1992 (9) TMI 349 - HC - VAT and Sales Tax

Issues Involved
1. Entitlement to special incentive of sales tax exemption for new dry process unit.
2. Denial of pioneer status and consequential sales tax benefits.
3. Interpretation and applicability of Government resolutions and circulars.
4. Eligibility criteria for pioneer units.
5. Impact of subsequent circulars on the original Government resolution.
6. Application of the doctrine of promissory estoppel.
7. Interpretation of terms such as "new industrial unit," "expansion," and "modernization."
8. Discriminatory and arbitrary denial of benefits.
9. Reconsideration of cases in light of judicial interpretation.

Detailed Analysis

1. Entitlement to Special Incentive of Sales Tax Exemption for New Dry Process Unit
The petitioners sought a declaration that they are entitled to the benefit of special incentive of exemption from payment of sales tax for their new dry process unit, which they claimed to be a pioneer unit under the Government resolutions dated August 27, 1980, and March 13, 1981. The petitioners argued that the new unit was a separate entity and not merely an expansion of the existing unit.

2. Denial of Pioneer Status and Consequential Sales Tax Benefits
The petitioners contended that the denial of pioneer status and the consequential sales tax benefits under the Government resolution dated August 27, 1980, was unjust. They argued that the benefits were wrongly denied due to the circulars dated November 5, 1981, and February 8, 1983.

3. Interpretation and Applicability of Government Resolutions and Circulars
The court examined the steps taken by the State Government for promoting industrial development and the benefits intended to be given by the resolutions dated August 27, 1980, and March 13, 1981. It was noted that the 1980 scheme aimed to accelerate industrial development in backward areas by providing sales tax incentives.

4. Eligibility Criteria for Pioneer Units
The court interpreted paragraph 7 of the 1980 scheme, which provided special incentives for large industrial units going to a completely new location in backward areas. The court clarified that the emphasis was on "new location in backward areas" and not necessarily on a "new large industrial unit."

5. Impact of Subsequent Circulars on the Original Government Resolution
The court held that the circulars dated November 5, 1981, and February 8, 1983, imposed additional conditions that were not part of the original Government resolution. These circulars restricted the eligibility for pioneer status and were not merely clarificatory but added new conditions, thus affecting the rights of the petitioners who had relied on the original resolution.

6. Application of the Doctrine of Promissory Estoppel
The court emphasized that the doctrine of promissory estoppel applied in this case. The petitioners had relied on the Government resolution of August 27, 1980, and taken steps to set up their new units before the issuance of the subsequent circulars. Therefore, the petitioners could not be denied the benefits based on the circulars issued later.

7. Interpretation of Terms such as "New Industrial Unit," "Expansion," and "Modernization"
The court referred to previous judicial decisions to interpret the terms "new industrial unit," "expansion," and "modernization." It held that setting up a new plant with new technology on a new site, even if adjacent to the existing unit, constituted a new industrial unit and not merely an expansion or modernization.

8. Discriminatory and Arbitrary Denial of Benefits
The petitioners also argued that the denial of pioneer status was discriminatory and arbitrary. The court noted that similar benefits were granted to other companies, and the denial to the petitioners was not justified.

9. Reconsideration of Cases in Light of Judicial Interpretation
The court directed the respondents to reconsider the cases of the petitioners in light of the judicial interpretation of the 1980 resolution and the observations made in the judgment. The court emphasized that the reconsideration should take into account all relevant facts and circumstances, including the separate industrial licenses, separate factory licenses, and separate records maintained for the new units.

Conclusion
Both petitions were partly allowed. The court issued a writ of mandamus directing the respondents to reconsider the cases of the petitioners within two months, maintaining the status quo until a decision is communicated to the petitioners. The respondents were directed to take into account the interpretation of the 1980 resolution, the impact of the circulars, and the factual circumstances presented by the petitioners.

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