1996 (5) TMI 398 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to exemption from payment of sales tax on purchase of raw materials.
2. Validity of the cancellation of the exemption certificate.
3. Jurisdiction to review and cancel the exemption certificate.
4. Interpretation of statutory orders S.O. 791 and S.O. 793.
5. Applicability of the Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990.

Issue-wise Detailed Analysis:

1. Entitlement to exemption from payment of sales tax on purchase of raw materials:
The petitioner sought a declaration for exemption from sales tax on the purchase of raw materials for its expanded/diversified unit under Notification No. S.O. 793 dated September 10, 1987. The relevant policy provided tax exemptions to industrial units for five years from the date of production. The petitioner, initially established in 1978, undertook expansions in 1988 and 1990, receiving exemption certificates for both expansions.

2. Validity of the cancellation of the exemption certificate:
The petitioner's second exemption certificate, issued on June 17, 1993, was cancelled by an order dated July 12, 1995/August 4, 1995. The respondents argued that the petitioner had already availed the benefit for the full five-year period from February 15, 1988, to February 14, 1993, under S.O. 793 and was not entitled to a second exemption.

3. Jurisdiction to review and cancel the exemption certificate:
The petitioner contended that the respondents had no jurisdiction to review and cancel the exemption certificate without the sanction of the Commissioner under section 32 of the Bihar Finance Act, 1981. However, this argument was deemed irrelevant by the court.

4. Interpretation of statutory orders S.O. 791 and S.O. 793:
S.O. 791 provided tax exemptions for new industrial units going into production on or after September 1, 1986, while S.O. 793 provided exemptions for old units undertaking expansion/diversification. The court noted that the tax exemption on purchase of raw materials was a one-time measure, applicable either as a new unit under S.O. 791 or as an expanded/diversified unit under S.O. 793, but not both.

5. Applicability of the Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990:
The petitioner argued that under rule 14 of the Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990, the expanded unit should be treated as a separate entity for sales tax registration. The court, however, focused on the fact that the exemption was a one-time benefit and could not be claimed multiple times for subsequent expansions.

Conclusion:
The court concluded that the petitioner, having already availed the benefit of tax exemption under S.O. 793 for the first expansion, was not entitled to a second exemption. The cancellation of the exemption certificate was upheld. The writ petition was dismissed without any order as to cost.