1990 (1) TMI 295 - HC - VAT and Sales Tax

Summary

Issues:
Petition against the decision of the Divisional Level Committee rejecting exemption claim under section 4-A of the U.P. Sales Tax Act, 1948 for a new unit.

Analysis:
The Divisional Level Committee rejected the review petition on two grounds. Firstly, it stated that since the unit had started production before obtaining a term loan, it could not be considered established after obtaining the loan as required by the exemption clause. Secondly, it argued that the lease for the unit was for less than seven years, making it ineligible for the exemption. The Court found both grounds unsustainable. The requirement for a lease of more than seven years came into effect after the unit was established, rendering the rejection on that basis erroneous. Regarding the loan, the petitioner had purchased machinery on credit before the loan was sanctioned, but installation and production began only after loan disbursement, meeting the criteria of the exemption clause.

The Court emphasized that the unit was deemed to be established after obtaining the term loan, making the petitioner eligible for the exemption certificate. It criticized the Divisional Level Committee for its error in denying the eligibility certificate to the petitioner. Consequently, the Court allowed the petition, quashed the previous orders of the Committee, and directed the Committee to grant the eligibility certificate to the petitioner within one month of the Court's order submission.

In conclusion, the Court found the petitioner entitled to the exemption under section 4-A of the U.P. Sales Tax Act, 1948. The judgment highlighted the errors in the Committee's decision-making process and ordered the issuance of the eligibility certificate to the petitioner promptly.