State Of Haryana & Ors vs Bharti Teletech Ltd

2. The facts that are imperative to be stated are that the respondent assessee, namely, M/s. Bharti Teletech Limited, was allowed sales tax exemption under Rule 28A of the Rules for the period 13.12.1991 to 12.12.1998 for an amount of Rs.498.80 lakhs. This benefit was granted subject to the conditions laid down in the said sub-rule 11 of Rule 28A of the Rules. The conditions postulated in sub-rule 11 (a) are that the industrial unit after availing of the benefit shall continue its production at least for the next five years not below the level of average production for the preceding five years. There is also stipulation in the sub-rule 11 that if the unit violates any of the conditions laid down in clause

3. As the facts would uncurtain, on 3.05.1997, the assessee submitted an application seeking amendment in the eligibility certificate so as to include certain other items but it was rejected vide order dated 22.7.1997 by the High Level Screening Committee. On an appeal being filed, the Commissioner of Industries accepted the same and remitted the matter to the High Level Screening Committee to revise the eligibility certificate allowing the benefit of sales tax exemption by inclusion of additional items. However, the period of exemption remained unaltered. Be it noted, the assessee was granted the full benefit of exemption for the entire period.

4. After the expiry of the period of exemption, the Deputy Excise and Taxation Commissioner (Gurgaon), the 2nd appellant herein, while monitoring the production level of the respondent unit, noticed that it was not maintaining the level of production of the preceding five years and, accordingly, initiated a proceeding against it on the foundation that it had violated the conditions enumerated under Rule 28A (11) (a) (i) and was thereby liable to make full payment of tax exemption benefit already availed by it along with interest. As required under the Rules, it issued a notice to show cause to explain non-maintenance of average production after the expiry of the benefit period inasmuch as it had drastically come down to Rs.9.06 crores from 17.52 crores. In the course of adjudication, in reply to the show cause, the assessee explained that it had established another unit as an expansion unit which had come into commercial production w.e.f. 27.3.1998 and for the purpose of determining the level of production after 12.12.1998, the production figures of the expansion unit were also required to be taken into account. A contention was raised before the 2nd appellant that the notice to show cause was premature as it was given prior to the expiry of twelve months from 12.12.1998, that is, the date on which the period of benefit expired.

5. The adjudicating authority rejected the said contention and proceeded to delve into the facts that had emerged before it. It came to hold that the Gross Turn Over (GTO) during January 1999 and December 1999 was Rs.9.06 crores as against the average GTO of Rs.17.52 crores during the five years immediately preceding 12.12.1998. The said authority also considered the GTO for the assessment year 1999-2000 (1.4.1999 to 31.3.2000) which reflected the amount as Rs.4,48,05,695.00 for the year immediately preceding, i.e., assessment year 1998-1999.

8. Grieved by the aforesaid order, the assessee preferred an appeal before the appellate authority who came to hold that the explanation for loss in production was due to outdated machinery and, hence, the reasons for fall in production could not be held to be beyond the control of the assessee, for it was well within his control to replace the outdated machinery of the old unit instead of putting up a new unit. On the aforesaid bedrock, the appellate authority declined to interfere in appeal.

9. Failure in appeal led the assessee to file an appeal before the Sales Tax Tribunal which, on reappreciation of the factual matrix in entirety, came to hold that the average manufacturing of EPBT in the subsequent three years was approximately of 9.32 lacs as against an average of 3.79 in the preceding five years. That apart, the appellant had not taken the plea that the lower production was because of factors beyond their control. The tribunal further observed that it was not a mere coincidence that the second unit (expansion) became operational soon after the expiry of benefit in the first unit from which it was evident that the assessee had a well thought out plan to deliberately reduce the manufacturing of EPBT drastically in the first unit and increase the production of the said item in the second unit. The tribunal also took note of the fact from the information provided by the assessee it was obvious that the turnover in the expanded unit had increased from Rs.65.49 lacs in 1998- 1999 to Rs.31.36 crores in 1999 but on the other hand, the turnover in the first unit had gone down from Rs.13.27 crore during 1998-99 to Rs.4.48 crore during 1999-2000 and hence, it was clearly indicative that the expanded capacity had been created to coincide with the expiry of the benefit period in the first unit. Finally, the tribunal held:-

25. In view of our aforesaid analysis and prismatic reasoning, the appeal is allowed and the judgment and order passed by the High Court is set aside and those of the tribunal and other authorities are restored. There shall be no order as to costs.

January 20, 2014.