1989 (1) TMI 313 - SC - VAT and Sales Tax

Exemption from sales tax of certain goods for specified period denied - Held that - Appeal allowed. That the denial of the exemption to the appellant under the notification dated September 30, 1982 was not justified. The rejection of the appellant s application in this regard is quashed and the appellant is declared entitled to the exemption in terms of the notification.

Summary

Issues:
- Application for exemption from sales tax under section 4-A of the Uttar Pradesh Sales Tax Act, 1948.
- Rejection of exemption application by Division Level Committee and High Court.
- Interpretation of the term "date of starting production" under section 4-A.
- Discrepancy regarding the date of commencement of production.
- Evaluation of evidence and certificates presented by the appellant.
- Review application and subsequent rejection based on joint inquiry report.
- Justification of denial of exemption and quashing of rejection.

Analysis:
The judgment by the Supreme Court of India addressed the issue of exemption from sales tax under section 4-A of the Uttar Pradesh Sales Tax Act, 1948. The petitioner, engaged in manufacturing electric motors and pump-sets, applied for exemption which was rejected by a Division Level Committee and the High Court. The key contention was the interpretation of the term "date of starting production" under section 4-A, which was crucial for determining eligibility for exemption. The appellant claimed to have commenced production on December 4, 1982, based on the use of electricity for production on that date. However, a certificate from Krishna Trading Co. presented a potential discrepancy, indicating trial production on December 4, 1981.

The Division Level Committee rejected the application primarily on the basis that the trial production date preceded October 1, 1982, thus disqualifying the appellant from exemption. The subsequent review application highlighted discrepancies in the joint inquiry report, questioning the validity of the evidence presented. The Committee's conclusion was based on a misconception that the trial production constituted actual production, overlooking the distinction between the two. The Court emphasized the importance of the date of purchase of raw materials or initiation of commercial production using electricity for determining the commencement of production.

The Court found the rejection of the appellant's exemption unjustified, as there was insufficient evidence to support the claim that production had started before October 1, 1982. The endorsement by the General Manager of the District Industries Centre further corroborated the appellant's assertion of commencing production on December 4, 1982. Consequently, the Court quashed the rejection of the exemption application, allowing the appeal. The Court refrained from determining the specific amount of exemption, leaving it to the authorities for consideration in subsequent years. No costs were awarded in the circumstances.

In conclusion, the judgment clarified the interpretation of the commencement of production under section 4-A and highlighted the significance of concrete evidence in determining eligibility for exemption from sales tax, ultimately ruling in favor of the appellant based on the lack of substantial evidence supporting the rejection of the exemption application.