Sales tax exemption conditions upheld where production continuity safeguards prevented diversion between units and supported industrial development.

The sales tax exemption notification was issued under section 42(1) of the Himachal Pradesh General Sales Tax Act, 1968, so it could validly impose conditions on the grant of exemption. The condition requiring the old unit to maintain its production level before the new unit could retain the exemption was upheld because it was aimed at preventing diversion of production between units, applied to the industrial complex as a whole, and was considered just and reasonable in furthering industrial development and employment generation. The challenge to the notification therefore failed.

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Issues: Whether the condition in the sales tax exemption notification requiring the old unit to maintain its production level as a prerequisite for exemption to the new unit was valid and enforceable.

Analysis: The exemption from sales tax was granted under the notification issued in exercise of powers under section 42(1) of the Himachal Pradesh General Sales Tax Act, 1968, and not under the incentive policy itself. The policy contemplated sales tax deferment for prestigious cement units, whereas the notification conferred exemption and could lawfully prescribe conditions for the grant of that benefit. The Court found that the petitioner and the other cement unit stood on different footing, and that the impugned condition was designed to prevent diversion of production from the old unit to the new unit while still retaining the tax benefit. Since the benefit was extended to the industrial complex as a whole and the condition served the object of industrial development and employment generation, it was held to be just and reasonable.

Conclusion: The condition attached to the exemption was upheld as valid, and the challenge to the notification failed.

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