1993 (8) TMI 278 - HC - VAT and Sales Tax

Summary

Issues:
Determining the criteria for an industrial unit to be considered "set up" as per a Government order granting subsidies.

Analysis:
The case revolves around the interpretation of the term "set up" in a Government order providing subsidies to industrial units. The petitioner established a dhal industry in Gulbarga district and sought a subsidy under the order dated November 28, 1989. The dispute arose as the Director of Industries and Commerce held that the unit was set up before October 1, 1988, based on the loan obtained earlier. The respondents argued that "set up" meant taking effective steps to acquire land or shed and obtain financial sanction. However, the petitioner contended that actual production commencement should define "set up."

The court analyzed previous judgments to interpret the term "set up." Referring to the Indian Hume Pipe case, it highlighted the importance of being registered as a small-scale industry for eligibility. Additionally, it cited the Commissioner of Wealth-tax case to explain the term "set up" in the context of industrial units. The court emphasized that a unit must be ready to function to be considered set up, even if production has not commenced.

In this specific case, the court noted that the industrial unit was not ready until electricity supply was sanctioned in February 1989, despite registration in April 1989. The court deemed the unit incomplete until essential elements like power supply were in place. It disregarded the loan acquisition date as irrelevant, emphasizing that having funds does not equate to unit establishment.

Consequently, the court ruled in favor of the petitioner, setting aside the previous order and directing the release of the subsidy. The judgment emphasized the necessity for an industrial unit to be fully operational and ready to function to be considered "set up" under the Government order.