2008 (4) TMI 718 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of Transport Subsidy Scheme for industrial units in Himachal Pradesh, determination of whether a second unit is a separate industrial unit or an expansion of the original unit.

Interpretation of Transport Subsidy Scheme:
The case involved a dispute regarding the entitlement of a petitioner company to transport subsidy under the Transport Subsidy Scheme framed by the Union of India in 1971. The scheme aimed to provide subsidy to industrial units in Himachal Pradesh for transportation of raw materials and finished goods. Initially, there was no time limit for the subsidy, but in 1993, it was limited to 5 years from the commencement of commercial production.

Separate Industrial Unit or Expansion:
The main issue was whether the second unit of the petitioner company was a separate industrial unit or merely an expansion of the original unit. The Union of India and State departments initially treated the second unit as separate. However, an objection by the Comptroller and Auditor General (CAG) led to a dispute. The CAG argued that the second unit was a substantial expansion of the first unit and not entitled to transport subsidy.

Legal Interpretation and Precedent:
The court referred to the definition of a new "Industrial Unit" under the Transport Subsidy Scheme and cited a precedent where the Supreme Court clarified that a new unit must have a distinct identity separate from the existing business. Applying this test, the court found that the second unit of the petitioner company was indeed a separate unit, supported by separate registrations, certificates, and approvals.

Decision and Dismissal of Appeal:
The court dismissed the appeal, upholding the judgment that the second unit qualified as a separate industrial unit eligible for transport subsidy. The court rejected the reasoning of the CAG and affirmed that the company had followed the necessary procedures to establish the second unit as distinct. The appeal and cross-objections were both dismissed, with no costs awarded.

Conclusion:
The judgment clarified the criteria for determining a separate industrial unit under the Transport Subsidy Scheme and emphasized the importance of distinct identity and compliance with formalities. The court's decision favored the petitioner company, affirming its entitlement to transport subsidy for the second unit, and upheld the judgment of the Single Judge.