Sunshieled Chemicals Ltd. and Anr. Vs State of Maha. and Ors.

 IN THE HIGH COURT OFJUDICATURE AT BOMBAY
 ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 826 of 1995

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 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.)

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 3. Deputy Commissioner of Sales Tax)

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 HQ (Incentive), having his )
 his office at Vikrikar Bhavan, )
 Mazgaon, Bombay 400 010. )

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 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

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 Mr. E.P.Bharucha, Senior Counsel with Mr. Boni Patel
 i/b. Thakore Jariwala & Associates for the petitioners.

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 Mr. S.K.Nair, A-Panel Counsel for respondents.

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CORAM: F.I.REBELLO AND

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 J.H.BHATIA,JJ.

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 DATE: 24th April, 2009.

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 JUDGMENT: (PER J.H.BHATIA,J.)

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 1. Petitioner No.1 is a company registered under the
 Companies Act and engaged in the business of manufacture

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 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

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 charge sales tax on the products sold by them. The

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 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.

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 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

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 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

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 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.

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 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 :-

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 "(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

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 materials" by the petitioners for their backward

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 area unit from vendors in Maharashtra if the
 Petitioners unit reaches it time limit without
 touching quantum restrictions;"

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 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

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 Certificate.

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 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.

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 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

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 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.

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 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

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 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.

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 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

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 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.

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 8. For the aforesaid reasons, the petition stands
 disposed of with following directions :-

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 (i) The petitioners shall be liable to pay the

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 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.

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 The petitioners shall make payment of the amount

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 with interest within 12 weeks from this day.

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(J.H.BHATIA,J.) (F.I.REBELLO,J.)

Sunshieled Chemicals Ltd. and Anr. v. State of Maha. and Ors.

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Sunshieled Chemicals Ltd. and Anr. v. State of Maha. and Ors.

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