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Judgment
S. Manikumar, J.—The petitioner has sought a writ of certiorarified mandamus to quash the order of the Deputy Commercial Tax Officer,
Arokanam Village, Vellore District and consequently, direct the respondents to consider the petitioner''s representation dated December 29, 2006
and February 8, 2007 and pass orders on the continuance of the waiver scheme of the deed of the agreement, dated July 12, 2006 entered into
between the Government of Tamil Nadu and the petitioner and for further orders.
The petitioner is a public limited company engaged in the manufacture of cement, carrying on its manufacturing activities in 10 plants located in
various parts of the country, including manufacturing unit at Arakonam Village, Vellore District. The said unit was established, pursuant to the
package of incentives given by the State vide G.O.Ms. No. 500, Industries (MIG-II) Department, dated May 14, 1990, whereby, the State
directed, inter alia, that the new industries set up in 30 most backward taluks notified in the annexure to the said order and also in three industrial
complexes of SIPCOT at Pudukottai, Cuddalore and Manamadurai, shall be eligible for full waiver of sales tax dues for a period of five years up
to a ceiling of total investment made in the fixed asset and G.O.Ms. No. 43, Industries (MIG-II) Department, dated December 13, 1992, directing
the package of incentives for large industries, whereby, an industry set up anywhere in the State having an investment of Rs. 100 crores and below
Rs. 200 crores will be eligible for a sales tax waiver of six years or deferral for 12 years subject to a ceiling of 100 per cent of the value of fixed
assets.
The petitioner has further submitted that the new unit at Arakonam was established at an eligible investment of Rs. 10,198.84 lakhs made in
fixed assets and it commenced production with effect from April 1, 2001 and as the petitioner was entitled to the sales tax waiver as provided in
G.O.Ms. No. 43 Industries (MIG-II) Department, dated December 13, 1992, it applied for and obtained an eligibility certificate, dated May 15,
2006 from the State Industries Promotion Corporation of the Tamil Nadu Limited (hereinafter referred to as, ""the SIPCOT""), under the waiver
scheme announced by the State.
Based on the said eligibility certificate, the petitioner and the Government signed a deed of agreement dated July 12, 2006, which, inter alia,
provided for waiver of the total amount of sales tax/surcharge/additional surcharge/additional tax not exceeding the eligible investment of Rs.
10,198 lakhs made in the fixed assets. The waiver scheme was extended to the petitioner for a period of six years from August 1, 2006 to July 31,
2012. One of the conditions of the waiver agreement is that the petitioner should not collect sales tax on local sales of cements for six years. The
said waiver scheme commenced with effect from August 1, 2006 and continued till January 1, 2007, when the value added tax (VAT) was
introduced in the State of Tamil Nadu by bringing into force the Tamil Nadu Value Added Tax Act, 2006. Since the exemption and waiver
schemes generally militate against the efficient working of the VAT system by breaking the VAT chain, the value added tax, inter alia, provided a
deeming provision in Section 33 of the Act.
It is the case of the petitioner that in the light of the aforesaid provision, the waiver scheme extended to the petitioner as per the deed of
agreement dated July 12, 2006, automatically stood modified as deferral scheme. Since the VAT Act provided that the Government on an
application from the industrial unit already availing remission of tax to pass orders for continuance of such remission for the unexpired portion or till
the balance of amount of tax is remitted (whichever is earlier), the petitioner made an application to the respondents as early as on December 29,
2006, even before the Act was notified, pointing out the legal position and explained the petitioner''s predicament arising out of switching over from
waiver to deferral scheme under the new Act and sought clarification regarding implementation of the scheme. Pending clarification, the petitioner
indicated that he would show the VAT separately in its invoices with effect from January 1, 2007 in order to enable its dealers to claim input tax
credit. According to the petitioner, the said recourse was in full compliance with Section 33 of the VAT Act.
Subsequent to the petitioner''s representation dated December 29, 2006, the SIPCOT convened a meeting between the Special Secretary to
the State Government and representatives from the industry on -January 18, 2007 and the issue relating to status of the existing exemption schemes
was discussed. The mechanism followed in other States such as Gujarat, Maharashtra, Karanataka and West Bengal was discussed to evolve a
suitable system in the State of Tamil Nadu for the continuance of the waiver schemes introduced in the TNGST Act. The petitioner has further
contended that during the said meeting the ad hoc procedure adopted by the petitioner, during the interregnum period of showing VAT invoices so
as to enable his dealers to avail the input tax credit was declared by the respondent, as not prejudicing the request for continuance of the waiver
scheme. Subsequently, the petitioner addressed a letter February 8, 2007, intimating the second and third respondents that pending necessary
notification by the first respondent, the petitioner was availing waiver facility under the VAT Act.
While the petitioner and the other industries were awaiting a notification from the Government on the VAT procedure and on the treatment of
existing waiver schemes under the new VAT Act, the petitioner was shocked to receive the impugned communication, dated March 20, 2007
from the Deputy Commercial Tax Officer, Arokanam, Vellore District, wherein, he has stated that the collection of tax from January, 2007 under
the Tamil Nadu VAT Act, 2006, is a violation of the conditions of eligibility certificate and waiver agreement dated August 1, 2006 and retention
of the tax collected, is an offence. On the basis of said finding, the petitioner has been directed to remit the amount within three days from the date
of communication of the letter failing which penal action would be initiated against the petitioner under the VAT Act. The petitioner has further
submitted that the impugned communication though termed as notice is in the nature of final order, where conclusion as to the alleged commission
of grave offence has already been arrived at by the fourth respondent. According to the petitioner, no opportunity has been given to them and
therefore, the impugned order is in violation of the principles of natural justice.
The petitioner has further contended that in the absence of clear notification indicating the Government''s policy on the treatment of existing
waiver schemes, it was incumbent on the part of the authorities concerned to have given some guidelines to the industries to act in conformity with
VAT Act. The petitioner has further submitted that on the failure of the authorities to discharge their duties in this regard, the petitioner was
constrained to adopt a procedure which was reasonable in the given circumstances. The act of invoicing with effect from January 1, 2007, was
also duly intimated to the authorities from time to time. Without taking any steps to clarify the position, on the representation dated December 29,
2006, the fourth respondent has taken a hasty decision in order to show collection of the tax before the closure of current financial year 2006-07.
In these circumstances, the petitioner has preferred the present writ petition for the relief as stated supra.
The respondent No. 4, in his counter-affidavit has submitted that the petitioner has availed the waiver scheme as per the sales tax waiver
agreement executed by the Government of Tamil Nadu, through the Assistant Commissioner (Commercial Taxes), Vellore, the third respondent
dated July 12, 2006. The eligibility certificate, dated May 15, 2006 was issued by SIPCOT, Chennai. The agreement as well as the certificate of
SIPCOT contained several conditions for availing the waiver of payment of tax. One of the important conditions for availing the waiver scheme is
that the dealer should not collect tax during the waiver period of six years on the sale of manufactured port land cement. The non-collection of tax
by the unit is in order to maintain the competitive advantage and this provision is incorporated in Rule 48A of the Tamil Nadu General Sales Tax
Rules, 1959. The VAT Act has been introduced by January 1, 2007 by Act 32 of 2006. The fourth respondent has further submitted that as per
Rule 16(4) of the Tamil Nadu Value Added Tax Rules, 2007, the Government may, in the public interest or to mitigate hardship to the trade, remit
the whole or any part of the tax or penalty or fee payable in respect of any period by any dealer u/s 31 subject to the condition that in respect of
remission of tax the dealer had not collected tax on the turnover in respect of that period for which remission is sought to be granted. It is the
further contention of the respondent that since the State of Tamil Nadu have intended to continue the waiver scheme, a proviso was provided to
Section 33(1) of the Tamil Nadu Value Added Tax Act, 2006. It is further submitted that the petitioner having addressed a letter much earlier to
the introduction of the TNVAT Act, 2006, which came into effect from January 1, 2007, the petitioner ought not to have collected tax for the
period from January 1, 2007 to April 30, 2007. The details of the tax collected and retained by the petitioner are as follows:
Months Rs. in crores
January 2.65
February 3.19
March 3.88
April 3.79
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Total 13.51
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The fourth respondent has further submitted that the petitioner has collected tax for about 13.51 crores and as on the date of filing of the
counter-affidavit the respondent was able to collect a sum of Rs. 4 crores towards the tax and the remaining amount of Rs. 9.4 crores is yet to be
paid. The fourth respondent has submitted that the demand to pay the balance amount of tax is valid and permissible under the Act. In response to
the above demand notice, the petitioner has sent a letter dated March 23, 2007, which reads as follows:
You will appreciate that we have sought clarifications from the department as well as SIPCOT as to the procedure to be adopted so as to
ensure our availment granted by the Government, while at the same time also ensuring that our dealers pay VAT only on the value addition.
The letters sent to your department as early as December 18, 2006, followed by several correspondences are yet to be replied.
We would like to bring to your kind notice, the assurance given by department in the meeting convened on January 18, 2007, that in view of the
confusion that has arisen on the change over to VAT, the period between the introduction of the VAT and the notification of procedure (which is
yet to be released) will be treated as period of ''transition'' during which period the Government will not initiate any action on account of the
industries charging VAT in the invoice so as to ensure dealers avail input tax credit.
The fourth respondent has further submitted that when the petitioner has intended to avail the waiver scheme for the unexpired period u/s 33(1)
of the Act, it is improper on their part to have collected tax on the sale of finished product during the period of waiver and retention of the same as
shown in their monthly returns from January to March 2007 (continued in April 2007 also), is in violation of the waiver agreement and against Rule
16(4) of the VAT Rules.
It is further submitted that the existing dealers who availed waiver scheme under the provisions of the Tamil Nadu General Sales Tax Act,
1959, are permitted to continue under the scheme and the main condition for continuing in the waiver scheme is that the dealer should not collect
taxes on the finished products, i.e., Rule 16(4) of the Tamil Nadu VAT Rules, 2006, should not be violated and in order to maintain VAT chain,
the dealer-customers of the waiver availing dealer, should not claim input tax credit. The respondent has further submitted that the petitioner has
violated Rule 16(4) of the TNVAT Rules, and has collected taxes of Rs. 9.72 crores from January 2007 to March 2007 and retained the same.
The respondent has further submitted that as per the agreement executed by the petitioner in the year 2006 with the Assistant Commissioner
(Commercial Taxes), Vellore District, the petitioner has agreed that they would not collect taxes on the sale of finished product (cement) as per
Rule 48A of the TNGST Rules, 1959. The eligibility certificate dated May 15, 2006, imposes the same condition. Besides, as per Rule 16(4) of
the Rules, 2007, the dealers under the waiver scheme should not collect tax on the finished products. Therefore, the ad hoc procedure followed by
the petitioner is against the Rules, terms of the agreement and the eligibility certificate. As stated supra, when the petitioner has intended to remain
in the waiver scheme under the VAT Act, they have no locus standi or right or authority to collect tax without amending eligibility certificate, for
availing the benefit u/s 33(1) of the VAT Act.
The respondents have further submitted that the manufacturing unit who wants to remain in the waiver scheme under the VAT Act, if allowed
to collect tax on the sale of finished products, then allowing its dealer-customers to claim full input tax credit is not compatible with the waiver
scheme borne out of the industrial policy of the State of Tamil Nadu and the above acts would break the VAT chain. The respondents have further
submitted that the Empowered Committee of State Finance Ministry has given following guidelines for the continuance of industrial incentives under
the VAT legislation. Para 2.15 of the abovesaid guidelines dated January 17, 2005 deals with incentives and it reads as follows:
Under the VAT system, the existing incentive scheme may be continued in the manner deemed appropriate by the States after ensuring that VAT
chain is not affected. The empowered committee while allowing the States to decide their own policy for treatment of incentives had prescribed
certain preconditions:
(1) The quantum as well as the time period allowed for availing the incentives should not be increased or extended.
(2) VAT chain should not be affected thus at the national level no common policy has been adopted in regard to the treatment of incentives
schemes. This was due to the reason that different States have offered various kinds of incentives depending upon their local needs of the State and
relevant tax system of the State.
The respondents have further submitted that in so far as State of Tamil Nadu is concerned, the Waiver Scheme is governed under G.O.Ms.
No. 500, Industries (MIG II) Department dated May 14, 1990 and the relevant notifications G.O. P. No. 396/dated September 10, 1991 is
governed u/s 17(4) of the Tamil Nadu General Sales Tax Act, 1959. As per Rule 48A of the TNGST Rules, 1959, the dealer availing waiver
should not have collected tax and after the introduction of VAT Act, 2006, the dealer should not collect tax under Rule 16(4) of the VAT Rules to
avail Waiver Scheme. The honourable Taxation Tribunal by order in O. P. No. 669 of 2001, dated January 4, 2002 in the case of V.V.K.
Packaging Private Ltd. v. Assistant Commissioner (CT), Tuticorin has held that the dealer availing the waiver concession should not have collected
taxes and it amounted to violation. It is further submitted that only under the deferral scheme, the dealers are permitted to collect taxes, which are
to be paid later on to the Government as per schedule of payment.
It is further submitted that as per the Tamil Nadu Industrial Policy and G.O.Ms. No. 500, and Notification G.O. P. No. 396, dated September
10, 1991, published in the Government Gazette, collection of tax is illegal. The Assistant Commissioner (Commercial Taxes), Vellore, the third
respondent, is empowered to cancel the waiver agreement. It is further submitted that as per the guidelines of the empowered committee,
incentives scheme and the modification thereto are left to the discretion of the particular State. As far as the State of Tamil Nadu is concerned,
there is no remission model. Other States, have adopted a different procedure of exemption (waiver) and the remission model of the other States
are not equivalent to the one followed by the State of Tamil Nadu. The respondent has further submitted that the petitioner, has elected themselves
to be under the waiver scheme and collected tax during the abovementioned period and that the same is contrary to the provisions of the TNGST
Act, terms of the agreement, eligibility certificate and the provisions of the VAT Act, 2006 and the contentions are summarised as follows:
(a) It is evident that the writ petitioner has addressed letters to the Secretary to Government and Commissioner of Commercial Taxes expressing
his intention to continue under waiver scheme under the Act.
(b) While so, the petitioner collected tax from his customers-dealers and retained the amount in his hands. The petitioner has no right to adumbrate
or accept having made an application to continue under waiver scheme the petitioner should not have collected tax from the customers during the
period of waiver.
(c) In nutshell, the dealers-customers of the writ petitioner have availed the full input tax credit and the bills of customer-dealer have to show that
the petitioner has not followed the norms relating to the waiver scheme. Since there is no automatic conversion of claim of waiver into deferral in
conformity with Section 33(1) of the Act but at the same time the petitioner is expressing his intention to continue under waiver scheme. Therefore,
the petitioner is expressing his intention to continue under waiver scheme which is nothing but bundle of inconsistencies.
For the foregoing reasons, the respondents have submitted the petitioner is not entitled to the reliefs sought in the writ petition.
The SIPCOT, second respondent, in their counter-affidavit has submitted that the Government have issued policy and guidelines with respect
to the establishment of the industrial unit in the specified area and as such and on the basis of the said policy and guidelines SIPCOT have issued
eligibility certificate to the petitioner on May 15, 2006 for a period of six years from June 1, 2006 to May 31, 2012. The second respondent has
further submitted that they are only a nodal agency in implementing the scheme and the policy of the Government, and they are not competent to
take action on the representation of the petitioner unilaterally.
Mr. Sathish Parasaran, learned Counsel for the petitioner, submitted that by the impugned communication, the fourth respondent without giving
an opportunity of hearing, has come to an erroneous conclusion that the petitioner has committed a grave offence of keeping the Government
money and that the said finding is unjust and in violation of the principles of natural justice. He further submitted that the impugned communication,
treating the petitioner''s request for continuance of waiver, even in the absence of a notification or an order to that effect by the Government, is
contrary to the express provisions contained in Section 33 of the TNVAT Act. According to him, such an approach of the fourth respondent
militates against the deeming fiction introduced in Section 33 of the Act to the effect, the remission of tax made under the repealed TNGST Act,
1959, shall be deemed to be a deferred payment of tax u/s 33 of the TNVAT Act for the unexpired period for such remission.
The learned Counsel for the petitioner further submitted that by coercing the petitioner to pay huge amounts, the fourth respondent has abused
the statutory powers conferred on it and therefore, the action of the fourth respondent amounts to colourable exercise of the powers. He further
submitted that even before coming into the force of the TNVAT Act on January 1, 2007, the petitioner has submitted a letter to the first
respondent as early as on December 18, 2006, anticipating possible confusion and lack of clarity as to the treatment of the dealers under the then
Waiver Scheme. In all the letters, the petitioner has categorically intimated that as an interim arrangement, they have decided to separately show
VAT collection in their invoices so as to avoid the VAT chain being snapped and to enable the customers to avail the input tax credits. According
to him, if the respondents had issued a clarification as early as in the month of December, 2006 or in January, 2007, the present situation could
have been averted and having put the petitioner in a such predicament, the respondents are not entitled to take advantage of their own default in
responding to representations promptly.
Placing reliance on the decision in The Commissioner of Commercial Tax, Ranchi and Another Vs. Swarn Rekha Cokes and Coals Pvt. Ltd.
and Others, , learned Counsel for the petitioner submitted that Section 33(1) of the TNVAT Act creates a legal fiction and while interpreting such
a provision, the court must ascertain the purpose, for which, fiction is created and assume such facts and circumstances, which are incidental or
inevitable corollaries to give effect to the legal fiction. He further submitted that the court must not lose sight of the fact that there may be
unforeseen events which may give rise to unusual circumstances. Applying the said judgment to the facts of this case, he submitted that when the
petitioner has submitted their representations dated December 29, 2006 and February 8, 2007, to clarify the procedure to be adopted during
transition period of conversion of the scheme, by operation of the deeming provision, the petitioner is entitled to collect tax and the same is not
illegal warranting action against the petitioner. The learned Counsel for the petitioner inviting the attention of this Court to a decision of the Supreme
Court in Gajraj Singh etc. Vs. The State Transport Appellate Tribunal and others etc., submitted that the legal fiction created under the deeming
provision should be recognised.
Mr. Haja Nazurudeen, learned Special Government Pleader for the State, submitted that with view to promote industrialisation, in certain most
backward taluks, the Government have introduced incentive schemes for industries and interest-free sales tax deferral/waiver schemes were
formulated. The petitioner by taking advantage of the industrial policy of the State of Tamil Nadu to avail sales tax waiver entered into an
agreement, dated July 12, 2006 with the Government. He further submitted that an eligibility certificate, dated May 15, 2006 was issued by the
SIPCOT, Chennai and one of the conditions for availing the waiver scheme is that the dealer should not collect tax during the period of waiver, i.e.,
for six years on the sales of the final product, cement. The non-collection of the tax in the waiver unit is to help the units in order to maintain the
competitive advantage and this provision is incorporated in the Rule 48A of the TNGST Rules, 1959.
Referring to the notification issued under Sub-section (4) of Section 17 of the TNGST Act in G.O.Ms. No. 43, dated December 13, 1992,
providing sales tax waiver, the eligibility certificate issued by the SIPCOT and Rule 16(4) of the TNVAT Rules, he submitted that the petitioner
should not collect tax during the waiver period of six years on the sale of manufactured finished products. Inviting the attention of this Court to
Clauses 1, 3 and 5 of the agreement entered into between the first respondent and the petitioner, Clauses 5, 6, 7, and 12 of the eligibility
certificate, dated May 15, 2006 and Clauses 1 and 2 of the additional eligibility certificate, dated May 15, 2006 read with Rule 48A of the
TNGST Rules and Rule 16(4) of the TNVAT Rules, the learned Special Government Pleader submitted that the dealers under the waiver scheme,
having agreed to the terms and conditions of the agreement and the certificate of eligibility, cannot adopt an ad hoc procedure of their own and
collect taxes contrary to the Rules and the agreement.
Placing reliance on the decision of the honourable Special Tribunal in the case of V.V.K. Packaging Private Limited v. Assistant Commissioner
(CT), Tuticorin O.P. No. 669 of 2001, dated January 4, 2002, he submitted that the collection of tax amounts to violation and therefore, when the
VAT chain has been broken by the petitioner by collecting the tax from the dealers, it is open to the Revenue to demand payment of tax due to the
Government. He submitted that only under the deferral schemes, taxes are collected and since the petitioner has already elected to opt for waiver
scheme, they ought not to have collected tax.
By referring to the prayer made in the writ petition, the learned Special Government Pleader submitted that if the intention of the petitioner is to
continue under the waiver scheme as per the deed of agreement, dated July 12, 2006, the question of collecting tax till the orders are passed on
the representations dated December 29, 2006 and February 8, 2007 does not arise. Collection of tax during the transition period would create
anomalous situation in the scheme of the Act, as two different schemes, viz., waiver/deferral cannot be put into effect, as per Section 33(1) of the
VAT Act.
The learned Special Government Pleader further submitted that the waiver scheme in Tamil Nadu is borne out of an industrial policy and is not
equivalent to the exemption schemes adopted in other States. Summing up and placing reliance on the industrial policy of the Government, the
terms of the agreement, eligibility certificate, the intention of the petitioner to continue under waiver scheme as per their own representations and
the prayer sought in the writ petition, learned Counsel for the respondent submitted that the petitioner cannot approbate and reprobate and as long
as the agreement and eligibility certificate remain in force without any variation, the statutory obligations under the documents, read with Rule 48A
of the TNGST Rules and Rule 16(4) of the TNVAT Rules, 2007, continue to operate and any violation of the waiver scheme under the Act entails
cancellation of eligibility certificate.
Heard the Counsel appearing for the parties and perused the materials available on record.
The Government of Tamil Nadu, with a view to promote industrialisation, have introduced an Interest-free Sales Tax Deferral Scheme in
G.O.Ms. No. 500, Industries (MIG-II) Department, dated May 14, 1990, by which, the State Industries Promotion Corporation of Tamil Nadu
Ltd., the second respondent herein (in short, ""SIPCOT"") is the authorised agency to receive applications, sanction and disburse for medium and
major industries, to assess the eligibility of a new industry and issue eligibility certificate under the scheme. G.O.Ms. No. 500, Industries (MIG-II)
Department, dated May 14, 1990 reads as under:
Government of Tamil Nadu
Abstract
Industries - Declaration of most backward taluks - Incentive schemes for industries - Interest-free sales tax scheme - Further liberalization �
Order - Issued.
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Industries (MIG-II) Department
G.O.Ms. No. 500 Dated : 14.5.1990
Read:
G.O.Ms. No. 305, Industries, dated May 22, 1989
G.O.Ms. No. 423, Industries, dated July 7, 1989
G.O.Ms. No. 563, Industries, dated August 19, 1989
G.O.Ms. No. 564, Industries, dated August 19, 1989
ORDER
The Government in the order second read above declared 105 taluks of this State as industrially backward for the purposes of grant of interest-
free sales tax loan, interest-free sales tax deferral, State capital subsidy, etc.
With a view to correct regional imbalances in the industrialisation in the State by giving further incentives to more backward areas, the
Government directed that 30 taluks, from among the 105 industrially backward taluks be declared as industrially most backward taluks. The
names of 30 taluks are annexed to this order.
The Government directed that the new industries to be set up in the 30 most backward taluks ordered in para 2 above and also in the three
industrial complexes of State Industries Promotion Corporation of Tamil Nadu at Pudukottai, Cuddalore and Manamadurai be eligible apart from
other existing concessions for full waiver of sales tax dues for a period of five years up to a ceiling of the total investment made in fixed assets.
Existing industries in the most backward taluks and in the three State Industries Promotion Corporation of Tamil Nadu (SIPCOT) complexes,
undertaking expansion/diversification are also eligible for full waiver of sales tax dues for a period of five years subject to a ceiling of the total
investment in fixed assets under expansion/diversification.
With a view to encourage more industries in Tamil Nadu, the Government directed that the following concessions also be made available to the
industries:
(a) For the industries to be started in the 75 backward taluks, i.e., other than the 30 most backward taluks, from among the 105 backward taluks,
and in the industrial estates developed by any of the Government agencies including Madras Export Processing Zone, Madras Metropolitan
Development Authority, the scheme of interestfree sales tax loan/deferral ordered in the Government order first, third and fourth read above is
modified as follows:
(i) For the existing units undertaking expansion or diversification, deferral of sales tax will be given for nine years and the total amount thus given
shall not exceed 80 per cent of the additional investment made in fixed assets.
(ii) For the new units, the total amount of deferral of sales tax will be given for nine years to the full extent of the total investment made in fixed
assets.
(b) The interest-free sales tax deferral scheme is extended to the expansion (Part I) as well as to the starting of new industries (Part II) in the other
areas also, where this scheme was not in vogue hitherto. The deferral of sales tax for the industries in these areas will be for five years subject to a
maximum of 60 per cent of the total investment made in fixed assets in the case of new industries and 50 per cent of the additional investment in
fixed assets made in the case of expansion/diversification, of the existing industries.
(c) As a gesture to the industries to be set up in any part of Tamil Nadu with an invest in fixed assets of more than Rs. 50 crores, a special
incentive of deferral of sales tax for a period of nine years to the extent of total investment made in fixed assets will be given. This deferral
concession will also be available to the existing industries going in for expansion/diversification with an additional investment in fixed assets for more
than Rs. 50 crores.
The sales tax deferral/waiver of expansion/diversification ordered in paras 3 and 4 above is subject to the sales tax payable on products
manufactured by the capacity created by expansion/diversification units only.
The industries in the most backward taluks and in the SIPCOT complexes at Cuddalore, Manamadurai and Pudukottai can opt either for the full
waiver of sales tax for a period of five years ordered in para 3 above or for the deferral of sales tax for nine years as applicable to the industries in
the backward taluks ordered in para 4(a) above. The option should be exercised along with the application to be submitted to the authority for
issuing eligibility certificate. The option once exercised and accepted will be final and cannot be changed.
The application for interest-free sales tax deferral should be filed before the General Manager, District Industries Centre concerned in the case
of small-scale industries and before SIPCOT in the case of medium and major industries before the commencement of commercial production.
The above scheme will be applicable to small, medium and major industries, as the case may be. The deferral/waiver period will commence
from the date of commencement of commercial production after the completion of the envisaged project. Such commencement shall be on or after
the date of issue of this order, for eligible units.
The General Manager, District Industries Centre and SIPCOT will be the competent authorities to issue eligible certificates in respect to small-
scale industries and major and medium industries, respectively. The respective sales tax assessing authority will assess the sales tax liability of the
units for each year. The sales tax authorities concerned, based on the assessments will raise demands for deferral of sales tax without interest or
waiver of sales tax after commencement of production by the units. But the tax payable for the year will be deferred/waived within the overall
ceiling for which the eligibility certificate is issued by the authority. The deferred instalments shall be payable by the assessed units after the
completion of the period of deferral together with the sales tax of the current year, without any interest thereon. In case the units avails the
complete deferral/waiver benefit before the completion of specified deferment period of five years or nine years, as the case may be, the unit has to
pay the normal sales tax immediately after the date of full availment of eligible deferral amount. The assessee of the unit for which the sales tax has
been waived will start paying the current sales tax dues after the completion of the waiver period or immediately after the full availment of eligible
waiver amount, whichever is earlier. However, the deferred amount of sales tax for five years or nine years as the case may be, has to be paid after
the completion of the deferral period along with the current dues, i.e., in the case of deferral of nine years, the amount deferred in the first year
being payable along with the sales tax due in the tenth year, the amount deferred in the second year being payable along with the sales tax dues in
the eleventh year and so on.
All eligible units which have commenced production before the date of issue of this order will be eligible for interest-free sales tax loan/
deferral, as per the order existing on the date of commencement of production. Units which have availed interest-free sales tax loan under existing
schemes, may opt for the deferral facility to the extent of uncompleted period and unutilised amount of the earlier scheme.
The original project in a taluk may go in for expansion/diversification in the same taluk where the original project is located or in any other taluk
and avail the interest-free sales tax deferral/waiver concession. However, this concession would be granted for one expansion/diversification only if
carried out in the same taluk where the original project is located.
Second-hand machinery will not be part of the investment eligible to the computation of deferral or waiver of sales tax.
This order modifies all the previous orders available on the subject-matter, to the extent to which the scheme has been covered by this order.
This order issued with the concurrence of Commercial Taxes and Religious Endowment and Finance Department vide their U.O. No.
20626/B2-90-1 dated May 2, 1990 and U.O. No. 2674/F9/P/90, dated May 7, 1990 respectively.
/By order of the Governor/
M.M. Rajendran,
Chief Secretary to Government.
(Here italicized supplied).
The eligibility certificate, dated May 15, 2006 granted to the petitioner inder IFST waiver scheme is extracted hereunder:
Eligibility Certificate Under IFST Waiver Scheme � Diversification
Eligibility Certificate No. : 46/VI/W/D
Date of issue : 15.05.2006
This EC is hereby granted to M/s. Ultratech Cement Limited located at Chitheri Village, Arakonam, Vellore District manufacturing portland
cement - All varieties under the IFST Waiver Scheme of the Government of Tamil Nadu.
Subject to the conditions mentioned in the sales tax waiver scheme and those mentioned hereinafter, the holder of this certificate shall be entitled
to the benefit of IFST Waiver Scheme for six years as per G.O.Ms. No. 500 Inds. (MIG.II) Dept, dated May 14,1990, and all other Government
Orders as are in and may come in force from time to time including G.O.Ms. No. 92, Commercial Taxes and Religious Endowment Department,
dated February 22, 1991 and G.O.Ms. No. 43, Industries (MIG. 2) Department, dated February 13,1992, G.O.Ms. No. 127, Industries
(MIG.2) Department, dated March 22, 2000 and G.O.Ms. No. 13, Commercial Taxes Department, dated January 24, 2000.
Based on the above, the holder of this EC will be eligible for waiver of sales tax not exceeding Rs. 10,198.84 lakhs (rupees ten thousand one
hundred and ninety-eight lakhs and eighty-four thousand only) under the waiver scheme for the six years from the month in which the holder''s unit
commenced its commercial production, i.e., from April 1, 2001 to March 31, 2007.
The actual amount waiver shall however be the least of the amounts mentioned in 4.1 and 4.2 below:
4.1(a) Notional sales tax liability on account of general sales tax, additional sales tax, surcharge and additional surcharge which would have
accrued during the period of waiver on the sale of finished goods manufactured by the unit.
4.2. 100 per cent of the value of initial gross fixed assets, i.e., Rs. 10,198.84 lakhs (rupees ten thousand one hundred and ninety-eight lakhs and
eighty-four thousand only).
The period of operation of sales tax waiver scheme shall be within the period of full availment of the eligible amount or five years period,
whichever is earlier. During this period of operation, the company shall not collect sales tax on the sales of its manufactured products.
The company shall submit periodical reports to the Commercial Taxes Department on the extent of sales and sales tax waiver availed, from time
to time, during the ""period of operation"" as defined in para 5.
After expiry of the ""period of operation"", as defined under para 5, the company shall immediately on further sales start remitting the applicable
sales tax to the Commercial Taxes Department.
The unit shall enter into an agreement with the Assistant Commissioner (Commercial Taxes) concerned as per terms and conditions stipulated by
that department.
Sales tax waiver benefit is subject to the sales tax payable on products manufactured by the capacity created by the Diversification scheme at
Chitheri Village, Arakkonam, Vellore District only.
The subject company has furnished the production/turnover details of its group companies vide its Letter dated May 3, 2006. The highest
production/turnover of the company is given below:
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Name & location Product Production Sales turnover Year
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(Rs. in Lakhs)
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nil
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The waiver scheme will be applicable to the unit/company only as long as it manufactures products for which the EC has been issued. If the
unit/company fails to manufacture the product for which the EC has been issued or manufactures any other goods under the guise of the products
for which the certificate has been issued or if the Commercial Taxes Department, is of the opinion that the unit/company is not manufacturing the
product for which the EC has been issued, the EC issued shall stand cancelled. The Commercial Taxes Department, shall have the right to demand
and collect the tax assessed for all the years covered by the scheme and the unit/company is liable to pay the same in one lump sum.
Violation of any of the conditions in the eligibility certificate and the connected Government orders will result in withdrawal of waiver entirely.
The deed of agreement executed under the Sales Tax Waiver Scheme of Tamil Nadu Government on July 12, 2006 between the petitioner
and the Territorial Assistant Commissioner (Commercial Taxes), Vellore, reads as follows:
This deed of agreement is made at Vellore on the 12th day of July 2006, under the sales tax waiver scheme, between the Government of Tamil
Nadu represented by Thiru. G.R. Poobalarayan, Territorial Assistant Commissioner (Commercial Taxes), Vellore, on the first part and Tvl. Ultra
Tech Cement Limited, having their factory at Chitteri Village, Arakkonam Taluk, Vellore District, Tamil Nadu, Pin 631003, represented by Thiru.
M.V. Ramana Rao, General Manager and Unit Head, Power of Attorney Holder, on the second part; both parties herein shall include their
respective successors, legal heirs, legal representatives, executors, nominees, assignees, etc.
Whereas, Tvl. Ultra Tech Cement Limited has established a new cement plant at Arakkonam, and has commenced production of their products
from April 1, 2001.
Whereas the Government have by their G.O.Ms. No. 500 Industries (MIG-II) Department, dated May 14,1990, directed that the new industries
to be set up in the 30 most backward taluks notified in the annexure to the order and also in three industrial complexes of SIPCOT at Pudukkottai,
Cuddalore and Manamadurai be eligible for full waiver of sales tax dues for a period of five years up to a ceiling of the total investment made in the
fixed assets, and that existing industries in the most backward taluks and in the three SIPCOT complexes undertaking expansion/diversification are
also eligible for full waiver of sales tax dues for a period of five years subject to a ceiling of the total investment made in fixed assets under waiver.
Whereas the Government have by their G.O.Ms. No. 43, Industries (MIG-II) Department, dated December 13,1992, directed the package of
incentives for large industries, an industry set up anywhere in Tamil Nadu having an investment of Rs. 100 crores and below Rs. 200 crores will be
eligible for a sales tax waiver for six years or deferral for 12 years subject to a ceiling of 100 per cent of the value of fixed assets.
Whereas Tvl. Ultra Tech Cement Limited, Chitteri Village, Arakkonam 631 003, have applied for waiver of sales tax/surcharge/ additional
surcharge/additional tax to the party of the first part and have also produced an eligibility certificate (No. 46/VI/W/D, dated May 15, 2006) issued
by the Managing Director, State Industrial Promotion Corporation of Tamil Nadu (SIPCOT), Chennai.
Now it is agreed between the parties as under:
The tax/surcharge/additional surcharge/additional tax to be waived shall relate to the tax on the sale of the product, (i. e.) cement manufactured
by the new unit in Tamil Nadu.
The total amount of tax/surcharge/additional surcharge/additional tax to be waived shall not exceed the total investment made in the fixed assets
of Rs. 10,198.84 lakhs. The party of the second part will be eligible for waiver of sales tax not exceeding Rs. 10,198.84 lakhs (rupees ten
thousand one hundred and ninety-eight lakhs and eighty-four thousand only), for a period of six years from August 1, 2006 to July 31, 2012.
The party of second part shall not collect sales tax on the local sales of cement for six years.
The party of the second part shall not be eligible to avail the waiver benefit when they avail the maximum amount of Rs. 10,198.84 lakhs or on
completion of six years, whichever is earlier. Afterwards, they shall pay sales tax on the sales of their produces to the department according to the
rate of tax that would be in force.
The party of the second part shall submit every month, monthly return showing the sales turnover under the TNGST Act and CST Act, to the
assessing authority of the jurisdiction concerned and to the Assistant Commissioner (Commercial Taxes) concerned.
The party of the second part shall not alienate or dispose or encumber or lease out the said fixed assets until the period of waiver nor shall they
remove the fixed assets from the unit''s premises, without the prior permission from the party of the first part who in turn shall obtain appropriate
orders from the Government for the same.
The party of the second part shall insure the fixed assets at a value not less than the value certified by the SIPCOT, Chennai, and keep the
insurance policies alive by renewing it every year until the period of waiver is completed and shall produce the policy for inspection by the party of
the first part on or before the 30th June of every year.
The party of the second part shall maintain the fixed assets in good condition, so that the market value of the assets is maintained from time to
time.
The party of the second part shall obtain permission of the party of the first part before the sale of the fixed assets.
The party of the second part shall furnish to the party of the first part the audited balance sheet and profit and loss account certified by the
chartered accountant, within six months of the close of the financial year.
The waiver scheme will be applicable to the unit only as long as it manufactures products for which eligibility certificate is issued, and if the unit
manufactures any other goods under the guise of the products for which the certificate has been issued or if the Commercial Taxes Department is
of the opinion that the unit is not manufacturing the product mentioned in the eligibility certificate, the Commercial Taxes Department shall have the
right to cancel this agreement, demand and collect the entire amount of tax waived for all years covered by the scheme and the party of the second
part is liable to pay the entire amount in one lump sum.
Any sales tax that would become payable by the party of the second part, in case of default shall have priority over all other claims against the
property of the said party of the second part and the same may, without prejudice to any other mode of collection be recovered as land revenue
treating the Government dues as first charge.
The total amount of tax to be waived shall not exceed the total investment made in fixed assets under expansion unit or the amount specified in
the eligibility certificate issued by the SIPCOT, Chennai, whichever is lower.
The party of the second part shall maintain true and correct accounts for the unit. In case, if any evasion of tax or suppression is noticed at a
latter date, the taxes and penalty due on the suppressed turnover shall not be eligible to waiver. This condition is also applicable to taxable turnover
not reported in the monthly returns filed by the company.
In case of default or violation of the conditions mentioned in the forgoing paragraphs, the party of the first part reserves the right to cancel or
modify any of the above conditions at any time during the period of waiver without any notice.
Subsequently, by proceedings in RC.A3/6123/06, dated July 12, 2006, orders were issued by the Assistant Commissioner (C.T.), Vellore,
extending the eligibility certificate for the waiver of the sales tax under the waiver scheme for six years from June 1, 2006 to May 31, 2012. By
virtue of the abovesaid agreements, the dealer is permitted to avail the benefits of waiver of sales tax to a sum of Rs. 10,198.84 lakhs for six years
from August 1, 2006 to July 31, 2012, as per the rescheduled period, subject to certain conditions:
(1) The period of operation of the Sales Tax Waiver Scheme shall be within the period of full availment of the eligible amount or six years period,
whichever is earlier. During the period of operation, the company shall not collect the sales tax on the sale of its manufactured products.
(2) the tax, surcharge and additional sales tax under the TNGST Act, 1959, to be waived shall relate to the tax on the sales of the products
manufactured by the unit.
(3) The total amount of tax, surcharge and additional sales tax waived shall not exceed the limit of the total investment made in fixed assets in the
case of the new unit.
As per Rule 48A of the TNGST Rules, the Government may, in the public interest or to mitigate hardship to the trade remit the whole or any
part of the tax or penalty or fee payable in respect of any period by any dealer under Sub-section (4) of Section 17 of the Act subject to the
condition that in respect of remission of tax the dealer had not collected sales tax on the turnover in respect of that period for which remission is
sought to be granted.
Value added tax has been introduced by the Government and Tamil Nadu Value Added Tax Act, 2006 was notified on January 1, 2007 and
as per the Act, the set-off will be given for input tax as well as taxes paid on previous purchases, other taxes such as, additional tax, surcharge,
additional surcharge, etc. The purpose of the Act is that there must be rationalisation of the overall tax burden, transparency and it is intended for
higher revenue growth. Section 31 empowers the Government to notify remission of tax and it reads as follows:
Power of Government to notify remission.--The Government may, in such circumstances and subject to such conditions as may be prescribed,
by notification, remit the whole or any part of the tax or penalty or interest or fee payable in respect of any period by any dealer under this Act.
Section 32 deals with the power of the Government to notify deferred payment of tax and it reads as follows:
(1) The Government may, in such circumstances and subject to such conditions as may be prescribed, by notification whether prospectively or
retrospectively, defer the payment, by any industrial unit in the pipeline, of the whole or any part of the tax payable in respect of any period.
Explanation.-For the purpose of this sub-section, the term ''industrial unit in the pipeline'' means an industry which, is registered as an industrial unit
with an industrial agency of the State or Central Government or has obtained allotment of land or purchased land for the factory or has applied for
finance from a financial institution for its activities, as on the date to be specified by the Government in this behalf.
Sections 31 and 32 deals with the power of the Government to notify remission/deferral payment of tax after the commencement of the Tamil
Nadu Value Added Tax Act, 2006.
Section 33 deals with the situation where cases of remission of tax made for a specified period or for any specified amount of tax under Sub-
section (4) of Section 17 of the TNGST Act, 1959 (Tamil Nadu Act 1 of 1959) on the date of commencement of the TNVAT Act, 2006. The
said Section is extracted hereunder:
(1) Notwithstanding anything contained in this Act, all remission of tax made for a specified period or for any specified amount of tax under Sub-
section (4) of Section 17 of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) in so far as the unexpired period of such
remission or balance amount of tax remitted, as the case may be, shall be deemed to be deferred payment of tax u/s 32. The tax payable in respect
of the unexpired period of such remission or balance amount of tax remitted shall be paid in such manner as may be prescribed:
Provided that the Government may, if it considers necessary, on application from any industrial unit availing such remission, allow such unit to
continue such remission for the unexpired period or till the balance of amount of tax remitted, whichever is earlier.
Rule 16(4) of the TNVAT Rules which is similar to the then Rule 48A of the TNGST Rules, is extracted:
The Government may, in the public interest or to mitigate hardship to the trade remit the whole or any part of the tax or penalty or fee payable in
respect of any period by any dealer u/s 31 subject to the condition that in respect of remission of tax the dealer had not collected tax on the
turnover in respect of that period for which remission is sought to be granted.
The impugned communication dated March 20, 2007 passed by the Deputy Commercial Tax Officer, Arakkonam, fourth respondent herein,
reads that as per the eligibility certificate dated May 15, 2006 and agreement dated July 12, 2006, the company shall not collect sales tax on the
sales of finished product. The statement of the petitioner in their letter dated December 29, 2006 addressed to the Commissioner of Commercial
Taxes, Chennai, that they are charging VAT on the invoice from January 1, 2007 on their own accord, shows nothing but collection of tax under
the Tamil Nadu VAT Act, 2006, which is a violation of the conditions of the eligibility certificate and waiver agreement, when the waiver scheme is
in force. The impugned order further reads that in the absence of any material to prove that the petitioner had applied to SIPCOT, Chennai, to
switch over from waiver to deferral scheme for the un-availed portion of waiver already granted under the TNGST Act, 1959, and since the
petitioner had opted to avail the unavailed portion of waiver under the VAT Act, collection of tax, while availing the waiver is barred. The dealers
who are purchasing cement from the petitioner concerned, would certainly claim input tax credit, since the petitioner is charging the VAT at 12 per
cent in the invoices raised from January 1, 2007 onwards and as the petitioner have collected tax, retention of the same would amount to an
offence and therefore, the petitioner has been directed to remit the Government money within three days from the date of receipt of the said notice.
As per the policy of industrialisation, the Government with a view to encourage more industries in Tamil Nadu, have granted certain
concessions for the existing unit undertaking expansions and diversification and deferral of sales tax was given for nine years and the total amount
thus given shall not exceed 80 per cent of the additional investment made in fixed assets. Similarly, for the new units, the total amount of deferral of
sales tax was given for nine years to the full extent of the total investment made in fixed assets. The interest-free sales tax deferral scheme was also
subsequently extended to the expansion as well as to the starting of new industries in the other areas also, where this scheme was not in vogue.
The eligibility certificate under the IFST Waiver Scheme was given for six years as per G.O.Ms. No. 43 (MIG-II) Department, dated
December 13, 1992, by which, the scheme would be applicable to the unit/company and the unit should not collect tax on the manufactured
product, for which, eligibility certificate has been issued. If the unit/company fails to manufacture the product, for which, the eligibility certificate has
been issued or manufactures any other goods, under the guise of the product, for which, the certificate has been issued by the Commissioner for
Commercial Taxes Department and if he is of the opinion that the unit is not manufacturing the product, for which, the eligibility certificate has been
issued, the said certificate would stand cancelled.
The petitioner has availed the waiver scheme for the period from August 1, 2006 to July 31, 2012, subject to the following conditions in the
agreement:
(1) The tax/surcharge/additional surcharge/additional tax to be waived shall relate to the tax on the sale of the product, i.e., cement manufactured
by the new unit in Tamil Nadu.
(3) The party of second part shall not collect sales tax on the local sales of cement for six years.
(5) The party of the second part shall submit every month, monthly return showing the sales turnover under the TNGST Act and CST Act, to the
assessing authority of the jurisdiction concerned and to the Assistant Commissioner (Commercial Taxes) concerned.
The eligibility certificate dated May 15, 2006 granted by the Nodal Agency, SIPCOT has been issued subject to the following conditions:
The period of operation of sales tax waiver scheme shall be within the period of full availment of the eligible amount or five years period,
whichever is earlier. During this period of operation, the company shall not collect sales tax on the sales of its manufactured products.
The company shall submit periodical reports to the Commercial Taxes Department on the extent of sales and sales tax waiver availed, from time
to time, during the ""period of operation"" as defined in para 5.
After expiry of the ""period of operation"", as defined under para 5, the company shall immediately on further sales, start remitting the applicable
sales tax to the Commercial Taxes Department.
Violation of any of the conditions in the eligibility certificate and the connected Government orders will result in withdrawal of waiver entirely.
The eligibility certificate has been subsequently extended from August 1, 2006 to July 31, 2012 with the following conditions:
(1) The period of operation of the Sales Tax Waiver Scheme shall be within the period of full availment of the eligible amount or six years period,
whichever is earlier. During the period of operation, the company shall not collect the sales tax on the sale of its manufactured products.
(2) The tax, surcharge and additional sales tax under the TNGST Act, 1959, to be waived shall relate to the tax on the sales of the products
manufactured by the unit.
As per the terms of the agreement and the certificate read with the statutory provisions under Rule 48A of the TNGST Rules and Rule 16(4)
of the TNVAT Rules, the Government, in the interest of the public or to mitigate hardship of the trade, remit the whole or any part of the tax or
penalty or fee payable in respect of any period, by the dealer subject to the condition that in respect of remission of tax, the dealer had not
collected tax on the turnover in respect of that period, for which, the remission is granted.
In Gajraj Singh etc. Vs. The State Transport Appellate Tribunal and others etc., , the Supreme Court at paragraph 22 of the judgment
explained the words as follows: ""legal fiction"" is one which is not an actual reality and which the law recognises and the court accepts as reality.
Therefore, in case of legal fiction, the court believes something to exist which in reality does not exist. It is nothing but a presumption of the
existence of the state of affairs which in actuality is non-existent. The effect of such a legal fiction is that a position which otherwise would not
obtain is deemed to obtain under the circumstances.
In The Commissioner of Commercial Tax, Ranchi and Another Vs. Swarn Rekha Cokes and Coals Pvt. Ltd. and Others, , considered the
nature and scope of Sections 84 and 85 of the Bihar Reorganisation Act, 2000 and held that the laws which were applicable to the undivided State
of Bihar would continue to apply in the new State of Jharkhand created by the Act. The question which arose before the Supreme Court was
whether on bifurcation from the appointed day, i.e., November 15, 2000, the sales tax exemption benefits flowing from the Industrial Policy, 1995
of the unified State of Bihar, crystallised in the notification of the Government of Bihar, dated December 22, 1995, would be extended to the new
industrial unit situated within the territory of the new State, Jharkhand, set up before November 15, 2000 and found eligible for grant of exemption
certificate under the industrial policy of the State of Bihar of the year 1995. Interpreting Sections 84 and 85 of the Bihar Reorganisation Act, 2000,
the Supreme Court held that the said provisions are enacted to maintain continuity and at the same time authorise the State to make such
modification and adaptations as are considered necessary to avoid arbitrary results and unusual situations. In the absence of any amendment,
alteration or repudiation by Legislature or statutory notification, the Supreme Court held that by virtue of a deeming fiction created under Sections
84 and 85 of the Bihar Reorganisation Act, 2000, the benefit of exemption from payment of tax on purchase of raw materials as provided under
the industrial policy of the State of Bihar would be extended to the units in the new State of Jharkhand. Absolutely, there cannot be any quarrel
over the proposition and scope of a deeming provision in an enactment. However, the facts of the The Commissioner of Commercial Tax, Ranchi
and Another Vs. Swarn Rekha Cokes and Coals Pvt. Ltd. and Others, are not applicable to the case on hand.
Liability to pay tax is statutory and waiver scheme is extended to the manufacturing units with an avowed object of industrialisation in some of
the most backward areas. Section 33(1) of the Act states that on the introduction of the Tamil Nadu Value Added Tax Act, 2006, units under the
waiver scheme by virtue of operation of the deeming provision u/s 33(1) of the Act get converted to the deferral scheme for the unexpired period
and on an application made by the unit, the Government, may consider it necessary and pass an order, permitting the unit to continue under the
waiver scheme.
VAT Act and the Rules framed thereunder have come into operation from January 1, 2007 onwards. Section 33 of the TNVAT Act, by virtue
of its operation alters the nature of the scheme from waiver to deferral for the unexpired period. Perusal of the representations December 29, 2006
and February 8, 2007 of the petitioner and the relief sought in the writ petition reveal that the intention of the unit is to continue under the waiver
scheme. The materials produced by the petitioner do not indicate that the respondents have held out any promise or assurance enabling the
petitioner to collect the tax during the transition period. Once the assessee has opted to remain under the waiver scheme, then the dealer is not
supposed to collect tax during the transition period and later on resile from the scheme. If the contention of the petitioner that they are eligible to
collect tax during the period till a decision taken by the Government is accepted, then there is no continuity in the waiver scheme. It is a well
recognised principle of interpretation of statutes that the provisions of the legislation are to be read in consonance with each other so that they do
not render the statutory provisions inoperative during a particular period. VAT chain has to be continuous on and from January 1, 2007 and it is
not open to the dealers to snap the chain for a particular period to suit their convenience on the ground that their representations are still pending. It
is to be noted that the dealers-customers of the petitioner would claim input tax credit during the transition period for the payment of tax made to
the manufacturing unit. Courts have consistently held that tax once collected from the consumers has to be paid to the Government and the dealers
cannot retain the same. In the case on hand, the dealer by claiming that they intend to continue under the waiver scheme cannot simultaneously
collect tax, presuming that by operation of the deeming provision, the unit has switched over to the deferral scheme.
If the contention of the petitioner that they can collect tax till a decision is taken and appropriate notification is issued by the Government is
accepted, then it would be amount to pushing the deeming provision u/s 33(1) of the TNVAT Act, too far, resulting in an anomalous position of
snapping the VAT chain, altering the conditions of the scheme under which the Government has permitted the dealer to start new industries.
The petitioner fully well aware of the policy of the Government and the rational in extending the benefit of deferral/waiver scheme to the new
units or units expanding their activity in backward areas has entered into an agreement not to collect tax during the period of waiver. Rule 48A of
the TNGST Rules and Rule 16(4) of the TNVAT Rules, mandate that the dealer availing waiver should not collect tax on the finished product
during waiver. The public purpose is industrialisation in backward areas and the concession given to the industries is waiver of payment of tax, that
the manufacturers should not collect tax on the local sales of the furnished products on the total investment made on the fixed assets for a specific
period. It is a settled legal position that while interpreting the statute, the Rule of purposive construction has to be applied. Having regard to the
policy of the Government of industrialisation and the concession given to the industries, coupled with the intention of the manufacturing unit, an ad
hoc procedure devised by the petitioner on its own, without authorisation from the competent authority, during the currency of agreement and the
eligibility certificate, amounts to violation of the terms and conditions.
The intention of the Legislature as per Section 33(1) is that, remission of tax made for a specified period or for any specified amount of tax
under Sub-section (4) of Section 17 of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) in so far as concerned the
unexpired period of such remission or balance amount of tax remitted, as the case may be, shall be deemed to be a deferred payment of tax u/s
The tax payable in respect of the unexpired period of such remission or balance amount of tax remitted shall be paid in such manner as may be
prescribed. If the petitioner had already exercised their option to continue under the waiver scheme, but simultaneously resorted to collection of tax
contrary to Rule 16(4) of the TNVAT Rules, 2007, and the terms of the agreement, etc., then, this Court cannot approve such action of the
dealer, for the reason that court cannot read anything into a statutory provision, substitute or rewrite the provision, which would snap the VAT
chain from January 1, 2007 onwards. Neither the terms of the agreement nor the statutory provisions u/s 33(1) of the TNVAT Act read with Rule
16(4) of the VAT Rules, contemplate operation of waiver/deferral schemes in different spells, while implementing the provisions of the VAT Act
and the Rules framed thereunder and such a situation would certainly create anomaly. The decision of the honourable Special Taxation Tribunal in
the case of V.V.K. Packaging Private Limited v. Assistant Commissioner (C.T.), Tuticorin that once the dealer availing the waiver concession, has
collected the tax contravening the provisions of the TNGST/VAT Acts, that the VAT chain is broken and that the manufacturer is also liable to pay
the tax due to the Government, has not been controverted by the petitioner. As stated supra, liability to pay is statutory, failure to remit in time
entails penal action under the taxing statutes. Retention of Government money collected towards tax attracts penal action and therefore, there is no
need to issue any show-cause notice and provide an opportunity of hearing before taking recourse to realise the dues. Having availed the waiver
scheme, the petitioner ought not to have collected tax from the dealers and therefore, they are liable to remit the same to the Government.
In view of the above, I do not find that there is any abuse of the statutory provisions by the respondents to extract money from the assessee. In
the result, the writ petition is dismissed. No costs.