2001 (10) TMI 1107 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of sub-rules (3) and (4) of rule 4 of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991.
2. Legality of the condition imposed in the exemption certificate requiring separate accounts for existing and expansion units.
3. Applicability of the 1991 Rules in light of the 1996 Industrial Policy.

Detailed Analysis:

1. Validity of sub-rules (3) and (4) of rule 4 of the 1991 Rules:
The petitioner challenged the validity of sub-rules (3) and (4) of rule 4 of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991, arguing that these provisions could not be invoked while granting exemption under the 1996 Policy. The petitioner contended that these sub-rules were ultra vires to the 1996 Policy and articles 265 and 300A of the Constitution of India. The court referred to a previous judgment in C.W.P. No. 5726 of 2000 (Oswal Fats and Oils, Ludhiana v. State of Punjab), which had already considered and answered this issue in the negative, stating that the 1996 Policy did not incorporate the concept of incremental production, which was central to these sub-rules.

2. Legality of the condition imposed in the exemption certificate:
The petitioner argued that the condition requiring the maintenance of separate accounts for the existing and expansion units, imposed by the Assistant Excise and Taxation Commissioner, was unjustified. This condition was based on rule 4(4) of the 1991 Rules, which the petitioner claimed was not applicable under the 1996 Policy. The court observed that the 1996 Policy and the Incentive Code, 1996, did not include the concept of incremental production, which was central to the 1991 Rules. Therefore, the imposition of such a condition was deemed ultra vires to the provisions of the 1996 Policy and the Incentive Code, 1996.

3. Applicability of the 1991 Rules in light of the 1996 Industrial Policy:
The court analyzed the differences between the 1989 Policy and the 1996 Policy, noting that the latter introduced a new concept of granting benefits based on additional fixed capital investment rather than incremental production. The court highlighted that rule 4-B of the 1991 Rules, inserted to give effect to the 1996 Policy, contained a non obstante clause, which indicated that the provisions of rule 4(3) and (4) of the 1991 Rules were overridden by the new rules. The court further emphasized that the non obstante clause in rule 4-B was intended to override any conflicting provisions in the earlier rules, including rule 4(3) and (4). Consequently, the court held that the respondents could not apply these sub-rules to the incentives granted under the 1996 Policy.

Conclusion:
The court concluded that the provisions of rule 4(3) and (4) of the 1991 Rules could not be applied to the incentives granted under the 1996 Policy. As a result, the condition in the exemption certificate requiring the petitioner to maintain separate accounts for the existing and expansion units was declared illegal and quashed. The respondents were directed to grant the benefit of exemption without insisting on the compliance of the said condition. The writ petition was allowed, and the court did not find it necessary to pronounce on the validity of rule 4(3) and (4) of the 1991 Rules.

Writ petition allowed.