Sales tax exemption under later industrial policy denied where unit was outside the eligible class under the earlier policy.

A unit that was ineligible for sales tax incentive under the 1986 industrial policy could not claim the extended two-year exemption under clause 7.2.3 of the 1989 policy as a continuing industry, because that benefit was confined to small-scale units that had already qualified for and enjoyed five years' exemption under the earlier policy. It also could not be treated as a new industry under Part I of the 1989 policy, since that part applied only to units established under the 1989 regime after its effective date. The later notification dated 16.08.1990 did not revive entitlement outside that class, so sales tax exemption was denied.

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Issues: Whether the respondent-unit was entitled to sales tax exemption under the Industrial Policy Resolution, 1989 as a continuing industry of the 1986 policy, as a new industry under the 1989 policy, or under the amending sales tax notification dated 16.08.1990.

Analysis: Clause 7.2.3 of the Industrial Policy Resolution, 1989 extended the benefit of sales tax exemption for two additional years only to small-scale continuing units of the 1986 policy which had already been eligible for and had enjoyed exemption for five years under that policy. The respondent-unit was set up when the 1986 policy was operative, but it fell within the ineligible category under that policy and therefore could not claim the status of a continuing industry entitled to the extended benefit under the 1989 policy. The unit also could not be treated as a new industry under Part I of the 1989 policy because that part applied only to units established under the 1989 policy after its effective date. The notification dated 16.08.1990, read with the industrial policy framework, applied only to industries covered by the 1989 regime and did not revive entitlement for a unit that was already outside the eligible class under the earlier policy.

Conclusion: The respondent-unit was not entitled to sales tax exemption under the Industrial Policy Resolution, 1989 or the notification dated 16.08.1990.

Final Conclusion: The challenge to the High Court's view succeeded, and the writ relief granting sales tax exemption was set aside.

Ratio Decidendi: A unit that was ineligible for sales tax incentive under the earlier industrial policy cannot claim extended or transitional exemption as a continuing unit, and a later policy or notification does not create entitlement unless the unit falls within the class expressly covered by that policy.

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