PERFECT FOUNDRIES PRIVATE LIMITED Vs. STATE OF MAHARASHTRA

JUDGEMENT

(1.) BY the present writ petition under Article 226 of the Constitution of India, the petitioners have challenged the legality and validity of notice dated 8th March 1988 demand notice dated 21st April 1988 and the Trade Circular dated 14th July 1986 issued by the respondent No. 3

(2.) THE short question which requires consideration in the present writ petition is whether the petitioners would be entitled to claim benefit of the Package Scheme of Incentives brought into force with effect from 1st August 1979 in respect of turnover tax and additional tax. Thus, the controversy revolves round the said scheme.

(3.) THE petitioner No. 1 is a Private Limited Company engaged in the manufacture of grey iron castings for automobiles and other industries. They set up an industrial unit for the manufacture of the said items at Solapur in 1982 and were granted registration as small scale unit issued by the General Manager, District Industries Centre, Solapur. The petitioner No. 1 had invested a total amount of Rs. 19,17,608,67 in setting up the said industry. By a resolution dated 5th January 1980, the respondent No. 1 brought into force a modified Package Scheme of Incentives with retrospective effect from 1st August 1979. The Package Scheme of Incentives comprised mainly of incentive qua sales tax relief in electricity tariff, octroi etc. The Western Maharashtra Development Corporation Ltd. was appointed as implementing agency for implementing the scheme for the District of Solapur. The Scheme provided for criteria for eligibility under the Scheme and also inter alia provided that incentives under the said scheme should not be claimed unless an eligibility certificate had been issued by the implementing agency concerned and the unit had complied with the conditions contained therein. The Scheme was widely published by the respondent No. 1 which also issued a press note setting out the incentives under the Scheme for persons setting up industrial units in the developing areas of the State. By a resolution dated 5th July 1986, the respondent No. 1 modified their resolution dated 5th January 1980 and inter alia provided further relief in Sales Tax. It is the petitioners contention in the petition that relying upon the representations, assurances and promises given by the respondents, the petitioner No. 1 decided to set up the said industry at Solapur, an underdeveloped area falling in Group C of the annexure to the said resolution dated 5th January 1980. The petitioners, as per this modified scheme, opted for deferral scheme of Sales Tax while applying for their eligibility certificate, and on the basis whereof, the eligibility certificate was granted on 19th September 1982 to the petitioner No. 1. The period of eligibility was for seven years, from 1st October 1982 to 30th September 1989 and thus, the petitioners availed of the facility of deferral scheme of Sales Tax. With effect from 1st April 1983, the respondent No. 1 introduced section 15a (1) to the Bombay Sales Tax Act 1959 providing for levy of Additional Tax in the case of dealers whose turnover exceeded Rs. 10,00,000/- per year. Thereafter, with effect from 13th July 1986, the respondent No. 1 introduced section 9 to the said Act whereby Turnover Tax at the rate of 1. 25% on the goods specified in schedule C therefore was payable by a dealer whose turnover on all sales exceeded Rs. 12,00,000/- per year. By notice dated 8th March 1988, the respondent No. 2 informed the petitioner No. 1 that they had not paid Additional Tax from 1st July 1984 and Turnover Tax from 30th July 1986 and they were called upon to pay the said Additional Tax and Turnover Tax from the said dates forthwith. The petitioner No. 1 were also served with demand notice for additional tax in the sum of Rs. 10. 627/- and Additional Tax in the sum of Rs 9,271/- for the period from 1st July 1986 to 31st July 1986 and 1st December 1986 to 30th June 1987. They also received a further demand notice dated 21st April 1988 for a sum of Rs 13,942/- being Additional Tax and Rs. 12,161/- being Turnover Tax for a period from 1st July 1987 to 31st December 1987. A reply was sent by the petitioners through their advocate on 10th April 1987 calling upon the respondents to withdraw the said notice dated 8th March 1988 and the said demand notices giving reasons therein. In short, it was the stand taken by the petitioners that under the said scheme, the incentives were also extended to the Additional Tax and Turnover Tax demanded. Thereafter, the petitioners came across a trade circular dated 14th July 1986 wherein the respondent No. 3, after referring to the introduction of turnover tax under section 9 of the said Act, stated that in case of a unit entitled to deferment of taxes by virtue of the eligibility certificate and entitlement certificate granted to it under the Package Scheme of Incentives, the deferment of taxes would be permissible only in respect of sales tax and purchase tax payable by it as reduced by the set-off admissible to it. It was further stated that the deferment would not be permissible in respect of turnover tax payable by the unit. The petitioners in the present petition have thus challenged the above notice, demand notice and the Trade Circular.