1997 (11) TMI 495 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Refusal to issue Form I-D for tax exemption.
2. Interpretation of the term "set up" under the Orissa Sales Tax Act and Rules.
3. Applicability of S.R.O. No. 789 of 1990.
4. Scope of judicial interpretation and principles of statutory construction.
5. Availability of alternative remedies.

Detailed Analysis:

Issue 1: Refusal to issue Form I-D for tax exemption

The petitioner challenged the refusal by the Sales Tax Officer to issue Form I-D to avail of tax exemption benefits under the Orissa Sales Tax Act, 1947, and the Orissa Sales Tax Rules, 1947. The petitioner argued that its unit was set up during 1990-92 with the first fixed capital investment made in January 1992 and commercial production starting on May 18, 1995. The Sales Tax Officer rejected the application, stating that the unit did not start commercial production within the stipulated period (December 1, 1989 - November 30, 1994) as per S.R.O. No. 789 of 1990.

Issue 2: Interpretation of the term "set up"

The term "set up" was interpreted by the apex Court in Commissioner of Wealth-tax, Madras v. Ramaraju Surgical Cotton Mills Ltd., where it was held that a unit cannot be said to have been set up unless it is ready to commence business. The petitioner argued that the material date for determining when the unit was set up is the date of the first fixed capital investment. The Sales Tax Officer's interpretation that commercial production must start within the stipulated period was challenged as misconceived.

Issue 3: Applicability of S.R.O. No. 789 of 1990

S.R.O. No. 789 of 1990 stipulates that units starting commercial production between December 1, 1989, and November 30, 1994, are eligible for tax exemption. The petitioner argued that the unit was set up after December 1, 1989, and started commercial production thereafter, making it eligible for exemption. The court noted that the notification did not specify an outer limit for the commencement of commercial production, thus supporting the petitioner's claim.

Issue 4: Scope of judicial interpretation and principles of statutory construction

The court emphasized that exemptions should be construed strictly and against the subject in case of ambiguity. However, once it is established that the subject falls within the exemption, a liberal interpretation should be applied. The court referenced several judgments to support this principle, including Collector of Central Excise, Bombay-I v. Parle Exports (P) Ltd. and Union of India v. Wood Papers Ltd.

Issue 5: Availability of alternative remedies

The Revenue argued that the petitioner should have approached the revisional authority instead of filing a writ application. The court acknowledged that similar disputes were frequently arising and that its interpretation would reduce litigation. Thus, the existence of an alternative remedy was considered inconsequential.

Conclusion:

The court directed the Sales Tax Officer to issue Form I-D to the petitioner within two weeks, provided the application was otherwise in order. The writ application succeeded, and there was no order as to costs.