1994 (8) TMI 275 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of U.P. Sales Tax Act - Exemption eligibility based on capital investment up to "first sale" or "first production"

Analysis:
The key issue in this case revolves around determining whether the capital investment in an industrial unit eligible for exemption under section 4-A of the U.P. Sales Tax Act should be considered up to the date of "first sale" or "first production" for the purposes of determining the period of exemption. The petitioner had applied for review claiming exemption for a period of five years based on the total capital investment exceeding Rs. 3 lacs as of the date of "first sale." However, the review was rejected on the grounds that the investment was less than Rs. 3 lacs on the date of "first production," entitling the petitioner to exemption for only three years from the date of "first sale."

The court analyzed the relevant notification and held that since the "first sale" occurred within six months from the date of starting production, the period of exemption specified in the notification would commence from the date of "first sale." The court referred to Explanation (1)(e) which stipulates that for exemption eligibility, all conditions specified in the Act, Rules, or notification must be fulfilled on the date from which the facility is granted. Therefore, the capital investment preceding the "first sale" should be taken into account for determining the exemption period.

The court cited the decision in Vijay Enterprises v. Sales Tax Officer, highlighting that the Divisional Level Committee erred in excluding the cost of machinery incurred by the petitioner on a specific date. It was determined that the cost of machinery incurred on that date should be included in calculating the period of exemption as per the notification.

Consequently, the writ petition was allowed, and the impugned order rejecting the review application was quashed. The Divisional Level Committee was directed to reconsider the review application within three months in accordance with the court's observations.

In conclusion, the judgment clarifies the interpretation of the U.P. Sales Tax Act regarding exemption eligibility based on capital investment up to the "first sale" date, emphasizing the importance of considering investments made before the "first sale" for determining the exemption period in line with the relevant notification and legal provisions.