FINOLEX CABLES LTD Vs STATE OF MAHARASHTRA: BOMBAY HIGH COURT (Dated: August 20, 2016)
Bombay Sales Tax Act - Section 41D - Bombay Sales Tax Rules, 1959 - Rule 31AAA
Keywords: Annual ceiling on benefits to be availed of under Package Scheme of Incentives, Appraisal of annual production capacity, sales tax incentives, revision, retrospective amendment, interest & penalty.
Whether the amended provisions of Section 41D and Rule 31AAA can be invoked in case where the assessment was completed prior to the insertion of section 41D wherein assessing officer allowed the sales tax incentive claimed by the assessee after duly examining the record - NO: HC
The assessee no. 1 is a company carrying the business of manufacture and sale of jelly filled telephone cables, submersible insulated winding wires etc. The raw materials, inter alia, consumed for the manufacture are copper wire rod, HDPE, LDPE, jelly compound, polyester tape, polyol tape, steel tape etc. Assessees are registered under the Bombay Sales Tax Act, 1959 and the Central Sales Tax Act, 1956. The assessees made Application to the Government of India, Ministry of Industry, Department of Industrial Development, for grant of Industrial Licence under the Industries (Development and Regulation) Act, 1951 for the expansion in manufacture of jelly filled telephone cables. The government of India, Ministry of Industry, Department of Industrial Development, Secretariat for Industrial Approval communicated approval of expansion from 5,00,000 CKM of jelly filled telephone cables to 10,00,000 CKM at the assessees' unit at Village Urse, Taluka Maval, District Pune. The Government of India, Ministry of Industry, Department of Industries Development, Secretariat for Industrial Approvals re-endorsed the capacity of the assessees' industrial undertaking at village Urse, Taluka Maval, District Pune, for the manufacture of jelly filled telephone cables from 19(Tan) lakh CKM to 12(Twelve) lakh CKM. Respondent no. 1 in continuation of past policies, formulated a scheme known as the Package Scheme of Incentives, 1983 to achieve dispersal of industries outside the Bombay-Thane-Pune belt. Applications were invited from eligible units. The assessees made an application to the State Industrial and Investment Corporation of Maharashtra in the prescribed form for eligibility under Part I of the Package Scheme of Incentives, 1983 for a proposed new unit for manufacturing five lakh CKM jelly filled telephone cables at village Urse, Taluka Maval, District Pune. The said application was made by the assessees after complying with the requirement of completing all initial effective steps. The assessees, thereafter, entered into an agreement with the Governor of Maharashtra (Government) in order to enable the assessees to avail sales tax incentives by way of deferral under the Package Scheme of Incentives, 1983 in respect of their new unit at village Urse, Taluka Maval, District Pune. The assessees also entered into an agreement with the Governor of Maharashtra (Government) towards special capital incentives available to the assessees under the Packaged Scheme of Incentives, 1983. The State Industrial and Investment Corporation of Maharashtra Limited, after processing the assessees' above application, issued Eligibility Certificate. The eligible unit was located at Village Urse, Taluka Maval, District Pune. The goods to be manufactured were jelly filled telephone cables with a capacity of 5 lakh CKM per annum, and submersible insulated winding wires with a capacity of 8000 K. M. per annum. The raw materials required as inputs were shown as copper wire rod, HDPE, LDFE, jelly compound, polyster tape, polyol tape, steel tape. The capital cost of the project was shown at Rs.1672.90 lakhs. The date of commencement of production was endorsed as 5th May, 1990. The maximum entitlement of sales tax incentives by way of deferral was fixed at Rs. 1338.32 lakhs. The eligibility certificate was valid for five years from 1st April, 1990 to 30th April, 1995. In terms of the Package Scheme of Incentives, 1983 and the eligibility certificate issued thereunder, the Deputy Commissioner of Sales Tax (Headquarters) and Director of Training, Maharashtra State, Bombay issued Certificate of Entitlement for availing sales tax incentives under Part I of the Package Scheme of Incentives, 1983 of Government of Maharashtra by way of deferment of sales tax liability. The terms and conditions set out in the certificate of entitlement with regard to the incentives are identical to those set out in the eligibility certificate. The assessees are a large/medium scale industrial unit qualified under the caption new unit under the Package Scheme of Incentives, 1983. The assessees' unit fell in Group 'C'. The incentives available under the Package Scheme of Incentives, 1983 were that the assessees were entitled to sales tax incentives by way of deferral of Rs.1338.32 lakhs. The period of eligibility was five years from 1st April, 1990 to 30th April, 1995. The assessees have since been manufacturing and selling their goods and have availed the sales tax incentives available under the Packaged Scheme of Incentives, 1983, the agreements entered into pursuant thereto, eligibility certificate and certificate of entitlement issued thereunder.
The assessees filed their returns and for the period 1st April, 1991 to 31st March, 1992, have already been assessed by order of assessment dated 31st March, 1995 passed under section 33(3) of the Act. The claim of the assessees towards sales tax incentives in view of the Package Scheme of Incentives, 1983, eligibility certificate and certificate of entitlement was examined and allowed by the assessing officer. Likewise, assessment under section 9(2) of the CST Act was finalised. The assessees had carried the matter in appeal before the Deputy Commissioner of Sales Tax (Appeal) on certain issues. The Deputy Commissioner of Sales Tax (Appeals) partly allowed the appeal and did not reverse the findings of the assessing officer in respect of the sales tax incentives claimed and allowed. Likewise, the assessees' appeal against the order of assessment passed under the CST Act also came to be disposed of.
Respondent no. 1 retrospectively amended section 41D by way of insertion to the BST Act by Maharashtra Act XVI of 1995 called the Maharashtra Tax Laws (Levy and Amendment) Act, 1995. Respondent no. 3 issued notice in Form 40 under section 57 of the BST Act read with Rule 62 of the Bombay Sales Tax Rules together with gist of order proposing therein to revise the order of assessment and the order passed in appeal by restricting the sales tax incentives, levying interest under section 36(3) (b) and penalty under section 36(2) (c) read with Explanation II.
The assessees seek a declaration that section 41D of the Bombay Sales Tax Act, 1959 amended by way of insertion by the Maharashtra Act No. XVI of 1995 called the Maharashtra Tax Laws (Levy and Amendment) Act, 1995 as also Rule 31AAA of the Bombay Sales Tax Rules, 1959 as ultra vires the constitution of India being beyond legislative competence of the Maharashtra State legislature, void and of no legal effect as these provisions curtail/restrict/withdraw the sale tax incentives by way of deferral availed by the assessees. It is further submitted that the notice in Form 40 issued by respondent no. 3 under section 57 of the BST Act read with Rule 62 of the Bombay Sales Tax Rules, 1959 together with the gist or order is without jurisdiction and/or in excess of jurisdiction and/or improper exercise of jurisdiction and is illegal, bad in law, suffers from a mistake apparent on the face of the record and is violative of the doctrine of promissory estoppel.
Having heard the parties, the Court held that,
+ once there was no embargo or prohibition on augmentation or increase in the production capacity and the expansion has been sanctioned, then, the impugned notice, which totally disregards all this, cannot be sustained. The assessees have pointed out that there is a promise and contained in this package scheme of incentives, which promise can be culled out from the various terms and conditions. The assessees have submitted and rightly so that they had availed sales tax incentives during the relevant period, namely, 1st April, 1991 to 31st March, 1992. The period of eligibility had not expired nor had the quantum fixed been achieved. It is in these circumstances that the assessing officer allowed the incentives claimed after duly examining the record. Even the appellate order confirms this position. Now, the third respondent desires to restrict the incentives availed of by the assessees and levy interest under section 36(3)(b) and penalty under section 36(2) (c) read with Explanation II. Respondent no. 3 has observed that the incentives have to be restricted in view of the annual licence/registration/production capacity, which was never envisaged in the package scheme of incentives, the agreement entered in pursuance thereof, the eligibility certificate and the certificate of entitlement. That is why the assessees have rightly submitted that the revisional powers cannot be exercised so as to defeat the scheme and such a scheme which contains clear assurances and promises on behalf of the State provided the assessees fulfill the conditions thereof cannot be set at naught by the process undertaken. (para 62)
++ the assessees were entitled to defer the tax payable in the periodical returns as well as the dues on assessment as per Rule 31B/C as against the validity period of the entitlement and eligibility certificate from 1st May, 1990 to 30th April, 1995. The assessee exhausted the financial ceiling of Rs.1,338.32 crores on 31st January, 1994. The assessing authority, while passing the order of assessment for the period 1991-92 and the appellate authority, followed Rule 31B/C. Once section 41D was inserted on 1st October, 1995, while the order of assessment was passed on 31st March, 1995, then, court does not think that against such a finalised process and assessment, the amended provisions can be invoked. (para 67)
++ in Rajesh Steel Industries and Anr. vs. Development Corporation of Konkan Ltd. and Anr.(Writ Petition No. 3862 of 1996) decided on 12th July, 2016) - 2016-TIOL-1422-HC-MUM-CT, the Division Bench of this court held that once it is held that para 2.11 of the 1988 GR provides for computation of notional tax liability on the basis of the tax actually payable by a unit not covered under the 1988 Scheme under the provisions of the sales tax law which includes the exemption provisions contained under the BST Act/BST Rules, then it would have to be held that rule 31AA inserted with effect from March 24, 1995 to the extent it directs the Commissioner to compute the CQB by ignoring the exemption provisions is bad in law. The reason being that the assessees had established a unit in the backward area on the assurance contained in the 1988 GR to the effect that the CQB would be computed at the maximum rates specified under the local sales tax law and not at the rate specified in the Schedule to the BST Act. The said terms and conditions which forms the basis for entering into a contract between the State Government and the assessees could not be altered retrospectively by introducing rule 31AA with effect from March 24, 1995. It was the package schemes of incentives were issued by the State Government from time to time with total exemption for the period specified therein, so as to attract establishment of units in the backward areas of the State. When the package scheme of incentives itself was to operate based on the exemption granted under the sales tax law, it is difficult to envisage that in calculating the CQB, the scheme intended to ignore the exemptions available under the sales tax law. Para 2.11 of the 1988 GR does not either directly or indirectly indicate that in calculating the CQB the exemption provisions contained under the sales tax law have to be ignored. It was held that the Calculation of CQB availed of by a unit covered under the 1988 Scheme as per para 2.11 of the 1988 GR had to be made with reference to the tax payable by a unit not covered under the 1988 Scheme at the maximum rates of tax specified under the local sales tax, which includes the exemption provisions contained in the BST Act/BST Rules and, therefore, rule 31AA inserted to the BST Rules with effect from March 24, 1995 to the extent it provides that the calculation of CQB under the 1988 Scheme has to be made by ignoring the exemption provisions contained under the sales tax law is illegal and contrary to law. (para 68)
Assessee's writ petition allowed
2016-TIOL-23-ARA-CUS + Story
PRAJESH MARKETING LTD: AUTHORITY FOR ADVANCE RULINGS (Dated: July 22, 2016)
Cus - Applicant is a public limited company proposing to import aircraft for providing non-scheduled (charter) service - they intend to charter the aircraft imported to related companies, primarily for use by the related company's top executives, directors, investors, promoters and their family members/friends, as revenue flights.
They seek ruling on -
Whether the benefit of the Notification No. 12/2012-Cus is available to NSOP (Non-Schedule Operator's Permit) holder for the following categories of revenue flights proposed to be undertaken;
a) Use by the permit holder's employees/directors/investors and their family/friends, not necessarily for business purposes.
b) Charter the aircraft to group companies for use by their employees/directors/investors and their family/friends, not necessarily for business purposes
c) Lease the aircraft to group companies for use by their employees/directors/investors and their family/friends, not necessarily for business purposes.
Revenue submits - that the intended purpose of this aircraft is in the nature of personal use and not for public use; that the aircraft is intended to be used for the personal use of their employees/directors/investors and their family/friends, not necessarily for business purposes - exemption notification (Sr. No. 453 of Notification No. 12/2012-Cus) does not cover these situations to be eligible to claim the benefit of the said notification - As the public interest is always a guiding factor in exemption and as the applicant does not fall within the scope of the notification as explained above, the application made for advance ruling may be rejected.
Ruling by Advance Rulings Authority: [para 8, 9, 11, 13]
+ Both the conditions in condition 77 annexed to Notification 12/2012-Cus make it clear that approval of competent authority is required for import of aircraft for providing non-scheduled (passenger) services or non-scheduled (charter) services and importer is required to furnish undertaking to the Deputy/assistant Commissioner of Customs at the time of import to the effect that the aircraft shall be used only for providing non-scheduled (passenger) services or non-scheduled (charter) services, as the case may be.
+ Both these conditions have to be read in conjunction with Explanation 2 to the notification, which clarifies that the use of such imported aircraft by a non-scheduled (passenger) operator for non-scheduled (charter) services or by a non-scheduled (charter) operator for non-scheduled (passenger) services, shall not be construed to be a violation of the conditions of import at concessional rate of duty. It is noticed from the application filed by the applicant that the applicant is proposing to import aircraft for providing non-scheduled (charter) services; therefore, applicant may use the aircraft imported for providing non-scheduled (passenger) services or non-scheduled (charter) services.
+ Paragraph 2.5 of CAR issued in pursuance of Rule 133A of the Aircraft Rules, 1937 is regarding operation and use of aircraft and same is part of Explanation I (c) to Notification No. 12/2012-Cus. Therefore, the contention of Revenue that provisions of CAR 2.5 and 2.6 cannot be invoked to avail concessions/facility/ provisions, are not correct. It also noticed that the subject notification as well as contents of CAR does not debar the use of said aircraft for other than business purposes. In the absence of any such restriction, aircraft can be used for other than business purposes.
+ Notification No. 12/2012-Cus has been issued by the Central Govt. in public interest. As discussed, benefit of exemption notification has been extended to operators subject to fulfillment of conditions mentioned therein. Therefore, it is not correct on the part of the Revenue to state that the applicant does not fall within the scope of the notification.
Ruling on the application:
The benefit of the Notification No. 12/2012-Cus is available to NSOP (Non Schedule Operator's Permit) holder for the following categories of revenue flights (with published tariff) proposed to be undertaken;
a) Use by the permit holder's employees/directors and their family, not necessarily for business purposes.
b) Charter the aircraft to group companies for use by their employees/directors and their family, not necessarily for business purposes
c) Lease the aircraft to group companies for use by their employees/directors and their family, not necessarily for business purposes.
Application allowed
2016-TIOL-22-ARA-CUS
H & M HENNES AND MAURITZ RETAIL PVT LTD: AUTHORITY FOR ADVANCE RULINGS (Dated: July 15, 2016)
Cus - Applicant is in the process of setting up its business of single brand retail trading of various products viz. Clothes and Apparel, Footwear, Cosmetics and Accessories, Handbags, Home furnishing products, Children Products, Outdoor utility products etc. under the brand 'H&M" & proposes to procure and import into India, said goods from independent overseas third party manufacturers at an agreed price. They seek ruling on the following -
A. Whether the value on the invoice raised by the overseas third party manufacturer on the applicant is the Transaction Value and on which Customs Duty is required to be paid in terms of Section 14 of the Act read with the Customs Valuation (Determination of Values of Imported Goods) Rules, 2007?
B. Whether the Trade Mark/ License Fee and the payment made in terms of the foreign collaboration agreement by the applicant to H&M GBC does not qualify as payment under Rule 10 (1)( c)of the Rules or any other Rule and is not required to be added to the Transaction Value of the said goods for levy of Customs Duty under the Act read with the Rules?
C. Whether the Sales and Business Support Fee paid by the applicant to H&M GBC does not qualify as payment under Section 10 (1) ( c) of the Rules or any other Rule and is not required to be added to the Transaction Value of the said goods for levy of Customs Duty under the Act read with the Rules?
Ruling: [para 10]
There is no divergence in the views of the applicant and the Revenue as far as questions raised in this application are concerned. Therefore, it is ruled as under -
A. The value on the invoice raised by the overseas third party manufacturer on the applicant is the Transaction Value and on which Customs Duty is required to be paid in terms of Section 14 of the Act read with the Customs Valuation (Determination of Values of imported Goods) Rules, 2007.
B. The Trade Mark/ License Fee and the payment made in terms of the foreign collaboration agreement by the Applicant to H&M GBC does not qualify as payment under Rule 10 (1) (c) of the Rules or any other Rule and is not required to be added to the Transaction Value of the said goods for levy of Customs Duty under the Act read with the Rules.
C. The Sales and Business Support Fee paid by the applicant to H&M GBC does not qualify as payment under Section 10 (1) ( c) of the Rules or any other Rule and is not required to be added to the Transaction Value of the said goods for levy of Customs Duty under the Act read with the Rules.
Application allowed
2016-TIOL-21-ARA-CUS
FIRST CONCEPT PRODUCTION SERVICES PVT LTD: AUTHORITY FOR ADVANCE RULINGS (Dated: August 5, 2016)
Cus - Applicant is in the process of setting up its business of providing support services to various broadcasting companies for conducting sports and entertainment related events and propose to procure and import various technical equipment, inter alia, including video cameras, camera lenses, audio and video cables and other supporting parts of the broadcasting equipment classifiable under Ch 85 or Ch 90 of Customs Tariff Act, 1975 on lease from various vendors in three different modes. They seek ruling on the following -
A. Whether the applicant is eligible to claim the exemption under Notification No. 27/2002-Cus dated 01.03.2002 as amended by Notification No. 27/2008-Cus dated 01.03.2008 under the category of temporary import of leased goods?
B. Whether the value stated in the Chartered Engineer's Certificate to be provided by the applicant at the time of import of the said Broadcasting Equipment can be the basis of Customs Valuation?
C. In the alternative, whether the book value of the said Broadcasting Equipment shown in the books of accounts of BS/foreign suppliers can be basis of Customs Valuation?
D. In the alternative, whether depreciated value of the said Broadcasting Equipment can be the basis of Customs Valuation?
Ruling by AAR: [para 15]
A. Applicant submits that they would be satisfying all the conditions of Notification No. 27/2008-Cus dated 01.03.2008, as amended, therefore, they are eligible to claim benefit of same - Revenue also has no objection. Held: The applicant is eligible to claim the exemption under Notification No. 27/2002-Cus dated 01.03.2002, as amended by Notification No. 27/2008- Cus dated 01.03.2008 under the category of temporary import of leased goods.
B, C, and D. The value stated in the Chartered Engineer's Certificate to be provided by the applicant at the time of import of said Broadcasting Equipment will be one of the basis of Customs Valuation in terms of paragraph 12 of CBEC Circular No. 25/2015-Cus dated 15.10.2015. Further, determination of value of the second hand Broadcasting Equipment proposed to be imported shall also be as per said Circular.
Application disposed
2016-TIOL-20-ARA-ST
GLOBAL TRANSPORTATION SERVICES PVT LTD: AUTHORITY FOR ADVANCE RULINGS (Dated: July 22, 2016)
ST - Applicant intends to provide logistics solutions to its customers, comprising of number of services, which are mutually exclusive and can be provided on a standalone basis. They seek ruling on the following -
A. Whether the freight margin recovered by the applicant from its customer in an outbound shipment not taxable under the Act in light of Rule 10 of Place of Provision (POP) Rules, 2012 on account of the fact that place of provision of service would be outside India?
B. The freight margin recovered by the applicant from its customer or a Freight Partner in an inbound shipment exempt from levy of service tax under the Act in light of the exemption provided to transportation of goods by aircraft and vessel under Section 66 D of the Act as same is service by way of transportation of goods by air or sea from a place outside India into Indian Customs area.
C. Without prejudice, whether the applicant is liable to discharge service tax liability on or only on the amount of differential freight margin retained by the applicant in case of both an outbound shipment and inbound shipment?
D. Without prejudice, whether the applicant shall be entitled to avail of CENVAT credit on account of input services utilized by it if its final output service, is held to be taxable under the Act?
Ruling: [para 16]
A. The freight margin recovered by the applicant from its customer in an outbound shipment is not taxable under the Finance Act, 1994 in light of Rule 10 of Place of Provision Rules, 2012 on account of the fact that place of provision of service would be outside India.
B. The freight margin recovered by the applicant from its customer or a Freight Partner in an inbound shipment is exempt from levy of service tax under the Finance Act, 1994 in light of the exemption provided to transportation of goods by aircraft and vessel under Section 66 D of the Act as same is service by way of transportation of goods by air or sea from a place outside India into Indian Customs area up-to 31.05.2016. However, exemption provided to transportation of goods by aircraft has been extended vide Notification No. 9/2016-ST (S. No. 53) w. e. f. 01.06.2016.
C & D. In view of A and B above, questions C and D have become infructuous.
Application disposed
2016-TIOL-19-ARA-ST
RAGHAVA ESTATES AND PROPERTIES LTD: AUTHORITY FOR ADVANCE RULINGS (Dated: July 01, 2016)
ST - Applicant, a public limited company is entitled to apply for an advance ruling in view of notification 4/2013-ST dated 01.03.2013 - objection by department is, therefore, rejected: AAR [para 1, 2]
ST - Activity which is proposed to be carried out is to build a house for an individual that is only for a single house for the customer - admittedly that activity is exempt from the Service Tax - Objection which seems to have been raised is that the applicant company would also obtain the necessary sanctions from the 'Gram Panchayat' for being able to construct the house - This amounts to a separate service and, if it is separate, if it is to be acquired by a separate agreement, it would attract the Service Tax - However, in this case, it is asserted that it is going to be a 'bundled service' meaning thereby that the company will obtain the necessary sanctions and then will build an individual house; that there will be no independent agreement regarding obtaining of sanctions and if there is any, the company will pay the Service Tax over that - Taking into consideration this stance that it will be only a bundled service of obtaining the necessary sanctions and then building the individual house, Authority feels that in this particular factual situation there will be no Service Tax attracted: AAR [para 4]
Conclusion - Ruled that in case there is a common agreement of obtaining the sanction and then building an individual house, it would be covered under the exemption notification: AAR [para 4]
Application disposed of
2016-TIOL-18-ARA-ST
STEADFAST CORPORATION LTD: AUTHORITY FOR ADVANCE RULINGS (Dated: July 15, 2016)
ST - Applicant, a Public Limited Company proposing to take up the activity of construction of Railway Works including sidings for private companies as well as Indian Railways seeks a ruling on as to whether they are entitled for exemption under notification 25/2012-ST vide entry 14(a) - AR submits that as per s. 2 (20) and (25) of the Railways Act, 1989 there are 2 types of railways; Government and Non-Government; that in order to qualify as "railway" for both of them, definition in 2(31) of the Railways Act, 1989 mandates it should be used for public carriage of passengers or goods; that construction of railway sidings for private companies/public undertakings which are exclusively used for private purposes cannot qualify as railway; that the side track constructed by a private/non-Governmental agency/ private entity cannot qualify as railway and are not eligible for exemption: Held: Notification No.25/2012-ST does not differentiate between Government and Non-Government railway - Railway as per the Railways Act, 1989 inter-alia means a railway, or any portion of railway for the public carriage of passengers or goods - However, Notification No. 25/2012-ST dated 20.06.2012 vide entry at S.No.14 (a) grants exemption to "railways" and is not restricted to "railway" - Even if the definition of "railway" is taken from the Railways Act, 1989 for interpreting said Notification, as Revenue has resorted to do, the benefit of Notification would be available to "railways" including "railway" used for purposes other than for public carriage of passengers or goods: AAR [para 6, 7]
Conclusion: Construction of railway siding for private parties is exempt under Notification No. 25/2012-ST dated 20.06.2012, as amended vide entry No. 14(a) thereof: AAR
Application allowed
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