Writ Petition No. 3862 of 1996. Case: Rajesh Steel Industries & Ors. Vs Development Corporation of Konkan Ltd. & Ors.. High Court of Bombay (India)
| Case Number | Writ Petition No. 3862 of 1996 |
| Counsel | For Appellant: Mr. P. C. Joshi i/b Mr. N. B. Shah, Advs. and For Respondents: Mr. V. A. Sonpal, Special Counsel |
| Judges | S. C. Dharmadhikari & Dr. Shalini Phansalkarjoshi, JJ. |
| Issue | Maharashtra Sales Tax Act, 1959 - Sections 41B, 41C; The Maharashtra Tax Laws (Levy and Amendment) Act, 1995; Bombay Sales Act, 1959 |
| Judgement Date | July 12, 2016 |
| Court | High Court of Bombay (India) |
Judgment:
Dr. Shalini Phansalkarjoshi, J.
1. The challenge in this writ petition is to the Constitutional validity of Sections 41B of the Maharashtra Sales Tax Act, 1959 ('Act' for short), as also Rule 31AA of the Maharashtra Sales Tax Rules, 1959, as amended from time to time ('Rules' for short), to the extent of their retrospective application, from 01.01.1980.
2. The petitioners have also challenged the validity of assessment orders passed on 20.10.1995. However, challenge to the same is, subsequently, given up by learned counsel for the petitioners as the petitioners have already preferred the appeals against the said assessment orders before the competent appellate authority under the Act. The challenge raised in the petition to Constitutional validity of Section 41C of the Act is also subsequently not pressed into submission.
3. The basic dispute raised in this petition is, when an unit is established as per the Government Resolution dated 04.05.1983 which provides for a mechanism to calculate the Notional Tax Liability of the unit covered under Package Scheme of Incentives, 1983 ('1983 Scheme' for short), whether a different mechanism for calculating the Notional Sales Tax Liability can be introduced with retrospective effect from 01.01.1980 by inserting Section 41B to the Act and Rule 31AA to the Rules, so as to defeat the rights vested in the units established under the 1983 Scheme prior to the insertion of Rule 31AA.
4. According to the petitioners, Section 41B and Rule 31AA, to the extent they are inconsistent with para 2.11 of the 1983 GR, are bad in law, whereas; according to respondent No.2Commissioner of Revenue, the method of determining Cumulative Quantum of Benefits ('CQB' for short) laid down under Section 41B read with Rule 31AA is in consonance with the method prescribed under para 2.11 of the 1983 GR and, therefore, no fault can be found with either Section 41B or Rule 31AA.
5. The crux of the dispute is, therefore, whether the full or partial exemption, granted to the industrial units established in pursuance of the 1983 Scheme, from payment of the tax on account of sale transactions can be taken away by the subsequent introduced Section 41B and Rule 31AA, so as to put the industrial units established in remote undeveloped areas in a situation far worse than the units established in the other areas? The necessary corollary to the said question is, 'whether the government can defeat the legitimate expectations which the petitioners had under the 1983 Scheme?'
6. The relevant facts, for deciding these issues, can be stated as under:
The State had, with a view to achieve development and dispersion of industries outside the MumbaiThanePune Belt, evolved various package schemes from time to time, for giving certain incentives to those industries, which may be set up in the backward areas. Under the 1983 Scheme, the entire State of Maharashtra was divided into 4 Groups; GroupA comprising of developed areas where no incentives were made available; GroupB consisting of the areas where some development had already taken place; GroupC covering those areas which were less developed than those under Group B and lastly, GroupD covering the rest of the areas which were least developed. The Village Dheku in Tal. Khalapur was covered under GroupC under the said Scheme.
7. The petitioners, with the sole object of availing the benefits of 1983 Scheme, established their Small Scale Industrial Unit at village Dheku, Tal. Khalapur for manufacturing iron and steel items like; MS Steel casting, rerolling of bars flats, angles and twisting of bars, channels etc. After satisfying itself about the full compliance of the procedure prescribed under the 1983 Scheme and also after satisfying about final effective steps taken by the petitioners, the 1st respondentDevelopment Corporation of Kokan Ltd. entered into an agreement with the petitioners on 30.03.1989 and the Eligibility Certificate dated 17.03.1989 was issued to the petitioners under the said scheme for the period of 5 years from 01.04.1989 to 31.03.1994.
8. Consequent to the issue of Eligibility Certificate in favour of the petitioners, the 2nd respondent through his subordinate Deputy Commissioner of Sales Tax, issued a Certificate of Entitlement to the petitioners on 01.04.1989. As per the said Certificate of Entitlement, the petitioners were exempted from payment of sales tax in respect of the sales and purchases relating to the said industrial unit effected during the period of validity of the said certificate. Thus, according to the petitioners, as the unit was established in the backward area under the 1983 Scheme, the petitioners were entitled for total exemption from the payment of sales tax. The petitioners' unit was also totally exempted from the payment of purchase tax on purchase of raw materials and sales tax on sale of finished products upto the financial ceiling of Rs.25,96,600/.
9. Subsequent thereto, the State Government has, by its Amendment Act of 1995 titled as, The Maharashtra Tax Laws (Levy and Amendment) Act, 1995 inserted Section 41B and Rule 31AA to the Sales Tax Act. Section 41B empowers the Commissioner of Sales Tax, respondent No.2 herein, to compute the cumulative quantum of benefits raised under entry No.136 of the Schedule to the Notification issued under Section 41 right from 01.01.1980 and also to determine as to whether the benefits so enjoyed have exceeded the relevant monetary ceiling under any Package Scheme of Incentives, including the 1983 Scheme. Moreover, consequent to the framing of Rule 31AA with effect from 24.03.1995, respondent No.2 has been authorized to calculate cumulative quantum of benefits in the manner prescribed by the said Rule. On the basis of this Rule 31AA, the tax assessment orders were issued for the period of 01.04.1989 to 31.03.1990 and 01.04.1990 to 31.03.1991, computing Notional Sales Tax Liability.
10. The grievance of the petitioners is that the full exemption granted to the petitioners from payment of sales tax, both while purchasing raw materials and selling the finished goods, under the 1983 Scheme is now completely taken away by the insertion of Section 41B read with Rule 31AA, as they create retrospectively new and fresh liability, never contemplated, nor covered by the provisions of 1983 Scheme. It is urged that Rule 31AA is framed beyond rule making powers contained in Section 74 of the Act and hence is void ab initio. By the said Rule, concession granted by the Government under the 1983 Scheme is sought to be whittled down, without showing it to be in the public interest. It is urged that Section 41B is also liable to be struck down, along with Rule 31AA, as there was impermissible delegation of legislative power inasmuch as Section 41B conferred upon the Commissioner to determine the cumulative quantum of benefits from 01.01.1980 onwards. Therefore according to learned counsel for petitioners, Section 41B is ultra vires to the other provisions of the Act. It is further urged that Rule 31AA is contrary to the other provisions of the Act also, especially Rules 41B & 41D. By those rules, a unit in a developed area will suffer the reduction of set off by only 2% for the transfers of the manufactured goods to the branch situated outside the State of Maharashtra, whereas a unit in backward area under rule 31AA will have to suffer a greater degree by the addition of 6% to the benefits computed under other subrules.
11. Thus, it is submitted that the Rule 31AA is totally inconsistent and contrary to the Scheme of the Act as well as the Rules framed thereunder and suffers from the vice of diagonally opposing the provisions of the Act and Rules as well as the 1983 Scheme. It is urged that these newly inserted provisions place a unit like the petitioners to a worse position than the other similarly placed units in a developed area. It is also taking away the vested rights, acquired by the petitioners under the 1983 Scheme. According to the petitioners, such a vested right cannot be disturbed by any future unilateral revision of the policy.
12. In this view of the matter, it is urged by learned counsel for petitioners that this Court may be pleased to declare Section 41B read with Rule 31AA of the Bombay Sales Act, 1959 to be ultra vires and illegal in so far as it affects the vested rights of the petitioners. The provisions are unconstitutional as well for they contravene the mandate of Articles 14 and 19(1)(g) of the Constitution of India.
13. On behalf of respondent No.2, an affidavitinreply is...
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