Job-work production under tax incentive scheme requires a factual finding before eligibility can be denied

Eligibility for sales tax incentive under clause 2(f) of the Sales Tax Incentive Scheme, 1989 depends on a factual finding on whether job-work production is of the kind covered by the scheme and can be counted toward increased production. Where the nature of third-party job-work has not been established before the revenue authorities, an assessment treating the assessee as ineligible is premature. The assessing authority must examine the evidence, determine the character of the job-work, and then decide entitlement after hearing the assessee. The impugned assessment was therefore set aside and the matter remitted for fresh consideration on the factual issue governing the incentive.

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Issues: Whether production undertaken on job-work basis could be taken into account while determining the increase in production under clause 2(f) of the Sales Tax Incentive Scheme, 1989, and whether the assessment order could stand without a factual finding on the nature of such job-work.

Analysis: The earlier Supreme Court decision had set aside the prior findings because the nature of the job-work had not been established before the revenue authorities. The governing question was therefore factual: whether the work done for third parties was of similar goods capable of being manufactured by the expanded unit so as to form part of the increase in production, or whether it related to different goods and could not be counted. In the absence of such findings, the assessment made against the assessee treating it as ineligible was premature. The competent assessing authority was required to examine the evidence, determine the nature of the job-work, and then decide eligibility under the Scheme.

Conclusion: The assessment order could not be sustained without the required factual determination, and the matter had to be reconsidered by the assessing authority after hearing the assessee.

Final Conclusion: The impugned assessment was set aside and the matter was remitted for fresh consideration on the factual question governing entitlement to the sales tax incentive.

Ratio Decidendi: Where eligibility under an incentive scheme depends on the nature of job-work production, the revenue authority must first record a factual finding on whether such job-work is of the kind covered by the scheme before denying or granting the benefit.

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