1. Dispute over eligibility for sales tax exemption under Industrial Policy Resolutions where a unit set up under a previous policy seeks benefits under a subsequent policy. (Para 2 , 3 , 4 )
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1998 Supreme(SC) 1007
1998(7) Supreme 382
Supreme Court of India
(From Orissa High Court)
S.P. Bharucha & V.N. Khare, JJ.
State of Orissa & Ors. -Appellants
versus
M/s. Vijay Laxmi Oil Industries etc. -Respondents
Civil Appeal No. 364 of 1994
With
C.A. No. 4889 of 1998
(Arising out of SLP (C) No. 10798/94)
With
C.A. Nos. 10757-10758 of 1996
And
C.A. No. 5630 of 1994
Decided on 18-9-1998
Counsel for the Parties :
For the Appellants : P.N. Misra, R.B. Masodkar, A.K. Gupta, Farrukh Rasheed, Advocates.
For the Respondents : Dushyant A. Dave, Sr. Advocate, Ms. Bina Gupta, Rakhi Ray and Ramesh Singh, Advocates.
Important Points
Important Point
The respondent oil unit was not eligible to get concession in the form of sales tax exemption under (Industrial Policy Resolution) Notification dated 16.8.90.
The respondent oil unit was not eligible to get concession in the form of sales tax exemption under (Industrial Policy Resolution) Notification dated 16.8.90.
Subject
Taxation Law - Sales Tax Exemption
Act Referred
Headnote
Industrial Policy Resolution, 1989-Clause 7.2.3-Exemption of sales tax on finished products-High Court of Orissa allowed the writ applications filed by the respondents and further directed the appellants to issue necessary sales tax exemption certificate in favour of the respondents under IPR 1989 issued by State of Orissa-Whether correct? (No).
Held : (A plain reading of clause 7.2.3 of Industrial Policy Resolution, 1989). Shows that only those Small Scale Continuing Units of 1986 Policy which were eligible to get concession/incentive and further has received such concession for five years would be given exemption of sales tax on finished product for additional period of two years. As stated above, although the respondent set up its unit on 17.7.89, but it was not eligible to get incentives/concessions in the form of sales tax exemption under IPR 1986 as it was in the “ineligible list” for grant of incentive/concessions irrespective of input capacity according to the provision of Part B definition (f) of IPR 1986. Thus, in view of clause 7.2.3, the respondent’s unit was not entitled to the benefit of incentives/concessions in the form of sales tax exemption under IPR 1989 as a continuing unit of 1986 Policy and it is here that the High Court fell in error in treating the respondent’s unit as entitled to the benefit of sales tax exemption under IPR 1989. (Para 9)
No doubt, Oil Mills of more than 10 M.T. were shown in the list of industries eligible to get exemption of sales tax in the notification dated 16.8.1990, but this amendment related to the industries which have commenced investment after 1.12.1989 which is effective date of IPR 1989. Admittedly, respondent Unit was set up prior to 1.12.1989 when the IPR 1986 was operative, the respondent Unit therefore cannot be treated as new Unit under IPR 1989 and notification dated 16.8.90 granting sales tax exemption to oil mills having output of more than 10 M.T. was not applicable to the respondent Unit which is a Unit under IPR of 1986. Since the respondent Unit was not eligible to get concession in the form of sales tax exemption under IPR 1986 it was not a continuing Unit of 1986 Policy under Part II of IPR 1989 and further was not a new industry under IPR 1989, as such was not entitled to sales tax exemption under Notification dated 16.8.1990. (Para 11)
Held finally : For the foregoing reasons, we are of the opinion that the judgment and order of the High Court in allowing the Writ Application of the respondent is not sustainable in law. We, accordingly set aside the impugned judgments and allow the appeals. All the three Writ Applications filed by the respondents shall, stand dismissed. There shall be no order as to costs. (Para 12)
Legal Category Hierarchy
Table of Contents
2. Whether a unit ineligible for exemptions under a prior industrial policy can claim benefits as a continuing industry or a new industry under a subsequent policy. (Para 6 , 10 , 11 )
3. A unit ineligible for exemptions under a prior policy cannot claim additional benefits as a continuing unit, nor be treated as a new unit if set up earlier. (Para 7 , 8 , 9 , 10 , 11 )
4. Eligibility for incentives under a subsequent industrial policy for continuing units depends on the unit's eligibility for incentives under the preceding policy. (Para 8 , 9 )
5. High Court judgments set aside and appeals allowed, resulting in the dismissal of the writ applications. (Para 12 )
6. Can a unit ineligible for sales tax exemption under a previous Industrial Policy Resolution (IPR) claim benefits as a continuing unit under a subsequent IPR?
No. Benefits for continuing units under a subsequent policy are only available to units that were eligible for and received incentives under the preceding policy. (Para 8 , 9 )
7. Does the date of commencement of commercial production determine whether an industry is a new industry under a specific Industrial Policy Resolution?
No. To be considered a new industry, the unit must be set up under that specific policy's framework. A unit set up under a previous policy cannot be treated as a new unit simply because commercial production began during the subsequent policy's tenure. (Para 10 )
8. How should government notifications regarding sales tax exemptions be interpreted in relation to Industrial Policy Resolutions?
Notifications on sales tax exemptions must be read in conjunction with the relevant Industrial Policy Resolutions. Amendments to such notifications typically apply only to industries that commenced investment after the effective date of the corresponding policy resolution. (Para 11 )
Judgment
V.N. Khare, J.-Leave granted.
2. This group of Civil Appeals is directed against the separate judgments and orders passed by the High Court of Orissa whereby the High Court has allowed the Writ Applications filed by the respondents, and further directed the appellants herein to issue necessary sales tax exemption certificate in favour of the respondents under Industrial Policy Resolution 1989 (in short IPR 1989), issued by the State of Orissa. Since common questions of facts and law are involved in this group of appeals, we propose to decide these appeals by a common judgment, noticing the facts of leading case Civil Appeal No. 364/94.
3. The State of Orissa, appellant No. 1 herein, had been issuing IPRs from time to time and for the purpose of the present case we are concerned with IPR 1986 and IPR 1989. The basic purpose for issuing IPRs by the State of Orissa was to maintain and enhance the growth of industrialization in the State by giving incentives/concessions to the industries which were set up within its State. Each one of these Policy Resolutions has a cut off date called “effective date” and it remained valid till the announcement of next Policy Resolution, except to the extent the new IPR allowed continuance of the provisions of the earlier Policy Resolutions. In such Resolutions, certain categories of industries were kept outside the purview of incentives/concessions provided in the IPR. Only those industries were entitled to incentives/concessions in the form of sales tax exemption which were set up within the framework of the provisions of IPR. The industries which did not come under the purview of the aforesaid IPR were not entitled to incentives/concessions in the form of sales tax exemption during the operative period of one IPR and thereby could not avail themselves of the benefits under subsequent IPR.
4. In the present case, the respondent, M/s. Vijay Laxmi Oil Industries made the first investment on fixed capital (land, building, plant and machinery) on 17.7.89 when IPR 1986 was operative. The IPR 1989 came into effect on 1.12.89. The respondent herein commenced commercial production on 9.6.90 when IPR 1989 was operative. The respondent filed an application for incentives/concessions in the form of sales tax exemption under IPR 1989 but the same was rejected by the General Manager, District Industries Centre, Balasore (appellant No. 3) by an order dated 29.9.92. Under such circumstances, the respondent was informed that its unit was of IPR 1986 and that under the said IPR its unit was not eligible to get sales tax exemption either on purchase of raw material or on sale of its finished products and hence the respondent was not entitled to sales tax concession under IPR 1989.
5. This led the respondent filing a Writ Application before the Orissa High Court challenging the order whereby the General Manager, District Industries Centre, Balasore had refused to extend sales tax exemption to it under IPR 1989. The High Court while allowing the Writ Application filed by the respondent, issued directions to the appellants herein, to issue sales tax exemption certificate in favour of the respondent. Aggrieved, the appellants have come to this Court by filing Special Leave Petition.
6. Learned counsel for the appellants urged that the respondent which is an oil mill, irrespective of input capacity, was ineligible for IPR incentives/concessions in the form of sales tax exemption under IPR 1986 vide item B-Definition (f) of IPR 1986 and as such was not entitled to have any incentives/concessions under IPR 1989. Elaborating his arguments, learned counsel further argued that the continuing small scale industrial units of 1986 Policy which were otherwise eligible for sales tax exemption on finished product for a period of 5 years, were only allowed to avail of the concessions for additional 2 years i.e. in all 7 years under 1989 Policy vide clause 7.2.2 of IPR 1989 and the view taken by the High Court in allowin
