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2021 (6) TMI 674 - HC - VAT and Sales TaxCancellation of the Sales Tax Eligibility Certificate - Entitlement for sales tax incentive - entitlement to priority industry status - Industrial Policy Resolution 1996 - HELD THAT - While it is true that the Petitioner as a new unit was in the SSI category, it graduated to a Medium Scale industry after the expansion and modernization drive. It satisfied the description of an existing unit that had undertaken expansion and modernization - Once the Petitioner has been declared as a priority industry in terms of IPR 1996 Clause 2.7 (i) and (xii) Part-II, the Petitioner's unit was eligible to get an additional two years of sales tax exemption. The Petitioner is right in its contention that the Opposite Parties are mistaken in their stand that IPR 1996 was meant only for a New/SSI/Medium/Large industry. The notification issued by the Opposite Parties themselves belies this contention. SRO 475/96 dated 26th July 1996, referred to hereinbefore, envisages an existing industrial unit undertaking fixed capital investment and having commenced after 1st March, 1996. Clearly, this would include an existing unit, which undertakes expansion and modernization after 1st March, 1996. The certificate issued by the DoI on 7th March, 2002, in Form II-A, granting the Petitioner eligibility for sales tax concession on sale of finished products acknowledges both the new products as well as the existing product viz., air coolers . Indeed, the Opposite Parties have no answer to the above contention of the Petitioner that it was a unit in the pipeline in terms of SRO 141/2000. The Petitioner has also clarified how its agreement with M/s. Nilkamal Plastic Private Limited had no relevance to its claim for sales tax exemption. The machineries for the manufacture of moulded plastic furniture were purchased from M/s. Nilkamal Plastic Private Limited under proper invoices, challans and excise gate passes. It was the Petitioner that produced the finished products - With the Petitioner satisfying all the requirements of the applicable notifications, there appears to be no justification in the Opposite Parties seeking to revoke the sales tax exemption thereby cancelling the certificate issued for that purpose. It is held that the Petitioner, as a priority industry, is eligible to avail sales tax benefit as contemplated under IPR 1996 in terms of notification dated 2nd February, 1999 and, therefore, is entitled to sales tax exemption for an additional two years as claimed by the Petitioner - Petition allowed.
Issues Involved:
1. Whether the Petitioner is a new unit under the Industrial Policy Resolution 1996 (IPR 1996). 2. Entitlement to priority industry status. 3. Eligibility for sales tax incentives under Clause 5.6 (Part-II) of IPR 1996. 4. Validity of the cancellation of the Sales Tax Eligibility Certificate issued on 15th October, 2005. Detailed Analysis: 1. Whether the Petitioner is a new unit under the Industrial Policy Resolution 1996 (IPR 1996): The Petitioner was initially a Small Scale Industry (SSI) registered on 21st December 1996, and started commercial production on 10th April 1994. It undertook a diversification programme under IPR 1996, investing ? 4,08,35,710/- to qualify as a Medium Scale Industry (MSI). The District Industries Center (DIC), Bhubaneswar recommended the issuance of a Priority Industries Certificate (PIC) after due verification. The DoI issued a production certificate on 8th January 2002, determining the unit's commercial production date as 12th November 2001, and certified it as a priority industry on 24th January 2002. However, the DoI later held that the Petitioner was not a new unit under IPR 1996, thus not entitled to priority industry status. 2. Entitlement to priority industry status: Clause 2.7 of IPR 1996 defines 'priority industry' as an industrial unit in specified categories with a project cost of not less than ? 1 crore. The DoI initially certified the Petitioner as a priority industry eligible for sales tax exemption, but later revoked this status. The Petitioner contended that it fulfilled the criteria under SRO 141/2000, which applied to existing units that had expanded. The Court found a factual misconception on the part of the DoI regarding the Petitioner’s status, recognizing it as a priority industry by the order issued on 24th October 2002. 3. Eligibility for sales tax incentives under Clause 5.6 (Part-II) of IPR 1996: The Petitioner argued that it was entitled to sales tax concession for seven years, including an additional two years for priority industries, as per a notification dated 2nd February 1999. The DoI initially issued a certificate of eligibility for sales tax concession on 7th March 2002, which was valid until 11th November 2006. The Petitioner contended that the cancellation of this certificate was unjustified, as it satisfied all criteria under SRO 141/2000. The Court agreed, noting that the Petitioner had been recognized as a priority industry and was eligible for the additional two years of sales tax exemption. 4. Validity of the cancellation of the Sales Tax Eligibility Certificate issued on 15th October, 2005: The DoI's cancellation was based on the view that the Petitioner was not a new unit and did not satisfy the eligibility criteria. However, the Court found that the Petitioner had undertaken significant expansion and modernization, qualifying as an existing unit that had expanded. The Petitioner was listed as an industry 'in the pipeline' as of 1st January 2000, satisfying all conditions for continued incentives. The Court held that the cancellation of the sales tax exemption certificate was unjustified and revived the certificate dated 15th October 2005. Conclusion: The Court set aside the impugned decision dated 18th January 2008 by the DoI, reviving the sales tax exemption certificate dated 15th October 2005. It held that the Petitioner, as a priority industry, is eligible for sales tax benefits under IPR 1996, including an additional two years of exemption as claimed. The writ petition was allowed with no order as to costs.
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