1997 (1) TMI 490 - HC - VAT and Sales Tax

Summary

Issues Involved: Quashing of appellate order, eligibility for sales tax exemption/deferment, purchase of old machinery, applicability of Rule 28A, classification of industrial unit (new vs. diversified).

Issue-wise Detailed Analysis:

1. Quashing of Appellate Order:
The petitioner sought to quash the appellate order passed by the Secretary to the Government of Haryana, Industries Department, dated May 14, 1996. The appellate order had upheld the rejection of the petitioner's application for an "eligibility certificate" for sales tax exemption by the Higher Level Screening Committee.

2. Eligibility for Sales Tax Exemption/Deferment:
The petitioner, a public company, set up a diversified unit for manufacturing liquid glucose and processed oil and sought exemption under Rule 28A of the Haryana General Sales Tax Rules, 1975. The company's application was initially rejected on the grounds of purchasing old machinery, which was deemed non-compliant with the rules.

3. Purchase of Old Machinery:
The Higher Level Screening Committee rejected the application, citing the purchase of old machinery worth Rs. 14,00,000, which was seen as a disqualification under clause (c) of sub-rule (2) of Rule 28A. The petitioner's counsel argued that clause (c) applied to new industrial units, not to diversified units like the petitioner's.

4. Applicability of Rule 28A:
Rule 28A was inserted to provide detailed provisions for sales tax exemption or deferment. Clause (c) defined a "new industrial unit," which should not result from the purchase of old machinery, except under certain conditions. Clause (d) defined "expansion/diversification of industrial unit" and laid down specific conditions for eligibility.

5. Classification of Industrial Unit (New vs. Diversified):
The petitioner argued that its case was one of diversification, not a new industrial unit. The diversified unit met all conditions under clause (d), including additional fixed capital investment exceeding 25% of the existing unit's investment and engaging in the production of different products. The court agreed, stating that clause (c) was not applicable to diversified units and that the petitioner's unit fulfilled all conditions under clause (d).

Judgment:
The court held that the petitioner's diversified unit was eligible for sales tax exemption under clause (d) of sub-rule (2) of Rule 28A. The appellate order dated May 14, 1996, was quashed. The Higher Level Screening Committee was directed to treat the petitioner's diversified unit as eligible and to re-examine the application for exemption in accordance with the law.

Conclusion:
The writ petition was allowed, and the petitioner's diversified unit was deemed eligible for sales tax exemption, fulfilling all conditions under clause (d) of sub-rule (2) of Rule 28A.