Case Law Details
Khushbu Vinyl Pvt Ltd Vs State of Gujarat (Gujarat High Court)
Conclusion: Department was not justified in cancelling the certificate of entitlement of assessee-company and denying refund of tax paid on purchase of raw material and intermediate products as since the date when the actual production started, assessee did not have the eligibility certificate, they continued to discharge tax liability as a normal dealer and claimed input tax credit by adjusting the same against output tax liability and on account of retrospective grant of eligibility certificate, assessee became liable for full amount of output tax liability, therefore, the department was directed to work out the amount of refund that assessee would be entitled to and adjust the same towards outstanding dues.
Held: Assessee-company was engaged in the business of manufacture and sale of cotton fabrics. In terms of the textile policy, a dealer was entitled to refund of tax paid on purchase of raw material and intermediate products from the Commercial Tax Department and was entitled to claim reimbursement of output tax paid on sales from the Industries Department. In the case of assessee-company, actual production started on 14.7.2013, whereas the eligibility certificate was granted on 23.12.2014 for the period from 14.7.2013. On the basis of the said eligibility certificate, the Deputy Commissioner of Commercial Tax granted Certificate of Entitlement to assessee under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as the “GVAT Act”) on 7.3.2015 for the period from 2013-14 to 2020-21. Since the date when the actual production started, assessee did not have the eligibility certificate, they continued to discharge tax liability under the Gujarat Value Added Tax Act, 2003 as a normal dealer and claimed input tax credit by adjusting the same against output tax liability.Commercial Tax Officer issued show cause notice dated 1.10.2015 to assessee on the ground that since they were eligible unit since 14.7.2013 they were required to claim refund of tax paid on purchases from the Value Added Tax Department and pay full output tax liability and claim refund from the Industries Department, therefore, a show cause notice was issued to assessee for outstanding tax for 14.7.2013 to 31.7.2015 and since assessee-company had claimed and adjusted input tax credit against output tax liability, they were defaulters of tax and, therefore, their registration certificate was liable to be cancelled. Assessee before the present Court argued on the above lines and additionally pleaded that the provisions of the textile policy and notifications thereunder being investment linked incentive scheme have to be read liberally and have to be read in consonance with the objects and provisions of the Act. Further, it has been contended that the retrospective cancellation of the certificate of entitlement was arbitrary, bad and illegal. It was held the order passed by Deputy Commr of Commercial Tax was quashed and set aside and restored the Certificate of Entitlement and directed the respondents to work out the amount of refund that assessee would be entitled to and adjust the same towards outstanding dues.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
1. By this petition, under Article 226 of the Constitution of India, the petitioners seeks the following substantive reliefs:-
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