2006 (9) TMI 516 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of deferral scheme for sales tax on products manufactured by industries in backward regions.

Analysis:
The judgment involves a company situated in a specific industrial park, manufacturing sheet metal components, assemblies, and sub-assemblies for automobiles, and benefiting from the IFST Deferral Scheme introduced by the Government of Tamil Nadu. The Government had issued a scheme for remission of sales tax payable by new industries in certain backward taluks, deferring tax payment for a period of nine years. The eligibility certificate for this scheme was granted by the first respondent. The petitioner sought inclusion of income from selling steel scrap, a by-product of their manufacturing process, under the deferral scheme. The Standing Committee directed the first respondent to declare that the steel scrap did not qualify for the concession, but the court was tasked with determining whether the steel scrap should be considered a part of the term "product" covered by the deferral scheme.

The court referenced a previous decision regarding a spinning mill where the term "product" was interpreted broadly to include by-products capable of being marketed separately. Similarly, the Supreme Court had considered coal ash as a by-product qualifying for a concessional scheme in another case. The court emphasized that the purpose of the incentive scheme was to encourage new industries and ensure financial viability, suggesting a wider interpretation of the term "product" to include distinct by-products. The judgment concluded by quashing the order denying deferral for steel scrap, directing the first respondent to reconsider and include the steel scrap within the eligibility certificate, in line with legal precedents. The parties were instructed to bear their own costs, and the case was closed without further orders.