Sales tax exemption period runs from commencement of production, and penalty notice for exempt-period non-payment was quashed.

A newly set-up industrial unit was entitled to sales tax exemption for five years counted from the actual commencement of production, not from the date of the exemption notification. Applying that interpretation, the unit remained within the exempted period for the relevant quarter, so the authority had no legal basis to treat tax as payable during that time. A notice proposing penalty for non-payment of admitted tax for the exempt period was therefore without authority and liable to be quashed.

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Issues: Whether a newly set-up industrial unit was entitled to sales tax exemption for five years from the date production commenced, and whether a notice for penalty for non-payment of admitted tax during that period could be issued.

Analysis: The notification governing the exemption provided that the five-year period would run from the date the industry started production. The period was therefore to be counted from the actual commencement of production, not from the date of the notification. On that basis, the industrial unit remained within the exempted period for the relevant quarter, and the authority had no legal basis to proceed on the footing that tax was payable during that time.

Conclusion: The petitioner was entitled to exemption from sales tax for the period from the start of production, and the notice seeking to levy penalty for non-payment of admitted tax was without authority and liable to be quashed.

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