1996 (2) TMI 524 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility for sales tax exemption incentives.
2. Interpretation of "designated area" under the notification.
3. Legality of revising the eligibility certificate and reducing tax exemption benefits.

Detailed Analysis:

1. Eligibility for Sales Tax Exemption Incentives
The petitioner, engaged in manufacturing melamine table-wares and electrical components, claimed eligibility for sales tax exemption incentives based on a resolution issued by the Industries, Mines, and Power Department on August 27, 1980. The scheme provided sales tax exemption for five years starting June 1, 1980, under entry No. 118 of a notification issued on February 5, 1981, pursuant to section 49(2) of the Gujarat Sales Tax Act, 1969. The petitioner established her unit in a backward area, beyond 10 kms from Surat, and complied with all conditions to qualify for the exemption. An eligibility certificate was granted on February 12, 1987, providing a 50% sales tax exemption amounting to Rs. 5,43,827.50.

2. Interpretation of "Designated Area" Under the Notification
The core issue revolved around the interpretation of "designated area" as defined in the statutory notification. The respondent authorities argued that the entire growth center's distance from municipal limits should be considered, not the specific unit's location. However, the court referenced its prior judgment in Khukri Packaging Private Ltd. v. State of Gujarat [1998] 109 STC 117 (Guj), which clarified that the relevant factor was the unit's location beyond 10 kms from Surat. The court reiterated that the notification's definition of "designated area" as an area beyond 10 kms from Surat must be applied, and the petitioner's unit met this criterion.

3. Legality of Revising the Eligibility Certificate and Reducing Tax Exemption Benefits
The respondent authorities reduced the sales tax exemption from 50% to 25% without notice or explanation, which the petitioner challenged. The court found this action unlawful, citing the statutory nature of the notification under section 49(2) of the Act, which could not be overridden by executive clarification. The court emphasized that any changes to the definition of "designated area" must be made through a similar statutory notification, not by executive fiat. The court also referenced a similar decision in Jai Laminart Ltd. v. State of Gujarat, supporting the petitioner's entitlement to the original exemption benefits.

Conclusion:
The court concluded that the petitioners were entitled to the original 50% sales tax exemption as granted in February 1987. The action of reducing the benefit to 25% was deemed illegal and contrary to law. The impugned orders revising the eligibility certificates and curtailing tax benefits were quashed and set aside. The respondent authorities were directed to continue granting the tax exemption benefits as initially provided. The petitions were allowed, and no costs were ordered.