State Of Tamil Nadu & Anr vs India Cements Ltd. & Anr

2.1 With a view to promote industrialisation, the Government of Tamil Nadu had declared 105 taluks of the State as industrially backward for the purpose of grant of interest free sales tax loan, interest free sales tax deferral, state capital subsidy etc. In furtherance thereof and to correct regional imbalances in industrialisation, vide G.O.Ms. No.500 dated 14th May, 1990, the Government declared 30 taluks from amongst the 105 industrially backward taluks to be industrially most backward taluks, offering them further incentives. It was directed that the new industries to be set up in these 30 most backward taluks as also in the three industrial complexes of State Industries Promotion Corporation of Tamil Nadu (for short "the SIPCOT") at three named places, in addition to the existing concessions, would be entitled to full waiver of sales-tax dues for a period of five years 2 upto a ceiling of the total investment made in the fixed assets. It was also stipulated that existing units in these areas/complexes undertaking expansion/diversification shall also be entitled to deferral of sales tax for nine years, limited to 80% of the additional investment made in fixed assets.

However, the benefit of sales tax deferral to the new units was to the full extent of the total investment made in the fixed assets. The scheme was subject to the sales tax payable on products manufactured by the capacity created by expansion/diversification units only.

2.3 It appears that with a view to protect the revenue and also to increase the production level of industries which were interested in availing concessions of deferral of sales tax, the State Government vide G.O.Ms.No.119, dated 13th April, 1994, imposed certain conditions and issued directions that were required to be complied with by the expansion/diversification units for availing sales tax benefits. For the sake of ready reference, the relevant portion of the said G.O. is extracted below:

"3. The Government after careful examination, have decided to accept the suggestions of the special Commissioner and Commissioner of Commercial Taxes as they protect the Revenue and also help to increase the production level of the industries availing the concession. Accordingly, the Government direct that -

3. The first respondent, engaged in the manufacture and marketing of cement in the States of Tamil Nadu and Andhra Pradesh was having manufacturing units at Sankari and Sankar Nagar. By their letters dated 13th March, 1996, 4th March, 1997 and 24th September, 1997 they proposed to set up an expanded unit at Dalavoi village, Sendurai taluk to avail the benefit of sales tax deferral scheme under G.O.Ms.No.119, dated 13th April 1994. On being approached, on 13th February, 1998, SIPCOT issued the requisite eligibility certificate to the first respondent, inter-alia, mentioning that: (i) the first respondent will be eligible for deferral of sales tax not exceeding `205.13 crores (later on revised to `270.21 crores), interest free for a period of twelve years from the month in which the first respondent's unit commenced its commercial production i.e. from 1st July, 1997 to 31st May, 2009 (cl.3); (ii) deferral of 5 sales tax will only be on the increased volume of production/sales; (iii) for the purpose of determining the increased volume of production, the base figure would be the highest of the volume of production/sale in the company in any one of the year during the last three years; (iv) till reaching the volume of production/sale specified earlier, the company would continue to pay tax and any liability in excess of the production/sale specified therein alone will be eligible for deferment (cl.5.3); (v) the deferral scheme will be applicable to the unit/company only as long as it manufactures products for which the essentiality certificate had been issued (cl.6) and (vi) violation of any of the conditions as stipulated in the eligibility certificate and the connected government orders will result in withdrawal of deferral facility in entirety (cl.7). In compliance of clause 5.2 of the eligibility certificate, on 12th April, 2000, the first respondent entered into an agreement with the Zonal Assistant Commissioner, Commercial Taxes, undertaking to comply with the Base Production Volume and Base Sales Volume (hereinafter referred to as "BPV" and "BSV" respectively) as indicated in the essentiality certificate.

4. The first respondent continued to remit the sales tax until they reached the level of BSV, viz. the highest of the actual annual sales in the last three years prior to the expansion, stating that they had also reached, in 6 the financial year, BPV, viz. the highest production in the last three years prior to the expansion and submitted its return claiming the deferral of tax on the sale in excess of BSV.

5. The Assistant Commissioner of Commercial Taxes, issued a notice dated 19th March, 2002, inter alia, informing the first respondent that once the BSV is reached, then the eligibility for availment of deferral under the eligibility certificate dated 13th February, 1998 would be available only for the unit at Dalavoi and the deferral could not be stretched to include the production of other units and accordingly, directed the respondent to pay a sum of `5322.14 lakhs which had been availed, in excess, as deferral of sales tax. The respondent was also informed that they could avail of deferral of sales tax after reaching the BSV/BPV for all the units whichever is earlier and then they could avail deferral for expansion unit at Dalavoi only. On 21st March, 2002 the Assistant Commissioner issued an erratum to the earlier notice dated 19th March, 2002 to the effect that the words `units whichever is earlier and then they can avail deferral for expansion unit' should be read as `units whichever is later and then they can avail deferral for expansion unit'.

(Emphasis supplied by us)

23. In the present case, it is not the case of the revenue that circular dated 1st May, 2000 is in conflict with either any statutory provision or the deferral schemes announced under the afore-mentioned government orders. We, therefore, hold that the said circular is binding in law on the adjudicating authority under the TNGST Act.

24.For the reasons afore-mentioned, we do not find any merit in this appeal and the same is dismissed accordingly.

25.However, in the facts and circumstances of the case, the parties are left to bear their own costs.

APRIL 21, 2011.

(RS) 22