Industrial incentive scheme: eligibility certificates bind tax authorities, and each independent manufacturing unit may claim separate exemption benefits.

An industrial incentive scheme treated the eligibility certificate issued by the Department of Industries as the ative step for tax exemption, so the sales tax authority could not re-examine that eligibility and could interfere only on limited grounds such as fraud or misrepresentation. On that basis, the exemption rejection was unsustainable. The scheme was also construed to advance industrial investment, so three independently functioning manufacturing units, with separate books and distinct products, could each claim a separate exemption limit. The benefit could not be confined to one unit merely because the same entrepreneur owned them.

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Issues: (i) whether the sales tax authorities could refuse an exemption certificate after the Department of Industries had granted eligibility certificates; (ii) whether three independently functioning manufacturing units under one entrepreneur were each entitled to a separate exemption limit under the 1989 Policy and the 1991 Rules.

Issue (i): whether the sales tax authorities could refuse an exemption certificate after the Department of Industries had granted eligibility certificates.

Analysis: The scheme required an eligible unit to obtain an eligibility certificate from the Department of Industries and thereafter apply for the exemption certificate in the prescribed form. The prescribed authority under the sales tax regime had only a limited role and could not sit in appeal over, or re-examine, the eligibility already determined by the competent industries authority. Its power was confined to matters such as fraud, deceit, misrepresentation or similar grounds for cancellation. The incentive scheme was therefore structured so that the Industries Department's determination of eligibility was conclusive for the purpose of the exemption process.

Conclusion: The sales tax authorities had no jurisdiction to question the eligibility certificates issued by the Department of Industries.

Issue (ii): whether three independently functioning manufacturing units under one entrepreneur were each entitled to a separate exemption limit under the 1989 Policy and the 1991 Rules.

Analysis: The policy and rules were framed to encourage industrial investment and had to be read in a manner that advanced that object. The record showed that the three units were independent manufacturing plants, maintained separate books and produced different goods. The definition of "unit" in the rules did not justify restricting the incentive to only one unit merely because the same dealer owned them. The later liberalisation of the policy also supported the construction that each independent unit could be treated separately for incentive purposes.

Conclusion: Each of the petitioner's three units was entitled to separate exemption benefits, and the benefit could not be confined to one unit only.

Final Conclusion: The challenge succeeded on both issues, the rejection orders were set aside, and the petitioner obtained relief for the additional units as well.

Ratio Decidendi: Where an industrial incentive scheme makes eligibility certificate issuance the decisive step for availing tax exemption, the sales tax authority cannot re-adjudicate eligibility, and independently established units cannot be denied separate benefits unless the scheme expressly imposes such a restriction.

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