1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINALCIVIL JURISDICTION WRIT PETITION NO. 818 OF 2001 1. Mirc Electronics Limited ) a Company incorporated under ) the provisions of the Companies ) Act,1956 and having its registered ) office at Onida House, G-1, M.I.D.C. ) Mahakali Caves Road, Andheri (East)) Mumbai 400 093. ) 2. Vijay Kumar – Vice President ) (Finance) & Co. Secretary of ) Petitioner No.1 having his office ) at Onida House, G-1, M.I.D.C., ) Mahakali Caves Road, Andheri (East)) Mumbai 400 093. ).. Petitioners Versus 1. The State of Maharashtra ) 2. The Commissioner of Sales Tax ) Maharahtra State, Mumbai ) having his office at Vikrikar Bhavan ) 8th Floor, Mazagaon, Mumbai 400 010) 3. Deputy Commissioner of Sales ) Tax (Incentives & Enforcement) ) Maharashtra State, Mumbai, ) Vikrikar Bhavan, 6th Floor, ) Mazagaon, Mumbai 400 010. ) 4. Sales Tax Officer, C-625, ) Palghar, District Thane, Mahim ) 2 Road, Palghar. ).. Respondents Mr. P.S.Jetly with Mr. G.S.Jetly wth Mr. A.S.Tungare, Advocates, for the petitoners. Mr.V.A.Sonpal, AGP, for Respondents. CORAM: F.I.REBELLO AND J.H.BHATIA,JJ. DATED: 19th June, 2009. JUDGMENT :(PER J.H.BHATIA,J.) 1. To state in brief, on 29.9.1994, the petitioners made an application to the State Industrial & Investment Corporation of Maharashtra Ltd., (for short SICOM) under the Package Scheme of Incentives,1993 for availing sales tax benefits. Sicom Ltd., after processing the said application issued Eligibility Certificate No. FINC(I)/1993/Deferral/EC-2828 dated 29.9.1994, under Part-I of the Package Scheme of Incentives, 1993. The petitioners unit was given the status of a “pioneer unit”. The goods/products eligible under the Eligibility Certificate were television sets and audio systems. The raw material required were mentioned as picture tube, integrated circuits, transistors, capacitors, resistors and other components. The Capital cost of the project was to be Rs. 3882.70. The date of commencement of production was mentioned as 16.7.1994. The petitioners were eligible to claim maximum entitlement of Sales tax Incentives by way of deferral was not to exceed Rs.50,47,51,000/-. The validity 3 period for the Eligibility Certificate was 15 years i.e. from 01.09.1994 to 31.08.2009. The Sales tax Incentives were computed at 130% of the total investment approved. The Deputy Commissioner of Sales Tax (Incentive Scheme & Enforcement) Maharashtra State, Mumbai, issued Certificate of Entitlement No. N 19L/R-31B/481 dated 30th September, 1994. Al the terms and conditions set out in the above Eligibility Certificate stood incorporated in the Certificate of Entitlement. On 5.6.1996, the petitioners made an application to Sicom Ltd., for incorporating Video Cassettes Recorder/player as products to be covered under the Eligibility Certificate. Sicom Ltd., issued Addenda granting permission. As there was an overrun in the cost, on 7.3.2000, the petitioners made a fresh application to SICOM LTD., to avail additional incentives under the Package Scheme of Incentives, 1993. SICOM LTD., after processing the application issued Addenda II showing the revised/modified capital cost of Rs. 47.85 crore and the maximum entitlement of Sales Tax Incentives by way of deferral which the Petitioners were eligible for stood revised at Rs. 62,20,50,000/-. On 3.10.2000, the petitioners made an application under the Package Scheme of Incentives, 1993, to Sicom Ltd., seeking permission and incentives in respect of expansion of their unit at Wada. The petitioners enclosed a project report. The proposed project cost for this expansion stood at Rs.205.77 crore. On 13.12.2000, the petitioners thereafter entered into agreements with the 4 State of Maharashtra. By the said agreements, the petitioners bound themselves to the terms and conditions specified and set out in the Package Scheme of Incentives, 1993. On 17.1.1998, the Commissioner of Sales Tax, Maharashtra State, Mumbai, issued Circular No.2 of 1998, whereby Sales tax Incentives are curtailed/restricted/withdrawn by computing the same by dividing the Fixed Capital Investment by 100 and/or by adopting the pro rata method. On 16.1.2001, the Deputy Commissioner of Sales Tax (Incentives & Enforcement) Maharashtra State issued Certificate of Entitlement No. 421303-S-E3/LM1519. The Sales Tax Incentives available to the petitioners is shown at Rs. 197,00,39,175/-. The Sales Tax Incentives have been computed by applying Circular no.2 of 1998 dated 17.1.1998 by applying the pro rata method. According to the petitioners, the Trade Circular No.2 of 1998 dated 17.1.1998 is without jurisdiction and/or in excess of jurisdiction and/or in improper exercise of jurisdiction, void, inoperative and in violation of the doctrine of promissory estoppal. It is contended that for the same reason, the conditions imposed in the Certificate of Entitlement dated 16.1.2001 are also invalid and are liable to be set aside. On the basis of these contentions, the petitioners have filed Writ Petition seeking to quash the aforesaid conditions in the Circular as well as the Certificate of Entitlement. 5 2. Heard the learned Counsel for the parties. Perused the record. 3. Paras 4 and 5 of the Trade Circular dated 17.1.1998 marked Exhibit “Z” are relevant. They are as under :- “4. In this regard, I would like to clarify that for cases covered under 1993 scheme, the trade circular referred to above, has to be followed in all respects subject to the following modification :- “Only that percentage of production of the unit after deemed expansion will be eligible for sales Tax Incentives, which is equal to the higher of the following two percentages :- (i) Increase in capacity x100 Total capacity / (Old + New). (ii) New fixed capital investment x 100 Total Gross fixed capital investment (Old + New) 5. It means that is deemed expansion unit of 1993 scheme will be eligible for package scheme benefits to the extent of higher percentages as calculated by above two methods and not on entire production of an eligible unit covered under such category.” 4. On the basis of the said para 4 and 5 of the Trade Circular, the following conditions were incorporated in the Certificate of Entitlement dated 16.1.2001. They are as under :- 6 “(i) The Unit made it clear that since the condition of identification of production from each of the Entitlement Certificate a prerequisite for availing the benefits through maintenances of accounts in that regards, is quite difficult to comply, this condition cannot be fulfilled by them. As such unit showed willingness to opt for prorate basis of entitlement as a criterion for claiming benefits in respect of Exemption Unit under 1993 Scheme for exemption. Accordingly the manner of claiming benefits is provided in clause (m) of this Certificate.” “a) Since the Unit has claimed that identification of production and maintenance of accounting of it for Existing Unit and Expansion Unit is difficult to comply with and as the Unit showed willingness to opt for investment as a criterion to claim benefits for Expansion Unit. In terms of provisions of the to the Unit in terms of this Entitlement Certificate the following basis adopted. (1) Gross Block of Fixed Capital Assets as on 31.03.99 = Rs. 53,85.93/- Lakhs (2) Projected Investment in Capital Assets in 1st Expansion = Rs.202,05.53/- Lakhs (3) The total Investment (1) + (2) = Rs.255,91.46/- Lakhs Prorata Benefits for Expansion Unit = The Investment in 1st Expansion Rs.202,05.53/- Lakhs --------------------------------------- = ------------------------- = 78.95% of the Total Investment After Expansion total production It would thus be clear that from 01.12.2000 onwards the production to the extent of 78.95% of the total production shall be apportioned as production of a Unit in Expansion relevant for this Entitlement Certificate. The 7 Entitlement Certificate is based on the ratio of investments for prorata computation, the benefits shall be available till the time period or the monetary ceiling whichever gets exhausted early. The production to the extent of 21.05% shall be apportioned to the Existing Unit. Corresponding to this production at 21.05% when the sales takes place the liability for payment of taxes shall be discharged by making payment of taxes into Govt. Treasury and the same shall be admitted in returns furnished thereafter. The same proportion is available for procuring raw-material without payment of taxes to suppliers on finishing declarations in respect of Expansion Unit.” 5. It is material to note that almost similar conditions were imposed in the case of the Commissioner of Sales Tax vs. M/s. Pee Vee Textiles Ltd. Sales Tax Application No.8 of 2007 in Reference Application No.90 of 2001. The following questions of law were raised in the matter of M/s Pee Vee Textiles Ltd. “(i) Whether on the facts and circumstances of the case, the Tribunal was justified in law in declaring that the conditions in paragraph (i) and (m) of the Certificate of Entitlement dated 25.1.2000 be deleted ab- initio ? (ii) Whether on the facts and circumstances of the case, the Tribunal was justified in law in going a step further in declaring that proportionate benefits theory is not applicable to expansion units covered under 1993 Package Scheme of Incentives, when it was not asked for by the applicant (appellant sic) and their prayer was simply to delete the conditions from the certificate of entitlement ?” After hearing the parties, the Division Bench of this Court by its judgment dated 13.10.2008 answered both the questions in affirmative i.e. in favour of the assesse and against the Revenue. It was held that the Deputy Commissioner could not impose such conditions. We find that the present case is squarely 8 covered by the decision in the Commissioner of Sales Tax vs. Pee Vee Textiles Ltd. For the same reasons, we hold that the Deputy Commissioner of Sales tax could not impose the conditions as per paras 4 and 5 of the Trade Circular dated 17.1.1998 and the above referred conditions in the Entitlement Certificate and, therefore, to that extent the said Circular and the conditions in the Certificate of Entitlement are liable to be set aside. 6. For the aforesaid reasons, paras 4 and 5 of the Trade Circular dated 17.1.1998 and the impugned conditions in the Certificate of Entitlement dated 16.1.2001, as referred above, are hereby quashed and set aside. 7 Rule made absolute accordingly. (J.H.BHATIA, J.) (F.I.REBELLO,J.)