Eagleton the Golf Resort vs The Director of Tourism

H.N. Nagamohan Das, J.—In this writ petition, Petitioner has prayed for a writ in the nature of certiorari to quash the order dated- 26.04.2010, Annexure-H passed by the respondent. In the year 1992, Government of Karnataka declared its "Tourism Policy" and announced a package of incentives and concessions as per Annexure-A. As per this tourism policy the units falling under Category-B are qualified for three years exemption from sales tax and luxury tax and the units falling under Category-C are qualified for such exemption for a period of seven years. Respondent recognized the petitioner''s golf resort as a new tourism unit. Petitioner commenced their business from 1.4.2000. Respondent issued a certificate as per Annexure-B dated 11/23.08.2000 stating that petitioner''s establishment as ''C'' category unit eligible for 100% tax exemption for a period of seven years. Accordingly, luxury tax assessment of petitioner''s establishment came to be completed up to the year 2006-2007 allowing 100% exemption of luxury tax.

When the matter stood at that stage, respondent issued a letter to the Assistant Commissioner of Commercial Taxes stating that they have withdrawn the exemption granted to the petitioner in the certificate Annexure-B and stated that petitioner''s unit falls under category-B and not under category-C. Accordingly, the assessing officer issued reassessment notices and passed reassessment orders levying tax on the petitioner. Aggrieved by the letter of respondent dated 6.4.2006 withdrawing the certificate, reassessment notices and reassessment orders, petitioner approached this court in W.P. No. 3061/2008 and W.P. No. 3792/2008. This court vide order dated 24.09.2008 allowed the writ petitions, set-aside the reassessment notices, reassessment orders and remanded the matter to the respondent to pass fresh orders on the question of withdrawing exemption after providing an opportunity to the petitioner. On remand the respondent has now passed the impugned order at Annexure-H dated 26.04.2010 declaring that petitioner''s establishment falls under category-B and not under category-C. Aggrieved by this order the petitioner is before this court.

Heard arguments on both the side and perused the entire writ papers.

At this stage, it is necessary to examine the law declared by the Apex Court and other High Courts on the issue involved in this case. The Supreme Court in Pondicherry State Cooperative Consumer Federation Ltd. Vs. Union Territory of Pondicherry, held as under:

G.O. Ms. No. 15/74 dated June 25, 1974 providing exemption clearly suggested that such exemption was given in the public interest. A liberal view of the G.O. would have to be taken. Since the exemption was granted to all small-scale industrial units registered with the Director of Industries and since the appellant was recognized and certified as a small-scale industrial unit, engaged in the activity of re-packing of edible oil and further since the exemption was granted with open eyes to this particular industry, the State could not be allowed to turn around and take a stance that the appellant was not entitled to the exemption on the ground that it did not manufacture any goods.

The Supreme Court in Lingaraj Pipes Pvt. Ltd. Vs. Sales Tax Officer and Others, held as under:

Held, allowing the writ petition, that the Industries Department had raised a doubt about the eligibility of the petitioner-company to the benefit of the IPR 1996 as a priority industry on April 18, 2006, i.e., date of filing of the counter-affidavit. The petitioner was transacting its business from the date of commencement of production, i.e., January 8, 2000 till January 7, 2005 on the premise that it was entitled to such benefit on the basis of the certificate granted to it. Necessarily the grant of said certificate was for benefit of the petitioner in respect of sales tax during the said period. If the said "mistaken notion" was given retrospective operation it would result in total injustice and would amount to arbitrary action and be violative of article 14 of the Constitution. Further the petitioner-company had made substantial investment and the State Government had also enjoyed the benefit from the investment made by the petitioner-company in the form of industrial development in the State, contribution to labour and employment and also a huge benefit to the State exchequer within the State of Orissa. Therefore, the impugned action on the part of the State Government was unfair, arbitrary and violative of article 14 of the Constitution. At best such mistaken notion could be corrected only in a prospective manner. Therefore, the impugned assessment orders and the consequential demands were liable to be quashed.

The Rajasthan Taxation Tribunal, Jodhpur in Commissioner, Commercial Taxes, Rajasthan Vs. Kandhari & Kandhari Private limited 1999 RTT 361 held as under:

Held, (i) that admittedly there was no allegation of any fraud or misrepresentation or suppression of facts on the part of the dealer. Nor had the dealer collected sales tax in the period during which the eligibility certificate remained effective. The quantum of exemption had been fully availed of under the eligibility certificate much before the proceedings were initiated for the eligibility certificate''s cancellation. The District Level Screening Committee''s decision to grant the eligibility certificate was for expansion as the basis of eligibility and was a conscious considered decision with all relevant facts before it, though the decision may have been erroneous. It ought not to have cancelled the eligibility certificate granted as this would, have the effect of the dealer being required to make good to the department the quantum of tax exemption availed of under the eligibility certificate without having collected tax. The mistake as the detailed references to the notings on file showed was that of the District Level Screening Committee. The dealer was not at fault and could not be made to now suffer the consequences of the mistake made by the District Level Screening Committee at this point of time, so many years after the benefits had been fully availed of. The Tax Board was justified in this case in holding that the eligibility certificate granted in favour of an entrepreneur could not be cancelled retrospectively even if the benefit under the scheme was availed on the basis of an eligibility certificate wrongly granted. However, this was not a case of promissory estoppel.

In BIRLA JUTE AND INDUSTRIES Ltd., v. STATE OF MADHYA PRADESH AND ANR. it is held as under:

There was, in our view, no justification for reviewing the said certificate long after the term thereof had expired and, therefore, long after its benefit had been availed by the appellant or at all. The view taken by the High Court in the judgment to which we have referred to is correct, and is borne out by the decisions of this Court aforementioned.

The High Court of Madhya Pradesh in Kitchen Aid vs. State of M.P. (STC 110 1998 MP 109) held as under:

There is, yet another aspect of the matter. There cannot be any denial of the fact that the petitioner had acted on the said eligibility certificate. It had carried on its business on the basis of the said certificate and did not charge any tax on the sales effected by it during the period of eligibility. Thus, it will be now too harsh for the respondents to ask for the payment of tax, even, for that period, for which under the grant of necessary certificate, it had carried on its business. Admittedly, the said period has now expired and no extension to the same has been granted.

It is not the case of respondents that on misrepresentation or by playing fraud the petitioner obtained the certificate as per Annexure B. The respondents granted the certificate Annexure B in favour of the petitioner with open eyes and at this length of time the respondents are not entitled to cancel the certificate on the ground that the petitioner do not fall under Category C. From the record it is seen that the respondents admitted that my mistake they had given the certificate Annexure B to the petitioner. Therefore in the name of correcting the mistake no retrospective effect can be given. Further it is seen that on the strength of the certificate Annexure B the petitioner had passed on the benefit of luxury tax to the customers. Now the impugned action results in making the petitioner to make good to the department the quantum of tax though not collected. Practically it is not possible for the petitioner to collect the luxury tax from the customers and who enjoyed that benefit. Further by acting on the certificate Annexure B the petitioners have not misappropriated any tax collected from the customers. It is not the case of respondents that in contravention of the certificate, the petitioners collected the tax and not remitted the same to the department. In the circumstances the impugned action on the part of the respondents is unfair, arbitrary and violative of Article 14 of the constitution of India. For the reasons stated above, the following;

ORDER

i. Writ petition is hereby allowed.

ii. The impugned order dated 26.04.2010, Annexure-H passed by the respondent is hereby quashed. Ordered accordingly.