2023 (2) TMI 1214 - SC - VAT and Sales Tax

Interpretation of SRO 1727/1993 which is an exemption notification issued by the State of Kerala - entitlement to exemption. The Revenue contends that the exemption limit by five years in point of time was to commence from the date of approval by the Central Government, to the approval to the project - The assessees had on the other hand contended that the exemption would commence from the date of commencement of production. HELD THAT - It is evident from the overall reading of the document issued by the Department of Industrial Development, Central Government on 16-12-1993 to the assessee that it was a mere permission conditioned upon fulfilment of certain specified requirements. Therefore, it was described as a letter of intent. The actual approval in clear terms enabling the benefit of exemption was issued on 27-10-1994, when Green Card was issued by the Central Government. Therefore, this Court is of the opinion that the term approval in the present case was issued in the letter dated 27-10-1994. In these circumstances, this Court is of the opinion that the term approval has to relate to unambiguous approval by the Central Government which in the present case was given on 27-10-1994 - Therefore, the assessee could have availed exemption after 27-10-1994. The assessee s contention that the date of commencement should be the date when the exemption also becomes determinable cannot be accepted. Another reason why such a contention is unfeasible is that it injects subjectivity with regard to assessment of proceedings itself. In a given case, the unit-holder may be vigilant and set up his or its unit early whereas in another case, the concerned unit-holder may be laid back or drags its feet resulting in the unit not commencing production. In the latter case, though it might have secured approval, the delay in the commencement of production should not be rewarded with an exemption. The court holds that date of approval in this case was 27-10-1994 and that would be the reckonable date for grant of exemption under the Notification SRO 1727/1993. Appeal allowed in part.

Summary

Issues:
Interpretation of exemption notification SRO 1727/1993 issued by the State of Kerala regarding entitlement to exemption from sales tax on purchase of raw materials for industrial units.

Analysis:
The Supreme Court granted leave in the Special Leave Petition (SLP) No. 36394/2011, observing a significant question of law concerning the interpretation of the exemption notification SRO 1727/1993. The appeals were filed by both the State (Revenue) and the Industrial unit, focusing on the controversy surrounding the commencement of the exemption period. The Revenue argued that the exemption period should start from the date of approval by the Central Government to the project, while the assessees contended it should commence from the date of commencement of production.

The relevant notification, Schedule VI, provided exemption for industrial raw materials, plant, machinery, etc., for a period of five years from the date of approval by the Central Government. The assessees claimed exemption for the purchase of raw materials for several years, leading to assessment, reassessment, and imposition of penalties by the assessing authority. The Tribunal's interpretation favored the assessees, but the Revision to the High Court was time-barred and not condoned. The Division Bench remitted the matter for fresh consideration.

The Court analyzed the key issue of interpreting the term "approved by the central government" in SRO 1727/1993. The letter dated 16-12-1993 was deemed a permission or letter of intent, while the actual approval enabling exemption was granted on 27-10-1994 with the issuance of the "Green Card." The Court held that the term "approval" in this case referred to the unambiguous approval by the Central Government on 27-10-1994, making it the reckonable date for granting exemption.

The Court rejected the assessee's argument that the date of commencement of production should determine the exemption date, emphasizing that rewarding delay in production commencement with exemption would be unfair. Injecting subjectivity into assessment proceedings was deemed unfeasible, and the Court concluded that the date of approval on 27-10-1994 was the determinative factor for granting exemption under the notification SRO 1727/1993.

In conclusion, the Court partially allowed the appeals based on the above analysis, settling the dispute over the entitlement to exemption from sales tax on the purchase of raw materials for industrial units.