KHUKRI PACKAGING PRIVATE LTD Vs. STATE OF GUJARAT

JUDGEMENT

(1.) THIS petition is filed by the petitioners for a declaration that the provisions of section 47 (4-A) of the Gujarat Sales Tax Act, 1968 (hereinafter referred to as "the Act") are ultra vires articles 14, 19 (1) (g) and 300-A of the Constitution of India. A prayer is also made to quash and set aside the revised eligibility certificate dated April 27, 1988, an order of amendment dated February 16, 1989 and notice dated February 24, 1989 being illegal, contrary to law, arbitrary and ultra vires. It is also prayed that eligibility certificate and exemption certificate issued by respondent No. 2 and the Assistant Commissioner of Sales Tax, respondent No. 3 are legal, valid and are in force.

(2.) IT is the case of the petitioners that petitioner No. 1 is a private limited company incorporated under the Companies Act, 1956. Petitioner No. 2 is the managing director of petitioner No. 1 and a shareholder of the company. The factory of the petitioner is in the State of Gujarat at A1-3502, GIDC, Sachin, District Surat. The company manufactures corrugated boxes for packing and selling them. IT is also a dealer registered under the Act. According to the petitioners, the company tempted to establish a small-scale industry in a backward area at Sachin, District Surat by investing huge amount on account of being informed by resolutions, dated August 27, 1980 and March 18, 1982 issued by the Industries, Mines and Power Department and Finance Department respectively of the first respondent-State. A scheme of the sales tax incentive from June 1, 1980 was introduced for a period of five years by which sales tax exemption incentives had been granted vide entry No. 118 as per notification dated February 5, 1981 issued under sub-section (2) of section 49 of the Act. The petitioner took steps to obtain factory shed of Gujarat Industrial Development Corporation, a Government of Gujarat undertaking at Sachin by obtaining possession thereof and by incurring expenses of Rs. 1,71,145. Thereafter it invested huge amount of more than Rs. 15 lacs. According to the petitioner, it started production from February 15, 1981. IT is asserted that the area of the factory shed of the petitioner is situated beyond 10 kms. of the municipal limits of Surat as such the petitioner is entitled to get exemption of payment of sales tax in accordance with the notification issued by the respondents. As per that notification the petitioner would be entitled to incentives by way of 50 per cent of the investment or Rs. 70 lacs whichever is less. IT is the case of the petitioner that it had complied with all conditions making it eligible for sales tax exemption and incentives envisaged by the above notification. The petitioner, therefore, made an application on May 12, 1986 for grant of eligibility certificate. Necessary documents were also submitted along with the application pointing out that the shed of the petitioner was situated beyond 10 kms. of the municipal limits of Surat. A copy of that certificate issued by GIDC is also annexed to the petition. According to the petitioner, respondent No. 2 made necessary inquiries, visited factory premises of the petitioners, collected necessary information and after verifying facts, he was satisfied that the factory of the petitioner was situated in the area beyond 1 kms. of the municipal limits of Surat and hence on October 29, 1987 granted eligibility certificate by which the petitioner is entitled to sales tax exemption to the extent of Rs. 8,15,696. A Certificate granted in favour of the petitioner is also produced by the petitioner. But after everything was over for the reasons best known to the respondents, they have revised that eligibility certificate on April 27, 1988 and exemption which was granted for 50 per cent to the extent of Rs. 8,15,696 was reduced to 25 per cent (Rs. 4,07,848 ). IT is this action which is challenged by the petitioner in the present petition.

(3.) AN affidavit-in-reply is filed by one A. J. Patel, General Manager and Joint Commissioner of Industries, Surat, supporting the action taken by the respondent-authorities. It is, inter alia, stated in the counter that the petitioners are entitled to certain incentives in accordance with Government declared policy of providing incentive to persons establishing new industries in the backward area in the State. From time to time such benefits have been extended by the Government to all the persons similarly situated. The incentives relating to exemption from sales tax is granted through statutory notification under section 49 (2) of the Act which empowers the State Government to exempt any specified class of sales or of specified sales or purchases from payment of the whole or any part of the tax payable under the provisions of the Act. Such exemption, however, would be subject to such conditions as Government would impose. Regarding entry No. 118, it is the case of the department that to give effect to the sales tax exemption envisaged in the Government resolution dated August 27, 1980 and in exercise of the power under section 49 (2), it was inserted wide notification dated April 29, 1970. One of the conditions specified in the said entry No. 118 was that the specified manufacturer claiming benefit of exemption must have obtained an eligibility certificate from the Commissioner of Industries or General Manager of District Industries Centre. In para (B), it is stated as under : " (B) At this stage, it would be pertinent to note that for the purpose of determining eligibility for incentive, and the extent thereof, what is material is the distance of growth centre from the municipal limits of certain specified cities (generally known as the banned distance) and not that of the concerned unit. In the case of Surat, such banned distance is 10 kms. In para (1), the deponent has stated that the question had arisen as regards the extent of incentives which an industrial unit located in a growth centre which falls partly within and partly outside the banned distance, would be entitled to. By a letter dated June 15, 1982 addressed to the Industries Commissioner, the Government clarified even if a portion of a growth centre falls within a banned distance, the whole of it should be treated as falling within the banned distance. In para (K) it was stated that since portion of the industrial estate of Sachin where the unit of the petitioner is located falls within the distance of 10 kms from Surat, as per the Government resolution the petitioners were not entitled to get exemption to the tune of 50 per cent but was entitled to 25 per cent only. It was, therefore, stated : I say that initially the petitioner was erroneously granted the eligibility certificate certifying that the petitioner was entitled to the benefit of sales tax exemption to the extent of Rs. 8,15,696. The said eligibility certificate was granted on the footing that the petitioner was entitled to such incentive at the rate of 50 per cent of the fixed capital investment. Subsequently, when it was realised that by virtue of the location of the petitioner's unit being in the Sachin Industrial Estate of Surat, the petitioner would be entitled to the benefit of sales tax exemption at the rate of 25 per cent of the fixed capital investment and not at the rate of 50 per cent of such investment, the eligibility certificate issued earlier was amended and the exemption facility was reduced from Rs. 8,15,848. " Thus, according to the respondents, at earlier point of time, the department had committed mistake in granting exemption of 50 per cent in favour of the petitioner. Such mistake could have been corrected by the department and accordingly it was corrected. The petitioner cannot make any grievance of such correction. Mr. Mehta, Assistant Government Pleader, therefore, submitted that there is no substance in the petition and the petition requires to be dismissed.