2005 (11) TMI 446 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of exemption under Incentive Scheme, 1987 for industrial units undertaking manufacturing processes outside factory premises.

Analysis:
The revision petition under section 86 of the Rajasthan Sales Tax Act, 1994 challenged the Rajasthan Tax Board's order dismissing the Revenue appeal regarding the entitlement of an industrial unit to exemption from sales tax under the Incentive Scheme, 1987. The assessing authority noted that part of the manufacturing process of polishing granite slabs and tiles was done outside the factory premises on a job basis from other industrial units. The authority argued that this disentitled the industrial unit from the exemption benefit. However, the first appeal by the assessee was allowed by the Deputy Commissioner (Appeals), and the Tax Board upheld this decision, ruling that the industrial unit could not be denied the benefit of the Incentive Scheme, 1987 despite the manufacturing process occurring outside the factory premises.

The judgment highlighted that the benefit of exemption under the Incentive Scheme, 1987 is granted to industrial units making eligible fixed capital investments within the State of Rajasthan. Eligibility for exemption is determined by competent Screening Committees at district or state levels. The power to grant, revoke, or modify exemptions lies with these Committees, not the assessing authority. The exemption from sales tax applies to goods manufactured by the industrial unit and sold within the state or in inter-State trade based on eligible investments made. Even if a part of the manufacturing process is outsourced to other industrial units due to business expediency or other reasons, the goods remain those manufactured and sold by the industrial unit, making them eligible for exemption under the Scheme.

In conclusion, the Court found no merit in the revision petition and dismissed it. The judgment emphasized that industrial units should not be denied the benefit of incentives under the Incentive Scheme, 1987, even if certain manufacturing processes are conducted outside the unit's premises. The decision reaffirmed that the industrial unit remains eligible for exemption as long as the goods are manufactured and sold by them, regardless of where specific manufacturing processes take place.