1990 (5) TMI 224 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the order passed by the Divisional Level Committee, Allahabad, dated 23rd December, 1988.
2. Determination of the "date of starting production" under section 4-A of the U.P. Sales Tax Act, 1948.
3. Eligibility for a five-year period of exemption based on capital investment exceeding rupees three lacs.

Detailed Analysis:

1. Validity of the Order Passed by the Divisional Level Committee:
The petitioners challenged the order of the Divisional Level Committee dated 23rd December, 1988, which rejected their review petition. The petitioners argued that the date of starting production should be considered as 20th May, 1986, when they received the power connection, rather than 1st March, 1985. The Divisional Level Committee modified the date to 30th March, 1985, but maintained that the exemption period should not be extended to five years.

2. Determination of the "Date of Starting Production":
The core issue was the interpretation of "date of starting production" as per section 4-A of the U.P. Sales Tax Act, 1948. According to the petitioners, the power connection received on 20th May, 1986, should be the starting date. However, the respondents argued that the production began on 1st March, 1985, when raw materials were first purchased, and the first sale occurred on 30th March, 1985. The Court noted that the definition in the Act states the date of starting production as "the date on which any raw material required for use in the manufacture or packing of the specified goods is purchased for the first time or the date of installation of power connection, where needed, whichever is later." The Court concluded that power connection was not essential for production, as the petitioners had already been manufacturing goods manually since March 1985. Therefore, the date of starting production was determined to be 1st March, 1985, and the date of the first sale, 30th March, 1985, was taken as the commencement of the exemption period.

3. Eligibility for a Five-Year Period of Exemption:
The petitioners contended that their capital investment exceeded rupees three lacs by 20th May, 1986, and thus, they should be entitled to a five-year exemption. The respondents countered that the investment was less than rupees three lacs as of 1st March, 1985, and no evidence was provided to show that the generator was installed before this date. The Court found no specific averment in the review petition regarding the capital investment being more than rupees three lacs on 1st March, 1985, or 30th March, 1985. The Court held that the petitioners' main contention was based on the date of starting production being 20th May, 1986, which was not supported by the facts. Consequently, the request for a five-year exemption period was deemed untenable.

Conclusion:
The Court dismissed the writ petition, upholding the Divisional Level Committee's decision that the date of starting production was 1st March, 1985, and the exemption period commenced on 30th March, 1985. The petitioners' claim for a five-year exemption period was rejected due to insufficient evidence of capital investment exceeding rupees three lacs as of the relevant dates. The interim order dated 11th January, 1989, was vacated.