1998 (11) TMI 530 - SC - VAT and Sales Tax

Court invalidates notification imposing conditions on sales tax exemption for pre-1993 industrial units.

The court held that industrial units established before April 1, 1993, with investments not exceeding Rs. 15 crores and commencing production before that ... CONCESSION — EXEMPTION FROM SALES TAX ON PURCHASE OF RAW MATERIAL - BENEFIT AVAILABLE ALSO TO OLD INDUSTRIAL UNITS, WHOSE INVESTMENT ON PLANT AND MACHINERY DID NOT EXCEED RS. 15 CRORES Issues Involved:1. Entitlement to benefits under paragraph 10.4(i)(b) of the Industrial Incentive Policy, 1993.2. Validity of Notification No. S.O. 95 dated April 4, 1994, imposing conditions on the benefit of sales tax exemption.Issue-wise Detailed Analysis:1. Entitlement to Benefits under Paragraph 10.4(i)(b) of the Industrial Incentive Policy, 1993:The primary issue was whether industrial units established before April 1, 1993, with investments in plant and machinery not exceeding Rs. 15 crores and which had commenced production before that date, were entitled to the benefit of sales tax exemption on the purchase of raw material for seven years from April 1, 1993, as per paragraph 10.4(i)(b) of the Industrial Incentive Policy, 1993.The petitioners argued that paragraph 10.4(i)(b) clearly referred to old industrial units without any condition regarding the date of production or previous benefits availed under earlier policies. The policy did not impose any additional conditions beyond the stated investment limit.The State, represented by the learned Advocate-General, contended that the policy was intended to exclude units that had already benefited under previous policies. The notification dated April 4, 1994, was issued to clarify that only units not availing earlier benefits were eligible for the exemption.The court held that the Industrial Incentive Policy of 1993 must be read as a whole. The policy's language was clear and unequivocal in extending the sales tax exemption to old industrial units meeting the investment criteria, without any additional conditions. The court concluded that the policy did indeed confer this limited benefit on older units, and the notification's additional condition was not warranted by the policy.2. Validity of Notification No. S.O. 95 dated April 4, 1994:The notification issued by the Commercial Taxes Department on April 4, 1994, stipulated that the sales tax exemption on the purchase of raw materials would only be granted to units that had not availed of benefits under any previous industrial policy.The petitioners argued that this notification was contrary to the clear language of the Industrial Incentive Policy, 1993, and thus should be quashed. They asserted that the notification effectively deprived them of the benefits promised under the policy.The State defended the notification, claiming it was consistent with the policy and issued under the authority of paragraph 10.5 of the policy, which allowed the Commercial Taxes Department to impose conditions for the exemption.The court found that the notification's condition was inconsistent with the policy decision. The Industrial Incentive Policy of 1993 did not impose such a condition, and the notification could not modify the policy by adding conditions that deprived industrial units of the benefits granted. The court held that the notification was invalid to the extent it imposed the additional condition.Conclusion:The court allowed the writ petitions, quashing the notification dated April 4, 1994, to the extent it imposed a condition that the facility of sales tax exemption on the purchase of raw material would be available only to old industrial units that had not availed of any facility/benefit under the earlier incentive policy. The court declared that the petitioners were entitled to the facility of sales tax exemption on the purchase of raw material under paragraph 10.4(i)(b) of the Industrial Incentive Policy, 1993.