Case Law Details

Case Name : SRF Ltd. Vs State of Madhya Pradesh And Others (Madhya Pradesh High Court)
Appeal Number : Writ Petition No. 9628/2020
Date of Judgement/Order : 16/10/2020
Related Assessment Year :
Courts : All High Courts (6111) Madhya Pradesh HC (76)

SRF Ltd. Vs State of Madhya Pradesh And Others (Madhya Pradesh High Court)

The issue under consideration is whether the petitioner is eligible for exemption from payment of entry tax based on certificates granted under Madhya Pradesh Udyog Nivesh Samvardhan Sahayta Yojna?

High Court states that, in the present case, as the exemption certificate has been granted in the year 2017 only, the petitioner was justified in immediately approaching the Authorities for grant of exemption and his request could not have been turned in the manner and method it has been done by the respondents. The petitioner initially preferred Writ Petition ie., W.P.No. 6666/2010. However, at the relevant point of time, there was no exemption certificate granted in favour of the petitioner and the Writ Petition was withdrawn with liberty to file a fresh Writ Petition. The petitioner has later on preferred Writ Petition ie., W.P. No. 1421/2014, W.P.No. 1323/2015 and 8845/2015 and they were withdrawn only because exemption certificate was issued in favour of the petitioner and the reassessment in respect of 4 years (2007­-08 to 2010-11) was pending at the relevant point of time. However, the same has not been done and, therefore, the inaction on the part of the Department is bad in law. The assessment orders passed by the Department for four years ie., 2007-08, 2008-09, 2009-10 and 2010-11 deserves to be set aside and are accordingly hereby set aside. It is nobody’s case that the exemption certificate has been withdrawn or was erroneously granted and the respondent State has admitted grant of exemption certificate and, therefore, once exemption certificate was granted, the Department cannot take advantage of technicalities, especially when the certificate itself was granted in the year 2017 with retrospective effect. Resultantly, the present Writ Petition is allowed.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

The petitioner before this Court, a Company registered under the Companies Act, 1956, has filed this present petition claiming exemption from payment of entry tax on account of the certificate granted to the petitioner under the Madhya Pradesh Udyog Nivesh Samvardhan Sahayta Yojna, 2004 and 2010. The contention of the petitioner is that the petitioner Company is engaged in the manufacturing of technical textile, chemicals, engineering, plastics packaging films, refrigerant gases at various locations in India and overseas. It employs directly and indirectly 9000 employees and the Company has established an industrial unit at Indore, Special Economic Zone (Pithampur) M.P. The unit which was established at Indore is engaged in the manufacturing process of polyester film which started its operation in 2004 and was entitled for various benefits and tax exemption under the Special Economic Zone Scheme announced by the Central Government as well as the Government of India. The unit of the petitioner company which was established in 2004 is referred by the tax department as principal unit and in 2009 expansion was carried out and the unit was referred as expansion unit and in 2010 further expansion was carried out and the department referred the unit as diversified unit. The contention of the petitioner is that under the Madhya Pradesh Udyog Nivesh Samvardhan Sahayta Yojna, 2004 and 2010 vide notification dated 4/4/2005 and 13/12/2010, the State has made provisions for exemption from payment of entry tax to all the industries in the State subject to certain terms and conditions. As per the aforesaid notification the eligible Companies are entitled for 100% exemption in respect of payment of entry tax. The petitioner company submitted an application for grant of exemption of entry tax for its new principal unit, expansion unit and diversified unit as they are located in Special Economic Zone on 5/3/2013 and pursuant to the application submitted by the petitioner company, three exemption certificates were granted by the M.P. Trade and Investment Facilitation Corporation Ltd., granting exemption in respect of payment of entry tax from 23/7/2004 to 8/5/2015 in respect of all three industrial units keeping in the provisions as contained u/S. 10 of the Madhya Pradesh Sthaniya Kshetra Me Maal Ke Pravesh Par Kar Adhiniyam, 1976. As already stated earlier, the certificate was granted on 13/2/2017 and on account of grant of certificate with retrospective effect all entry tax assessment orders also for the year 2004 to 2013 and subsequent assessment orders also upto 2015 became null and void because the exemption was granted for a period of 9 years that too with retrospective effect. The contention of the petitioner is that the Commercial Tax Department was under an obligation to grant 100% exemption of entry tax amount, interest and penalties for the entire period of 9 years in terms of the certificate issued. However, the respondent State has granted exemption only in respect of 5 assessment years i.e., 2004 – 2005 to 2006 – 2007 and 2011 – 2012 to 2012 – 2013. The petitioner as the re-assessment for four years was not done i.e., 2007 – 2008 upto 2010 – 2011 wrote letters to the authorities dated 16/2/2017 and 20/2/2017 along with the exemption certificate and again wrote letters on 29/8/2017, 9/10/2017, 2/8/2018, 25/10/2018, 14/12/2018, 8/1/2019, 8/7/2019 and 25/2/2020 for granting exemption for the remaining years. However, nothing was done in the matter. The petitioner has prayed for the following reliefs:

1. A direction or order may kindly be passed to give effect to the Entry Tax Exemption Certificate issued on 13/2/2017 (Annexure P/11 to P/13) and consequently the impugned assessment orders (Annexure P/7 to P/10) passed by the respondent department for 4 years of assessment ie., 2007-08, 2008-09, 2009-10 and 2010-11 be set aside.

2. Any other relief, as is deemed fit and proper by this Hon’ble Court.

2. A reply has been filed in the matter on behalf of the State of M.P. and the State Government in the reply has admitted that as per the Madhya Pradesh Udyog Nivesh Samvardhan Sahayta Yojna, 2004 and 2010, the petitioner did apply for grant of exemption before the State Government and keeping in view S.10 of the Entry Tax Act, 1976, the State Government has granted eligibility certificate to the petitioner in the year 2017 i.e., on 13/2/17. The respondent State has admitted that the Tax exemption was granted with retrospective effect i.e., 23/7/2004 to 22/7/2009, 24/11/2009 to 23/11/2014 and 9/5/2010 to 8/5/2015. The respondents in the return have stated that the petitioner is having an alternative remedy and the petitioner can very well prefer an appeal against the assessment orders passed from time to time in the matter levying entry tax. Reliance has been placed upon the judgment delivered in the case of Assistant Collector of Central Excise Vs. Dullab India and others reported in ( 1985 SC 330) and great emphasis has been laid upon the availability of alternative remedy. It has also been argued that the petition is hopelessly barred by delay and latches. The cause of action accrued to the petitioner on 13/2/2017 i.e., the date on which exemption was granted and, therefore, such a claim at a belated stage cannot be looked into. The respondent have stated that various assessment orders were passed on 19/5/2010, 27/4/2011, 30/4/2012 and 28/3/2013 under Section 13 of the Entry Tax Act read with Sec. 20 of the M.P. V.A.T. Act and the petitioner has not preferred appeal in the matter nor has approached the appropriate Court after the exemption was granted.

3. The respondents have stated that the power of reopening of an assessment is provided u/S. 13 of the Entry Tax Act read with Sec. 21 (1) of the M.P. V.A.T. Act, 2002 and on account of the limitation provided u/S. 21, the question of reopening the assessment does not arise.

4. The respondent have further stated that for the year 2004 – 2005, the order of assessment dated 15/1/2008 was revised vide order dated 18/12/2015 by the revisional authority and the order of reassessment was passed. It has been further stated that the petitioner applied for exemption on 14/7/2017 before the assessing authority on which revision order was passed on 20/7/2017 as the assessing authority himself can not reassess the case without prior permission of the higher authority, so the reassessment order was passed on 31/7/2017 and, therefore, original order of reassessment was passed on 31/7/2017 and, therefore, the application of the petitioner for reassessment being within time limit prescribed by the statute was entertained and exemption was granted.

5. In respect of year 2005 – 2006 and 2006 – 2007 the reassessment orders were passed on 30/11/2015, the petitioner applied for reassessment of the Entry Tax and on 14/7/2017, the assessing authority forwarded the matter before the higher authority and the higher authority has passed a revised order on 20/7/2017 and remanded the matter back to the assessing authority. Thereafter, the assessing authority has passed an order on 31/7/2017 and granted exemption to the assessee.

6. In respect of the assessment year 2011 – 2012 to 2014 – 2015 the original assessment orders in respect of assessment years were passed on 17/4/2014, 20/1/2015, 23/11/2015 and 17/11/2016, respectively. It has been further contended that the application for reassessment for the year 2004 – 2005 and 2006 – 2007 was filed by the petitioner on 14/7/2017 was within the period of limitation. The same was processed and the exemption was granted accordingly. The respondents have stated that the petitioner is seeking exemption in view of notifications issued in the year 2004 and 2010. However, the petitioner himself applied for grant of exemption in the year 2013 i.e., on 5/10/2013 and the petitioner has not assigned any reason as to why he did not seek an exemption against various assessment years in respect of which the assessment orders have been finalised and crystalised. The respondent have also stated that reopening of assessment cannot be done after five years in the light of the absolute statutory bar as provided under Section 21. Reliance has been placed upon the judgment delivered in the case of Singh Enterprises V/s Commissioner of Central Excise reported in (AIR 2008 SC 353); M/s.  Nitco Tiles Ltd. Vs. Gujarat Ceramic Floor Tiles Mfg.  Association and another reported in (2005) 12 SCC 454; Union of India Vs. Kirloskar Pneumatic reported in 1996 SCC (4) 453. The respondents have prayed for dismissal of the writ petition.

7. Heard learned Counsel for the parties at length and perused the record, the matter is being disposed of at the motion hearing stage itself with the consent of the parties, through Video Conferencing.

8. The undisputed facts of the case reveal that the petitioner before this Court is a Company registered under the Companies Act and is having a unit at Indore (Special Economic Zone), Pithampur. The petitioner Company started its production in 2004 and was entitled for various benefits and tax exemption. The unit which was established in the year 2004 is referred by the respondent – Department as Principal Unit. Thereafter, in 2009 expansion was carried out and the same is referred by the department as Expansion Unit and in 2010 further expansion was carried out and the unit is known as diversified unit. The State of M.P. in order to promote industrialisaiton and establishment of industries has granted various incentives from time to time under the Madhya Pradesh Udyog Nivesh Samvardhan Sahayta Yojna, 2004 and 2010. Two notifications were issued on 4/4/2010 and 13/10/2010. The petitioner applied for exemption and 100% exemption was granted towards payment of entry tax vide Notification dated 12/3/2017 and exemption certificates were issued in respect of all the three industrial units in pursuance to the provisions as contained under Section 10 of the Madhya Pradesh Sthaniya Kshetra Me Maal Ke Pravesh Par Kar Adhiniyam, 1976.

9. The details of exemptions granted in the matter are reproduced as under :

S.No. Date Ref. No. Period
1 13/02/2017 19/Fiscal Incentives/ E.T. / 2015 / 107 for New Industrial Unit 23/7/2004 – 22/07/2009
2 13/02/2017 20/Fiscal Incentives/ E.T. / 2015/ 108 for Expansion in Existing Industrial Unit 24/11/2009 23/11/2014
3 13/02/2017 21/Fiscal Incentives/ E.T./ 2015/109 for Diversified Unit 09/05/2010 – 08/05/2015

10. The statutory provisions governing the field as contained under the M.P. Entry Tax Act, 1976 reads as under :

Section 3 of the M. P. Entry Act, 1976 reads as under :

3. Incidence of taxation. – (1) There shall be levied an entry tax,-

(a) on the entry in the course of business of a dealer of goods specified in Schedule II, into each local area for consumption, use or sale therein; and

(b) on the entry in the course of business of a dealer of goods specified in Schedule III into each local area for consumption or use of such goods but not for sale therein;

and such tax shall be paid by every dealer liable to tax under the [Madhya Pradesh VAT Act, 2002 (No. 20 of 2002)] who has effected entry of such goods ;

Provided that no tax under this sub-section shall be levied,-

(i) in respect of goods specified in Schedule II other than the local goods, purchased from a registered dealer on which entry tax is payable or paid by the selling registered dealer;

(ii) in respect of goods specified in Schedule II which after entry into a local area are sold outside the State or in the course of inter-State trade or commence or in the course of export out of the territory of India;

(iii) in respect of goods specified in Schedule III imported from outside the State for consumption or use but which have been disposed of in any other manner;

(iv) in respect of goods exempted from entry tax under Section 10;

(v)…     …        …

Section 10 of the M. P. Entry Act, 1976 reads as under :

10. Power to exempt. – The State Government may, by notification, and subject to such restrictions and conditions as may be specified therein, exempt, whether prospectively or retrospectively, in whole or in part :

(i) any class of dealers or persons, or any goods or class of goods, from the payment of entry tax under this Act in respect of all or any of the local areas, for such period as may be specified in the notification;

(ii) any dealer or class of dealers, from any provision of the Act as may specified in the notification :

Provided that in respect to the period during which the Ordinance, repealed under Section 24 was in force, the retrospective effect may be given from the date of the commencement of the said Ordinance as if the liability to pay tax arose under this Act and for that purpose it shall and shall always be deemed that the provisions of this Act to the extent they correspond to the provisions of the said Ordinance were in force during the material times.]

11. The undisputed facts further reveal that the exemption certificate was granted on 13/2/2017. The undisputed facts also reveal that pursuant to issuance of exemption certificate, the petitioner certainly became entitled for exemption from payment of entry tax as it was granted with retrospective effect i.e., 23/7/2004 and the Commercial Tax Department was certainly under an obligation to grant 100% exemption of entry tax amount, interest and penalties for the entire duration of 9 years period i.e., w.e.f. 2004 – 2005 to 2012 -2013. The petitioner has made various applications immediately after grant of certificate which are on record dated 16/2/2017 and 20/2/2017 as well as on 29/8/2017, 9/10/2017, 2/8/2018, 25/10/2018, 14/12/2018, 8/1/2019, 8/7/2019 and 25/2/2020. However, exemption has not been granted in respect of entire period.

12. Vivek Dalal, learned Additional Advocate General has vehemently argued before this Court that the statute does not provide for grant of exemption as the matter has become time barred. In the present case, the exemption certificate itself was granted only in the year 2017 i.e., on 13/2/2017 and the cause of action arose for the first time in the year 2017 for grant of exemption as exemption certificate was granted with retrospective effect. Thus, there was a sufficient and reasonable cause in respect of condonation of the delay.

13. The respondents have stated that there is an alternative remedy under the M.P. VAT Act.

Section 51 of the M. P. V.A.T. Act, reads as under :

51- Extension of period of limitation in certain cases:

The provisions of Section 5 of the Limitation Act, 1963 (36 of 1963), so far as may be, shall apply to appeals and applications for revision under this Act.

Section 5 of the Limitation Act, reads as under :

5 Extension of prescribed period in certain cases. —Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.

Explanation.— The fact that the appellant or the applicant was misled by any order, practice or judgment of the High Court in ascertaining or computing the prescribed period may be sufficient cause within the meaning of this section.

14. The Madhya Pradesh Value Added Tax Act became applicable w.e.f. 1/4/2006 and Section 51 of the VAT Act provides that provision of Sec. 5 of the Limitation Act are applicable in respect of appeals, applications and revisions. The petitioner was certainly having a sufficient cause for condonation of delay, as exemption certificate was granted in the year 2017 and, therefore, the stand taken by the Department in respect of the limitation has got no meaning. The State of Madhya Pradesh has granted eligibility certificates to the petitioner for 100% exemption in respect of payment of entry tax for total 9 assessment years ie., 2004-05 to 2012-13 with retrospective effect ie., w.e.f. 23/7/2004 and, therefore, the respondent Department is certainly under an obligation to abide by the exemption certificates and to provide exemption in letter and spirit of the eligibility certificate.

15. The respondents have carried out the reassessment only in respect of five assessment years ie., 2004-05, 2006- 07 and 2011-12 to 2012-13 and exemption has been granted only in respect of five assessment years. The respondents ought to have re-assessed the assessment years w.e.f. 2007-08 to 2010-11 also. The petitioner has submitted more than a dozen of applications to the Commissioner for granting exemption in respect of the remaining years and the Commissioner does have the power u/S. 47 of the M. P. VAT Act. The Commissioner is having a power of suo-moto revision also and this power could have been exercised by the Commissioner keeping in view Sec.5 of the Limitation Act. Thus, it is wrong on the part of the State Government to state that the statute does not provide for reopening of cases which are time barred even though reasonable explanation is provided. In the present case, as the exemption certificate has been granted in the year 2017 only, the petitioner was justified in immediately approaching the Authorities for grant of exemption and his request could not have been turned in the manner and method it has been done by the respondents. The petitioner initially preferred Writ Petition ie., W.P.No. 6666/2010. However, at the relevant point of time, there was no exemption certificate granted in favour of the petitioner and the Writ Petition was withdrawn with liberty to file a fresh Writ Petition. The petitioner has later on preferred Writ Petition ie., W.P.No. 1421/2014, W.P.No. 1323/2015 and 8845/2015 and they were withdrawn only because exemption certificate was issued in favour of the petitioner and the reassessment in respect of 4 years (2007­08 to 2010-11) was pending at the relevant point of time. However, the same has not been done and, therefore, the inaction on the part of the Department is bad in law. The assessment orders passed by the Department for four years ie., 2007-08, 2008-09, 2009-10 and 2010-11 deserves to be set aside and are accordingly hereby set aside.

16. It is nobody’s case that the exemption certificate has been withdrawn or was erroneously granted and the respondent State has admitted grant of exemption certificate and, therefore, once exemption certificate was granted, the Department cannot take advantage of technicalities, especially when the certificate itself was granted in the year 2017 with retrospective effect.

17. Resultantly, the present Writ Petition is allowed. The respondents are directed to confer all benefits to the petitioner in terms of the Entry Tax Exemption Certificate dated 13/7/2017 (Annexure P/11 to P/13) and as a consequence the impugned assessment orders for four years ie., 2007-08, 2008-09, 2009-10 and 2010-11 are set aside. The Department shall refund the amount recovered from the petitioner within 90 days from the date of receipt of certified copy of this order by passing appropriate consequential orders. No order as to costs.

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