2005 (11) TMI 447 - HC - VAT and Sales Tax

Issues Involved:
1. Definition and interpretation of "base turnover" under G.O. Ms. No. 108, dated May 20, 1996.
2. Eligibility for sales tax deferment for expanded industrial units.
3. Applicability of previous Government Orders (G.O.s) in interpreting G.O. Ms. No. 108.
4. The necessity of achieving local sales levels for tax deferral benefits.

Issue-wise Detailed Analysis:

1. Definition and Interpretation of "Base Turnover" under G.O. Ms. No. 108:
The primary issue revolves around the meaning of "base turnover" as contained in para 7 of G.O. Ms. No. 108, dated May 20, 1996, for the purpose of computing the benefit of deferral sales tax in respect of expanded industrial units. The term "base turnover" was defined as "the best production achieved during three years preceding the year of expansion or the maximum capacity expected to be achieved by the industry as per the appraisal made by the financial institution before funding the project, whichever is higher." The court emphasized that this definition signifies the best production in terms of the quantity of goods produced rather than in monetary value.

2. Eligibility for Sales Tax Deferment for Expanded Industrial Units:
The petitioners, all manufacturers in Andhra Pradesh, claimed the benefit of sales tax deferment based on their expanded production capacities. They argued that once they achieved the base production level as defined under G.O. Ms. No. 108, they should be eligible for deferment. The court agreed with the petitioners, stating that the benefit of deferment should be computed based on the best production in terms of quantity, not turnover or sales tax levels.

3. Applicability of Previous Government Orders (G.O.s) in Interpreting G.O. Ms. No. 108:
The court examined whether G.O. Ms. No. 108 should be read in conjunction with earlier G.O.s, such as G.O. Ms. No. 386 and G.O. Ms. No. 75, which provided different definitions of "base turnover." The court concluded that G.O. Ms. No. 108 is a self-contained and independent code, and there is no need to refer to earlier G.O.s for interpreting its provisions. The court noted that the term "base turnover" in G.O. Ms. No. 108 was defined differently from previous orders, emphasizing the best production achieved rather than turnover in value.

4. The Necessity of Achieving Local Sales Levels for Tax Deferral Benefits:
The departmental authorities and the Tribunal had taken the view that dealers must not only achieve the base turnover but also exceed the level of local sales tax payment to qualify for deferment. The court rejected this view, stating that G.O. Ms. No. 108 does not impose any requirement for maintaining local sales levels. The court held that the benefit of deferment is available based on achieving the base production level in terms of quantity, without any reference to local or inter-State sales levels.

Conclusion:
The court set aside the impugned orders of the Tribunal and the assessments, directing the assessing authorities to compute the benefit of deferral in sales tax based on the "base turnover" as the best production in terms of the quantity of goods produced. The tax revision cases filed by the petitioners-assessees and the writ petitions were allowed, while those filed by the department were dismissed.

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