2006 (5) TMI 177 - SC - VAT and Sales Tax

Whether the industrial unit set up by the appellant fulfilled all the necessary conditions for being declared a prestigious unit ? Whether the appellant had made the necessary investment of Rs. 25 crores or more within the period prescribed? Whether the negative list appended to S.R.O. No. 249 applies to prestigious units as well? Held that - Appeal allowed ,set aside the judgment and order of the High Court of Jammu and Kashmir. It is declared that the appellant is entitled to all the incentives and subsidies applicable to prestigious units under the new Industrial Policy published vide Government Order No. 202-IND of 1998 dated May 27, 1998, and the notifications issued pursuant thereto from the date the aforesaid unit went into commercial production.

Summary

Issues Involved:
1. Eligibility of the appellant as a "prestigious unit".
2. Applicability of the negative list to "prestigious units".
3. Validity of certificates and declarations issued by SIDCO and the Department of Industries and Commerce.

Detailed Analysis:

1. Eligibility of the appellant as a "prestigious unit":
The appellant claimed exemption from general sales tax and Central sales tax under Notification No. S.R.O. 247 of August 20, 1998, issued by the Government of Jammu and Kashmir, which offered incentives to "prestigious units" with capital investment of Rs. 25 crores or more. The appellant set up a soft drink manufacturing unit and claimed to have invested over Rs. 25 crores. The State Government denied this claim, leading to writ petitions. The High Court dismissed these petitions, stating the appellant did not validly acquire the status of a "prestigious unit" as the required investment was not made at the time of commercial production.

The Supreme Court examined whether the appellant fulfilled the necessary conditions for being declared a "prestigious unit". The appellant had signed a memorandum of understanding (MOU) with SIDCO, which allowed them to complete the investment of Rs. 25 crores within six months from the date of commercial production. The appellant commenced production by March 30, 2000, and invested over Rs. 27 crores by September 30, 2000. The Court found that the Government's decision to allow the investment to be completed by September 30, 2000, was a conscious decision and the appellant complied with this requirement.

2. Applicability of the negative list to "prestigious units":
The appellant argued that the negative list in S.R.O. No. 249, which included "soft drinks", applied only to medium and large scale industrial units and not to "prestigious units". The Supreme Court agreed, noting that paragraph 10 of annexure "B" to G.O. No. 202 of 1998, which deals with "prestigious units", begins with a non-obstante clause ("Notwithstanding anything contained in paragraphs 7, 8 and 9 above"). This indicated that "prestigious units" were to be treated differently and were not subject to the negative list. S.R.O. No. 247, which granted exemptions to "prestigious units", did not mention the negative list, further supporting this interpretation.

3. Validity of certificates and declarations issued by SIDCO and the Department of Industries and Commerce:
The High Court had held that the Director of Industries and Commerce was not competent to declare the unit as a "prestigious unit" and that such a declaration should come from the Government through an S.R.O. The Supreme Court, however, found that the appellant had fulfilled all conditions laid down by the Government for acquiring the status of a "prestigious unit". The certificates issued by SIDCO and the Department of Industries and Commerce, which verified the investment and declared the appellant as a "prestigious unit", were valid. The Court held that the appellant was entitled to the benefits promised under the State's new Industrial Policy (1998-2003).

Conclusion:
The Supreme Court set aside the judgment and order of the High Court, declaring that the appellant is entitled to all incentives and subsidies applicable to "prestigious units" under the new Industrial Policy from the date the unit went into commercial production. The appeal was allowed without any order as to costs.