1998 (9) TMI 510 - SC - VAT and Sales Tax

Whether High Court correct in directing the appellants herein to issue necessary sales tax exemption certificate in favour of the respondents under the Industrial Policy Resolution, 1989 issued by the State of Orissa? Held that - Appeal allowed. Admittedly, respondent- unit was set up prior to December 1, 1989 when the IPR 1986 was operative, the respondent-unit therefore cannot be treated as new unit under IPR 1989 and notification dated August 16, 1990 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 August 16, 1990. Thus the judgment and order of the High Court in allowing the writ application of the respondent is not sustainable in law

Summary

Issues:
1. Interpretation of Industrial Policy Resolutions (IPRs) 1986 and 1989 regarding sales tax exemption for industries.
2. Eligibility criteria for sales tax exemption under IPRs for continuing industrial units.
3. Application of amendments to sales tax exemption notifications in relation to the effective dates of IPRs.

Analysis:

Issue 1: The Supreme Court examined the Industrial Policy Resolutions (IPRs) 1986 and 1989 to determine the eligibility of industries for sales tax exemption. The IPRs aimed to promote industrial growth by providing incentives and concessions to industries within the state. Industries falling within the provisions of the IPR were entitled to sales tax exemptions, while those outside were not eligible to avail such benefits.

Issue 2: The Court analyzed the eligibility criteria for sales tax exemption under IPRs for continuing industrial units. It was observed that small-scale continuing units under the 1986 policy could receive exemptions for an additional two years under the 1989 policy. The Court emphasized that only eligible units that had received concessions for five years under the 1986 policy were entitled to further exemptions under the 1989 policy.

Issue 3: The Court considered the application of amendments to sales tax exemption notifications concerning the effective dates of IPRs. It was highlighted that industries established before the effective date of the IPR were subject to the provisions of the previous policy. The Court clarified that amendments to sales tax exemptions were applicable to industries set up after the effective date of the amended policy, and not retroactively to units established under previous policies.

In conclusion, the Supreme Court held that the High Court's decision to grant sales tax exemption to the respondent was legally unsustainable. The appeals were allowed, and the writ applications filed by the respondents were dismissed, with no order as to costs.