court is inclined to admit the petition, interim relief may not be granted. In the alternative, Page 14 of 25 HC-NIC Page 14 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER the petitioner may be directed to deposit the amount of the conversion tax in the Registry of the Court, which can be refunded to it if successful in the final result of the petition.

18. In support of this submission, reliance has been placed upon a judgment of the Supreme Court in the case of Siliguri Municipality And Others v. Amalendu Das And Others - (1984)2 SCC 436.

19. In rejoinder to the submissions advanced by the learned Advocate General, Mr.Mihir Joshi, learned Senior Advocate has submitted that it is clear from the communications dated 30.06.2015 and 30.04.2016, that in levying the demand of conversion charge, the Collector has acted upon the instructions of the State Government, therefore, to approach the State Government would be an empty formality.

20. Responding to the submissions advanced by the learned Advocate General, learned Senior Counsel has once again referred to the provisions of Section 67A of the Code and contended that the conversion of the land is required to be at the Page 15 of 25 HC-NIC Page 15 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER hands of the occupant and in this case, the petitioner has not made an application for conversion and the land is being used for the same purpose for which it was allotted. It is submitted that the manner in which conversion takes place has been clearly defined in Section 67A which states that where any land assessed or held for the purpose of agriculture is permitted or deemed to have been permitted under Section 65 to be used for any other purpose, then conversion tax would be leviable. In the present case, neither has the land been assessed for agricultural purpose or held for the agricultural purpose by the petitioner and nor has the petitioner applied for the use of the land under Section 65 of the Code.

21. It is emphatically submitted by the learned Senior Counsel that the concept being developed by the learned Advocate General that all lands of the State Government are agricultural lands is not supported by either facts or law. Land revenue does not apply to the State Government. Even if it is assumed, for the sake of argument Page 16 of 25 HC-NIC Page 16 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER that deemed conversion takes place in the hands of the State Government, the petitioner cannot be made to suffer.

22. Referring to Rule 117B of the Rules, it is submitted that this Rule pertains to conversion tax payable under Section 67A and mandates that the tax should be paid in advance by a Challan in the Government Treasury and a demand notice shall be issued by the Collector for this purpose. Such demand notice shall state that necessary orders for permission under Section 65, or as the case may be, under Section 65A, shall be issued after production of the Challan before the Collector. In the present case, there has been no permission under Section 65 of 65A, therefore, there is no question of issuing a demand notice under this provision.

23. Referring to Section 48 of the Code, learned Senior Counsel submits that this Section does not pertain to the character of the land. The land revenue does not depend on the character of the land but on the use thereof. Section 48 does Page 17 of 25 HC-NIC Page 17 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER not presume that there is any deeming assessment in the hands of the State. There must be an actual assessment.

24. It is further submitted that the contention of the learned Advocate General that the Sanad ought to have been issued under Rule 87 read with Form M further supports the case of the petitioner. Form M contemplates an application to be made to the Collector under Section 65 or Section 65A of the Code, which has not been done in the present case.

25. Learned Senior Advocate further submits that the judgment in the case of Hindustan Brown Boveri Ltd. v. Ashok Chavla, Collector of Baroda & Ors. (supra), relied upon by the learned Advocate General would actually support the case of the petitioner as it held in the said judgment that subsection (2) of Section 67A of the Code would be applicable where the land assessed or held for any nonagricultural purpose is used for any other nonagricultural purpose that is other than that for which it has Page 18 of 25 HC-NIC Page 18 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER been converted. Only then would the question of levying tax arise, otherwise not. In the present case, the land has neither been converted from agricultural to nonagricultural or from one purpose to another purpose by the petitioner, therefore, the taxable event under Section 67A does not occur.

26. Learned Senior Counsel has distinguished the judgment in Siliguri Municipality And Others v. Amalendu Das And Others (supra), by submitting that in this case, there was a challenge to the constitutional validity of the Rules, therefore, this judgment would not be applicable.

27. On the other hand, learned Advocate General has distinguished the judgment relied upon by the petitioner in Kantilal Ramswarup Shah v. Secretary Revenue Department (Appeals) And Others (supra) by submitting that this judgment pertains to a mining lease.

28. In the background of the above submissions, this Court has heard learned counsel for the respective parties at length, and considered the Page 19 of 25 HC-NIC Page 19 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER rival submissions and the provisions of the Code, the Rules and judicial pronouncements cited at the Bar. Having done so, this Court finds that certain salient issues emerge from the legal and factual position on record, which can be enumerated as below:

(1) The orders of allotment of the lands to the petitioner clearly specify that the lands are being allotted for industrial purposes, in order to develop a SEZ. The conditions attached to the said orders clearly state that the lands are assessed as nonagricultural lands. There does not appear to be any mention in the orders that the lands have been held for agricultural use.

(2) Section 67A pertains to payment of conversion tax by the occupant for the change of the use of the land which is assessed or held for the purpose of agriculture when it is permitted or deemed to be permitted under Section 65, to be used for any other purpose. In the present case, there is no conversion of the Page 20 of 25 HC-NIC Page 20 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER user of the land by the petitioner. It was allotted for the industrial purpose of establishing a SEZ and it is being used for the same purpose.

(3) It remains to be decided whether the legality and validity to levy and demand conversion tax is to be determined under Section 67A of the Code, which is the only provision for this purpose in the Code or whether, as suggested by the learned Advocate General, the provisions of Section 37, 48, 65, 65A and Rule 8, are required to be read into Section 67A. (4) The order of allotment contains no condition or stipulation regarding the levy of conversion tax. Neither does the Sanad contain any such condition. Whether, in the absence of any condition or stipulation in the allotment order or the Sanad, can it be said that the demand and levy of conversion tax is not required to be specifically provided for and would flow from a general reading of the statute?

Page 21 of 25

HC-NIC Page 21 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER (5) Whether the demand and levy of conversion tax would arise from an audit objection, without reference to any specific provision of the Code? Can such a demand be general in nature, without it being specified as to how and under which subsection of Section 67A the demand arises from?

(6) Whether the taxable event under Section 67A of the Code be overridden by executive instructions, such as the Government Resolution dated 06.06.2003?

(7) Even assuming that there is a mistake in the issuance of the Sanad under Section 133 of the Code read with Form H, would that mistake justify the levy of commercial tax under Section 67A of the Code if the ingredients necessary for conversion tax to be applicable are primafacie not attracted?

29. The above aspects are, in the view of the Court, highly relevant and vital for a proper determination of the issues arising in the petition. Serious questions of law have been Page 22 of 25 HC-NIC Page 22 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER raised by the parties that require deeper and detailed consideration which can be accorded at the stage of the final hearing of the petition.

30. Insofar as the grant of interim relief is concerned, it has been submitted by the learned Advocate General that the petitioner may be directed to deposit the entire amount of the demand in the Registry of this Court and, if it succeeds in the litigation, the amount can be returned to it. Emphasis has also been laid upon the judgment of the Supreme Court in Siliguri Municipality And Others v. Amalendu Das And Others (supra) where it has been stated that it is only in exceptional cases that an interlocutory order for the recovery of tax should be stayed. As pointed out by the learned Senior counsel for the petitioner, in this judgment, the Supreme Court was dealing with the constitutional validity of the provision whereby tax was levied. In the present case, the petitioner has raised a question regarding the very legality and validity of the levy of conversion tax under the provisions of Section Page 23 of 25 HC-NIC Page 23 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER 67A of the Code. It falls for the determination of the Court whether the requirements of the said provision, in order to constitute the taxable event, has occurred at all, in the case of the petitioner.

31. Having considered the case from all angles, at this stage, it suffices to state that upon consideration of the submissions advanced by learned counsel for the respective parties, this Court is of the view that Mr.Mihir Joshi, learned Senior Advocate for the petitioner, has succeeded in establishing a good primafacie case for the admission of the petition and the grant of interim relief.

32. Hence, the following order is passed:

Issue Rule, returnable on 04.07.2017. By way of interim relief, the respondents are restrained from recovering conversion tax from the petitioner till the final decision of the petition.

33. Ms.Sangita Vishen, learned Assistant Government Page 24 of 25 HC-NIC Page 24 of 25 Created On Fri Dec 30 00:08:39 IST 2016 C/SCA/12733/2016 ORDER Pleader, has prayed that this order may be stayed for some time. In view of the issues arising in the petition and as the Court has found a strong primafacie case in favour of the petitioner, the request is declined.

34. It is made clear that the Court has expressed a tentative view of the matter and no observations made in this order may be taken as an expression of a final opinion on the merits of the case.

(SMT. ABHILASHA KUMARI, J.) sunil Page 25 of 25 HC-NIC Page 25 of 25 Created On Fri Dec 30 00:08:39 IST 2016

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