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| Baig's legal bid fails to save softdrink of Rs 5 crore penalty | | | Early Times Reporter
Jammu|Sep 17
As a Minister for Finance and Law for nearly four years, the Peoples Democratic Party stalwart Muzaffar Hussain Baig apparently did everything best to protect interests of the state but now after crossing over the fence he stood against a government contention but had to loose a legal battle to his one time 'student' eventually bringing a disappointment to his client softdrink which has been slapped with a penalty of over Rs five crores.
After Rs three crore penalty to the ICICI Lombard which had tried to get away with the tax dues, the soft drink tycoon, has come under a Rs five crore tax slap which has been upheld by the Jammu and Kashmir High Court. Senior advocate Muzaffar Hussain Baig, who might have tried to "break necks" of the tax evaders during his stint as Finance Minister, defended the case of softdrink but eventually lost. Ironically, when it came to defending the State's interests, Baig's once junior Altaf Hussain Naik, the Advocate General of the J&K Government, had his way.
It is interesting to recall here that before joining as a Minister in Jammu and Kashmir government in 2002, Muzaffar Hussain Baig was a standing counsel for the softdrink besides other corporate majors. The present Advocate General Altaf Hussain Naik then used to work in Baig's chamber in Delhi. Baig is regarded as a master of the corporate law.
In a petition pleaded by Muzaffar Hussain Baig, Justice YP Nargotra of J&K High Court Jammu wing by a common judgment disposed of two writ petitions filed by Hindustan Coca Cola Beverages Pvt Ltd and held that no benefit under VAT Act stands granted to prestigious units, therefore, the order of the authority under the Value Added Tax Act imposing the penalty of Rs 5, 23, 07, 793.33 cannot be held to be invalid because the petitioner was enjoying tax exemption in terms of SRO 247 as the exemption granted is not extendable to the liability to pay tax under the Vat Act. The petitioner is therefore liable to pay tax under the Vat Act, said the court.
In two writ petitions filed in the year 2002 and 2005, the dispute in the petition filed in the year 2002 relates to the entitlement of petitioner company to the benefit of tax exemption liable under the provision of J&K General Sales Tax Act being a " Prestigious Unit" in terms industrial Policy formulated and implemented for the years 1998-2003. In the petition filed in the year 2005 challenging the order passed by commercial tax officer circle-1 Jammu on July 26, 2005, imposed the penalty of Rs 5, 23, 07,793.33 for the first quarter of 2005-2006 and consequently issued the recovery certificate on August 9, 2005.
Justice YP Nargotra after hearing Beigh appearing for the petitioner and Advocate General AH Naik appearing for the state respondents observed that SRO 91 contemplates grating of remission of tax in favour of small medium and large scale industrial units up to the year 2010. According to Sr. Adv MH Beigh that even after the enforcement of Vat Act, the Govt found it necessary to grant tax benefit to the said unit in view of the fact that the industry in the state was still informative stage. Why similar benefit should be not extended to " Prestigious Units" going by the same reasoning that industry in the state is still in the formative stage. Adv Beigh further stated that the state Govt could not have left out the " Prestigious Units" while grating tax benefits to small, medium and large scale industrial units. Upon this the court said that the fact remains that grating of the similar benefits to " Prestigious Unit" is a policy matter for the Govt to decide in which Courts have no role to play. It would suffice to say that it would have been appropriate if the Govt have consider the case of " Prestigious Unit" as well for granting tax remissions, which it may even now considered as after all the "Prestigious Unit" are also most important component of industrial growth meets much in the state.
Justice YP Nargotra further said that that no benefit under VAT Act stands granted to "Prestigious Units", therefore, the order of the authority under the VAT Act imposing the penalty (Rs 5, 23, 07, 793.33) cannot be held to be invalid because the petitioner was enjoying the tax exemption in terms of SRO 247.
As the exemption granted is not extendable to the liability to pay tax under the VAT Act, the petitioner is, therefore, liable to pay tax under the Act. Without prejudice to the right of the petitioner to appeal or avail other available remedies under the VAT Act the orders issued for imposition of penalty are held to be legally competent. With these observations Court allowed the petition 513/2002 regarding exemption and petitioner is held to be a " Prestigious Units" entitled to be the tax exemption benefit in terms of SRO 247 with effect from January 12, 2002 to Marc h 31, 2005 and consequentially the orders dated January 15, 2002, March 18, 2002 and October 25, 2002 are set-aside. However writ No 579/2005 regarding recovery of penalty challenged by the petitioner company shall stand dismissed.
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