2009 (2) TMI 773 - HC - VAT and Sales Tax

Notification S. No. 827 dated December 6 1990 benefit denied - Held that - Since no cut-off date or water tight compartment is sought to be placed in the said notification this court is not inclined to take a narrow view of the matter. The courts must incline towards purposive interpretation rather than being in denying mode. Therefore this court is of the clear opinion that the assessee was entitled for exemption on the purchase of machinery in question under the said notification dated December 6 1990. Against Revenue.

Issues Involved:
1. Interpretation of Notification S. No. 827 dated December 6, 1990.
2. Eligibility for tax exemption on machinery purchased for setting up an industry.
3. The distinction between "setting up" and "expansion" of an industry.
4. The applicability of previous judgments and notifications.

Detailed Analysis:

1. Interpretation of Notification S. No. 827 dated December 6, 1990:
The core issue revolves around the interpretation of Notification S. No. 827 dated December 6, 1990. The notification exempts from tax the sale of machinery for setting up specified industries in Rajasthan, provided certain conditions are met. The conditions include the industry coming into production between April 1, 1990, and March 31, 1997, holding a valid certificate of registration, providing a declaration for the use of machinery, and proving no tax was charged on the sale of such goods.

2. Eligibility for Tax Exemption:
The Tax Board ruled in favor of the respondent-assessee, stating that the machinery purchased for setting up a mineral-based industry in Rajasthan met all requisite conditions of the notification. The assessing authority, however, denied this benefit, imposing a four percent tax under section 5CC of the RST Act, 1954, by reassessing under section 12 of the Act. The crux of the Revenue's argument was that the industry had commenced production on July 17, 1990, and thus the purchase of machinery on November 29, 1991, could not be exempted as the setting up process was considered complete by the production start date.

3. Distinction Between "Setting Up" and "Expansion":
The Revenue relied on a previous judgment (ACTO v. Srinath Minerals Industries) which held that "setting up" does not include "expansion." The court in that case stated that expansion involves setting up but is not covered by the notification dated December 6, 1990. The respondent-assessee countered this by arguing that the notification did not explicitly exclude expansion and that the term "setting up" should be interpreted liberally to include the continuous process of establishing an industry.

4. Applicability of Previous Judgments and Notifications:
The respondent-assessee cited the decision in Shurvi Colour Chem (P.) Ltd. v. State of Rajasthan, which supported a liberal interpretation of "setting up" to include expansion, emphasizing the notification's objective to encourage industrial investment. Additionally, the court referred to ACTO v. Shri Vijaya Industries, where it was held that the purchase of machinery for setting up an industry, even if received after the commencement of production, was eligible for exemption if ordered simultaneously.

Conclusion:
Upon reviewing the submissions and relevant judgments, the court concluded that the respondent-assessee was entitled to the tax exemption under the notification dated December 6, 1990. The court emphasized that "setting up of industry" should be interpreted as a continuous process rather than a discrete event. The court criticized the assessing authority for not conducting a proper inquiry and for dismissing the assessee's claims without evidence. The court also noted that the notification did not explicitly exclude expansion and that a liberal interpretation should be applied to fulfill the notification's purpose of encouraging industrial investment.

The court dismissed the Revenue's revision petition, thereby upholding the Tax Board's decision in favor of the respondent-assessee, and ruled that the machinery purchased on November 29, 1991, was eligible for tax exemption.

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