Sales tax incentive restrictions on deemed expansion units struck down as unauthorised pro rata conditions under the entitlement scheme.

Sales tax incentive conditions restricting a deemed expansion unit to proportionate or pro rata benefits were invalid where the package scheme conferred entitlement on the unit as such. The Bombay High Court followed earlier Division Bench authority and held that the Deputy Commissioner had no power to impose restrictive conditions through the trade circular or the certificate of entitlement when they cut down the scheme benefit. The proportional benefits theory was not applicable in the manner attempted, and the impugned circular conditions and corresponding entitlement conditions were set aside in favour of the assessee.

---

---

Issues: Whether the conditions introduced by the trade circular and incorporated in the certificate of entitlement, which restricted sales tax incentives for a deemed expansion unit by applying proportionate or pro rata computation, were valid.

Analysis: The challenged conditions required the unit to receive incentives only on the proportion of production attributed to the expansion unit and not on the entire production of the eligible unit. The Court followed the earlier Division Bench view that the Deputy Commissioner had no authority to impose such restrictive conditions where the package scheme conferred the benefit on the unit under the stated entitlement. The proportional benefits theory was held inapplicable in the manner sought to be applied through the circular and entitlement certificate conditions.

Conclusion: The impugned circular conditions and the corresponding conditions in the certificate of entitlement were invalid and were set aside in favour of the assessee.

---