Purposive interpretation of expansion incentives: licensed capacity under obsolete industrial licensing read as existing installed capacity.

In a post-licensing regime, the expression "licensed/registered capacity" in the Rajasthan Sales Tax Incentive/Deferment Schemes, 1987 and 1989 was construed purposively to mean the unit's existing installed capacity, not the maximum theoretical capacity stated in an old industrial licence. The schemes required both increased fixed capital investment and production growth of at least 25% of the relevant base capacity, with benefit available only after prescribed utilisation was achieved. Because industrial licensing had ceased and a strict licence-based reading would frustrate the schemes' object, claims for expansion benefits could not be rejected merely by reference to the obsolete licence capacity. The units were therefore eligible for treatment as expansion units under the schemes.

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Issues: Whether, for claiming benefit as an "expansion" unit under the Rajasthan Sales Tax Incentive/Deferment Schemes, 1987 and 1989, the expression "original licensed/registered capacity" referred to the maximum capacity mentioned in the industrial licence or to the installed capacity actually existing when the expansion was undertaken.

Analysis: The schemes required both an increase in fixed capital investment and an increase in production to the extent of at least 25% of the original licensed/registered capacity, with the benefit available only after the unit had achieved the prescribed level of utilization. The Court noted that the industrial licensing regime under the Industries (Development and Regulation) Act, 1951 had been abandoned in 1991, making a rigid reference to the licensed capacity commercially and legally unrealistic for schemes that continued to operate thereafter. Reading the scheme in the light of its object, the Court held that the reference to "licensed/registered capacity" could not be confined to the theoretical maximum capacity mentioned in an old licence, but had to be understood as the existing installed capacity relevant to the unit's actual expansion and production.

Conclusion: The units were eligible to be treated as expansion units under the schemes, and rejection of their claims on the ground that production had not increased with reference to the licence capacity was in law.

Ratio Decidendi: Where an incentive or deferment scheme uses the expression "licensed/registered capacity" in a regulatory environment where industrial licensing has ceased, the expression must be construed purposively as referring to the existing installed capacity so as to make the scheme workable and consistent with its object of granting benefits for substantial expansion.

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