Sales tax incentive conditions must be read harmoniously; diversified units cannot be tied to an irrelevant existing-unit benchmark.

Sales tax deferral and waiver under the incentive scheme turned on harmonised reading of the statutory notifications, Government Order, eligibility certificate and agreement. For an expansion unit, the base production and base sales conditions were treated as a single regulatory test, so relief applied when the financial year's production exceeded the base production volume and sales exceeded the base sales volume. For a diversified unit, the existing unit's production benchmark was held inapplicable because the diversified unit made a different product; it was to be treated as a new plant for relief, and the matter was directed for reconsideration on merits. The demands were set aside with consequential relief.

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Issues: (i) Whether an expansion unit of an existing industry is entitled to sales tax deferral in a financial year when production exceeds the base production volume for sales made in that year in excess of the base sales volume. (ii) Whether a diversified unit of an existing industry is entitled to sales tax waiver in a financial year when production exceeds the base production volume for sales made in that year in excess of the base sales volume, even if the existing unit and the diversified unit manufacture different products and the existing unit was later sold to a third party.

Issue (i): Whether an expansion unit of an existing industry is entitled to sales tax deferral in a financial year when production exceeds the base production volume for sales made in that year in excess of the base sales volume.

Analysis: The deferral scheme was held to arise from the statutory notifications, while the later Government Order, the eligibility certificate and the agreement supplied the method and machinery for implementing the scheme. Those instruments had to be read harmoniously. On that construction, the conditions as to base production volume and base sales volume were not independent alternatives but part of a single regulatory test intended to protect past revenue while granting the incentive. The circular issued under the Act also supported the view that entitlement turns on reaching the benchmark in the relevant year.

Conclusion: The industry is entitled to sales tax deferral when production in a financial year exceeds the base production volume and the sales in that year exceed the base sales volume, and the issue is answered in favour of the assessee.

Issue (ii): Whether a diversified unit of an existing industry is entitled to sales tax waiver in a financial year when production exceeds the base production volume for sales made in that year in excess of the base sales volume, even if the existing unit and the diversified unit manufacture different products and the existing unit was later sold to a third party.

Analysis: The waiver scheme was also held to be statutory, but the benchmark adopted for the diversified unit was found to be irrational because the diversified unit manufactured a product wholly different from the existing unit. The existing unit's production figures could not sensibly govern the diversified unit's eligibility. In that setting, the eligibility condition in the certificate was held inapplicable, and the unit was to be treated as a new plant for the purpose of relief, with the Government directed to reconsider the matter on merits.

Conclusion: The eligibility condition based on the existing unit's base production and base sales did not apply to the diversified unit, and the issue is answered in favour of the assessee.

Final Conclusion: The impugned demands were set aside, and the petitioners were held entitled to the relevant sales tax reliefs, with consequential reconsideration and refund directions.

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