2004 (8) TMI 665 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to communication rejecting sales tax incentives under New Incentive Policy-Capital Investment Incentive Scheme, 1995-2000 for setting up an oxygen gas plant. Dispute over eligibility of fixed capital investments - land, building, and plant & machinery. Compliance with conditions of the Scheme regarding continuous production.

Analysis:

Eligibility of Fixed Capital Investments:
The petitioner claimed sales tax incentives under the New Incentive Policy-Capital Investment Incentive Scheme for setting up an oxygen gas plant. The dispute arose over the eligibility of fixed capital investments, including land, building, and plant & machinery. The authorities contended that the land was acquired before the scheme's commencement, making it ineligible. They also argued that the plant & machinery were second-hand as they were initially purchased by another firm. Regarding the building, the authorities objected based on the construction contract's pre-scheme execution. However, the petitioner argued that the plant & machinery were new, directly delivered to their premises, and put to use for the first time by them. The High Court directed the State Level Committee to reexamine the issue, emphasizing the actual delivery and installation of the machinery at the petitioner's premises.

Compliance with Scheme Conditions:
The authorities raised concerns about the petitioner's compliance with the Scheme's conditions, particularly regarding continuous production. The petitioner faced interruptions in production beyond their control, leading to non-operational periods. The State Level Committee was tasked with considering the petitioner's representation for condonation of breaks in production. The petitioner asserted that sales tax incentives should be based on their investments, and any production interruptions should not affect eligibility for incentives. The High Court instructed the petitioner to apply for condonation of breaks, providing relevant details and documents to the State Level Committee for a fresh decision.

Conclusion:
The High Court disposed of the petition, directing the State Level Committee to review the petitioner's claim for sales tax incentives based on the investments in the new building and plant & machinery. The petitioner was given the opportunity to apply for condonation of breaks in production, with the State Level Committee required to decide expeditiously and afford a personal hearing if needed. The petition was thus resolved without costs, emphasizing a fresh examination of the eligibility and compliance issues under the Scheme.