1995 (2) TMI 380 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of sales tax holiday incentive for small-scale industries under G.O. Ms. No. 498 and G.O. Ms. No. 117 of the Government of Andhra Pradesh.

Analysis:
The petitioners, small-scale industries, claimed entitlement to collect sales tax during a five-year sales tax holiday period under G.O. Ms. No. 498. However, the court held that the scheme only provided for sales tax exemption, not collection. The judgment emphasized that the scheme aimed to enhance competitiveness by exempting small-scale industries from sales tax up to a specified limit. The court highlighted the distinction between sales tax deferment for medium and large industries and sales tax exemption for small-scale industries, emphasizing the policy objective of promoting market competitiveness for small-scale units.

The court referred to the manual of guidelines for the incentives scheme, clarifying that the term "sales tax holiday" in the application form actually meant "sales tax exemption." The judgment emphasized that the government's intention was to grant exemption, not permission to collect and retain sales tax. The court relied on the provisions of the Andhra Pradesh General Sales Tax Act, emphasizing that dealers cannot collect tax on exempted goods, as per the Act's provisions.

The judgment addressed the petitioners' argument regarding sales tax holiday benefits granted to other parties and highlighted that the conditions for availing incentives only applied to deferred payment cases, not collection. The court rejected the petitioners' contention that allowing collection of sales tax without remittance would be a real incentive, emphasizing that the scheme's objective was to support small-scale industries' competitiveness by exempting them from sales tax.

Overall, the court dismissed the writ petitions, affirming that the scheme's intent was to provide sales tax exemption to small-scale industries to enhance their market competitiveness, not to allow them to collect and retain sales tax during the holiday period. The judgment underscored the policy considerations behind the scheme and upheld the government's authority to grant exemptions under the relevant legislation.