1992 (5) TMI 176 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Quashing of the notification dated February 5, 1988.
2. Quashing of the demand notice dated October 1, 1991.
3. Direction to grant eligibility certificate from June 28, 1988, instead of October 1, 1991.
4. Validity of sub-clause (d) of clause 7 of the Sales Tax Incentive Scheme for Industries, 1987.

Detailed Analysis:

1. Quashing of the Notification Dated February 5, 1988:
The petitioner sought to quash the notification dated February 5, 1988, which affected their eligibility for sales tax exemption under the Sales Tax Incentive Scheme for Industries, 1987. The court examined the sequence of events, noting that the petitioner commenced commercial production on June 28, 1988, and applied for exemption on the same day. Despite fulfilling the conditions for exemption, the petitioner faced delays and amendments in the scheme that affected their eligibility.

2. Quashing of the Demand Notice Dated October 1, 1991:
The petitioner also requested the quashing of the demand notice dated October 1, 1991. The court noted that the petitioner had not been charging sales tax, believing they were eligible for exemption. The demand notice was issued after the scheme was amended on August 6, 1988, and again on September 10, 1990, which restored the petitioner's eligibility. The court found that the demand notice was inconsistent with the petitioner's entitlement to exemption from the date of their application.

3. Direction to Grant Eligibility Certificate from June 28, 1988, Instead of October 1, 1991:
The core issue was whether the petitioner was entitled to an exemption certificate from June 28, 1988, the date of their application, or from October 1, 1991, the date the certificate was issued. The court observed that the petitioner had applied for the exemption on June 28, 1988, when they were eligible under the scheme. The delay in issuing the certificate was due to the authorities' inaction, not the petitioner's fault. The court held that the petitioner should not suffer due to administrative delays and was entitled to the exemption from the date of application.

4. Validity of Sub-Clause (d) of Clause 7 of the Sales Tax Incentive Scheme for Industries, 1987:
The court scrutinized sub-clause (d) of clause 7, which stated, "The benefit of incentive scheme shall be available from the date of the issue of the eligibility certificate." The petitioner argued that this provision was arbitrary and contrary to the scheme's objective of supporting new units in their initial stages. The court agreed, citing precedents where the exemption was effective from the date of application, not the certificate's issuance. The court found sub-clause (d) to be "unreasonable and arbitrary," lacking essential guidelines about time limits, and thus declared it ultra vires and violative of Article 14 of the Constitution.

Conclusion:
The court quashed sub-clause (d) of clause 7 of the scheme, holding it ultra vires. It directed the respondents to issue the eligibility certificate to the petitioner with effect from June 28, 1988. The petition was disposed of accordingly, ensuring the petitioner received the intended benefits of the exemption scheme from the date of their application.