SAL STEEL LIMITED Vs. STATE OF GUJARAT

JUDGEMENT

(1.) - By way of this petition under Article 226 of the Constitution of India, the petitioner has prayed for issuance of writ, order or direction, directing the respondents-authorities to extend the period of Sales Tax Eligibility Certificate for a further period of five years for un-utilized amount of Rs. 57.82 Crores out of Rs. 188.15 Crores, and to consider the expenses of Rs. 257.55 Crores which were incurred and paid upto 12th April 2007 instead of Rs. 213.58 Crores, being the period of eighteen months from the date of commencement of commercial production ie., 12th October 2005.

(2.) Facts leading to the present petition, in nutshell, are as under:- 2. 1 That, on account of devasting earthquake which shook the entire State of Gujarat and more particularly, the District of Kutch and consequently, the economic development of Kutch region had come to a major halt, in an attempt to give impetus to the economic development and for creating better opportunities of employment and environment of Industrial Development, the respondent-State vide its Resolution dated 9th November 2001 announced a sales-tax incentive scheme known as, "Incentive Scheme 2001 for Economic Development of Kutch District" [hereinafter referred to as, "the Scheme"] and thereby invited existing industrial undertakings and new industries to set-up industrial units in the said district by promising benefit of Sales-tax exemption or Sales-tax Deferment Eligibility Fixed Capital Investment under Section 49 [2] of the Gujarat Sales Tax Act, 1969. 2. 2 That, the period of the Scheme was initially notified from 31st July 2001 to 31st October 2004 which came to be extended further by two Notifications dated 13th September 2004 and 7th January 2005 by which the applicability of the Scheme was extended upto 31st December 2005. 2. 3 That, the petitioner-Company is engaged in manufacture of sponge iron, ferro alloys and SS/MS round, flat, angles and other structural steel pig iron. That, the petitioner decided to set-up a Unit for the manufacturing of above products in the Kutch district. That the petitioner-Company accordingly entered into a Memorandum of Understanding with the State Government and proposed to set-up projects involving investment of approximately Rs. 2,000 Crores. It is the case on behalf of the petitioner that as per the Scheme, the petitioner-Company applied for Sales Tax Exemption [Remission of Tax] and pursuant thereto, the petitioner-Company was initially given Sales Tax Exemption [Remission of Tax] Certificate to the tune of Rs. 53.39 Crores on 23rd February 2007 and it was subsequently enhanced to Rs. 188.15 Crores by final Eligibility Certificate dated 6th November 2008. 2. 4 That thereafter, the petitioner-Company was registered as a Sick Industrial Undertaking under the Board of Financial Reconstruction. At this stage, it is required to be noted that so far as the first prayer of the petitioner ie., to extend the period of Sales Tax Eligibility Certificate for a period of five years for un-utilized amount of Rs. 57.82 Crores out of Rs. 188.15 Crores is concerned, in wake of the subsequent development, the cause does survive. 2. 5 It is the case on behalf of the petitioner-Company that thereafter, the Company wrote a letter on 18th February 2015 requesting the Industries Commissioner to extend the Sales Tax Exemption Certificate for a further period of five years to give the benefit of eligible assets, which were created and paid upto 11th April 2007, being the period of 18 months from the date of commercial production [ie., 12th October 2005]. 2. 6 At this stage, it is required to be noted that the petitioner-Company went in for commercial production on and around 12th October 2005. It is the case on behalf of the petitioner-Company that thereafter though the petitioner Company was entitled to VAT Incentive to the extent of Rs. 1,16,43,38,399/= as on 1st April 2011, the Deputy Commissioner of Commercial Tax, while passing assessment order dated 31st March 2016, raised demand of Rs. 2,34,72,290/= which inter alia includes tax demand of Rs. 72,89,531/=, interest of Rs. 52,48,462/= and penalty of Rs. 1,09,34,297/=. It is the case on behalf of the petitioner that while raising the said demand, it has been observed in the assessment order that the total tax payable is of Rs. 7,99,52,981/= and additional tax of Rs. 1,93,16,671/=. Out of this tax liability, the remission of tax available on manufactured goods under Section 41 of the Act is only Rs. 7,65,46,403/=. It is the case on behalf of the petitioner that the respondents have considered the expenses of Rs. 257.55 Crores which were incurred and paid upto 11th April 2007, instead considered the expenses of Rs. 213.58 Crores, being paid within 18 months from the date of commercial production ie., 12th October 2005, which is absolutely unjust, improper and against the terms and conditions of the Incentive Scheme 2001. It is the case on behalf of the petitioner that the State Government/respondents have considered the investment to the extent of Rs. 213.88 Crores incurred upto 31st December 2005 only. It is the case on behalf of the petitioners that as per the Scheme, more particularly Clause 3.8 thereof, even the investment made during the period of 18 months from the date of commercial production ie., 12th October 2005 is required to be considered while granting the tax exemption benefit under the Scheme ie., expenses of Rs. 257.55 Crores incurred and paid upto 11th April 2007 and instead a sum of Rs. 213.58 Crores has been considered, being the expenses incurred upto 31st December 2005 only. It is the case on behalf of the petitioner-Company that number of representations have been made, however, the same have been responded to and the expenses incurred upto 11th April 2007, being the period of 18 months from the date of commercial production ie., 12th October 2005 has been considered while granting tax exemption benefit under the Scheme, the petitioner has preferred this Special Civil Application under Article 226 of the Constitution of India for the aforesaid reliefs.

(3.) As observed hereinabove, the first prayer ie., to direct the respondent authorities to extend the period of Sales Tax Eligibility Certificate for a further period of five years for un-utilized amount of Rs. 57.82 Crores, out of Rs. 188.50 Crores is concerned, in view of the subsequent development, the cause does survive, and therefore, the only question which is required to be considered is whether the petitioner-Company is entitled to tax exemption benefits on the investment made after 31st December, 2005 but before 12th April, 2007 ie., the investment made during the period of 18 months from the date of commencement of commercial production ie., 12th October, 2005 or not.