TaxTMI 
TaxTMI 
2009 (11) TMI 872
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....t the State of Himachal Pradesh with a view to encourage the setting up of industrial units in the State framed an Industrial Policy in which certain incentives and concessions were given to the industries. We are concerned with clause 7.1.1 which reads as follows: "7.1.1. Village industries/tiny units: New industries with fixed capital investment up to Rs. 10 lakhs and financed wholly by HPKVIB/KVIC shall be exempted from payment of sales tax for a period of eight years in industrially backward areas and in priority sector, and for a period of five years for units in industrially developing areas. In respect of other new village industries and tiny units, sales tax shall be leviable at a concessional rate of 25 per cent of the applicable ....
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....es Act, 1956, or the Board constituted under the Himachal Pradesh Khadi and Village Industries Board Act, 1966: (i) for a period of eight years in case the unit is located in the industrially backward areas or in case the unit is a priority industrial unit, and (ii) for a period of five years in case the unit is located in the industrially developing areas: 2.. The Governor is further pleased to direct that the tax shall be levied at the rate of 25 per cent of the rates notified or specified under section 6 of the aforesaid Act on the sale of goods [other than those manufactured by the breweries, distilleries, non-fruit/vegetable based wineries and bottling plants (both of country liquor and Indian-made foreign liquor) manufacture....
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....cerned unit goes over the prescribed limits of Rs. 45 lacs and Rs. 60 lacs, then the unit is liable to pay sales tax at full rates even on the turnover up to the limit of Rs. 45 lacs and Rs. 60 lacs. A perusal of the incentive policy clearly shows that it was held out to the investors that if a village industry/tiny unit with a fixed capital investment up to Rs. 10 lacs is financed wholly by the HPKVIB/KVIC then the unit is entitled to total exemption of sales tax for a period of eight years if the unit is located in industrially backward areas and falls in the priority sector and for a period of five years in industrially developing areas. However, in respect of other new village industries and tiny units with fixed capital investm....
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....We are unable to accept this contention of the State. This would make the very incentive policy infructuous. We must remember that sales tax is an indirect tax which the producer has to collect from the customer. In case the unit is located in the industrially backward area and falls in the priority sector as per the notification for eight years, no tax had to be paid up to a turnover of Rs. 60 lacs per annum. We may take the example of a unit where the turnover for the entire year is Rs. 61 lacs. If the argument made on behalf of the State is accepted then the result would be that the unit would have to pay sales tax on the entire sales of Rs. 61 lacs at the full prescribed rate whereas on sales up to Rs. 60 lacs it will not have collected....