Eligibility certificate under industrial incentive scheme cannot be denied solely because the finished product is tax free.

An industrial incentive scheme under the Haryana General Sales Tax Act was construed as requiring eligibility to be determined first, with the later quantification of benefit dealt with separately. The High Court noted that Rule 28A and its negative list did not expressly exclude cattle feed or units manufacturing tax-free products, so a unit could not be denied an eligibility certificate merely because its finished product was not liable to sales tax. The Court also held that an alleged departmental clarification did not bar the challenge where it was not duly communicated. On that basis, the rejection orders were quashed and the authorities were directed to proceed according to law.

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Issues: (i) Whether an industrial unit manufacturing tax-free goods can be denied an eligibility certificate under the Haryana General Sales Tax incentive scheme merely because its finished product is not liable to sales tax. (ii) Whether a prior departmental clarification or communication barred the petitioner from challenging the rejection of its application.

Issue (i): Whether an industrial unit manufacturing tax-free goods can be denied an eligibility certificate under the Haryana General Sales Tax incentive scheme merely because its finished product is not liable to sales tax.

Analysis: Section 13-B of the Haryana General Sales Tax Act, 1973 empowered exemption to promote industrial development, and Rule 28A framed the eligibility conditions. The definition of eligible industrial unit in Rule 28A(2)(f) and the negative list in Schedule III did not exclude cattle feed or units manufacturing tax-free products. The Court also noted that the scheme contemplated determination of eligibility first, while the quantum and mode of benefit were matters for a later stage. The fact that the product was tax free on the relevant date did not, by itself, create a legal bar to issuance of the certificate.

Conclusion: The denial of the eligibility certificate on the sole ground that the petitioner manufactured tax-free goods was not sustainable and was set aside.

Issue (ii): Whether a prior departmental clarification or communication barred the petitioner from challenging the rejection of its application.

Analysis: The alleged clarification was not shown to have been duly communicated to the petitioner, and the correspondence relied upon by the State was not sufficient to defeat the challenge. The objection therefore did not establish any procedural bar to adjudication of the claim on merits.

Conclusion: The objection was rejected.

Final Conclusion: The petitions succeeded, the impugned orders of the screening committees were quashed, and the authorities were directed to proceed in accordance with law.

Ratio Decidendi: A unit cannot be denied an eligibility certificate under the industrial incentive scheme merely because its finished product is tax free, unless the statute or the prescribed negative list expressly excludes it.

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