Writ petition dismissed on the grounds that the State’s decision to deny remission was not arbitrary

Fact and issue of the case

This writ petition is at the instance of a registered dealer under the West Bengal Sales Tax Act, 1994 (for short “the 1994 Act”) under the West Bengal Value Added Tax, 2003 (for short “WB VAT”) Act praying for a writ of mandamus, commanding the respondents to allow remission of tax after setting aside the order dated 08.02.2022 passed by the West Bengal Taxation Tribunal (for short “The Tribunal”) in case no. RN-1761/12.

The petitioner no. 1 claims to be one of the leading producers of Ductile Iron (for short “DI”) Pipes and has set up its unit at Khardah (for short “the unit”) for the manufacture of DI Pipes with an installed capacity of 60,000 metric ton. The petitioner undertook expansion of the unit from time to time and became eligible for remission of sales tax under various Incentive Schemes of the State. It is the further case of the writ petitioners that the actual investment made up to 31.03.2005 including the expansion programs undertaken by the unit stood at Rs. 250.88 cores i.e., Rs. 251 crores. The petitioners claim to have made a further investment of Rs. 23 crores during the period from 01.04.2005 to 31.12.2005 taking the total investment till 31.12.2005 at Rs. 274 crores. The petitioners claim that the Gross Value of Fixed Capital Assets (for short “GVFCA”) was determined at Rs. 194 crores. Petitioners prayed for enhancement of GVFCA by Rs. 80 crores to include the investment made by the petitioner till 31.12.2005. The Standing committee of the industries of the State Cabinet in its meeting held on 18.03.2006 enhanced the Fixed Capital Investment (for short “FCI”) by Rs. 57 crores instead of 80 crores as prayed for by the petitioner. The Special Secretary to the Government of West Bengal by a letter dated 20.06.2006 informed the petitioner that the investment of Rs. 23 crores made after 31.03.2005 will not be counted.

Challenging the decision of the respondent authorities not to allow remission on the FCI of Rs. 23 crores, the writ petititoners filed an application under Section 8 of the West Bengal Taxation Tribunal Act 1987 (for short “the 1987 Act”) giving rise to case no. RN 1761 of 2012.

Before the learned Tribunal, the writ petitioners prayed for an order directing the respondents to allow remission of tax to the petitioner covering the GVFCA of 23 crores. The Tribunal, by a judgment and order dated 25.07.2018, dismissed the said application. The writ petitioners challenged the said order of the Tribunal before this Court in WPTT No. 20 of 2018 which was disposed of by a co-ordinate bench by an order dated 28.08.2019 by setting aside the order of the learned Tribunal dated 25.07.2018 and by directing the learned Tribunal to rehear and decide RN 1761/12 by giving an opportunity of being heard to the parties and by passing a reasoned decision within the time limit stipulated therein.

Observation of the court

With greatest of respect to Mr. Mitra, this Court is unable to accept such contention for the reasons assigned hereinafter.

The object and purpose behind framing the said scheme is to promote industries in the State of West Bengal. From a bare reading of the scheme it is evident that the State promised to allow remission of sales tax on condition that an investment is made on Fixed Capital Assets which may be either by setting up a new unit or by way of expansion of an existing unit. The real object behind the scheme is to attract investors and encourage them to invest in the State. The said scheme, however, had a limited duration of 5 years with effect from 01.04.1999 till 31.03.2004. Mr. Mitra, would contend that the duration of the scheme or the last date of 31.03.2004 is of no relevance. The terms and conditions of the scheme is to be interpreted harmoniously to make the said scheme a workable one so that none of the clauses becomes otiose. The amount of remission of sales tax allowable under the scheme is dependant on the investment made in Fixed Capital Assets. The right to claim remission of sales tax under the Scheme accrues only upon an investment being made on Fixed Capital Assets. Therefore, the investment is the prerequisite for the right to claim benefit under the scheme to accrue. Such right to claim remission, therefore, has to accrue on or before the last date i.e., 31.03.2004. This Court is, therefore, of the considered view that only investments made in Fixed Capital Assets in terms of the conditions incorporated in the scheme before the last date i.e., 31.03.2004 would only qualify for remission under the scheme. If the investment in Fixed Capital Assets is made within such date, the unit will be entitled to enjoy the benefit of remission as per the said scheme for the balance unexpired period or the balance eligible amount even after 31.03.2004 and for such purpose only the said scheme shall be deemed to be in operation even after 31.03.2004. Any contrary interpretation thereto will lead to laying down a proposition that the scheme is of unlimited duration which will be against the very object of the scheme.

The learned senior counsel for the petitioner strenuously argued that there has been a breach of the doctrine of promissory estoppel in the instant case as the unit altered its position by investing the aforesaid amount of Rs. 23 crores on fixed capital assets acting on the promise made by the State in the scheme to allow remission of sales tax on the fixed capital investment while undergoing expansion of the unit. As observed herein before, the promise of the State was limited to allowing remission on the investment on fixed capital assets to the extent of Rs. 194 crores only. The petitioners failed to demonstrate before this court that there was any promise made by the government to allow remission for the investments made on fixed capital assets after 31.03.2004. Since the decision of the Cabinet not to allow remission of sales tax on the investments made on fixed capital assets with effect from 01.04.2005 appears to have coincided with the date of coming into force of the WB VAT Act, the learned senior counsel for the petitioners was prompted to advance an argument that introduction of the WB VAT Act cannot deprive the unit from enjoying the benefit of remission of tax which was allowed to the petitioner under the provisions of the 1994 Act read with the Incentive Scheme. Mr. Mitra learned Senior Counsel referred to Section 118(c) of the WB VAT Act 2003 in support of such contention.