1 IN THE HIGH COURT OFJUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 826 of 1995 WRIT PETITION NO. 826 of 1995 WRIT PETITION NO. 826 of 1995 1. SUNSHIELD CHEMICALS LIMITED ) a company having its registered ) office at Janaki Niwas, N.C. ) Kelkar Road, Dadar, Bombay ) 400 028 and Industrial Unit ) at lot Nos.149/6, 147/1B and ) 149/2B etc. at Rasal, Tal. ) Sudhagad District Raigad. ) 2. Mr. Satish Manohar Kelkar ) of Indian Inhabitant, ) Managing Director of Petitioner ) No.1 abovenamed, residing at ) 26 Whitelily Society, Ash Lane, ) Dadar, Bombay 400 028. )..Petitioners Versus 1. State of Maharashtra ) 2. Commissioner of Maharashtra ) having his office at Vikrikar ) Bhavan, Mazgaons,Bombay 400 010.) 2 3. Deputy Commissioner of Sales Tax) HQ (Incentive), having his ) his office at Vikrikar Bhavan, ) Mazgaon, Bombay 400 010. ) 4. Development Corporation of ) Konkan Limited, a Government ) of Maharashtra Undertaking ) having its office at Warden ) House, Sir P.M.Road, Fort, ) Bombay 400 001. )..Respondents Mr. E.P.Bharucha, Senior Counsel with Mr. Boni Patel i/b. Thakore Jariwala & Associates for the petitioners. Mr. S.K.Nair, A-Panel Counsel for respondents. CORAM: F.I.REBELLO AND CORAM: F.I.REBELLO AND CORAM: F.I.REBELLO AND J.H.BHATIA,JJ. J.H.BHATIA,JJ. J.H.BHATIA,JJ. DATE: 24th April, 2009. DATE: 24th April, 2009. DATE: 24th April, 2009. JUDGMENT: (PER J.H.BHATIA,J.) JUDGMENT: (PER J.H.BHATIA,J.) JUDGMENT: (PER J.H.BHATIA,J.) 1. Petitioner No.1 is a company registered under the Companies Act and engaged in the business of manufacture 3 of chemicals and other products. Petitioner No.2 is its Managing Director. In 1988, Government of Maharashtra had formulated a scheme known as "Modified Package Scheme of Incentives" as per the Government Resolution dated 30.9.1988. That Scheme was to provide incentives in the form of exemption or deferral of payment of sales tax for certain period to attract the industry in the backward areas identified as Group-A to Group-D. Village Rasal, Tal. Sudhagad, District Raigad falls in Group-B. To avail the benefits under that Scheme, the petitioners decided to expand and diversify the unit for manufacture of chemicals in the backward area of Village Rasal. Under the Scheme, initially, on 4th June, 1993, the petitioners were issued an eligibility certificate by the Development Corporation of Konkan Ltd. - respondent No.4 whereby the sales tax incentives upto the limit of Rs.2,73,72,900/- for the period of four years from 7th April 1993 to 6th April 1997 was granted. This incentive was further enhanced by an addendum dated 2.9.1993 and finally the said limit of sales tax incentives w as enhanced to an amount of Rs.5,99,57,240 without any change in the period. That benefit could be taken only within the prescribed period of four years. Under the said entitlement certificate, the petitioners would not be liable to pay the purchase tax on the purchase of raw materials to their vendors, but could 4 charge sales tax on the products sold by them. The liability to pay the purchase tax was to be on the petitioners and this liability was deferred beyond the period of four years and that deferred amount of purchase tax was required to be paid to the Government as per that Scheme. This amount of purchase tax, payment of which was deferred, would remain with the petitioners as interest-free funds. 2. As per the provisions of Section 12, whenever any goods were sold to an authorised dealer or recognised dealer or a commission agent holding a permit on behalf of principal or a registered dealer or a dealer holding certificate of entitlement, on production of necessary declaration in the prescribed form, the sales to such dealer would be deducted from turnover of sales for the purpose of payment of sales tax. As a result, the vendor would not be required to pay sales tax on the goods sold to such dealer holding certificate of entitlement. Under Section 13, the purchaser holding entitlement certificate would be liable to pay purchase tax on the goods but in view of the above Scheme that payment of purchase tax would stand deferred for the prescribed period. Section 12(b) and 13A came to be amended with effect from 1.5.1995 and as a result of the amendment, it became necessary for the vendor to collect 5 sales tax and to pay the same. As a result of this amendment, the benefits granted to the petitioners under the said Scheme could not be availed. By this petition, the petitioners challenge the validity of the said Amendment Act insofar as it pertains to withdrawal of facility to the petitioners’ units about deferment of payment of purchase tax and sur charge under the said Scheme and requiring the petitioners to pay purchase tax and sur charge on raw material. They also sought directions to allow the petitioners to continue to avail the facility of deferment of amount equal to payment of purchase tax on the raw material and to other packing material purchased within the State and to give benefit of the amount equivalent to purchase tax collected from the petitioners from 15th April 1994 onwards by refund thereof. Several other reliefs were sought. 3. By prayer clause c(iii), the petitioners sought the following interim relief pending the hearing and final disposal of the petition. It reads as follows :- "(iii) to order the Respondents to grant the Petitioners an additional period of time after 6th April 1997 if so required, so as to enable the Petitioners to defer the amount equivalent to the purchase tax and surcharge on purchase of "raw 6 materials" by the petitioners for their backward area unit from vendors in Maharashtra if the Petitioners unit reaches it time limit without touching quantum restrictions;" The said interim relief was granted by this Court as per order dated 4.7.1995. On the basis of the said interim relief granted by this Court, the petitioners addressed a letter dated 15.9.1995 to the Deputy Commissioner of Sales Tax i.e. respondent No.3 and requested him to issue orders accordingly. In response to the same, the respondent No.3 replied by the letter dated 12.10.1995 and informed that in terms of the order of the High Court, the Department would grant additional period of time to enable them to defer the amount equivalent to purchase tax and sur-charge, if any, on the purchase of raw-materials in terms of the Scheme. They further informed that the period could not be extended at that stage because the entitlement certificate was valid upto 6.4.1997, however, in terms of the Court order and the provisions of law, as would be in force at the material time, the Department would permit them to defer amount equivalent to purchase tax and surcharge as per the Scheme by extending the time from 6.4.1997 if the petitioners ould not have reached the quantum restrictions at that time as per Entitlement 7 Certificate. 4. Admittedly, in view of the interim relief granted by this Court and the letter dated 12.10.1995 from the respondent No.3, the petitioners were getting benefit of non-payument of purchase tax. At the time of hearing of this matter, learned Counsel for both the parties pointed out that the relevant provisions of Sections 12 and 13 were amended again with effect from 15.5.1997 to restore the position as it stood prior to 1.5.1994. The learned Counsel for the respondents pointed out that in the meantime, the Government by a Government Resolution dated 3.1.1996 had decided that the units availing incentives by way of deferral should be given extension of the period by 1/5th of residual period if they could not get full benefit within the prescribed period in view of the amendment made in 1994. Following the aforesaid G.R., the eligibility period of the petitioners was extended from 7.4.1997 to 26.6.1997. 5. The petitioners availed that benefit from April 1993 to April 1994 to the tune of Rs.18,78,128/-. It is pointed out that during the period from 1.4.1994 to 30.9.1995, the petitioners could not avail the benefit of deferment of purchase tax to the extent of Rs.15,19,625/-. However, they availed the benefit of 8 deferment of Rs.34,62,520/- during the extended period from 7.4.1997 to 26.6.1997. The petitioners however sought further extension of time which was not granted. However, they have taken the benefit of deferment on the basis of the High Court order during the period from 26.6.1997 to 31.8.1997. The learned Counsel for the petitioners submitted that during the period from 26.6.1997 to 31.8.1997, the petitioners had availed the benefit of deferral to the tune of Rs.26,23,236/- and including this they had taken total benefit of Rs.5,99,57,240/- which was the quantum limit as per the Entitlement Certificate. 6. At the time of hearing of this petition, in view of the above developments which had taken place during the period from 1995 to 1997 and the fact that the petitioners had actually availed the benefit of the deferral either by the order of this Court or on the basis of the Government Resolution, the learned Counsel for the petitioners conceded that the petitioners are not interested in pressing the challenge to the validity of the impugned amendments in the Bombay Sales Tax Act. Admittedly, as per the entitlement certificate issued to the petitioners, the maximum benefit of deferral of payment of purchase tax was to the tune of Rs.5,99,57,240/- and this could be availed within the 9 period of four years only. The petitioners could not get more than that benefit even during the period of 4 years nor they could take any benefit beyond the period of 4 years even if full benefit was not availed during the said period. Now it is admitted that in view of the developments noted above, within the prescribed period as extended upto 26.6.1997, the benefit availed by the petitioners short of only amount of Rs.26,23,236/- and this benefit was availed by them beyond 26.2.1997 on the basis of the interim order which was operating. As the Amendment Act and the Policy of the Government is no more in challenge, the petitioners could not avail the said benefit beyond the period extended by the Government. As per the said Scheme, during the deferral period, the petitioners could retain the amount of the purchase tax without payment of interest on the same. However, they received the amount of Rs.26,23,236/- beyond the extended period and they have retained that money with them. Legally they could not retain that amount. Therefore, they are liable to pay the said amount to the Government with interest. 7. The learned Counsel for the respondents contended that the amount of Rs.26,23,236/-, which ought to have been paid by the petitioners because it was received beyond the extended period of the entitlement 10 certificate, the petitioners may be required to pay penalty under section 36. As per Section 36, where any person, dealer or commission agent purchase any goods and fails to pay the tax, the Commissioner may, after giving such person a reasonable opportunity fo being heard, by order in writing impose on him in addition to any tax payable, a sum by way of penalty not exceeding twice the amount of tax. Even though we do not hold that the petitioners were entitled under the entitlement certificate to defer payment of purchase tax beyond 26.6.1997, this petition was pending before the Court and there was an interim relief operating in their favour and therefore it cannot be said that they had deferred payment illegally or wrongly or without any authority of law. It is also to be noted that if the amount deferred by them beyond the extended period is taken into account the total benefit taken by them, does not go beyond the amount prescribed in the entitlement certificate. Therefore, in our considered opinion, the petitioners should not be liable to pay any penalty under section 36, but should be liable to pay interest on the said amount. 8. For the aforesaid reasons, the petition stands disposed of with following directions :- 11 (i) The petitioners shall be liable to pay the amount of Rs.26,23,236/-, being the amount of tax on he purchases made by them after 26.6.1997 till 31.8.1997 i.e. beyond the extended period of entitlement certificate, to the respondent NO.3 with interest at the rate of 8% per annum till the date of payment. However, they shall not be liable to pay any penalty under Section 36 of the Bombay Sales Tax Act on the said amount. The petitioners shall make payment of the amount with interest within 12 weeks from this day. (J.H.BHATIA,J.) (F.I.REBELLO,J.) (J.H.BHATIA,J.) (F.I.REBELLO,J.) (J.H.BHATIA,J.) (F.I.REBELLO,J.)