2003 (10) TMI 645 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to tax exemption under Notification dated 13.06.1994.
2. Classification of manufacturing units as new or existing for the purpose of tax exemption.
3. Interpretation of the Export Oriented Units (EOU) and Export Processing Zone (EPZ) Scheme 1992-97 in relation to tax benefits.
4. Impact of the conversion of existing units into EOUs on tax exemption eligibility.

Detailed Analysis:

1. Entitlement to Tax Exemption Under Notification Dated 13.06.1994:
The primary issue was whether M/s Vikas WSP Limited was entitled to tax exemption on the purchase of raw materials for its manufacturing units under the Notification dated 13.06.1994. The notification provided tax exemption for raw materials purchased by 100% Export Oriented Units (EOUs) for manufacturing goods meant for export. The Tribunal initially granted exemption for the new unit at Plot No. B-86 but denied it for the units at Plot No. B-87, which were established before the application for EOU registration.

2. Classification of Manufacturing Units as New or Existing for the Purpose of Tax Exemption:
The court examined whether the units at Plot No. B-87, which were established before the registration as an EOU, could be classified as new manufacturing units eligible for tax exemption. The Tribunal had concluded that since the units at Plot No. B-87 were operational before the EOU registration, they did not qualify as new units under the notification. However, the court found that the essential criterion was the registration as a 100% EOU with the Government of India, not the date of establishment.

3. Interpretation of the EOU and EPZ Scheme 1992-97 in Relation to Tax Benefits:
The court analyzed the Export Oriented Units (EOU) and Export Processing Zone (EPZ) Scheme 1992-97, which allowed existing units to convert into EOUs and avail tax benefits. Clause 118 of the scheme permitted existing Domestic Tariff Area (DTA) units to convert into EOUs without losing eligibility for tax concessions on new installations post-conversion. The court emphasized that the scheme aimed to promote exports by extending tax benefits to all registered EOUs, regardless of whether they were newly established or converted from existing units.

4. Impact of the Conversion of Existing Units into EOUs on Tax Exemption Eligibility:
The court noted that the conversion of existing units into EOUs did not disqualify them from tax benefits. The Export Import Policy 1992-97 provided that both new and converted EOUs were entitled to tax concessions on raw materials and other inputs. The court concluded that the notification should be interpreted in line with the export policy, which did not differentiate between new and converted EOUs for tax exemption purposes.

Conclusion:
The court held that M/s Vikas WSP Limited was entitled to tax exemption on the purchase of raw materials for all its units, including those at Plot No. B-87, under the Notification dated 13.06.1994. The court dismissed the writ petition filed by the revenue and allowed the writ petition filed by the assessee, modifying the Tribunal's order to extend the tax benefit to all units of the assessee. The court emphasized that the registration as a 100% EOU with the Government of India was the determining factor for tax exemption eligibility, not the date of establishment of the units. No orders as to costs were made.