1997 (12) TMI 575 - SC - VAT and Sales Tax

Appellants aggrieved by the Industrial Policy Resolution of 1989 of the State of Orissa which came into force from December 1, 1989 in so far as it restricted the benefit of deferment of sales tax to industries which had gone into commercial production after April 1, 1986 and denied such benefit to those which had gone into production before April 1, 1986. Held that - Appeal dismissed. Para 2.18 of the 1989 policy and the corresponding provisions of the Notification SRO No. 790 of 1990 (Finance) dated August 16, 1990, in so far as they extended the benefit of the 1989 policy only to the continuing units of 1980 policy which had gone into production after April 1, 1986, the said classification is valid and was not hit by article 14 of the Constitution of India.

Issues Involved:
1. Restriction of sales tax deferment benefits under the Industrial Policy Resolution of 1989.
2. Classification of industrial units under different policies (1980, 1986, 1989).
3. Validity of the cut-off date (April 1, 1986) for granting benefits.
4. Alleged violation of Article 14 of the Constitution of India.
5. Application of the principle from Nakara v. Union of India.
6. Exercise of powers under Article 142 of the Constitution of India.

Detailed Analysis:

1. Restriction of Sales Tax Deferment Benefits Under the Industrial Policy Resolution of 1989:
The appellants challenged the Industrial Policy Resolution of 1989, which restricted sales tax deferment benefits to industries that commenced commercial production after April 1, 1986, and excluded those that began production before this date. The policy, notified by the Orissa Government under S.R.O. No. 790 of 1990, came into effect on December 1, 1989.

2. Classification of Industrial Units Under Different Policies (1980, 1986, 1989):
The court examined three industrial policies:
- 1980 Policy: Provided interest-free loans equivalent to the sales tax paid within the state for the first five years.
- 1986 Policy: Introduced sales tax deferment and exemption schemes for new medium and large industrial units, effective from April 1, 1986.
- 1989 Policy: Defined new industrial units and continuing units of the 1980 and 1986 policies, providing sales tax deferment/exemption benefits to units that commenced production after April 1, 1986.

3. Validity of the Cut-off Date (April 1, 1986) for Granting Benefits:
The court found no drafting mistake in the cut-off date of April 1, 1986, as claimed by the appellants. The date was consistently used in the policy and corresponding statutory notifications. The court reasoned that the cut-off date had significance and was not arbitrary.

4. Alleged Violation of Article 14 of the Constitution of India:
The appellants argued that the policy discriminated against units that began production before April 1, 1986, violating Article 14. The court rejected this argument, stating that the classification was based on valid economic and policy considerations. The court emphasized that the state has greater latitude in taxation matters and that the classification was not "palpably arbitrary."

5. Application of the Principle from Nakara v. Union of India:
The appellants contended that the cut-off date should be declared invalid based on the Nakara case, which dealt with the withdrawal of existing benefits. The court distinguished the present case, noting that the 1989 policy was a new scheme, not a continuation of the 1980 policy. Therefore, the Nakara principle did not apply.

6. Exercise of Powers Under Article 142 of the Constitution of India:
The appellants requested the court to grant relief under Article 142, arguing that they were the only industry affected. The court declined, stating that the appellants had no case on merits and that it was not a fit case for exercising powers under Article 142.

Conclusion:
The Supreme Court dismissed the appeal, upholding the validity of the 1989 policy and its classification. The court found that the cut-off date of April 1, 1986, was justified and that the policy did not violate Article 14 of the Constitution. The court also refused to grant relief under Article 142.

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