2000 (1) TMI 941 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility for tax incentives under the Rajasthan Sales Tax New Incentive Scheme for Industries, 1989.
2. Interpretation of "expansion" and the conditions required for eligibility.
3. Consideration of job-work production in determining eligibility.
4. Applicability of the Supreme Court's decision in Prestige Engineering (India) Ltd. v. Collector of Central Excise, Meerut.
5. Legislative intent and object of the incentive scheme.

Detailed Analysis:

1. Eligibility for Tax Incentives:
The case revolves around the eligibility of the respondent-assessee for tax incentives under the Rajasthan Sales Tax New Incentive Scheme for Industries, 1989. The respondent-assessee, a manufacturer of stainless steel sheets, applied for an eligibility certificate as an expansion unit. The District Level Screening Committee (DLSC) rejected this application, which was later overturned by the Rajasthan Tax Board.

2. Interpretation of "Expansion" and Conditions for Eligibility:
The Scheme of 1989 defines "expansion" in clause 2(f) as an increase in the value of fixed capital investment by not less than 25% of the net fixed assets of the existing project, accompanied by an increase in production by at least 25% of the original licensed/registered capacity. Additionally, the unit must have achieved at least 85% of its licensed/registered capacity before expansion. The respondent-assessee met these conditions by increasing its fixed capital investment and achieving the required production levels.

3. Consideration of Job-Work Production:
A key issue was whether production through job-work could be included in the calculation of increased production. The DLSC held that job-work production should not be considered, while the Tax Board disagreed, stating that the scheme does not differentiate between production for the unit's own account and job-work. The Tax Board emphasized that the essential factor is the utilization of the unit's production capacity.

4. Applicability of Supreme Court's Decision in Prestige Engineering:
The Revenue argued that the Supreme Court's decision in Prestige Engineering (India) Ltd. v. Collector of Central Excise, Meerut supported their stance. However, the court found that this case was not applicable as it dealt with specific provisions under the Central Excises and Salt Act, which are not present in the Rajasthan Sales Tax Act. The court noted that the absence of an exclusion for job-work in the incentive scheme supported the respondent-assessee's eligibility.

5. Legislative Intent and Object of the Incentive Scheme:
The court highlighted that the primary objective of the incentive scheme is to promote economic growth and increased production in backward areas. The scheme aims to attract capital investment and ensure that units achieve and exceed their production capacities. The court found that the legislative intent did not impose a restriction on the type of production (own account vs. job-work) for eligibility.

Conclusion:
The Rajasthan High Court upheld the Tax Board's decision, affirming that the respondent-assessee met all the conditions for eligibility under the incentive scheme, including the consideration of job-work production. The court dismissed the revision petition filed by the Revenue, emphasizing that the legislative intent and the scheme's objectives were to promote increased production and economic growth without restricting the type of production. The petition was dismissed with no order as to costs.