Sales tax deferment for industrial expansion could not be confined to incremental production under the 1996 policy regime.

Under the Industrial Policy, 1996 and the Punjab Industrial Incentive Code, 1996, sales tax deferment for expansion was to be governed by the later scheme based on additional fixed capital investment, not by the earlier incremental-production model. The amended Rule 4-B of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 was treated as overriding Rule 4 to implement that policy, so deferment for an expansion after 1 April 1996 could not be confined to incremental production. Proceedings founded on that assumption were invalid, and the restrictive condition was quashed; the unit was entitled to deferment on total production under the applicable policy regime.

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Issues: Whether the condition granting sales tax deferment only on an incremental basis could be applied to the petitioner's expanded industrial unit under the Industrial Policy, 1996 and the Punjab Industrial Incentive Code, 1996, and whether the proceedings initiated on the basis of that condition were valid.

Analysis: The governing framework under the Industrial Policy, 1996 and the Punjab Industrial Incentive Code, 1996 replaced the earlier concept of incentive on incremental production with a scheme based on additional fixed capital investment. The later-amended Rule 4-B of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991, which was introduced to give effect to the 1996 policy, was treated as overriding the earlier provisions of Rule 4 and the incremental-production method used under the earlier regime. On that construction, the deferment benefit for an expansion undertaken after 1 April 1996 could not lawfully be confined to incremental production. Since the notice and further proceedings were founded on the erroneous assumption that only incremental deferment was available, those proceedings could not stand.

Conclusion: The condition restricting deferment to incremental basis was illegal and was quashed, and the petitioner was held entitled to deferment benefits on total production under the applicable 1996 policy regime.

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