Astra Lighting Limited Vs. State of Punjab and ors. - Court Judgment

Excerpt:
- limitation act, 1963.[c.a. no. 36/1963]. sections 60 & 62: usufructuary mortgage right to seek redemption limitation held, the limitation of 30 years under article 61(a) begins to run when the right to redeem or the possession accrues. the right to redemption or recover possession accrues to the mortgagor on payment of sum secured in case of usufructuary mortgage, where rents and profits are to be set off against interest on the mortgage debt, on payment or tender to the mortgagee, the mortgage money or balance thereof or deposit in the court. the right to seek foreclosure is co-extensive with the right to seek redemption. since right to seek redemption accrues only on payment of the mortgage money or the balance thereof after adjustment of rents and profits from the interest thereof, therefore, right of foreclosure will not accrue to the mortgagee till such time mortgagee remains in possession of the mortgaged security and is appropriating usufruct of the mortgaged land towards the interest on the mortgaged debt. thus the period of redemption or possession would not start till such time usufruct of the land and the profits are being adjusted towards interest on the mortgage amount. in view of the said interpretation, the principle that once a mortgage, always a mortgage and, therefore, always redeemable would be applicable. the plea that after the expiry of the period of limitation to sue for foreclosure, the mortgagees have a right to seek declaration in respect of their title over the suit property would not be tenable. the mortgage cannot be extinguished by any unilateral act of the mortgagee. since the mortgage cannot be unilaterally terminated, therefore, the declaration claimed is nothing but a suit for foreclosure. it is equally well settled that it is not title of the suit, which determines the nature of the suit. the nature of the suit is required to be determined by reading all averments in plaint. such declaration cannot be claimed by ban usufructuary mortgagee. therefore, in case of usufructuary mortgage, where no time limit is fixed to seek redemption, the right to seek redemption would not arise on date of mortgage but will arise on date when mortgagor pays or tenders to the mortgagee or deposits in court, the mortgage money or the balance thereof. thus, it was held that once a mortgage always a mortgage and is always redeemable. -- transfer of property act, 1882 [c.a. no. 4/1882]. sections 60 & 62; usufructuary mortgage right to seek redemption limitation held, since the mortgage is essentially and basically a conveyance in law or an assignment of chattels as a security for the payment of debt or for discharge of some other obligation for which it is given, the security must, therefore, be redeemable on the payment or discharge of such debt or obligation. fact that at one point of time the mortgagor for one or the other reason mortgaged his property to avail financial assistance on account of necessities of life, the mortgagors right cannot be permitted to be defeated only on account of passage of time. the mortgagee remains in possession of the mortgaged property; enjoys the usufruct thereof and, therefore, not to lose anything by returning the security on receipt of mortgage debt. the limitation of 30 years under article 61(a) begins to run when the right to redeem or the possession accrues. the right to redemption or recover possession accrues to the mortgagor on payment of sum secured in case of usufructuary mortgage, where rents and profits are to be set off against interest on the mortgage debt, on payment or tender to the mortgagee, the mortgage money or balance thereof or deposit in the court. the right to seek foreclosure is co-extensive with the right to seek redemption. since right to seek redemption accrues only on payment of the mortgage money or the balance thereof after adjustment of rents and profits from the interest thereof, therefore, right of foreclosure will not accrue to the mortgagee till such time mortgagee remains in possession of the mortgaged security and is appropriating usufruct of the mortgaged land towards the interest on the mortgaged debt. thus the period of redemption or possession would not start till such time usufruct of the land and the profits are being adjusted towards interest on the mortgage amount. in view of the said interpretation, the principle that once a mortgage, always a mortgage and, therefore, always redeemable would be applicable. the plea that after the expiry of the period of limitation to sue for foreclosure, the mortgagees have a right to seek declaration in respect of their title over the suit property would not be tenable. the mortgage cannot be extinguished by any unilateral act of the mortgagee. since the mortgage cannot be unilaterally terminated, therefore, the declaration claimed is nothing but a suit for foreclosure. it is equally well settled that it is not title of the suit, which determines the nature of the suit. the nature of the suit is required to be determined by reading all averments in plaint. such declaration cannot be claimed by ban usufructuary mortgagee. therefore, in case of usufructuary mortgage, where no time limit is fixed to seek redemption, the right to seek redemption would not arise on date of mortgage but will arise on date when mortgagor pays or tenders to the mortgagee or deposits in court, the mortgage money or the balance thereof. thus, it was held that once a mortgage always a mortgage and is always redeemable. order1. delay condoned.2. the assessee has preferred this appeal under section 68 of the punjab value added tax act, 2005 (for short, 'the act'), proposing to raise following substantial questions of law:(a) whether the tribunal is correct in interpreting that the total exports in ten years have to be 25 per cent and the said 25 per cent has to be calculated annually?(b) whether the tribunal has interpreted that the terms of policy with regard to the clause that the 25 per cent of the total turnover, i.e., target for availing the tax benefits has to be calculated after ten years or every year and the tax exemption be granted for the year the said target is achieved?(c) whether the tribunal has erred in law and in facts by directing the appellant to deposit the tax in the year the targets of export are not achieved?(d) whether the tribunal has erred in law and facts by holding that during the year in which the appellant is unable to achieve the target, the tax exemption be not given?(e) whether the direction to deposit the tax at this stage would lead to diminishing of the working capital of the appellant and in turn result as a hurdle in carrying out the running of the unit?3. the assessee was granted exemption under the punjab general sales tax (deferment and exemption) rules, 1991 (for short, 'the rules') for a period of ten years from march 20, 2001 to march 19, 2011. the exemption certificate granted to the petitioner was under category 'a', i.e., export oriented unit. under rule 2(xi-a) of the rules, such a unit is defined as unit, exporting at least 25 per cent of its products with a minimum value addition of 33 per cent against direct receipt of foreign exchange or in the manner specified under the rules. till october 28, 2002, the assessee failed to make the exports as required. a show-cause notice was issued to the assessee as to why exemption certificate be not cancelled. after considering the case of the assessee, the exemption certificate was cancelled vide order dated october 28, 2002. on appeal, the matter was remanded to the assessing officer and the assessing officer reiterated its order on september 21, 2004 vide annexure a2. it was observed that the performance of the unit had to be seen every year. under the scheme of the rules, there was provision for annual assessment. mere fact that at the end of ten years, the unit may have total export of 25 per cent, could not be a ground to continue exemption when in a particular year the unit did not fulfil the eligibility of exporting 25 per cent as required.4. the assessee preferred an appeal and the appellate authority vide order dated march 30, 2006 (annexure a3) upheld the view of the assessing officer. on further appeal, the tribunal held that the assessee will not be entitled to tax exemption in the year in which target was not achieved, but if at the end of total deferment period, the assessee achieves the target, it will be entitled to refund of tax paid with interest at nine per cent per annum. the observations of the tribunal are as under:in the facts and circumstances of the case, it will not be proper for the respondent to withdraw the exemption granted and make an order of cancellation, in this respect. it will be in the interest of the state as well as the appellant-industrial unit that the appellant is allowed to continue with the production and making of exports. during the year in which it is unable to achieve the targets, tax exemption be not given and in the year in which it is able to achieve the targets till the expiry of the deferment period, tax exemption be given. if at the end of the deferment period or any time earlier, the appellant is able to show the exports and foreign exchange receipts in the percentages to its production as required and achieve the targets by totalling up, then the respondent-state shall be liable to refund of the tax collected during the period of exemption when the unit had not been able to achieve the targets and tax had been charged. that refund will be with interest at nine per cent per annum from the year it was charged, to the date of refund.5. no provision has been shown from the rules which allows exemption to continue even if the assessee does not achieve the target of exports, as required. in the absence of any such express provision, contention raised on behalf of the assessee that exemption should continue to be granted to enable the assessee to recover the tax and retain the same, irrespective of target being achieved and only after the expiry of the total period of ten years, the assessee should be required to pay the tax, if 25 per cent export target is not achieved, cannot be accepted. such a contention has no basis in the rules, as held by the tribunal.6. we are unable to hold that any substantial questions of law arises for consideration.7. dismissed.

Judgment:
ORDER

1. Delay condoned.

2. The assessee has preferred this appeal under Section 68 of the Punjab Value Added Tax Act, 2005 (for short, 'the Act'), proposing to raise following substantial questions of law:

(a) Whether the Tribunal is correct in interpreting that the total exports in ten years have to be 25 per cent and the said 25 per cent has to be calculated annually?

(b) Whether the Tribunal has interpreted that the terms of policy with regard to the clause that the 25 per cent of the total turnover, i.e., target for availing the tax benefits has to be calculated after ten years or every year and the tax exemption be granted for the year the said target is achieved?

(c) Whether the Tribunal has erred in law and in facts by directing the appellant to deposit the tax in the year the targets of export are not achieved?

(d) Whether the Tribunal has erred in law and facts by holding that during the year in which the appellant is unable to achieve the target, the tax exemption be not given?

(e) Whether the direction to deposit the tax at this stage would lead to diminishing of the working capital of the appellant and in turn result as a hurdle in carrying out the running of the unit?

3. The assessee was granted exemption under the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 (for short, 'the Rules') for a period of ten years from March 20, 2001 to March 19, 2011. The exemption certificate granted to the petitioner was under category 'A', i.e., export oriented unit. Under Rule 2(xi-a) of the Rules, such a unit is defined as unit, exporting at least 25 per cent of its products with a minimum value addition of 33 per cent against direct receipt of foreign exchange or in the manner specified under the Rules. Till October 28, 2002, the assessee failed to make the exports as required. A show-cause notice was issued to the assessee as to why exemption certificate be not cancelled. After considering the case of the assessee, the exemption certificate was cancelled vide order dated October 28, 2002. On appeal, the matter was remanded to the assessing officer and the assessing officer reiterated its order on September 21, 2004 vide annexure A2. It was observed that the performance of the unit had to be seen every year. Under the scheme of the Rules, there was provision for annual assessment. Mere fact that at the end of ten years, the unit may have total export of 25 per cent, could not be a ground to continue exemption when in a particular year the unit did not fulfil the eligibility of exporting 25 per cent as required.

4. The assessee preferred an appeal and the appellate authority vide order dated March 30, 2006 (annexure A3) upheld the view of the assessing officer. On further appeal, the Tribunal held that the assessee will not be entitled to tax exemption in the year in which target was not achieved, but if at the end of total deferment period, the assessee achieves the target, it will be entitled to refund of tax paid with interest at nine per cent per annum. The observations of the Tribunal are as under:

In the facts and circumstances of the case, it will not be proper for the respondent to withdraw the exemption granted and make an order of cancellation, in this respect. It will be in the interest of the State as well as the appellant-industrial unit that the appellant is allowed to continue with the production and making of exports. During the year in which it is unable to achieve the targets, tax exemption be not given and in the year in which it is able to achieve the targets till the expiry of the deferment period, tax exemption be given. If at the end of the deferment period or any time earlier, the appellant is able to show the exports and foreign exchange receipts in the percentages to its production as required and achieve the targets by totalling up, then the respondent-State shall be liable to refund of the tax collected during the period of exemption when the unit had not been able to achieve the targets and tax had been charged. That refund will be with interest at nine per cent per annum from the year it was charged, to the date of refund.

5. No provision has been shown from the Rules which allows exemption to continue even if the assessee does not achieve the target of exports, as required. In the absence of any such express provision, contention raised on behalf of the assessee that exemption should continue to be granted to enable the assessee to recover the tax and retain the same, irrespective of target being achieved and only after the expiry of the total period of ten years, the assessee should be required to pay the tax, if 25 per cent export target is not achieved, cannot be accepted. Such a contention has no basis in the Rules, as held by the Tribunal.

6. We are unable to hold that any substantial questions of law arises for consideration.

7. Dismissed.