2006 (12) TMI 452 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility for State capital subsidy and sales tax waiver.
2. Interpretation of Government Order G.O. Ms. No. 500.
3. Consideration of second-hand machinery in subsidy eligibility.

Issue-wise Detailed Analysis:

1. Eligibility for State Capital Subsidy and Sales Tax Waiver:
The petitioner, a registered firm manufacturing polypropylene woven sacks, sought a writ of certiorarified mandamus to quash the order dated August 9, 1999, which rejected their request for State capital subsidy and sales tax waiver. The rejection was based on the premise that the asset in question was partly created by a previous entrepreneur and completed by the petitioner, which, according to the respondents, disqualified it from being considered a new asset under the Government Order.

2. Interpretation of Government Order G.O. Ms. No. 500:
The petitioner argued that the Government Order did not stipulate any conditions that would disqualify them from receiving the subsidy and waiver. The petitioner emphasized that the land and partially completed shed were repossessed by SIPCOT and allotted to them, making it a new asset from their perspective. They invested a substantial amount and commenced commercial production within the stipulated time, thus fulfilling the requirements of the Government Order.

The respondents countered that the petitioner was not entitled to the benefits because the asset was not entirely new and included second-hand machinery. They cited clause 12 of the Government Order, which excludes second-hand machinery from being considered in the computation of deferral or waiver of sales tax.

3. Consideration of Second-hand Machinery in Subsidy Eligibility:
Clause 12 of the Government Order explicitly states that second-hand machinery will not be part of the investment eligible for the computation of deferral or waiver of sales tax. The respondents used this clause to argue against the petitioner's eligibility. However, the court noted that the primary reason for rejecting the petitioner's claim was the asset's partial creation by another entrepreneur, which the court found to be an extraneous consideration not supported by the Government Order.

Judgment and Conclusion:
The court referred to previous judgments, including Sulochana Cotton Spinning Mills (P) Ltd. v. State of Tamil Nadu and other unreported decisions, to interpret the scope and requirements of G.O. Ms. No. 500. It concluded that the petitioner's industry, which commenced operations on December 13, 1996, should be considered a new industry. The court found that the asset, although partly created by another entrepreneur, was acquired by the petitioner through SIPCOT and thus should be regarded as a new asset.

The court set aside the impugned order and remitted the matter back to the respondent authorities to reconsider the issue and pass appropriate orders in accordance with the law, specifically the requirements enunciated in G.O. Ms. No. 500 dated May 14, 1990. The writ petition was disposed of with no costs.