Clarification issued by Finance Department upheld, HC

Facts in Brief:

1. Petitioners have challenged the clarification issued by the Finance Department (Tax Division) of Government of Rajasthan on 10.10.2008 whereby the State Government issued clarification that the term "tax payable" under the Rajasthan Value Added Tax Act, 2003 is the amount of tax leviable under the Act less the amount of input tax credit if any for the purpose of the Scheme.

2. The Scheme in question is Rajasthan Investment Promotion Policy, 2003 which was issued by the State Government on 20.8.2003 with a view to provide the investors an attractive opportunity to invest in the State of Rajasthan and certain incentives in the form of subsidy was directed to be paid to the eligible units.

3. The grievance raised in the present writ petition is that the said clarification issued by the State Government on 10.10.2008 is contrary to the provisions of RIPS, 2003 as well as Rajasthan VAT Act, 2003 which does not define as such the term "tax payable" as such.

HC held as under,

4. In the considered opinion of this Court, the clarification issued by the Finance Department (Tax Division) on 10.10.2008 is perfectly in consonance with the Rajasthan VAT Act, 2003 read with clause 7 of the Scheme - RIPS, 2003 and the same cannot be said to be either without jurisdiction or bearing incorrect or erroneous interpretation of provisions of the Scheme or VAT Act, 2003.

5. Moreover, the subsidy provided under the RIPS, 2003 is a concession and there is no vested right of assessee or manufacturer to claim a particular amount of subsidy upto a particular limit and the amount of subsidy could be curtailed or limited as has been done in clause 7 upto 50% of the 'tax payable and deposited' under the Rajasthan VAT Act, 2003 or CST Act,1956 or erstwhile Rajasthan Sales Tax Act, 1994 putting a limit on such amount of subsidy which is computed on the basis of interest paid on the funds borrowed by the assessee and such clarification of such term cannot be said to be unjustified, illegal or arbitrary.

6. The interpretation sought to be put by the learned counsel for the petitioner that 'tax payable' should be construed as 'gross tax liability' would be dehors the provisions of the S.B.CIVIL WRIT PETITION NO.6903/2009 M/s RSWM Limited V/s State of Rajasthan and ors. and one connected writ petition Order dt: 24 /11/2011 Scheme itself and VAT Act, 2003 and therefore, such distorted interpretation cannot be put on the terms 'tax payable' and upon a harmonious and plain reading of said term in RIPS, 2003 and VAT Act, 2003 as given in clause 2 of the impugned clarification dtd.10.10.2008 cannot be said to be arbitrary and illegal by any stretch of imagination and the same is found to be in consonance with the Act and the Scheme as per settled rules of interpretation of taxing statutes.

7. The clarification dtd.10.10.2008 being merely a clarification of interpretation of terms already existing would apply to all pending proceedings also and for the period prior to 10.10.2008, since the commencement of RIPS, 2003 itself and the impugned orders determining the cap of subsidy amount on the basis of net tax payable as well as the rectification orders to give effect to the same to rectify the mistake apparent under the relevant powers under the Act and Scheme would be permissible in law and the impugned orders passed by the authorities are thus bound to be upheld.

8. Accordingly, both these writ petitions are found to be devoid of merit and same are accordingly dismissed. No order as to costs. 

Case Reference - M/S. R.S.W.M. Limited vs State Of Raj. & Others on 24 November, 2011 .