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Judgment
Bharati H. Dangre, J
1 The Appellant Company has filed the present Appeal assailing the concurrent findings of the Maharashtra Sales Tax Tribunal and the Commissioner
of Sales Tax, Pune Division. The present Appeal raised substantial questions of law and we deem it fit to admit the same on the following questions of
law.
(A) Whether in the facts and circumstances of the case, exemption from whole of tax under Serial No.1 of Notification No. VAT/1505/Cr
122/Taxation dated 1.4.2005 issued under Section 8(4) of Mah.VAT, 2003 is available for the entire turnover of Ratnagiri unit, despite of Chapter 14
of MVAT Act, 2002 as retrospectively amended/substituted by Mah.Act 22 of 2009 ?
(B) Whether in the facts of the circumstances, Section 93 of MVAT Act, 2002 as amended by Act 22 of 2009 is applicable to turnover of Ratnagiri
unit which has already exhausted the monetary ceiling limits of exemption before 28.08.2009 being the date of coming into force Maharashtra Act 22
of 2009
(C) Whether in the facts and circumstances of the case, in view of the validation and saving provision contained in Section 5 of Maharashtra Act 22
of 2009, full exemption is available for entire turnover of Ratnagiri unit, particularly when the eligibility certificate/certificate of entitlement both dated
10.02.2003 did not contain any condition of proportionality for availing of incentives under 1993 Scheme ?
On the appeal being admitted, we have heard Shri Sridharan learned Senior Advocate appearing for the appellant and Mr.Sonpal appearing for the
respondents and have taken up the matter for final hearing by consent of the parties.
2 The Appellant is a Company incorporated under the provisions of Companies Act and is having its registered office in Pune. The appellant Company
is engaged in the manufacturing of PVC Plastic Pipes, Pipe fittings and other allied products. The said factory is situated at Urse and is functional
since 1980. In or around 1994, the appellant company set up another factory in Village Ranpar, Post Gholap, District Ratnagiri for manufacturing PVC
Resins.
The appellant is duly registered under the provisions of Maharashtra Value Added Tax Act, 2002 (for short “MVAT Act, 2002) and the Central
Sales Tax Act, 1966 for both the places of business separately. The dispute raised in the First and Second Appeals as well as the Appeal presented
before this Court revolves around the Package Scheme of Incentives floated by the State Government and the benefits flowing from the said scheme.
3 The Appellant Company, in the year 1994, has made a fixed capital investment of Rs.329.5 crore, thereby creating a new manufacturing factory in
Ratnagiri (hereinafter referred to as “Ratnagiri Factoryâ€) for manufacturing of PVC Resins and also PVC Pipes. The said factory claimed the
benefits of the Package Scheme of Incentives which was prevailing at the relevant time, known as PSI Â 1988 and an eligibility certificate under Part
I of the 1988 Scheme was granted to the appellant by SICOM qua its Ratnagiri unit. By virtue of the said eligibility certificate, the appellant was held
eligible for maximum entitlement of sales tax incentives of Rs.313,03,07,000/Â by way of exemption. The said eligibility certificate was valid for a
period of 10 years from 4th April 1994 to 30th April 1994. On the basis of the said eligibility certificate, the Sales Tax Department also issued an
entitlement certificate on 25th April 1994 to the appellant and both the certificates mentioned the production capacity as 1,30,000 metric tonnes. The
said eligibility certificate expressly described the unit of the appellant as “Pioneer Unitâ€.
In the year 1993, a new Package Scheme of Incentives substituted the existing Package Scheme of Incentives. The appellant made a further
investment in its Ratnagiri unit to the tune of Rs.208.89 crore in August 2002 and accordingly, the existing capacity of PVC Resins and extruded
products like pipes, flared up from 1,30,000 metric tonnes to 2 lakh metric tonnes per annum. The appellant, accordingly, made an application for
availment of necessary incentives in terms of 1993 Package Scheme of Incentives vide application dated 8th October 2002. Accordingly, on 10th
February 2003, a fresh eligibility certificate was issued to the appellant in the capacity as Pioneer Unit by SICOM. The said certificate issued on 11th
February 2003 was valid for 106 months i.e. from 1st August 2002 to 31st May 2011 and the eligibility certificate issued in favour of the appellant for
additional fixed capital investment of Rs.20889.76 lakhs for village Ranpar, District Ratnagiri was made subject to review/ monitoring every year.
Certain conditions were stipulated in the said eligibility certificate which included the condition of automatic curtailment of the eligibility certificate from
the point of time when the total sales tax incentives admissible under the Scheme are availed of, or exceed the limits as specific in the 1993 Package
Scheme of Incentives i.e. on attaining 69.93% of the gross value of Fixed Capital Investment actually made subject to a ceiling of Rs.20889.70 lakhs
i.e. Rs.14,608.17 lakhs or from the date from which the certificate of entitlement is either cancelled or revoked, whichever event occurred earlier.
4 The certificate of Entitlement issued in favour of the appellant on 21st October 2002 by SICOM did not incorporate any condition whatsoever that
availment of incentives should be on proportionate basis of increase in production capacity to the additional investment. The consequential certificate
of entitlement dated 10th February 2003 issued by the Sales Tax Department, according to the appellant, also does not in any condition stipulating that
the appellant should avail the incentives of a proportionate basis of increase in production capacity of additional investment. It is the specific case of
the appellant that for the Financial Years 2005Â06, 2006Â07, 2007Â 08 and 2008Â09 and in particular, for the Financial Year 2005Â 06 in respect of
which the present Appeal is filed, the appellant relied upon the eligibility certificate and the Entitlement certificate issued in its favour and claimed
complete exemption from taxes for the entire turnover of sales made by it from Ratnagiri unit. It is the case of the appellant that it fully satisfied all the
conditions of exemption imposed under the notification dated 1st April 2005 issued under the MVAT Act 2002 and necessary declarations were also
duly made on the invoice as required in the notification. As such, the appellant exhausted the eligible quantum of benefit under the entitlement
certificate in the month of March 2009 itself. The appellant also claimed a refund of tax paid on purchases in terms of Rule 78 of the MVAT Rules
2005 for the period from 4th February 2006 to 1st March 2006 and accordingly, the respondent granted provisional refund to the appellant amounting
to Rs.5,65,39,588/Â. Perusal of the chronology of events would further reveal that on 22nd February 2013, an assessment order was passed by the
Assessing Authority for the disputed period 2005Â06. In the assessment order, the Assessing Authority applied the provisions of Section 93 of the
MVAT 2002 as retrospectively substituted by Maharashtra Act No.XXII of 2009 and only allowed the exemption to the extent of proÂrata turnover
of 35%. The assessing authority rejected the claim of 100% exemption without applying proÂrata factor on the ground that the dealer has not
produced any books of accounts and has not identified the goods manufactured by old and new units and there was no identification of goods.
Resultantly, the appellant was assessed to VAT Tax at Rs.6,07,82,694/Â and the claim was verified and finally allowed at Rs.10,30,85,904/Â and it
was held that the assessment had resulted in excess amount which was refunded to the dealer. For the remaining amount, a demand notice was
served on the appellant.
5 Being aggrieved by the said assessment order, an appeal was preferred to the Appellate Authority i.e. the Joint Commissioner of Sales Tax
(Appeals) II Pune City, assailing the order dated 22nd March 2013 passed by the Deputy Commissioner of Sales Tax, Pune for the period from 1st
April 2005 to 31st March 2006. The First Appellate Authority, by an order dated 29th September 2015, upheld the order of the Assessment Authority
and confirmed the demand raised therein. Being aggrieved, the appellant preferred a Second Appeal before the Maharashtra Sales Tax Tribunal,
Mumbai and the Tribunal by an order dated 27th February 2017 confirmed the order passed by the First Appellate Authority.
Being aggrieved by the said order, the appellant has approached this Court with a grievance that the amended Section 93 of the Value Added Tax Act
is not applicable to an eligible unit availing incentives by way of 'exemption' and it can apply to units availing deferment or interestÂfree loan. The
claim of the appellant is based on the fact that the ceiling limit specified in the eligibility certificate/certificate of entitlement issued to the appellant was
already exhausted by March 2009 before Section 93 came to be amended and which was precisely done on 27th August 2009 and therefore, the
substituted Section 93 cannot be made applicable to such a situation and the precise legal submission is about the retrospective effect of the amended
Section 93 of the MVAT Act. The submission is that this Amendment Act would not be applicable to units whose Cumulative Quantum of Benefits
(CQB) would have been fully utilized during the eligible period and as per the appellant, it has paid full tax on sales from 1st April 2009 after
exhausting the Cumulative Quantum of Benefits as per the eligibility certificate in March 2009 based on the law which was prevailing at the relevant
time. The appellant submits that the Assessing Authority as also the first and second appellate authorities, conveniently ignored the said legal position
which is by now settled and therefore, the appeal challenges the concurrent findings recorded by the two authorities being in utter infraction of the
settled position of law.
6 In support of this Appeal, we have heard the learned senior counsel Shri Sridharan. According to the learned senior counsel, the appellant had set up
a new unit in the year 1994 at Ratnagiri by way of backward integration and has made a fixed capital investment of Rs.329.5 crore, thereby creating a
new manufacturing unit at Ratnagiri for manufacture of PVC Resins and PVC Pipes. A part of the resin manufactured at Ratnagiri was sold
therefrom, whereas the balance was transferred to the Urse factory for use in the manufacturing of pipes. The learned counsel would submit that a
further investment was made in the Ratnagiri unit in or around August 2002 to the tune of Rs.208.89 crore and the date of commencement of
commercial production of the unit was on or around 1st August 2002. According to Shri Sridharan, the additional investment of Rs.208.89 crore itself
qualified the said unit as a pioneer unit in terms of para 3.12 of the 1993 Scheme. It is the specific submission of the learned counsel that this
investment was in addition to the original investment made in the year 1994, which itself qualified the Ratnagiri unit as Pioneer unit and he would
submit that in terms of para 3/12(b) of the 1993 Scheme, threshold investment in Group (c) for a pioneer unit was Rs.60 crore much less than
Rs.208.98 crore invested by the appellant. According to the learned senior counsel, the eligibility certificate issued on 10th February 2003 specifically
stated that the appellant was a pioneer unit and on the basis of this eligibility certificate, Sales Tax Department issued entitlement certificate dated 10th
February 2003 and both the certificates would conclusively establish that the new investment at Ratnagiri was recognized as a Pioneer Unit by
SICOM. In terms of the said certificate, according to the learned senior counsel, the appellant was eligible for availing maximum sales tax incentives
of Rs.146,08,17,000 and the validity period of the eligibility certificate was from 1st August 2002 to 31st August 2011 and the commercial production
commenced on 1st August 2002.
Shri Sridharan would submit that in terms of para 5.1(ii)(i) Group C, the appellant was eligible for benefit to the extent of 95% of the Fixed Capital
Investment and the incentive amount in terms of the eligibility certificate was worked out at Rs.146.08 crore. He would submit that after the issuance
of certificate, Sales Tax Eligibility in terms of monetary ceiling was provisionally curtailed by SICOM based on the amended 1993 Scheme. The
eligibility certificate itself stated that the Quantum of Eligibility was subject to change as per the decision of the Court. Shri Sridharan would rely upon
a Division Bench Judgment of this Court in the case of Associated Cement Ltd Vs State of Maharashtra WP 290 of 2001 dt.31/7/09, and would
submit that it has been held by this Court that the ceiling of entitlement in respect of a pioneer unit cannot be curtailed to 75% by applying the logic
contained in para 3.8(1)(i)(c) of the Amended 1993 Scheme so as to restrict its benefit.
7 The precise submission of the learned Senior counsel is that the eligibility certificate and the entitlement certificate conferred on the appellant on 21st
October 2002/ 10th February 2003 did not incorporate any condition that the availment of incentives should be on proportionate basis of increase in
production capacity to additional investment. Further, it is the submission of the learned counsel that for the Financial Year 2005Â06, 2006Â07,
2007Â08 and 2008Â09, the appellants relied upon the eligibility and entitlement certificates and claimed complete exemption from tax for the entire
turnover of sales made by it from Ratnagiri unit and exhausted the eligible quantum of benefit of Rs.146 crore under Entitlement Certificate in the
month of March 2009 itself, much before the expiry of the period of entitlement mentioned in the eligibility and essentiality certificate being May 2011.
The appellant has, therefore, duly discharged the tax liability for all sales made from Ratnagiri unit from April 2009 without availing any exemption
though the time limit for availing exemption was available till May 2011.
8 According to Shri Sridharan, the appellant paid the taxes from April 2009 onwards and if the principle of proÂrata was to be followed from April
2005, then, the appellant could have easily exhausted the ceiling of incentives of Rs.146 crore till May 2011, being the period of validity certificate of
entitlement and if it was so, then no portion of the sanctioned limit of incentives would have lapsed due to expiry of time. In the circumstances, Shri
Sridharan would submit that the assessment order dated 22nd February 2013 passed by the Assessing Authority for the disputed period 2005Â06
which is based on applicability of the provisions of Section 93 of the MVAT Act, 2002, retrospectively as substituted by Maharashtra Act No.XXII of
2009, the Assessing Authority only allowed the exemption to the extent of proÂrata turnover of 35%. The First Appellate Authority upheld the order
passed by the Assessing Authority and confirmed the demand of Rs.1,42,36,378/Â along with interest payable under Section 50(3). This order was
further confirmed by the Tribunal and the subject matter of the present appeal.
9 Shri Sridharan would invite the attention of the Court to the series of judgments delivered by this Court and the position of law which has been
ultimately settled by the Hon'ble Apex Court in relation to the retrospective amendment made by Maharashtra Act No.XXIX of 2009 to Section 93 of
the MVAT Act, 2002. His precise submission is that the appellant's unit being a pioneer unit, is not governed by the said amendment. Another
submission of the learned senior counsel is that the validation provision contained in Section 5(1) of the Maharashtra Act No.XXII of 2009, validates
and affirms an eligibility certificate/certificate of entitlement already issued including certificates which did not contain any condition of proportionality
for availing of incentives under 1993 Scheme. Further, according to him, the said amendment is inapplicable to the unit which has already exhausted
the monetary ceiling limit of exemption before 28th August 2009, the date of coming into force of the Amending Act. According to Shri Sridharan, the
relief will have to be moulded and no demand of tax should be made in a case where after exhausting the ceiling limits before August 2009, the
assessee has paid full tax at appropriate rate on all sales made thereafter within the original period of validity in terms of eligibility certificate and the
essentiality certificate and within the ceiling limit mentioned in these certificates, based on the law as it stood prior to the amending Act No.XXII of
2009. Another submission of the learned counsel is that in cases where provisional assessment has resulted in refund or where a provisional refund is
granted, then, no interest is leviable under Section 30(3), when at the time of the assessment, demand of tax is raised out of the refund granted. In the
backdrop of the aforesaid submission, the learned senior counsel would pray that the concurrent findings recorded by the First Appellate Authority as
well as the Tribunal are erroneous and he prays for allowing the Appeal by setting aside the said orders.
10 As against the said submission canvassed by the learned senior counsel, Shri Sonpal appearing for the Sales Tax Authorities, submits that the Dy.
Commissioner of Sales Tax, Pune has passed the assessment order for the period from 1st April 2005 to 31st March 2006 which was assailed in
appeal before the First Appellate Authority being the Joint Commissioner of Sales Tax (Appeals) II, Pune City, which partly allowed the appeal.
According to Shri Sonpal, the appellant was holding the entitlement certificate under the Package Scheme of Incentives â€" 1988 (PSI) for Rs.580.66
crore for the period commencing from 4th April 1994 to 3rd April 2005 and under the Package Scheme of Incentives â€" 1993 (PSI) from 1st August
2002 to 31st May 2011 for Rs.146.08 crore by way of exemption mode. Shri Sonpal would submit that the arguments which are canvassed before this
Court in the Appeal are not raised before the Tribunal and he is highly critical about the manner in which new points have been raised in the appeal for
the first time. Shri Sonpal would submit that the case of the appellant is based on the premise that no condition was imposed in the
eligibility/entitlement certificate about restrictions on the incentives to be drawn for a year and therefore, the appellant continued to enjoy the
incentives on 100% turnover of sales for the year 2005Â06 and thereafter, but according to Shri Sonpal, the assessment for the year 2005Â 06 was
taken up and an order was passed by the Assessing Authority on 22nd February 2013 and the incentives to be availed for the Financial Year were
restricted to the percentage of sales turnover as per formulae prescribed in section 93(1A) of the MVAT Act which was made applicable from 1st
April 2005. The submission of Shri Sonpal is that Section 93(1A) was inserted in August 2009 with retrospective effect from 1st April 2005. Shri
Sonpal would submit that the argument of the learned counsel for the appellant that the restriction and curtailment of incentives under Section 93(1A)
is not applicable to the appellant is entirely misconceived. He would submit that on plain reading of the Package Scheme of Incentives, no provision
gives a right to claim 100% exemption on turnover of sales as exemption to a pioneer unit and restrictions or curtailment are only in respect of non
pioneer unit. According to Shri Sonpal, the Pioneer unit do not enjoy any special status over a non pioneer unit. According to him, in the Package
Scheme of Incentives of 1993, pioneer unit is defined in para 3.12 and the extra benefits to the pioneer unit are conferred in terms of para 5.1.C(2)
and the only benefits which are in excess to a non pioneer unit is in terms of number of years which is 15 as compared to 12 years in case of a non
pioneer unit and weighted incentives of 130% of fixed capital investment as compared to 120% for non pioneer unit. Apart from this, according to Shri
Sonpal, there are no exclusive benefits availed to a pioneer unit. He would distinguish the judgment of the Division Bench in case of Associated
Cement Co. Ltd vs. State of Maharashtra (supra) relied upon by the learned counsel for the appellant and submit that the said decision was not on the
point of proportionality of benefits but it was regarding an existing unit going for expansion under PSI 1993 scheme to avail the benefit of a pioneer or
non pioneer unit, to the extent of 75% of the benefits available for new unit. According to him, the ratio derived from the said judgment is that
restriction of 75% is not applicable to new unit. However, according to Shri Sonpal, in the present appeal, the said issue do not arises since the
appellants were already enjoying the benefits of new unit.
Reliance on the judgment in case of M/s. Pee Vee Textiles Ltd & ors vs. Commissioner Appeal No.48/2000 dt.17 March 2001 by the learned counsel
for the appellant is rebutted by Shri Sonpal by stating that it has lost its significance after the amendment to Section 93 and insertion of Section 93A by
August 2009 Amendment and according to him, the said judgment did not distinguish between a pioneer or non pioneer unit. The submission of Shri
Sonpal is that the reliance on circular dated 17th January 1998 is not justiciable in light of the amendment to the statute itself and the said circular
cannot override the provision introduced by the Amending Act XXII of 2009.
As regards the submission of the retro activity sought to be introduced by Section 5 of the Maharashtra Act No.XXII of 2009, the same is dubbed by
Shri Sonpal as illogical, specious and irrational. According to him, the entitlement certificate or eligibility certificate, though do not contain any condition
of proportionality, this argument is of no consequence in light of insertion of Section 93A which begins with a nonÂobstante clause. Shri Sonpal would
submit that in order to do away with the judgment of the Tribunal and the Bombay High Court in M/s.Pee Vee Textiles (supra), the Act itself was
amended and Section 5 of the Maharashtra Act No.XXII of 2009 saved and validated any assessment, review, levy or collection of tax in respect of
sales or purchases effected by a dealer or person and this section, according to him, refers to validation.
12 Shri Sonpal would also further submit that the appellant was issued an eligibility certificate and entitlement certificate under PSI 1988 and 1993 in
the year 1994 and 2003 respectively prior to the appointed date i.e. 1st April 2005. According to Shri Sonpal, in view of the amended section, as per
clause (a) in respect of the units to whom certificates are issued, prior to appointed date, i.e. 1st April 2005, Section 93 will apply from the appointed
date. Hence, according to him, to interpret that it will be applicable from 27th August 2009 is contrary to the plain language of Section 93A(a).
According to him, subÂsection (2) of Section 93 provides that if benefits are availed contrary to Section 93(1), it shall be deemed to have been
withdrawn and in absence of any exclusion therein, it must be construed that it shall be irrespective of the fact that the Cumulative Quantum of
Benefits (CQB) is fully utilized before the date of coming into force of the Ordinance in August 2009 and therefore, in absence of such exclusion
provided in Section 93(2) it does not matter whether the CQB is fully utilized or not.
Contradicting the last submission advanced by the learned counsel for the appellant that no interest is leviable because refund of Rs.5,65,39,588/Â has
been granted on 4th February 2006 and 1st March 2006 because if there is a provision of interest on refund, then that is independently payable to
dealer for which appropriate proceedings are required to be taken.
The precise submission of Shri Sonpal is that the appellant is covered by PSI 1993 Scheme of expansion of existing units and it does not matter
whether it was a pioneer unit or non pioneer unit except that the pioneer unit was entitled to higher percentage of incentives and for a larger period as
compared to a non pioneer unit. In such circumstances, according to Shri Sonpal, the amendment to the MVAT Act should be given full effect from
1st April 2005 and even it would cover the eligibility certificate or entitlement certificate which are issued before the said date and Shri Sonpal would
further submit that it is manifest and axiomatic that any concession/exemption or deferral conferred can always be taken away by a statutory
amendment and there is no estoppel against the statute. In such circumstances, he would pray for dismissal of the present appeal.
13 We have carefully perused the copy of the Appeal along with its annexures and considered the submissions advanced by the learned counsel for
the respective parties.
14 Before adverting to the controversy involved in the present petition we would delve into the antecedent events which would be necessary to be
referred to for an effective adjudication of the present Appeal. The existing regime of the Bombay Sales Tax Act, 1959, empowered the State
Government under Section 41 to grant Tax exemption either in full or in part in public interest. The Package Scheme of Incentives are a reflection of
the exercise of said powers conferred on the State Government. Section 41 read thus :Â
“Section 41ÂExemptionsÂSubject to such conditions as it may impose, the State Government may, if it is necessary so to do in the public interest,
by notification in the Official Gazette, exempt any specified class of sales or purchases from payment of the whole or any part of any tax payable
under the provisions of this Act (any notification issued under this section may be issued so as to be retrospective to any date not earlier than the 1st
January 1960.â€
15 The State Government to encourage the dispersal of the industries to the less developed areas of the State is empowered to make provision for
grant of incentives on Sales Tax to the eligible units either by way of exemption or deferral of Sales Tax payable on the finished products. The
Package Scheme of Incentives was introduced for the first time by the Government of Maharashtra and was known as Package Scheme of
Incentives, 1964 so as to encourage dispersal of the industries to less developed areas of the State. The quantum of sales tax incentives was spread
over for a period of 15 years as determined based on the quantum of eligible gross fixed capital investment. The said Package Scheme of Incentives
came to be suitably amended in 1969, 1973, 1976, 1979, and 1983. On 30.09.1988 a new Package Scheme of Incentives was introduced with a view
to rationalize the scope, scale and mode of release of incentives and accelerate the dispersal of industries from the developed areas of the State to the
undeveloped regions. This scheme was again amended by notifying another scheme on 07.05.1993 and was known as Package Scheme of Incentives
of 1993.
Under the Package Scheme of Incentives of 1988 the area of the State was classified into groups. GroupÂA comprised of developed areas, where no
incentives were available, GroupÂB comprised of areas where some development had already taken place. GroupÂC areas were those areas which
were less developed than those in GroupÂB; GroupÂD were the least developed areas not covered by Group A, B and C and “No Industry
Districtsâ€, as notified by the Government of India. The salient feature of the said scheme stipulated that the existing/new units in the areas covered
by Group B,C,D or No Industry Districts which were created on or after 01.10.1988 with additional fixed capital investment for the additional
production or manufacturing facilities either for the manufacture of the same product or for diversification were held eligible for incentives subject to a
minimum stipulated threshold of additional fixed capital investment. The requirement of the additional fixed capital investment stipulated that it should
exceed 25% of the gross fixed capital investment and in case of expansion, the additional fixed capital investment had to result in an increase of the
existing installed capacity by at least 25%. The expression “Sales Tax liability†was assigned a definite connotation under the scheme to include
sales tax/additional tax/turnover Tax payable by the eligible unit on the sale of finished products. The Sales Tax incentives under the scheme could be
availed by way of exemption or by way of deferral which was admissible to a new unit/pioneer unit as also in the case of expansion or diversification
of units set up in Groups B,C or D or No Industry Districts. An exemption was available in respect of Sales Tax payable under the Bombay Sales Tax
Act, 1959 on the sale of finished products for the eligible unit. The quantum of sales tax incentives was prescribed under the said scheme and for
eligible units undertaking expansion or diversification, the quantum was linked to a proportion of fixed capital investment and was limited to a stipulated
period.
16 Under the 1993 Scheme, the incentives offered to the industrial units in areas were made available on the graded scales in ascending order. It
would be apposite to refer to para 3.8.I(c) of the 1993 Scheme dealing with expansion is necessarily to be referred to and is reproduced below :
3.8 Gross Fixed Capital Investment
(I) Gross Fixed Capital Investment shall means and include, the case of:
(i) New Fixed Assets  The value of New Fixed Assets Acquired at site and paid for;
Explanation â€
(a)
(b)
(c) Any acquisition of new Fixed Assets outside the project scheme accepted by the Implementing Agency can be considered for the purposes of
proportionate incentives during the residual eligible period provided such acquisition is not less than 25% of the Gross Fixed Capital Investment at the
end of the previous financial year of the Eligible Unitâ€
Para 3.8(I)(c) contemplates benefits to be granted for acquisition of new fixed assets. As per the said para, acquisition of new Fixed Assets is eligible
for incentives (provided such acquisition is not less than 25% of the Gross Fixed Capital Investment at the end of the previous financial year)
As per the original 1993 Scheme, such incentive is available only for residual eligible period.
At this stage, it would also be relevant to make reference to clause contained in the 1993 Scheme which deals with pioneer unit as contained in para
3.12 which reads thus:
3.12 Pioneer Unit
A Pioneer Unit shall mean and include a large scale New Unit set up or a large scale fixed Capital Investment made by an Existing Unit after 1st
October, 1993 in Group B/C/D+ areas for which at least one Final Effective Step is taken after 1st October 1993, provided it is ÂÂÂÂ
(a) A New Unit with the Fixed Capital Investment exceeding Rs.100 crore in Group B area or Rs.30 crore in Group C area or Rs.15 crore in Group
D area or Rs.5 crore in Group D+ area, being set up as the first Unit in point of time in a Taluka where there is, as on 1st October 1993, no such
existing Unit in the Taluka, or
(b) A New Unit being set up with, or an Existing Unit undertaking in the same Taluka, the Fixed Capital Investment exceeding Rs.300 crore in Group
B or Rs.60 crore Group C or Rs.30 crore in group D are or Rs.10 crore in Group D+ areaâ€
A reading of para 3.12 would reveal that it defined the term “Pioneer Unit†to mean and include a large scale new unit set up or fixed capital
investment made by an existing unit after the prescribed date of 1st October 1993 in Group 'C' area for which atleast one financial effective step is
taken after 1st October 1993. It is also pertinent to note that a new unit being set up with, or an existing unit undertaking in the same Taluka where the
fixed capital investment exceeds 300 crore in Group B or 60 crore in Group 'C' is eligible for fresh exemption. Thus, by virtue of clause (b) of para
3.12 benefit is available to existing unit also and in this clause, there is no prescription of proportionate incentive in case unit is eligible for benefit.
13 The 1993 Scheme thus has to be looked at with two distinguishing features as against the benefits granted for acquisition of new fixed assets in
terms of para 3.8(I)(c) and fixed capital investment made by a pioneer unit (more than 60 crore for Group 'C' area) in terms of quantum, period of
incentives etc. In case of the former where the benefits are to be conferred on the basis of gross fixed capital investment, by virtue of clause (c) of
para 3.8 (i),it is the proportionate incentive to be availed during the residual eligible period where such acquisition is not less than 25% of the gross
fixed capital investment at the end of the previous financial year of the eligible unit, whereas in case of the later, i.e. the Pioneer unit covered by
clause 3.12, no such restriction in terms of the quantum or period of incentives is applicable.
14 Clause 3.8 of the 1993 Scheme came to be amended by issuing a Government Resolution dated 6th July 1994 and the word “proportionateâ€
came to be deleted. As a necessary consequence, an acquisition of new fixed asset outside the project scheme accepted by Implementing Agency
was liable to be considered for incentives other than special capital incentive, if the acquisition was not less than 25% of the gross fixed capital
investment. However, for the purpose of sales tax benefits, the quantum of entitlement was limited to 75% of that which is admissible to a new unit.
Existing units were also held entitled for benefits of the said scheme.
15 The Package Scheme of Incentives of 1988 was succeeded by a scheme of 1993 and the object of this scheme was to achieve a dispersal of
industries outside BombayÂThane Pune belt and attract them to the underdeveloped and developing areas of the State, particularly, regions away
from BombayÂThaneÂPune belt. The coverage of the scheme extended to the eligible units in the industries set out in first schedule of the (Industries
Development and Regulation Act, 1951) as amended from time to time as well as industries falling within the preview of small scale industries board,
coir board, silk board, khadi and village industries board etc., hotel poultry and agro industries and cold storage. The said scheme was to operate for a
period of 5 years from 01.10.1993 to 30.09.1998. The concerned District Industries Center (DIC) were appointed as implementing agencies for the
purpose of implementation of the scheme.
On 27th March 2001, Section 41 BB came to be inserted in the Maharashtra Sales Tax Act which restricted the incentives to an eligible unit to be
proportionate in certain contingencies and it read thus :
“41BBÂProportionate incentives to an Eligible Unit in certain contingencies â€" (1) Notwithstanding anything to the contrary contained in any
Package Scheme of Incentives, any Eligible Unit, to whom the Eligibility certificate has been granted, shall be eligible to draw the benefits in the
current year or in any year, whether preceding or succeeding the date of commencement of section 12 of the Maharashtra Act 22 of 2001, only on
that part of its turnover of sales or purchases as may be arrived at by applying the ratio as may be prescribed by the State Government to the total
turnover of sales and purchases of the said unit in that year and different ratios may be prescribed for different classes of dealers and different
schemes.
(2) The benefits availed of by an Eligible Unit in contravention of subÂsection (1), if any, shall be and shall be deemed to have been withdrawn and
such unit shall be liable to pay tax in respect of the turnover of sales and purchases in excess of the turnover arrived at under sub section (1) and
accordingly any benefit which is withdrawn shall be arrears of tax as provided in subsection.
(3) For recovery of arrears of tax as provided in sub section (2), the Commissioner shall require the unit, by order in writing, to pay the tax, interest
and penalty on such turnover on which the benefits are not available and serve on the dealer notice of demand accordingly;
Provided that, no order under this section shall be passed without giving the dealer a reasonable opportunity of being heard.
ExplanationÂFor the purposes of the provisions contained in Section 41BA and 41BB the terms “Existing Unit, Eligible Unit, implementing agency,
Eligibility Certificate and Certificate of Entitlement†shall have the same meaning as provided in the relevant Package Scheme of Incentives.â€
16 It is noted that the MVAT Act, 2002 came to be enacted by the State legislature and it came into force in the State of Maharashtra from
1.04.2005, which repealed the Bombay Sales Tax Act. Section 8(4) of the said act empowered the Government to provide for exemption for payment
of whole of tax in respect of class or classes or sales of goods effected by unit holding as defined in Section 88 to whom the incentives are granted
under the Package Scheme of Incentives, by way of exemption of payment of Tax. ChapterÂXIV of the MVAT Act contained provision in regard to
the Package Scheme of Incentives and it defines the terms “Certificate of Entitlementâ€
and “Eligibility Certificateâ€. The expression Package Scheme of Incentives included the 1988 and 1993 schemes. The Section 89 stipulated that
where an eligibility certificate has been recommended by the implementing agencies under any Package Scheme of Incentives such eligible unit may
apply for grant of entitlement certificate to the Commissioner who was empowered to grant such a certificate. Section 93(1) provided for
proportionate incentives to an eligible unit in certain contingencies. Section 93(1) reads thus :Â
“93. Proportionate incentives to an Eligible Unit in certain contingencies:Â
(1) Notwithstanding anything to the contrary contained in any Package Scheme of Incentives, any Eligible Unit to whom the Eligibility Certificate has
been granted, shall be eligible to draw the benefits in any year, after the appointed day, only on that part of its turnover of sales or purchases as may
be arrived at by applying the ratio as may be prescribed by the State Government to the total turnover of sales and purchases of the said unit in that
year and different ratio may be prescribed for different classes of units and different schemes.â€
17 The provisions of subÂsection (1) of section 93 came to be substituted by Maharashtra Act No.22 of 2009 and Section (3) of the amending Act
provided that SubÂSection (1) of Section 91, as originally enacted shall be substituted by sub section (1), (1A) and (1B) and shall be deemed to have
been substituted by Maharashtra Act No.XXII of 2009 which reads thus :
“(1A) In case where the Eligible Unit hasÂ
(a) maintained separate accounts of sales and purchase and is able to identify the sales and purchases pertaining to the increase in the production
capacity or, as the case may be, the said eligible investment, then the portion of the turnover eligible for benefits will be decided solely on the basis of
such identification;
(b) not maintained separate accounts of sales and purchases and is not able to identify the sales and purchases in relation to increase in the production
capacity or, as the case may be, the said eligible investment, then such benefits shall be calculated after applying the formula in subÂclause (i) or, as
the case may be, subÂclause (ii) given as under :Â
(i) in case where there is increase in production capacity, then for the Package Scheme of Incentives for 1998, or, as the case may be, Package
Scheme of Incentives for 1993, the formula shall be as below :Â
Eligible Turnover =Turnover x Increase in production capacity Total production capacity after such increase.
(ii) in case where there is no increase in production capacity, then for the Package Scheme of Incentives for 1993, the formula shall be as below :Â
Eligible Turnover =Turnover x New Fixed Capital Investment Total gross fixed capital investments (1B) When the eligible turnover comprises of
multiple finished products, thenÂ
(a) the production capacity of each of the finished products shall be separately considered in determining the corresponding eligible turnover, and
(b) eligible turnover shall relate to those products on which the eligible investment has made impact and when eligible investment does not add to
production capacity, then it shall apply to all the finished products.
18 At the same time Section 93A came to be inserted to provide that Section 93 shall apply to all eligible units, to whom eligibility certificate and
certificates of entitlement have been issued under any of the Package Scheme of Incentives if such certificates have been issued on or before the
appointed date i.e. 1.04.2005.
The said enactment contained Section 94(2) which provided that notwithstanding anything to the contrary contended in the Act or in the Rules or in
any part of the Package Scheme of Incentives, the eligible unit to whom an entitlement certificate has been granted for availing incentives by way of
deferment of Sales Tax or Purchase Tax as the case may be, pays in respect of the any of periods during which the certificate is valid, prematurely in
the place of amount of tax deferred by it, an amount equal to the net value of the deferred tax and on making such a payment the deferred tax shall be
deemed in the public interest to have been paid.
19 The validity of the said amending Act No.22 of 2009 was called in question in a bunch of petitions before this Court by invoking writ jurisdiction
under Article 226 of the Constitution of India in case of M/s.Jindal Poly Flims V/s. State of Maharashtra. The said amendment was challenged in the
backdrop of the power of the legislature to enact the legislation with a retrospective effect and it was a specific submission that the retrospective
effect was not in respect of the tax but it was in respect of an incentive scheme. It was submitted that the State legislature by the amendment has
sought to collect a tax after the petitioner had availed the benefit of the exemption and passed on the benefit and therefore it was unreasonable since
assessee was not able to collect the tax from the customer because of the exemption granted earlier. It was also urged that the said amendment was
bad on account of the fact that the assessee would be liable to pay not only the tax but also interest and penalty which was held to be violative of
Article 14 and 19(1)(g) of the Constitution. As against this the specific stand of the State Government was that the Package Scheme of Incentives,
1993 was specifically amended on 6.07.1994 and a conscious decision was taken not to provide for proportionality. The State Government also
clarified that an enabling provision in form of Section 41BB was already introduced in the Bombay Sales Tax Act, 1959 in the year 2001 but the said
provision was not invoked by framing the rules and infact the Sales Tax Department had attempted, by way of administrative decision to impose a
norm of proportionality which came to be stuck down by this Court. On consideration of the gamut of the matter, the Division bench did not find
favour with the challenge to the constitutional validity of the Maharashtra Act No.22 of 2009 and arrived at a conclusion that the legislature has not
transgressed the limitations on its constitutional powers while enacting the validating legislation. However, as far as subÂsection (2) of Section 93 of
the Enactment was concerned which proposed to include a penalty and interest, it was held to be operating harshly and to that extent it was directed
to operate prospectively. Thus, it was in the year 2013 that this Court had already tested the validity of the Maharashtra Value Tax (Levy and
Amendment) Act, 2009 and has upheld the same which validated Section 93 with a retrospective effect from 1.04.2005. By virtue of the said
provision any eligible unit to whom the eligibility certificate and the entitlement certificate has been granted before the appointed date, would be
entitled to draw the benefits only on that part of its turnover of sales/purchases as may be arrived by applying the provisions of subÂsection (1) to the
total turnover of sales and purchases and the eligible turnover was to be calculated by taking into consideration the turnover in proportion to the
increase in production capacity in its proportion to the total production capacity after such increase. The said judgment delivered by this Court was
carried to the Hon'ble Apex Court and the Hon'ble Apex Court by judgment delivered on 08.03.2017 in Eurotex Industries and Exports Limited and
Another V/s. State of Maharashtra and Anr. 2017 SCC Online SC 608 Civil Appeal No.4491 of 2016 has approved the view of the Hon'ble Division
Bench of the Bombay High Court and dismissed the Appeal assailing the said judgment. By the said judgment the issue as to whether Section 93(1) of
the MVAT Act could be given a retrospective effect has been put to rest.
The position of law which thus emerges from the aforesaid judgment is that all the eligible units to whom the eligibility certificates and certificates of
entitlement have been issued under any of the Package Scheme of Incentives, even certificates have been issued on or before the appointed date i.e.
1.04.2005, then, the benefits permitted to be drawn would be proportionate to the increase in the production capacity and would render a person liable
for assessment and claim of exemption on proÂrata basis and this is to be so construed to be on the statue book from 1.04.2005.
20 The appellant has attempted to make a distinction between a pioneer unit and a nonÂpioneer unit under the PSI 1993. It is the submission of the
learned counsel for the appellant that the appellant had made a fixed capital investment of Rs.329.5 crore while creating a new manufacturing factory
at Village Ranpar, Post Gholap, District Ratnagiri for manufacturing of PVC Resins and PVC Pipes. This was done in the year 1994 by way of
backward integration. It is to be noted that the dispute in the present appeal is in relation to the Ratnagiri factory of the appellant and for the period
commencing from 1st April 2005 to 31st March 2006. The appellant obtained an eligibility certificate on 25th April 1994 which was granted under Part
I of the 1988 Scheme of the Package Scheme of Incentives by SICOM for its Ratnagiri unit. By virtue of the said eligibility certificate, the appellant
was eligible for maximum entitlement of sales tax incentive of Rs.313 crores and this was to be availed by way of exemption. This certificate was
valid for a period of 10 years. i.e. from 4th April 1994 to 3rd April 2004. The appellant was issued an entitlement certificate based on the said eligibility
certificate which covered a production capacity of 1,30,000 metric tonnes. Perusal of the eligibility certificate issued on 21st April 1994 described the
unit as a “Pioneer unit†and the maximum entitlement of sales tax incentive was not to exceed Rs.313,03,07,000/Â. The caption of the said
certificate dated 21st October 2002 read as “eligibility certificate for new unit for sales tax incentive under Part I of 1988 scheme†as notified
under Government of Maharashtra resolution dated 30th September 1988. In terms of the 1988 scheme, the Ratnagiri unit is the pioneer unit in terms
of para 3.1(ii) which is described to be a new unit with fixed capital investment exceeding Rs.25 crore being set up in Group “C†areas. Further,
in terms of clause 5.2(i), the quantum of sales tax unit are available either by way of exemption or deferral and the ceiling limits prescribed in the 1988
scheme permitted a Group “C†unit for Medium scale Industries/large scale industries to avail the exemption to the extent of 75% of the fixed
capital investment and for small scale industry unit to the extent of 100% of the fixed capital investment and the number of years when the exemption
can be availed for Group “C†was prescribed as 7 years or earlier if the ceiling limits are reached. The appellant thus squarely falls within clause
3.1(ii) of 1988 Scheme and is entitled to avail the benefits stipulated in para 5.2(i) of 1988 scheme. Thus, the Ratnagiri factory of the appellant would
fall within the purview of 'Pioneer Unit†in terms of the 1988 scheme. The appellant made a further investment in the Ratnagiri unit to the tune of
Rs.208.89 crore in or around August 2002 and increased its capacity from 1,30,000 metric tonnes per annum to Two lakh metric tones per annum. A
fresh eligibility as well as entitlement certificate was obtained under the 1993 Package scheme. Perusal of the eligibility certificate dated 10th
February 2003 would reveal that the status of the Ratnagiri unit remain unchanged as a Pioneer unit under the PSI 1993 Scheme and the title of the
said certificate thus reads thus :
“Eligibility certificate for Sales Tax incentive under Para 3.12(b) of the 1993 Scheme as notified by the Government of Maharashtra vide
Resolution No.TDT/1093/(8889)/IND  8 dated 7th May 1993 PIONEER UNITâ€.
The said certificate is issued on 11th February 2003. The certificate thus categorizes the unit of the appellant as Pioneer unit. Further, the additional
investment of Rs.2.89 crore itself qualified the Ratnagiri factory as a pioneer unit in view of clause 3.12 of the 1993 Scheme since clause (b) covered
a new unit being set up with or an existing unit undertaking in the said Taluka, the Fixed Capital Investment exceeding Rs.300 crore in Group “Bâ€
or Rs.60 crore in Group “Câ€. The investment of the appellant Company being more than 60 crore fell within clause (b) of clause 3.12 of the 1993
Scheme. The said unit at Ratnagiri was recognized as such by SICOM and the appellant was held eligible for availing maximum sales tax incentives of
Rs.146,08,17,000/Â and the eligibility certificate was valid for the period commencing from 1st August 2002 to 31st May 2011. In terms of para 5.1(ii)
(i) Group C of the policy, the appellant factory was eligible for benefit to the extent of 95% for the fixed capital investment by way of exemption. At
the time of issuance of the said certificate, sales tax eligibility in terms of monetary ceiling came to be curtailed by SICOM based on para 3.8(1)(c) of
the Amended 1993 Scheme. The certificate was subjected to changes made from time to time.
21 An issue about the restriction of the benefit of 75% under para 3.8(1)(i)(c) of the 1993 Scheme was subject matter of a writ petition before this
Court in case of ACC Limited Vs. State of Maharashtra (supra). The Division Bench of this Court in Writ Petition No.290 of 2001 was called upon to
decide an issue whether the eligibility certificate granted in favour of ACC Limited was entitled to Sales Tax Incentives by way of exemption to the
extent of 110% of the capital investment in the project. The claim of the petitioner that it was a pioneer unit and the issue was whether the ceiling on
entitlement in respect of pioneer unit can be curtailed by para 3.8(1)(i)(c) of the 1993 Scheme as amended on 6th July 1994 because earlier the
Company had started another unit in the same Taluka under the 1969 scheme. It is pertinent to note that the Government Resolution dated 6th July
1994 substituted the existing paragraph 3.8(1)(i)(c) by restricting the availment of incentives and it read thus :
“Any acquisition of new Fixed Assets outside the project scheme accepted by the implementing Agency can be considered for incentives, other
than Special Capital Incentives, provided such acquisition is not less than 25% of the Gross Fixed Capital Investment at the end of the previous
financial year. A separate Eligibility Certificate will be issued for availing in the relevant category units as per the scheme. However, for the purpose
of sales tax benefits the quantum of entitlement will be limited to 75% of that admissible to a new unit in the relevant area and for the relevant
category of units as per the scheme. A unit cannot however, claim benefits for acquisition of new Fixed Assets under this Clause more than twice.
Explanation : Existing units will also be entitled for benefits under this clause, provided acquisition of new Fixed Assets by such units is not less than
25% of the Gross Fixed Investment at the end of the previous year†(emphasis supplied)
The Division Bench deliberated on the issue as to whether the petitioner unit was an existing unit so as to cover the sales tax benefit to the extent of
75% as a new unit. On construing the entire scheme along with the amended clause, the Division Bench concluded that the proper construction of
para 3.8(1)(i)(c) makes it amply clear that it only applies in the event the Company in respect of which a scheme has been sanctioned under the 1993
Scheme or by virtue of the expansion to an existing unit, if it claims to make any additional investment outside the project scheme, then, it would be
entitled to 75% of the entitlement and not 110%. The Division Bench further clarified that this does not mean that when the petitioner sets up a new
unit under the 1993 Scheme and has an eligibility certificate as a pioneer unit under the PSI 1993, merely because it had an earlier unit, which had
availed the benefit of another scheme, it will not be entitled to 110% incentive. The contention of the respondent that the petitioner unit was an existing
unit, since it was set up earlier and availed of benefit under that scheme and therefore, it was entitled only for 75% of that admissible to a new unit,
came to be rejected. We find that the ratio laid down by the Hon'ble Division Bench squarely applies to the appellant to the effect that the ceiling of
entitlement in respect of a pioneer unit cannot be curtailed by applying the amended para 3.8(1)(i)(c) to restrict the benefit to 75% under that para. In
such circumstances, the amended para do not govern the case and therefore, cannot restrict the benefits availed by the appellant.
22 In any case, the appellant availed a fresh eligibility and entitlement certificate on 21st October 2002/10th February 2003 and in the said certificate,
the SICOM has not incorporated any condition to the effect that the availment of benefit would be proportionate to the increase in production capacity
additional investment. The certificates have been issued after issuance of circular dated 17th January 1998 on which Mr.Sonpal places heavy reliance.
The Commissioner of Sales Tax who had issued a Trade circular regarding units covered under the deemed expansion of 1993 Scheme clarified to the
following effect.
 “2. Under 1993 Scheme, incentive is not restricted to only those Units where capacity expansion is 25% or more. In the original Scheme, the
benefits to the expansion Units were not granted other than Pioneer Units covered under 3.12(b) of the Scheme. The said Scheme was amended
subsequently and concept of deemed expansion was introduced on the basis of investment made by the unit. Any acquisition of new fixed assets
outside the project scheme accepted by the Implementing Agency can be considered for incentives other than Special Capital Incentives provided
such acquisition is not less than 25% of the gross fixed capital investment at the end of the previous financial year. A separate Eligibility/Entitlement
Certificate will be issued for availing of such benefits. Under such a category, it is not necessary that there will be increase in production capacity of
such industrial unit. The Sales Tax Incentives will be allowed on the basis of investments made by the industrial unit in the manner as stated above.
Now, various representations have been received to this office from different traders and associations regarding how to calculate Sales Tax
Incentives in cases of units covered under category deemed expansion of 1993 scheme (i.e. Eligibility Certificate granted on the basis of investments
in fixed capital assets made by such unit, which is more than 25% of its gross fixed capital investment)
In this regard, I would like to clarify that for cases covered under 1993 Scheme, the Trade Circular referred to above, has to be followed in all
respects, subject to the following modification: “Only that percentage of production of the unit after deemed expansion will be eligible for Sales
Tax Incentives, which is equal to the higher of the following two percentages :Â
(i) Increase in capacity X 100
(ii) New fixed capital investment X 100 Total gross fixed capital investment (old + new)
5 It means that a deemed expansion unit of 1993 Scheme will be eligible for Package Scheme Benefits to the extent of higher percentage as
calculated by above two methods and riot on entire production of an eligible unit covered under such categoryâ€.
Perusal of the above circular referred to above deals with acquisition of new fixed assets and it clarifies the position as to whether any acquisition of
new fixed asset outside the project can be considered for incentives other than special capital incentives where such acquisition is not less than 25%
of the gross fixed capital investment at the end of previous Financial Year. It rather clarified that a separate eligibility/entitlement certificate will be
issued for availing such benefits. It also clarified that under such a category, it is not necessary that there has to be an increase in production capacity.
The circular clarifies the position in view of the representations that were received since there was some doubt about the manner of calculating the
sales tax incentives in cases of units covered under the category of deemed expansion of 1993 scheme. A clarification was issued in para 4 and it was
conclusively declared that a deemed expansion unit of 1993 Scheme will also be eligible for the Package scheme benefits to the extent of the higher
percentage as calculated by the method prescribed in clause (4) and not on the entire production of eligibility certificate covered under such category.
Thus, by virtue of the said trade circular, no restriction was imposed on the pioneer unit who were covered by para 3.12 (b) of the PSI which had to
invest a minimum 60 crore in category “Câ€. The circular rather highlighted that the benefit be conferred on the expansion units and do not in any
way, restrict the availment of the benefits by unit like the appellant.
23 As regards the submission of the learned senior counsel about the benefits available to the appellant being proportionate to the increase in
production capacity additional investment, the eligibility or the entitlement certificate under the 1993 Package Scheme of Incentives do not contain any
condition of availing incentives in proportion to the increase in production capacity of additional investment. The attempt on the part of the respondent
to rely on the amended Section 41BB of the Sales Tax Act which introduces the provision for availing the proportionate incentive to an eligible unit in
certain contingencies, in fact did not apply to large scale investment by a pioneer unit but it was applicable to non pioneer unit. The explanation
appended to the said section clarifies that the terms 'existing unit', 'eligible unit', etc. would have the same meaning as provided in the relevant Package
Scheme of Incentives and therefore, in the backdrop of the scheme, the term “eligible unit' was distinct and different from a 'pioneer unit' which
was covered by para 3.12 and not by para 3.8(1)(c) of the 1993 Scheme. The Division Bench of this Court in Pee Vee Textiles Ltd & ors. Vs. The
Commissioner, while dealing with a reference, affirmed the view of the Sales Tax Tribunal which held that the Quantum of Incentives is not restricted
in proportion of capacity of investment and this was contrary to the 1993 scheme which came to be amended in July 1994. The Tribunal had further
ruled that the expansion units are entitled for incentives on entire production. This view was further affirmed by the Hon'ble Apex court when it
dismissed the SLP filed by the State ÂSales Tax Department.
However, it is to be noted that the MVAT Act came to be enacted in the year 2002 and it came into force in the State of Maharashtra from 1st April
2005 which repealed the Bombay Sales Tax Act. Section 93(1) of the said Enactment provided for proportionate incentives to a eligible unit in certain
contingencies. Section 93(1) was substituted retrospectively with effect from 1st April 2005 by MVAT (Levy (Amendment and Validation Act) 2009,
Maharashtra Act No.XXII of 2009. By virtue of the said amendment, notwithstanding anything contrary contained in any Package Scheme of
Incentives, any eligible units to whom the eligibility certificate and certificate of entitlement have been granted at any point of time before or after the
appointed date, it was held entitled to draw the benefits in any year only on that part of its turnover of sales or purchases as may be arrived at by
applying the provisions of subÂsection (1A) to the total turnover of sales and purchase of the said unit in that year. The constitutional validity of the
retrospective amendment of the said section came to be upheld by the Division Bench of this Court in case of M/s.Jindal Poly films Ltd Vs. State of
Maharashtra, 2013 SCC Online 672 and Division Bench of this Court categorically held that the legislative intent was to allow the benefits only on a
proportionate portion of the turnover and therefore, anything contained in the Package Scheme of Incentives would stand overruled by the said
section. The Hon'ble Apex Court in case of Eurotex Industries and Exports Ltd Vs. State of Maharashtra & Anr 2017 (6) SCALE 124 has upheld the
decision of this Court. Once the constitutional validity of the retrospective amendment in question was upheld and way was paved for the legislative
intent to allow the benefit only on a proportionate part of turnover for nonÂpioneer unit, the benefits could be restricted qua the said units. However,
this was not applicable to a pioneer unit which stood on a different footing in the scheme of Package incentives from the very beginning including the
1988 and 1993 scheme.
Reliance placed by Shri Sridharan on the circular of 17th January 1993 as amended in July 1994 reveals that the concept of deemed expansion was
introduced for non pioneer units on the basis of the investment made by them. The amendment to Section 93(1) intended to cover nonÂpioneer unit in
light of the possibility of the misuse by such unit, however, this never intended to cover the pioneer units. The comparison of para 3.8.1(c) of the 1993
Scheme dealing with the expansion categorically stipulated that it was in respect of nonÂpioneer unit and therefore, it refers to acquisition of new
fixed asset and the benefits were made proportionate to the increase in the production capacity. When Section 93(1) of MVAT Act applies the phrase
“increase in production capacity†and “acquisition of new fixed capital assetâ€, it refers to para 3.8(1)(i)(c) of 1993 Scheme. The pioneer units
in para 3.12 rather applies the term “fixed capital investment†and do not employ the term “increase in production capacity†or acquisition of
new fixed capital asset. The appellant who has been granted the eligibility certificate as a pioneer unit, therefore, cannot be governed by the amended
Section 93 of the MVAT Act as substituted by Maharashtra Act No.22 of 2009.
24 Perusal of subÂsection (1) of Section 5 of Act No.XXII of 2009 validates all acts, proceedings or things done or taken by the State Government or
any officer of the State Government in connection with the assessment, levy or collection of any such taxes and creates a deeming fiction that it has
always been done in accordance with law. By virtue of this provision, the argument of learned senior counsel is that the certificate of entitlement
granted in favour of the appellant is validated and in reference to that, his submission is that any action in relation to assessment/levy or collection of
the tax under the provisions of MVAT Act before commencement of the amendment has been deemed to be valid and effective. He thus submits that
the appellant was issued with a certificate of entitlement on 10th February 2003 by the Sales Tax Department in relation of assessment of sales tax
and these certificates in result, stand validated by Section 5(1) of the Act No.XXII of 2009 and this certificate do not contain any condition for
proportionate availment of incentive. Any order that is passed in contradiction to the said certificate, according to Shri Sridharan is deemed to be
invalid. The effective date of the amending Act No.XXII of 2009 is 27th August 2009. it is not disputed that the appellant has already exhausted its
Cumulative Quantum of Benefits in the month of March 2009 itself. The certificate of entitlement comes to an end either on its cancellation or on
availing the benefits before or after the appointed date exceeding the monetary ceiling limit fixed for the eligibility unit. Since the appellant has already
exhausted its limit in March 2009, the certificate issued in favour of the appellant stands automatically cancelled and the dealer ceases to be the
eligible unit in terms of Section 90. If the appellant is no more an eligible unit, then the provisions contained in Section 93(1) cannot be made applicable
to the appellant unit, when the said section has been amended prospectively with effect from 27th August 2009 and by this time, the appellant had
already ceased to an eligible unit. Recourse to Section 93A would make it clear that it is inserted with effect from 27th August 2009 and the said
section would operate prospectively and it makes it clear that the provisions of Section 93 shall apply to all eligible units to whom the eligibility
certificate and certificate of entitlement have been issued under the Package scheme incentives if such certificates are issued on or before the
appointed date from such an appointed date and in any other case, from the date of effect mention in the said certificate. There is force in the
submission of the learned counsel when he submits that Section 93 would come into effect only from 27th August 2009 and the units which have not
already exhausted the monetary ceiling limits by the said date would continue to be governed by the amended Section 93 irrespective of the date of the
eligibility or entitlement certificate. i.e. before 1st April 2005 or after 1st April 2005 or whether before 27th August 2009 or after 27th August 2009.
The appellant who has already exhausted the ceiling limit on 27th August 2009 thus cannot be governed by Section 93(1) since its cumulative quantum
benefits are already availed.
25 In light of the aforesaid legal position, if the assessment order is perused, it can be seen that the appellant has paid full tax on sales from 1st April
2009 i.e. after exhausting the Cumulative Quantum of Benefits in terms of the eligibility certificate in March 2009. The life of the certificate was till
May 2011 but since the ceiling limit was exhausted by March 2009 from April 2009, the appellant unit becomes liable for payment of sales tax. The
returns were filed by the appellant for the years 2005Â06 and he was also granted refund of Rs.5,65,39,588/Â on 4th February 2006 and 1st March
2006. However, subsequently, the assessment order had been passed on 22nd March 2013 which raised a demand of tax of Rs.1,42,36,378/Â by
partially recalling the refund already granted. This also includes the interest of Rs.1,49,48,197/Â levied under Section 30(3) of the MVAT Act, 2002.
The assessment order which was passed and impugned for the years 2005Â06, the Assessing Authority invoked and applied the provisions of Section
93 of the MVAT Act, 2002 as retrospectively substituted by Maharashtra Act No.XXII of 2009 and only allowed the exemption to the extent of
proÂrata turnover of 35%. The First Appellate Authority maintained the said order and held that since in light of the retrospective amendment made to
the MVAT Act, 2002, the appellant Company will have to pay net amount by way of tax of Rs.48,50 crore in respect of the four years
commencement from 1st April 2005 to 31st March 2009 along with interest and penalty. The Appellate Authority held that the dealer has taken full
benefit of entitlement certificate for existing unit and is liable for proÂrata applicable for extension unit. The appellate authority noted that the State
Government is empowered to grant exemption by virtue of Section 8 of the Bombay Sales Tax Act and Package Scheme of Incentives was an order
conferring certain benefits and though it did not contain any restrictions and conditions like the proÂrata restriction, the statute MVAT Act, 2002 has
settled in and restricted the benefits on proÂrata basis, with a retrospective effect which impliedly overrides all the exemptions which were granted
under the Package Scheme of Incentives. The Appellate Authority held that on 1st April 2005, the said legislature had declared that both the deferral
and exemption units under expansion will have to pay tax on part of their sales and granted power to the State Government to grant exemption from
payment of tax to sales effected by exemption units, and on the same day, the State Government issued an exemption notification and the same do not
contain a restriction of the one contemplated under Section 93 and the authority has held that the net effect is that Section 93 continues to operate but
only against deferred unit. The dealer though had claimed 100% exemption without applying proÂrata and he has not produced any books of accounts
nor has he enlisted the goods manufactured by his old and new units and there is no identification as a dealer is liable for proÂrata application. In this
backdrop, the appellate authority confirmed the order passed by the Assessing Authority and held that the appellant is liable to pay an amount of
Rs.2,91,84,575/Â. This order was upheld by the Tribunal on more or less same grounds and the Tribunal concluded that there is no conflilct between
Section 8(4) of the Bombay Sales Act and Section 93 of the MVAT Act, 2002 and they are independent provisions, mutually exclusive for units
holding entitlement certificate and both operate in separate sphere. The Tribunal held that the argument of the appellant that he is entitled for full
exemption is not accepted since Section 93 came to be amended with retrospective effect from 2009 and this amendment has been upheld by the
Hon'ble High Court as well as the Apex Court and thus, the appellant is entitled to enjoy the benefits on proÂrata basis.
26 The findings recorded by the First Appellate Authority as well as the Tribunal is amiss the legal position laid down by the Hon'ble High Court in
ACC Ltd Vs. State of Maharashtra (supra), wherein it was categorically held that the expansion made by the existing pioneer unit which specified
conditions under para 3.12(b) will not be hit by expansion under para 8.1(i)(c). The amendments made by Maharashtra Act No.XXII of 2009 will not
apply to units whose Cumulative Quantum of Benefits have been fully utilized before expiry of the eligibility period even if the incentive is computed in
terms of amended Section 93 of the MVAT Act, 2002.
The amendment inserted by Act No.XXII of 2009 would only govern those units where the Cumulative Quantum of Benefits has not yet lapsed
without full utilization and is in the process of being availed. The eligibility availed under Section 93(1) is computed for a particular year and if there is
excess availment, then, the benefits can be withdrawn. The challenge to the constitutional validity of Act No.XXII of 2009 was rejected by a Division
Bench of this court in case of Jindal Poly Films (supra) which is upheld by the Hon'ble Apex Court and thus, upholding the retrospectivity of the said
amending enactment. The amendment of Section 93(1) being retrospective in the sense would make the provision applicable to the unit set up before
the date of the said amendment, but in respect of sales which are made by such unit on or after 27th August 2009. Since the appellant has already
exhausted the benefits of exemption before 27th August 2009, the appellant cannot be deprived of the said benefits in light of Section 93A which was
inserted with effect from 27th April 2009. The amendment, thus would not apply to the sales already made between 1st April 2005 to 28th August
2009. A retrospectivity of a statute has to be tested in the backdrop of its nature. A statute is not said to be retrospective in operation merely because
a part of the requisite for its operation is drawn from a time antecedent to its passing. A situation which takes away or impairs any vested right
acquired under the existing law or which creates a new obligation or imposes a new liability will be treated as retrospective. If the amendment which
is made on 27th August 2009 applied to a unit to deprive it of all the exemptions of sale after 27th August 2009, then, the amendment would affect
such vested right and not merely a future or contingent right and it would be retrospective in operation. The industrial unit like the appellant which has
been set up before 27th August 2009 and fulfilled all the requirements of the scheme, which was prevailing, relating to enjoyment of certain sales tax
benefits and if it had fulfilled all the requirements of the scheme, then, a vested right is created in favour of the unit to avail the exemption for a
specified period and if on the basis of an amendment which deprives the unit of all such benefits, it would be retrospective in operation and would be
against the spirit of a taxing statute. Reliance placed by the learned counsel for the appellant in in MRF Ltd, Kottayam Vs. Asstt. Commissioner
(Assessment) Sales Tax and ors, (2006) 8 SCC 702 advances the case of the appellant to the effect that the right of exemption already vests in the
unit based on the existing law when the conditions of the notification like setting up of the unit has been fulfilled prior to the amendment. It would be
appropriate to make a reference to the relevant part of the said judgment.
In any case MRF's accrued right to exemption was not taken away or in any way affected by the amending notification SRO 38/98; which merely
applied to those units which were established or expanded after 15.1.1998. If an industrial unit had been set up prior to 15.1.1998 and had also
commenced commercial production prior to 15.1.1998 then the amending notification SRO 38/98 would have no retrospective application at all. The
notification SRO 38/98 is prospective in operation which is evident by its mere reading as it specifically mentioned therein that:
notification shall be deemed to have come into force with effect from the 1st day of January, 1998.
The provisions of the Act or notification are always prospective in operation unless the express language renders it otherwise making it effective with
retrospective effect. This Court in S.L. Srinivasa Jute Twine Mills (P) Ltd. Vs. Union of India & Anr., 2006 (2) SCC 740, has held that it is a settled
principle of interpretation that:
retrospective operation is not taken to be intended unless that intention is manifested by express words or necessary implication; there is a
subordinate rule to the effect that a statute or a section in it is not to be construed so as to have larger retrospective operation than its language
renders necessary.
27 For the aforesaid reasons, we find that the orders passed by the Assessing Authority, the Appellate Authority and the Tribunal cannot be sustained
and they suffer from a gross illegality. The appellant could not have been made to pay the tax for the sales affected from 1st April 2005 to 27th
August 2009 and the assessment order is liable to be quashed and set aside. The substantial questions of law framed above are answered in favour of
the Dealer and against the Revenue.
There will be no order as to costs.