Patna High CourtM/S Lumbini Beverages Private Limited vs The State Of Bihar & Ors on 16 August, 2016Author:Hemant GuptaBench:Hemant Gupta,Ahsanuddin AmanullahIN THE HIGH COURT OF JUDICATURE AT PATNA

                  Civil Writ Jurisdiction Case No.18989 of 2015
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M/s Lumbini Beverages Private Limited, a Company incorporated under the
provisions of theCompanies Act, 1956having its industrial unit/ place of business
situated at H-2, EPIP, Industrial Area Hajipur, District Vaishali, through one of its
authorized representative Ganesh Prasad Singh, son of Late Jadu Nandan Singh,
resident of Mahesh Nagar, P.S. Patliputra, Town & District-Patna.

                                                                .... ....   Petitioner/s
                                    Versus
1. The State of Bihar, through the Chief Secretary, Government of Bihar, Old
   Secretariat, Patna.
2. The Principal Secretary, Department of Industries, Bihar, Vikas Bhawan, Patna.
3. The Principal Secretary, Department of Commercial Taxes, Government of
   Bihar, Vikas Bhawan Patna.
4. The Joint Commissioner of Commercial Taxes, Administration, Tirhut
   Division, Muzaffarpur.
5. The Assistant Commissioner of Commercial Taxes, Hajipur Circle, Hajipur.
6. The Commercial Taxes Officer, Hajipur Circle, Hajipur.

                                                      .... .... Respondent/s
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Appearance :
For the Petitioner/s : Mr. Suraj Samdarshi, Advocate.
For the Respondent/s : Mr. Vikash Kumar, S.C. 11
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CORAM: HONOURABLE MR. JUSTICE HEMANT GUPTA
           and
           HONOURABLE MR. JUSTICE AHSANUDDIN AMANULLAH
                          C.A.V. JUDGMENT
(Per: HONOURABLE MR. JUSTICE HEMANT GUPTA)
Date: 16-08-2016

                    The challenge in the present writ application is to an

   order dated 13th of September, 2013 passed by the Commercial Taxes

   Officer, Hajipur Circle, Hajipur, whereby request of the petitioner for

   waiver of interest to the extent of Rs. 1,70,28,937/- stands declined.

                    2. The said request for waiver of interest was made in

   view of the fact that the petitioner, a Private Limited Company, is

   engaged in production of non-alcoholic beverages. The petitioner was
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        granted certificate by the Director, Technical Development, Bihar,

        Patna on 22nd of July, 1998 that the petitioner has commenced its

        commercial production on 14th of April, 1998 so as to make the

        petitioner eligible for the grant of Sales Tax exemptions under the

        Industrial Policy, 1995. Such policy was framed by the State wherein,

        certain initiatives were promised to the intending entrepreneurs to

        provide exemption to the units coming into production within the

        policy period i.e. from 1st of September, 1995 to 31st of August, 2000,

        which was further extended for pipeline industries from 1st of April,

        2000 to 27th of June, 2003. Since the petitioner satisfied the

        requirement of exemption from Sales Tax, the same was granted for

        10 years i.e. from 14th of April, 1998 to 13th of April, 2008 with a

        ceiling of 150 per cent of the fixed capital investment. Consequent to

        the exemption granted, the goods produced by the petitioner were

        treated to be exempted from payment of Sales Tax in terms ofSection

        7(3)(b)of the Bihar Finance Act, 1981.

                          3. During the period when the exemption from payment

        of taxes was being availed by the petitioner, theBihar Value Added

        Tax Act, 2005(hereinafter referred to as "VAT Act") came into force

        on 1st of April, 2005. In terms ofSection 96(3)(b)of the VAT Act, the

        unit enjoying the benefit of exemption from payment of tax under theBihar Finance Act, 1981were allowed to opt for deferment of its tax
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        liability in the manner and extent provided.

                          4. The petitioner challenged such provision before this

        Court in C.W.J.C. No. 5613 of 2005, which is pending consideration.

        The State Government took a decision on 14th of September, 2009 for

        giving exemption to the units which could not avail full exemption

        due to enforcement ofVAT Actwith effect from 1st of April, 2005.

        The amount of exemption was to be borne by the Department of

        Industries, Government of Bihar.

                          5. On 18th of March, 2010 a decision was taken under

        the Chairmanship of the Chief Secretary, Bihar when a direction was

        issued to the Department of Industries for obtaining necessary

        Government order for reimbursement of Rs. 18.75 crores to 22 such

        units including the unit of the petitioner. The Director of Industries

        thereafter issued a disbursement order on 31st of December, 2012 in

        favour of the units including the petitioner which were granted

        exemption from tax under the Bihar Industrial Policy, 1995 but could

        not avail full amount of exemption. The Commissioner, Commercial

        Taxes directed the respective Circle Incharge of Commercial Taxes

        Department to ensure that the VAT is paid along with the interest

        before disbursement of grant is started by the State Government.

                          6. The petitioner submitted representation for the

        payment of the amount deducted towards interest on delayed payment
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        of deferred amount of VAT. Such representation remained

        unsuccessful. It is thereafter the petitioner invoked the writ

        jurisdiction of this Court.

                          7. In the counter affidavit, the stand is that once theVAT Actcame into force with effect from 1st of April, 2005, the

        exemption granted under theBihar Finance Act, 1981and the

        notification issued there under became redundant. The remaining

        period of exemption was provided to be optional for deferment. Any

        delay in payment of deferred amount of tax was to carry interest over

        it in terms of Rule 57 of the Bihar Value Added Tax Rules, 2005

        (hereinafter referred to as "the VAT Rules). It is averred that

        petitioner did not opt for deferment of his VAT liability by applying

        in Statutory Form A-XII to his Circle Incharge in terms of the

        provisions contained inSection 96(3)(b)of the VAT Act read with

        Rule 57 of the VAT Rules for the period commencing from 1st of

        April, 2005 to 13th of April, 2008. Since the petitioner has failed to

        opt for deferment of his VAT, he is bound in law to deposit the

        monthly admitted VAT amount and also interest at the rate of 1.5%

        per month for delay in payment of monthly admitted VAT amount.

        The total VAT amount, which was not deposited from 1st of April,

        2005 to 13th of April, 2008 is Rs. 10,77,80,886.26/-. It is also pointed

        out that had the petitioner opted for deferment of his VAT liability, it
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        was essential for the petitioner to deposit the admitted VAT amount in

        five equal instalments payable by 31st March every year commencing

        after the expiry of the year 2008-09. It is further stated that there

        cannot be estoppel against the provisions of law. Therefore, since the

        petitioner has not opted for deferment of tax in terms ofSection 96of

        the VAT Act, the liability to pay interest arises. It is pointed out that

        total amount of statutory interest which was deposited by the

        petitioner for delayed payment of instalments of deferred amount of

        VAT was Rs. 1,70,28,937/-.

                          8. The petitioner has filed rejoinder controverting the

        stand of the State in the counter affidavit.

                          9. We have heard learned counsel for the parties at

        length.

                          10. It is admitted fact that the petitioner was granted

        exemption from payment of tax for a period of 10 years i.e. from 14th

        of April, 1998 to 13th of April, 2008 but due to enactment of theVAT

        Actwith effect from 1st of April, 2005, the provision of exemption

        came to an end.Section 96of the VAT Act contains transitory

        provisions which reads as under:-

                                               "96 (3) Where-
                                               (a) any dealer has been granted the facility of
                          deferment of tax payable undersection 23Aof the Bihar Finance
                          Act, 1981, (Bihar Act 5 of 1981) as it stood before its repeal bysection 94, and who has, on the commencement of this Act, not
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                          availed of the full entitlement, he shall be allowed to continue to
                          defer the tax payable under this Act, in the manner and to the
                          extent prescribed;
                                                (b) any dealer has been granted the facility of
                          exemption from payment of tax under clause (b) of sub-section
                          (3) ofsection 7of the Bihar Finance Act, 1981 (Bihar Act 5 of
                          1981) as it stood before its repeal bysection 94, and who has, on
                          the commencement of this Act, not availed of the full
                          entitlement, he shall be allowed to opt for deferment of his tax
                          liability under this Act, in the manner and to the extent
                          prescribed."


                          11. The prescribed procedure for availing the deferment

        is contained in the VAT Rules. The relevant Rule is 57 which reads as

        under:-

                                         "57. Deferment.-(1) Such industrial units as are
                          availing the benefit of exemption from payment of tax on the
                          scale of their finished products granted under clause (b) of sub-
                          section (3) ofsection 7of the earlier law and who have not
                          availed of their full entitlement shall be allowed to opt for
                          deferment of their liability to pay tax in terms ofsection 96of
                          the Act. Such deferment shall be equivalent to his unavailed
                          entitlement.
                                         (2) No dealer eligible for deferment under sub-rule
                          (1) shall be allowed to defer his tax liability under the Act unless
                          he applies, to the concerned Circle Incharge, for the same in
                          form A-XII
                                         (3) Upon receipt of such application the concerned
                          Circle Incharge shall issue the dealer a certificate in form C-VIII.
                                         (4)(a) The amount of tax deferred under sub-rule (1)
                          shall be paid in 5 equal installments payable by 31st March every
                          year commencing after the expiry of the year during which the
                          unavailed entitlement terminated.
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                                       (b) Where after expiry of the period of deferment the
                          deferred tax is not paid within the time specified in clause (a),
                          interest at the rate of one and half percentum per month or part
                          thereof shall be payable on such amount of default till the date of
                          its payment without prejudice to any action that maybe taken for
                          recovery under the Act.
                                       Explanation- For the purpose of this rule, the
                          expression "unavailed entitlement" shall mean the remaining
                          period or the remaining monetary ceiling, whichever may be
                          applicable, of exemption to which such unit would have been
                          entitled on the appointed date."


                          12. The petitioner did challenge the provisions inSection 96of the VAT Act before this Court. But the said writ

        application is pending and there is no interim protection granted to the

        petitioner. Therefore, the petitioner is bound by the provisions of theVAT Actand the rules framed there under.

                          13. In terms of the statutory provisions, the petitioner

        could opt for deferment of tax in terms ofSection 96(3)(b)of the

        VAT Act which he failed to do soon after theVAT Actcame into

        force. In absence of the option for deferment, the liability of the

        petitioner was to pay VAT in terms ofSection 24of the VAT Act.

        The failure to pay tax attracts interest in terms of sub-section (10) ofSection 24of the Act i.e. 1.5% per month of the amount due from the

        date, the tax becomes due to the date of its payment. On the other

        hand, option of the petitioner for deferred payment of tax in terms of
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                                         8/9Section 96(3)(b)of the VAT Act was exercised far too late only on

        14.03.2013, and that too when it found no other option to avail the

        grant from the State Government. Therefore, such option results into

        delayed payment of the deferred amount of tax, which would attract

        interest at the rate of 1.5% per month or part thereof. Therefore, in

        either situation, after the commencement of theVAT Act, the liability

        of the petitioner was to deposit the amount of tax either by way of a

        regular assessment or in case of deferment by deposit of the deferred

        amount of tax.14. The petitioner has failed to deposit the amount of

        tax after the enactment of theVAT Actwith effect from 1st of April,

        2005. Since the liability is statutory, therefore, it is presumed that the

        petitioner has collected tax from its consumers as a manufacturer of

        non-alcoholic beverages. It is not the stand of the petitioner that the

        burden of amount of interest paid by it was not passed on to the

        consumers. The petitioner cannot claim that the interest would not be

        payable as the same is payable in either situation for non-filing of

        return or for not filing the deferred tax returns. There was no

        immunity to pay the tax amount and consequently the interest. Once

        the interest has been deposited, the burden of the said interest must

        have passed on to the consumers.15. Therefore, the petitioner would not be entitled to its
            Patna High Court CWJC No.18989 of 2015 dt.16-08-20169/9refund as it will be a case of undue enrichment as laid down by the

                   Supreme Court in the case reported asMafatlal Industries Ltd. and

                   others, Vs. Union of India and others, (1997) 5 SCC 536. Therefore,

                   the interest for not paying tax in terms ofSection 24of the VAT Act

                   or seeking deferment in terms ofSection 96(3)(b)of the VAT Act is a

                   statutory interest and cannot be claimed by the petitioner once there is

                   no assertion that the burden has not been passed on to the consumers.16. Thus, we do not find any merit in the writ petition.

                   The same is dismissed.(Hemant Gupta, J)


           Ahsanuddin Amanullah, J                 I agree.


                                                                  (Ahsanuddin Amanullah, J)

P.K.P.
N.A.F.R.

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