2004 (1) TMI 661 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of "have taken effective steps for setting up new industrial unit" under Notification S.R.O. No. 1092 of 1999.
2. Eligibility of the petitioner for sales tax exemption under the Kerala General Sales Tax Act, 1963.
3. Procedural propriety in the rejection of the petitioner's application for sales tax exemption.

Detailed Analysis:

1. Interpretation of "have taken effective steps for setting up new industrial unit" under Notification S.R.O. No. 1092 of 1999:
The court examined the scope and ambit of the expression "have taken effective steps for setting up new industrial unit" as used in Notification S.R.O. No. 1092 of 1999. It was crucial to determine whether the petitioner had taken such effective steps before January 1, 2000, to qualify for sales tax exemption. The notification specifies that an industrial unit is considered to have taken effective steps if it:
- Obtained provisional registration (for SSI units).
- Owned, acquired, or was allotted land and applied for financial support before January 1, 2000.
- For self-financed units, acquired or placed firm orders for the necessary plant and machinery before January 1, 2000, provided commercial production commenced on or before December 31, 2001.

The court emphasized that the notification allows for establishing that firm orders were placed through means other than advance payments. The burden of proof lies on the industrial unit to demonstrate that firm orders were placed before the cutoff date.

2. Eligibility of the petitioner for sales tax exemption under the Kerala General Sales Tax Act, 1963:
The petitioner had set up an industrial unit and commenced commercial production on March 6, 2001. They applied for sales tax exemption under Notification S.R.O. No. 1729 of 1993, which was amended by S.R.O. No. 1092 of 1999. The petitioner argued that they had taken effective steps by acquiring land and placing firm orders for plant and machinery before January 1, 2000. The court noted that the petitioner had provided evidence of advance payments and firm orders placed before the cutoff date. However, the second respondent rejected the application, stating that the petitioner did not fully satisfy the definition of "effective steps" as required by the notifications.

3. Procedural propriety in the rejection of the petitioner's application for sales tax exemption:
The court found several procedural lapses in the rejection of the petitioner's application. The second respondent had abdicated their jurisdiction by relying solely on the decision of the State Level Committee without independently verifying the petitioner's claims. The petitioner was not given an opportunity to present their case before the State Level Committee. The court also noted that the decision was based on an incorrect interpretation of the notification, requiring advance payments for all plant and machinery, which was not mandated by the notification.

Conclusion:
The court set aside the order rejecting the petitioner's application for sales tax exemption. It directed the second respondent to independently reconsider the application, taking into account the observations made in the judgment and the documents provided by the petitioner. The court emphasized the need for a reasoned order addressing the petitioner's evidence and ensuring procedural fairness. The interim stay on recovery proceedings was extended until a new order was passed and communicated to the petitioner. The petition was disposed of accordingly.