1995 (4) TMI 279 - HC - VAT and Sales Tax

Issues Involved:

1. Constitutional validity of Section 47(4-A) of the Gujarat Sales Tax Act, 1968.
2. Legality of the revised eligibility certificate dated April 27, 1988, and subsequent orders.
3. Entitlement of the petitioner to sales tax exemption under the statutory notification.
4. Interpretation of "designated areas" under the notification.

Issue-wise Detailed Analysis:

1. Constitutional Validity of Section 47(4-A):

The petitioners challenged the constitutional validity of Section 47(4-A) of the Gujarat Sales Tax Act, 1968, arguing that it was ultra vires Articles 14, 19(1)(g), and 300-A of the Constitution of India. However, the learned counsel for the petitioners conceded that this issue had already been decided by a Division Bench of the High Court in Ashapura Mineral Company v. State of Gujarat [1993] 89 STC 289, which upheld the validity of Section 47(4-A). Consequently, this question did not survive for further consideration in the present case.

2. Legality of the Revised Eligibility Certificate and Subsequent Orders:

The petitioners contended that the revised eligibility certificate dated April 27, 1988, which reduced the sales tax exemption from 50% to 25%, was illegal, arbitrary, and contrary to law. Initially, the petitioner was granted an eligibility certificate on October 29, 1987, entitling them to a 50% sales tax exemption. However, this was later revised, reducing the exemption to 25%. The respondents argued that the initial certificate was issued erroneously and that the correction was justified as the petitioner's unit was located within a 10 km radius of Surat, which limited the exemption to 25%.

3. Entitlement to Sales Tax Exemption:

The petitioners asserted their entitlement to a 50% sales tax exemption based on a notification issued under Section 49(2) of the Act, which provided incentives for new industries established in designated areas. The petitioners claimed that their unit was situated beyond 10 km from the municipal limits of Surat, fulfilling the conditions for the higher exemption. The respondents, however, argued that the entire Sachin Industrial Estate, where the petitioner's unit was located, fell within the 10 km radius, thus limiting the exemption to 25%.

4. Interpretation of "Designated Areas":

The core issue revolved around the interpretation of "designated areas" as defined in the notification. The petitioners argued that the relevant factor was the location of their specific unit, which was beyond 10 km from Surat, rather than the entire industrial estate. The court agreed with the petitioners, stating that the statutory notification defined "designated area" as an area beyond 10 km from Surat. The court found sufficient evidence, including a certificate from the Deputy Executive Engineer, GIDC, confirming that the petitioner's unit was indeed beyond the 10 km boundary.

The court held that the respondents' action of modifying the eligibility certificate and reducing the exemption was unlawful. The statutory notification's definition of "designated area" must be given effect unless amended by a similar notification under Section 49(2) of the Act. The court emphasized that an executive clarification could not override a statutory definition.

Conclusion:

The court allowed the petition, quashing the impugned orders revising the eligibility certificate and curtailing the tax benefits. The respondent authorities were directed to grant the tax exemption benefits in accordance with the statutory notification. The petition was allowed with no order as to costs.

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