2015 (4) TMI 285 - HC - VAT and Sales Tax

Exemption from payment of tax under Section 13-B of the Haryana Sales Tax Act read with Rule 28-A of the Haryana General Sales Tax Rules, 1975 - Held that - The exemption is to be sought by and in respect of a unit, inter alia, of a company and is granted to the unit. The distinction between the juristic entity, namely, the company and a unit thereof has been drawn throughout the Rules. The Rules we quoted earlier are only a few illustrations of this. The exemption is given to the unit and not to the company. The refusal of the exemption to the second unit makes no difference in determining whether the provisions of sub Rule (11) of Rule 28-A had been met by the unit to which the exemption was granted. For this reason, it is irrelevant whether the registration certificate in respect of the second unit is granted or not and if granted whether it is subsisting or not. Even if it is not subsisting or not granted, it would be irrelevant while determining whether the unit in respect of which exemption is granted has achieved the production figures and has met the other requirements. - Decided against assessee.

Summary

Issues Involved:
1. Separate assessment of tax after rejection of exemption claim for expansion unit.
2. Prohibition of extending tax exemption benefits to expanded capacity under Rule 28A.

Issue-wise Detailed Analysis:

1. Separate Assessment of Tax After Rejection of Exemption Claim for Expansion Unit:

The appellant set up an industrial unit in Gurgaon, Haryana, and was a registered dealer under the Haryana General Sales Tax Act, 1973, and the Central Sales Tax Act, 1956. They were granted a tax exemption from 04.04.1996 to 03.04.2003. The appellant later made an additional fixed capital investment which increased production capacity and sought further exemption for the expansion unit. However, this exemption was denied, and separate ex-parte assessments were framed for the expanded unit, leading to an additional tax demand. The appellant argued that after the rejection of the exemption for the expansion unit, both units should be considered a single entity for tax assessment purposes.

The court rejected this argument, referencing the Supreme Court's judgment in State of Haryana and others Vs. Bharti Tele Tech Limited (2014), which clarified that production from separate units cannot be combined to meet exemption conditions. The court emphasized that each unit must independently meet the conditions for tax exemption, and the rejection of the exemption for the expansion unit did not affect the assessment of the original unit.

2. Prohibition of Extending Tax Exemption Benefits to Expanded Capacity Under Rule 28A:

The appellant contended that Rule 28A of the Haryana General Sales Tax Rules, 1975, does not prohibit extending tax exemption benefits to the expanded capacity within the overall exemption limit granted to the original unit. The court examined Section 13-B of the Haryana Sales Tax Act and Rule 28A, which define terms like "new industrial unit," "expansion/diversification of industrial unit," and conditions for eligibility and exemption certificates.

The court noted that the appellant's application for exemption for the expansion unit was rejected due to non-compliance with Rule 28A requirements. The appellant did not challenge this rejection. The court highlighted that the exemption is unit-specific, and each unit must independently meet the exemption conditions. The Supreme Court's judgment in Bharti Tele Tech Limited was cited, which stated that clubbing production from different units to meet exemption criteria is not permissible. The court concluded that the appellant's expanded unit could not benefit from the exemption granted to the original unit, as they are considered independent for exemption purposes.

In conclusion, the court dismissed the appeals, affirming that the appellant's expanded unit could not be assessed jointly with the original unit for tax exemption purposes, and each unit must independently meet the conditions for tax exemption under Rule 28A.