Sales tax exemption for expanded existing units may extend to priority industry status under industrial policy notifications.

An expanded and modernized existing industrial unit may qualify for sales tax exemption under the applicable industrial policy and notifications if it satisfies the criteria for priority industry status or pipeline status. The materials described the unit as moving from SSI to Medium Scale Industry, with contemporaneous industry certificates recognising it as a priority industry and granting concession. The stated point is that policy benefits were not confined to newly established units alone, but extended to qualifying existing units making fixed capital investment. On that basis, the cancellation of the eligibility certificate was treated as unsustainable.

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Issues: Whether the petitioner, having expanded and modernized its existing industrial unit and been recognised as a priority industry, was entitled to sales tax exemption for an additional two years under the Industrial Policy Resolution 1996 and the relevant notifications, and whether the cancellation of its eligibility certificate was sustainable.

Analysis: The unit had originally been an SSI and later underwent expansion and modernization, resulting in a Medium Scale Industry status. The materials on record showed that the unit satisfied the conditions of an existing industrial unit undertaking fixed capital investment and also fulfilled the criteria for an industry in the pipeline under the relevant notification. The contemporaneous certificates issued by the Director of Industries recognised the unit as a priority industry and granted sales tax concession. The cancellation proceeded on a mistaken premise that the policy benefit was confined only to a new unit, whereas the notifications themselves contemplated benefits for qualifying existing units and priority industries. The record also showed that the unit had been included in the list of pipeline industries and that the Opposite Parties could not dislodge the factual basis supporting eligibility.

Conclusion: The petitioner was entitled to the sales tax benefit as a priority industry and to the additional two years of exemption claimed by it. The cancellation of the eligibility certificate was unsustainable and was set aside.

Ratio Decidendi: Where an existing industrial unit satisfies the conditions of the applicable industrial policy and notifications for priority industry status or pipeline status after expansion and modernization, the authorities cannot deny sales tax exemption by restricting the benefit to newly established units alone.

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