2022 (5) TMI 1194 - HC - VAT and Sales Tax

Benefit of sales tax exemption - excess production and sale of cement of a quantity of 1670 MT - HELD THAT - The industrial unit was to avail tax exemption in terms of I.P.R.1989. The installed capacity of the unit is that which stands certified under Annexure-2 and 3 and it cannot be changed or modified unless there is expansion/modernization/diversification. In other words, the installed capacity can be altered subject to the justification by amending the registration certificate. In the instant case, the claim of the Petitioner s case is not based on any such expansion etc. Of course, no bar lies for excess production which may be accomplished with more than one shift but the exemption which the Petitioner is entitled would stand restricted to 15000 MT and cannot cover the excess production. Admittedly, no expansion has been undertaken by the Petitioner and notwithstanding the fact that there is excess consumption of power and raw materials during the impugned period, such exemption can only be made available only to the extent of production of 15000 MT that being the installed capacity and for the excess production of 1670 MT, the unit is ineligible for the concession and hence, in the considered view of the Court, the Tribunal rightly upheld the assessment for the year 1995-96 and concluded that the Petitioner is required to pay sales tax thereon @ 12%. The revision stands disposed of with the question answered in favour of the Department and against the Petitioner.

Summary

Issues:
Challenge to the legality and judicial propriety of the order denying sales tax exemption on excess production and sale of cement.

Analysis:
The petitioner, a small scale industrial unit, challenged the order of the Orissa Sales Tax Tribunal denying sales tax exemption on the excess production and sale of cement. The petitioner argued that it was entitled to exemption based on I.P.R. 1989 and the Orissa Sales Tax Rate Chart. The Tribunal upheld the assessment, ruling that the excess production of 1670 MT was taxable at 12%. The petitioner contended that the unit's installed capacity of 15000 MT did not bar excess production. However, the Department argued that the excess production rendered the unit ineligible for exemption on the entire production. The Court noted that the unit's eligibility certificates were issued for availing exemption on a specific quantity, and any excess production beyond the installed capacity was taxable. The Court emphasized that the exemption could only apply to the installed capacity of 15000 MT, and any excess production, like the 1670 MT in question, was liable for tax at 12%.

The petitioner relied on a letter from the Project Manager, District Industries Centre, to support its claim that the excess production should not negate the tax benefit. However, the Court held that the installed capacity, as certified in Annexure-2 and 3, could only be altered through valid amendments to the registration certificate due to expansion or modernization. Since no such modifications were made in this case, the exemption remained limited to 15000 MT. The Court concluded that the Tribunal correctly upheld the assessment for the year 1995-96, requiring the petitioner to pay sales tax at the prescribed rate on the excess production.

In summary, the Court dismissed the petitioner's challenge, ruling in favor of the Department and upholding the assessment of sales tax on the excess production of cement.