1984 (12) TMI 280 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to exemption from sales tax for a period of five years prior to the grant of registration by the Industries Department.
2. Interpretation of the notifications issued under section 4(3)(b) of the Bihar Sales Tax Act, 1959.
3. Validity of the earlier Division Bench judgment in Kailash Roller Flour Mills v. Assistant Commissioner of Commercial Taxes.

Detailed Analysis:

1. Entitlement to Exemption from Sales Tax for a Period of Five Years Prior to the Grant of Registration by the Industries Department:
The primary question referred to the court was whether the petitioner is entitled to exemption from sales tax for the period of five years prior to the grant of registration by the Industries Department. The industrial unit in question started production on January 5, 1971, but was registered as a small-scale industry on July 2, 1976. The dispute arose regarding the exemption period from July 1, 1972, to March 31, 1976. The court held that to claim exemption, the industrial unit must be registered by the Industries Department of the State Government. The court concluded that an industrial unit cannot claim exemption for the period during which it was not a registered small-scale industry.

2. Interpretation of the Notifications Issued Under Section 4(3)(b) of the Bihar Sales Tax Act, 1959:
The notifications in question were issued to grant exemption from general and special sales tax to newly set up small-scale industries for a period of five years from the date they started production. The court emphasized that the exemption is a concession granted by the State Government and not an inherent right. The notifications defined a "small-scale industry" as an industrial unit with an investment up to Rs. 7.5 lacs on plant and machinery, approved and registered by the Industries Department. The court held that the exemption is available only to industrial units that are newly set up and registered as small-scale industries within five years from the date of starting production. The period of exemption is not an inflexible five years but is determined by the date of registration and the date of starting production.

3. Validity of the Earlier Division Bench Judgment in Kailash Roller Flour Mills v. Assistant Commissioner of Commercial Taxes:
The court reviewed the earlier judgment in Kailash Roller Flour Mills, which held that the benefit of exemption is available even to industrial units registered a year or two after starting production. The court found that this view was not tenable, as it would lead to anomalous and discriminatory results. The court held that the exemption should be granted only from the date of registration and not retrospectively. The court overruled the observations in Kailash Roller Flour Mills and clarified that the exemption is available only to small-scale industries registered within five years from the date of starting production.

Conclusion:
The court concluded that to be eligible for exemption from sales tax under the notifications, an industrial unit must be approved and registered by the Industries Department as a small-scale industry and must be newly set up, i.e., not older than five years from the date of starting production. The exemption is not available retrospectively for the period prior to registration. The court answered both questions referred by the Tribunal in the negative, against the petitioner-assessee.