Sales-tax incentive scheme cut-off rules limited post-date claims, while pre-cut-off acquired assets remained eligible despite later payment.

A beneficial sales-tax incentive scheme was construed as capped by the stated cut-off date, so expenditure incurred after 31 December 2005 and claims to extend benefits through Phase-II as a pipeline project were rejected. The scheme could not be enlarged beyond its terminal date merely because production had begun shortly before the cut-off. At the same time, plant and machinery acquired before the cut-off date remained eligible capital investment even if payment was made later, because deferred payment does not alter the character of an already acquired asset. Advance payments for assets not actually acquired and installed within the relevant period were excluded.

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Issues: (i) whether the petitioner was entitled to sales-tax incentive on investment or expenditure incurred after 31 December 2005 but within 18 months from commencement of commercial production; (ii) whether Phase-II could be treated as a pipeline project for extending the scheme period; and (iii) whether plant and machinery acquired before 31 December 2005 but paid for later could be included in eligible investment.

Issue (i): whether the petitioner was entitled to sales-tax incentive on investment or expenditure incurred after 31 December 2005 but within 18 months from commencement of commercial production.

Analysis: Clause 3.8 of the scheme was construed as keeping the scheme period capped by 31 December 2005, and the omission of the words indicating that the earlier of the two dates would govern was treated as an inadvertent printing error. The scheme was read harmoniously and purposively, and the Court declined to permit a claim based on the later period merely because the petitioners had commenced production shortly before the cut-off date.

Conclusion: The issue was answered against the assessee.

Issue (ii): whether Phase-II could be treated as a pipeline project for extending the scheme period.

Analysis: The scheme itself identified pipeline units as those which had not commenced commercial production before the relevant cut-off date. Since the petitioners had already commenced production, Phase-II could not be split out and treated as a pipeline project for extending the benefit up to 31 December 2007.

Conclusion: The issue was answered against the assessee.

Issue (iii): whether plant and machinery acquired before 31 December 2005 but paid for later could be included in eligible investment.

Analysis: Relying on the principle that deferred payment does not change the character of an asset already acquired for the industry, the Court held that investment in land, building, plant and machinery acquired before the cut-off date could not be excluded merely because payment was made later. However, advance payments for assets not actually acquired and installed before the cut-off date were not eligible.

Conclusion: The issue was answered partly in favour of the assessee.

Final Conclusion: The petition succeeded only to the limited extent that eligible capital investment had to include assets acquired before the cut-off date even if paid for later, while the broader claims for post-cut-off expenditure and Phase-II benefits were rejected, and the matter was remitted for giving effect to the limited relief.

Ratio Decidendi: Under a beneficial incentive scheme, assets acquired before the specified cut-off date cannot be excluded from eligible capital investment merely because payment was deferred, but the scheme cannot be extended beyond its stipulated terminal date or to assets not actually acquired and installed within the governing period.

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