(Per : HONOURABLE MS. JUSTICE HARSHA DEVANI) 1. By this petition under Article 226 of the Constitution of India, the petitioner has called in question the order dated 9th October, 2001 made by the Deputy Industries Commissioner and General Manager reducing the sales tax exemption limit granted to the petitioner, as well as the order dated 15th April, 2004 passed by the Joint Industries Commissioner pursuant to the order passed by this court in Special Civil Application No.136/2002.
2. The petitioner, a partnership firm is engaged in the business of manufacturing and exporting of dyes, chemicals and intermediates and is duly registered under the provisions of the Gujarat Sales Tax Act. The Government of Gujarat in exercise of powers under section 49(2) of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as 'the Act'), introduced a new incentive policy giving sales tax incentives to eligible units established in less developed and rural areas for the period 16th August, 1995 to 15th August, 2000 (hereinafter referred to as “the scheme”). The said scheme, inter alia, provided for incentives by way of sales tax exemption and sales tax deferment. The petitioner, who was eligible for availing of the benefits under the scheme, made an application for availing of the benefit of sales tax exemption under the scheme. After making detailed inquiry the second respondent granted an eligibility certificate dated 5th January, 1998. Under the said eligibility certificate the limit of exemption was Rs.10,14,790/- . Pursuant thereto, the third respondent issued a sales tax exemption certificate dated 5th January, 1998 for the period 14th July, 1996 to 13th July, 2002 provisionally granting exemption to the tune of Rs.10,14,790/-. Subsequently, after due verification and detailed inquiry, a final eligibility certificate dated 18th September, 1998 came to be issued by the second respondent by way of amendment of the earlier certificate, enhancing the total exemption limit to Rs.41,64,000/-. Consequently, on 27th October, 1998, the 4th respondent amended the sales tax exemption certificate and enhanced the limit of exemption to Rs.41,64,000/-.
3. It is the case of the petitioner that both the eligibility certificate as well as the exemption certificate were issued to the petitioner after making necessary inquiry by the 2nd respondent and subordinates of the 6th respondent. Therefore, in view of the exemption granted by virtue of the said certificates, it bonafide did not collect sales tax from its customers. The petitioner had also regularly filed its sales tax returns and claimed the exemption to the limit allowed every year as per its total sales in its sales tax returns. For assessment years 1996-97, 1997-98 and 1998-99, assessment orders were framed and the exemption was allowed. For assessment year 1999-2000, the petitioner had claimed exemption to the tune of Rs.6,91,079/-. The limit of exemption, that is, Rs. 41,64,000/- was exhausted on 31st March, 2000. Accordingly, the petitioner started paying tax from 1st April, 2000.
4. Thereafter, the second respondent issued an Amendment Certificate dated 9th October, 2001 reducing the exemption granted earlier from Rs.41,64,000/- to Rs.40,08,434/-. It appears that by a notice dated 20th November, 2001, the petitioner was called upon to pay the differential amount of Rs.1,55,566/- with interest from October, 1999 to 22nd November, 2001 within a period of three days, in the light of the amendment made in the exemption certificate. Being aggrieved, the petitioner approached this court by way of a writ petition being Special Civil Application No.132/2002 which came to be disposed of by an order dated 22nd January, 2002 in the light of a statement made by the learned counsel appearing for the Department that the concerned authority who had issued the amendment order dated 9th October, 2001 would hear the petitioner and pass a fresh order in accordance with law and until that is done, the recovery which had been commenced would not be effected. Pursuant thereto, after affording an opportunity of hearing to the petitioner, by an order dated 15th April, 2004, the Joint Industries Commissioner held that the amendment of the exemption certificate reducing the exemption limit to Rs.40,08,434/- was in accordance with the provisions of the scheme and rejected the request of the petitioner to maintain the limit of Rs.41,64,000/-. Being aggrieved, the petitioner has moved the present petition.
5. Vehemently assailing the impugned order dated 15th April, 2004, Mr. J.S. Yadav, learned advocate for the petitioner submitted that except for stating that the earlier exemption limit was not in accordance with the provisions of the scheme, no reasons have been assigned as to why the same was required to be reduced. It was urged that it was in view of the final exemption certificate granted by the respondent authorities that the petitioner had not recovered sales tax from its customers to the extent of the exemption limit. It was only after the exemption limit was exhausted that the respondents, after a considerable delay, have amended the earlier certificate without assigning any proper reasons. It was submitted that such amendment whereby the exemption limit is reduced, seriously affects the rights of the petitioner inasmuch as, it would now not be possible for the petitioner to recover the sales tax to the extent of the differential amount. According to the learned counsel, when the final exemption certificate was granted after due inquiry and examination of relevant documents, in the absence of any fraud or misrepresentation on the part of the petitioner, it was not permissible for the respondents to now reduce the exemption limit to the prejudice of the petitioner.
6. Opposing the petition, Ms. Maithili Mehta, learned Assistant Government Pleader supported the impugned order as well as the reduction in the exemption limit by submitting that on the earlier occasion, while granting the eligibility certificate proper inquiry had not been made and that the Government of Gujarat undertaking Gujarat State Financial Corporation had calculated the figures relying upon which the District Industries Centre had granted necessary certificate. However, subsequently upon the correct facts coming to the notice of the respondents, the certificate has been amended. It was submitted that the petitioner was entitled to exemption as permissible under the scheme and that the earlier certificate having been granted on account of a mistake on the part of the concerned authority, the petitioner was not entitled to exemption in accordance with the earlier certificate and that the respondents were justified in amending the certificate by granting exemption to the limit to which the petitioner was entitled.
7. Before adverting to the merits of the case, it may be necessary to briefly refer to the scheme under which the sales tax exemption benefit has been granted to the petitioner. Section 49 of the Act makes provision for “Exemptions”. Sub- section (2) thereof provides that subject to such conditions as it may impose, the State Government may, if it considers it necessary so to do in the public interest, by notification in the Official Gazette, exempt any specified class of sales or of specified sales or of purchases from the payment of the whole or any part of the tax payable under the provisions of the Act. The Government of Gujarat by a resolution dated 11th September, 1995, announced a new incentive policy – Capital Investment Incentive (General) Scheme of 1995-2000. The operative period of the scheme was from 16th August, 1995 to 15th August, 2000. Under the scheme, a unit which satisfied the requirements thereunder was entitled to exemption on the basis of the capital investment made by it. The eligible units under the scheme were entitled to (1) Capital Investment Subsidy, (2) Sales tax incentive subject to the conditions of the Government Resolution and the provisions of the Act and the notifications thereunder. The Sales Tax Incentives available under the scheme were (a) Sales Tax Exemption and (b) Sales Tax Deferment. As noted earlier, the petitioner had opted for the sales tax exemption scheme. The procedure for availing of the benefit under the scheme is provided under Part-III of the resolution under paragraph 7 thereof. Paragraph 7.1 lays down the procedure for State Cash Subsidy and paragraph 7.2 which is relevant for the present purpose lays down the procedure in respect of the sales tax incentive. The procedure laid down thereunder is that the eligible industrial unit shall register itself atleast 90 days before the date of commercial production with the sanctioning authority. The sanctioning authority will issue registration certificate with a copy to the Sales Tax Department. On the basis of this registration certificate the eligible unit can start enjoying the benefit of sales tax from the date of commercial production. However, the validity of registration certificate shall be only 120 days from the date of commercial production. The unit shall have to obtain eligibility certificate for continuing to enjoy the incentive thereafter. After going into commercial production, the industrial unit shall submit its detailed application for grant of eligibility before the expiry of 120 days from the date of commercial production. On submission of all relevant documents to the sanctioning authority, the Industries Department will carry out the inspection, if required and issue the eligibility certificate. However, pending the verification of the assets etc., the Industries Department may issue provisional eligibility certificate to the extent of 25% of its tentative total eligibility.
8. Thus, the scheme envisages issuance of eligibility certificate by the Industries department after carrying out due inspection. However, pending verification of the assets a provisional eligibility certificate to the extent of 25% of the tentative total eligibility can be issued. Accordingly, pending verification of the assets of the petitioner, a provisional eligibility certificate to the extent of 25% of the total tentative eligibility came to be issued to the petitioner on 5th January, 1998 granting exemption to the extent of Rs.10,14,790/-. An exemption certificate for Rs.10,14,790/- also came to be issued by the concerned sales tax authority. Subsequently a final eligibility certificate, titled as an amendment certificate, came to be issued on 27th October, 1998 enhancing the exemption from Rs.10,14,790/- to Rs.41,64,000/-. Thereafter, the petitioner availed of the benefit under the scheme and the limit of exemption of Rs.41,64,000/- was exhausted on 31st March, 2000, where after the petitioner stopped availing of the benefit under the scheme. Much later, by the impugned amendment certificate dated 9th October, 2001 the exemption granted to the petitioner came to be amended by reducing the limit of exemption from Rs.41,64,000/- to Rs.40,08,434/-. By the impugned order, after hearing the petitioner, the reduction in the exemption limit has been sustained by the respondent authorities.
9. It may be recalled that the scheme envisages two stages for grant of eligibility certificate. Firstly, pending verification, exemption may be granted to the extent of 25% of the unit’s tentative total eligibility. Subsequently, upon verification of assets a final eligibility certificate in respect of the total eligibility would be issued. Thus, when a final eligibility certificate is issued, one would certainly be justified in presuming that prior to issuance of the final eligibility certificate necessary verification has been carried out. That of course does not mean that in no case such certificate can be amended. In a given case, if the facts so justify it may be permissible for the authorities to amend the certificate after following due procedure. However, even such action has to be taken within a reasonable time, before the party irreversibly changes its position as in the present case. Here, the petitioner has already exhausted the exemption limit. Accordingly, it has not collected sales tax from its consumers in respect of the goods covered under the exemption. Now, an irreversible situation has arisen whereby it is not possible for the petitioner to recover tax on sale of goods in respect of the differential amount between the exemption granted earlier and the reduced amount. Thus, the action of the respondents in reducing the exemption limit prejudicially affects the petitioner without any default on its part. As is evident from the record of the case including the affidavit filed on behalf of the respondent No.2, the sole reason stated therein for revising the limit of exemption is that since the Gujarat State Finance Corporation, a Government of Gujarat undertaking had calculated the figures the District Industries Centre relying upon those papers had granted necessary certificate. However, subsequently the same is sought to be reduced for the reason that there should be a true and correct benefit which must be given to a party in consonance with the policy and guidelines of the Government. That the party concerned cannot say that it can take advantage of somebody’s error or mistake. However, there is not even a whisper as to how the eligibility certificate granted earlier was not in consonance with the policy or as to what is the nature of mistake committed by the authorities. In any case one thing is clear, that even if there is a mistake the same is not attributable to the petitioner but to the respondents authorities. Thus, the petitioner cannot be made to suffer on account of the default of the respondents.
10. At this juncture it may be apposite to refer to the decision of the Supreme Court in the case of Birla Jute and Industries Ltd. v. State of M.P. and another, (2000) 119 STC 14 wherein the eligibility certificate granted to the appellant therein under an exemption notification issued under section 10 of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par kar Adhiniyam, 1976 was sought to be reviewed long after the period specified in the said certificate had expired. The court referred to the following observations in the judgment of the Supreme Court [reproduced at page 368 as an order connected to the judgement in State of Rajasthan v. Mahaveer Oil Industries, (1999) 4 SCC 357)] in State of Rajasthan v. Gopal Oil Mills, (1999) 4 SCC 357)] :
“6. We find that even after the impugned judgment of the High Court was rendered on 12-1-1993, eligibility certific- ates were issued to certain industrial units and a circular dated 27-1-1994 was also issued by the Director of Indus- tries of the State Government on the same lines under which some benefit has been availed by those industrial units under the State Sales Tax Act. In these circumstances, we consider it appropriate to direct that the unavailed bene- fit under those eligibility certificates under the State Sales Tax Act would not be available to them but the extent to which the benefit under the State Act has been already availed up to 4-4-1994, the date on which the ex parte order of stay was made by this Court, on the basis of the eligibility certificates so issued, the State Government would not dis- turb that position by seeking to recover any amount under that head.”
and accordingly was of the view that there was no justification in reviewing the said certificate after the term thereof had expired and therefore, long after its benefit had been availed by the appellant or at all.
11. The facts of the present case, wherein the eligibility certificate is sought to be amended without any justification, that too, long after its benefit had been availed by the petitioner would be squarely covered by the aforesaid decision. Under the circumstances, the impugned amendment certificate dated 9th October, 2001 as well as the order dated 15th April, 2004 cannot be sustained.
12. It may also be noted that during the course of hearing of the earlier writ petition filed by the petitioner, it had been stated on behalf of the respondents that a fresh amendment certificate would be issued after hearing the petitioner whereas in the impugned order, the said respondent has proceeded on the basis as if the petitioner had made a representation against the reduction in the exemption certificate which was being turned down.
13. In the light of the aforesaid discussion, the petition is allowed. The impugned certificate dated 9th October, 2001 passed by the Deputy Industries Commissioner and General Manager as well as the consequential reduction by the Assistant Sales Tax Commissioner by certificate dated 17th October, 2001 demanding recovery of Rs.1,55,566/- with interest as well as the order dated 15th April, 2004 are hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs.
14. At this stage, the learned counsel for the petitioner submitted that this court while issuing rule in the matter had not granted interim relief but it had been clarified that any payment made by the petitioner pursuant to the impugned demand shall be without prejudice to the petitioner's rights and contentions in this petition and such payment shall be treated as deposit and abide by the final outcome of the petition. The learned advocate also drew the attention of the court to the challan evidencing payment of Rs.1,55,566/- pursuant to the aforesaid order passed by this court. It was, accordingly, submitted that the respondents be directed to refund the aforesaid amount.
15. The request appears to be reasonable. In the light of the order passed by this court at the time of admission of the writ petition, the petitioner having succeeded in the petition would be entitled to refund of the amount deposited by it along with interest. Accordingly, the respondents shall forthwith refund the amount of Rs.1,55,566/- deposited by the petitioner with simple interest at the rate of 9% from the date of such deposit till the date of payment thereof.
( Akil Kureshi, J. ) ( Harsha Devani, J. ) hki