2013 (2) TMI 688 - HC - VAT and Sales Tax

the existing unit if on the basis of the efforts made by the incumbent, becomes 100 per cent. exporting unit and as such the fixed capital investment till the recognition took place shall qualify for exemption if other condition which made, i.e., the period within which, the unit must be become 100 per cent. exporting unit.

Summary

Issues Involved:
1. Fixing of cut-off date for capital investment exemption.
2. Denial of exemption for investments made prior to April 1, 1994.
3. Legality of the State Level Committee and State Appellate Forum's decisions.
4. Interpretation of Notification No. 43 dated June 6, 1995.

Issue-wise Detailed Analysis:

1. Fixing of Cut-off Date for Capital Investment Exemption:
The petitioner challenged the decision of the State Appellate Forum, which confirmed the State Level Committee's (SLC) refusal to grant exemption for capital investments made between April 1, 1992, and March 31, 1994. The petitioner argued that the fixing of a cut-off date was arbitrary as the notification did not specify such a date.

2. Denial of Exemption for Investments Made Prior to April 1, 1994:
The SLC and the State Appellate Forum denied the petitioner the benefit of exemption for investments made before April 1, 1994, despite the petitioner's unit being converted into an exporting unit. The petitioner contended that the entire investment towards fixed assets as of the date of recognition (Rs. 232.41 lacs) should be considered for exemption, rather than the reduced amount (Rs. 104.11 lacs) determined by the SLC.

3. Legality of the State Level Committee and State Appellate Forum's Decisions:
The High Court previously quashed the State Appellate Forum's decision as a "cryptic and non-speaking order" and remanded the case for a fresh decision. Despite this, the State Appellate Forum upheld the SLC's decision to disregard investments made prior to April 1, 1994, which the petitioner argued was illegal and without jurisdiction.

4. Interpretation of Notification No. 43 Dated June 6, 1995:
The petitioner argued that the notification did not specify any cut-off date for calculating the exemption, and the SLC's interpretation to include such a date was unfounded. The notification aimed to provide incentives to dealers converting their units into 100% export-oriented units, without limiting the period of capital investment prior to recognition of the unit as an exporting unit.

Court's Observations and Judgment:

1. Fixing of Cut-off Date:
The court noted that the notification did not mention any cut-off date for capital investments. The SLC and State Appellate Forum's decision to fix such a date was not supported by the notification and was therefore arbitrary.

2. Denial of Exemption for Investments Made Prior to April 1, 1994:
The court observed that the notification provided for exemption based on the total capital investment made by the dealer. The investments made prior to April 1, 1994, should be included in the exemption as the notification did not restrict the period of investment.

3. Legality of the Decisions:
The court found that the decisions of the SLC and the State Appellate Forum were not in accordance with the notification or the industrial policy. The arbitrary cut-off date imposed by the SLC and upheld by the State Appellate Forum was not justified.

4. Interpretation of Notification:
The court emphasized that the notification aimed to incentivize the conversion of units into 100% export-oriented units without limiting the period of capital investment prior to recognition. The court referred to the Supreme Court judgment in State of Orissa v. Tata Sponge Iron Ltd., which supported the view that exemptions should be granted based on the total capital investment without imposing any arbitrary cut-off dates.

Conclusion:
The court concluded that the petitioner was entitled to the benefit of exemption for the entire investment towards fixed assets (Rs. 232.41 lacs) as claimed. The orders of the State Level Committee and the State Appellate Forum were modified to grant the petitioner the full benefit of exemption. The writ petition was disposed of with no order as to costs.