9911796707
TMI Blog1998 (11) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... units from payment of tax on the sales, within the State or in the course of inter-State trade or commerce as the case may be, of the goods manufactured by them within the State. Under both the sets of Schemes sick units as well as units going in for expansion and diversification are eligible for benefits. The Schemes envisage that an industrial unit eligible for sales tax exemption under them shall apply for the grant of an eligibility certificate (EC) to the appropriate Screening Committee which in the case of large scale units is the State Level Screening Committee (SLSC) which comprise the Secretary Industries as Chairman, Chairman-cum-Managing Director, RIICO and Commissioner, Commercial Taxes Department as members and the Director of Industries as Member-Secretary. 5.. The 1989 Schemes contain a provision in sub-clause (f) of clause (1) to the effect that no industrial unit shall be allowed to take the benefit of both the 1987 Scheme and the 1989 Scheme simultaneously. 6.. Prior to October 15, 1994 none of these Schemes contained a provision for review and reconsideration . Such provision was made by an amendment to the Schemes with effect from October 15, 1994 which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural steel and rolled steel. For the manufacture of these diversified products the petitioner s unit had for the first time put the raw material into the production process on February 26, 1987 and therefore in terms of the provisions of the 1987 Schemes the date of commencement of commercial production was taken to be April 27, 1987, i.e., the 61st day after February 26, 1987. This was well within the operative period of the 1987 Schemes. The case for the grant of an EC to the petitioner s unit was put up to the SLSC at its meetings of October 16, 1989 and January 16, 1990 when Here italicised. it was decided to defer the decision of the case. The SLSC at its meeting of January 8, 1991 decided to sanction benefits to the petitioner s unit on the basis of diversification. The relevant extract of the minutes of the meeting of January 8, 1991 of the SLSC read: 2. M/s. Pratap Rajasthan Special Steel Ltd.: It was decided to accord sanction to the above case, subject to the condition that the record of the above unit as regards to the date of commencement of the commercial production is verified by the Additional Commissioner, CTD. 8.. Thereafter, on March 4, 1991 the Director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax or deferment of tax. The learned advocate of the unit wanted time to reply this question and no body has appeared up to this time to answer the said question. In these circumstances, the said unit cannot be given the benefit of Incentive Scheme till the basic issue raised by the undersigned is resolved in accordance with the relevant provisions of the law. Thereafter, its records of production would be required to be verified. (Signed) AddI. Commissioner (A/E)" (emphasis* added) 11.. The matter came up before the SLSC at its meeting of September 9, 1991. The relevant extracts of the minutes of this meeting of the SLSC reads: 2. M/s. Pratap Rajasthan Special Steel Ltd.: SLC in its meeting held on January 8, 1991, has sanctioned the case on the basis of diversification subject to condition that the record of the above unit as regards the date of commencement of commercial production be verified by Commercial Taxes Department. The representative of CTD informed that the unit has not so far given documents in support of its claim for the date of commencement of commercial production, and as such the date of commencement of commercial production has not been veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the SLSC on September 23, 1992 to the effect that the question of the date of commencement of commercial production had to be determined and certified by the District Level Screening Committee and that therefore the Commercial Taxes Department was not required to take any action in the matter. 14.. On March 4, 1993 the petitioner wrote to the Director of Industries drawing attention to the decision of the SLSC of January 8, 1991 and requesting for the early issue of the EC as all the necessary records had been produced before the Additional Commissioner, Commercial Taxes. 15.. In reply to that the petitioner-firm was required by the Directorate s letter of March 11, 1993 to refer to the Directorate s earlier letter of December 18, 1992. Apparently the petitioner had subsequent to its application for benefits under the 1987 Schemes on the basis of eligibility also sought benefits under the 1989 Schemes on the basis of its unit having become a sick unit in the meanwhile. The petitioner was required to clarify whether it wished to avail of benefits on the basis of diversification under the 1987 Schemes or on the basis of a sick unit under the 1989 Schemes. The petitioner replied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again on the basis of expansion and put up the same before the SLC for decision in its next meting. (emphasis added) 18.. The matter came up next before the SLSC at its meeting of January 24, 1994. The note circulated by the Director of Industries for the consideration of the SLSC at this meeting reads as follows: M/s. Pratap Rajasthan Special Steels Ltd.: This is a large scale industrial unit engaged in manufacturing ingots, billets, blooms, rounds, channels, angles, flats and bars, etc. The unit had submitted its application for the benefit under Sales Tax Incentive Scheme, 1987 on the basis of expansion and diversification . SLC in its meeting held on January 8, 1991 had sanctioned the benefit to the unit on the basis of diversification subject to the condition that the record of the above unit as regards to the date of commencement of commercial production be verified by Commercial Taxes Department. While not receiving any report from Commercial Taxes Department the case of this unit was again put up before SLC in its meeting held on September 9, 1991, October 7, 1991 and November 4, 1993. In the meeting dated November 4, 1993 representative of Commercial Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that Member-Secretary may examine this case again on the basis of expansion and put up the same before the SLC for decision. The matter was examined at the level of Member-Secretary and found that it is a case of diversification . Therefore, the case was put up before the SLC in this meeting for confirming the decision taken in the meeting dated January 8, 1991. SLC however, decided to defer the decision on this case for next meeting. (emphasis added) 20.. The matter came up once again before the SLSC on March 9, 1994. Relevant extracts of the minutes of this meeting read: 6. M/s. Pratap Rajasthan Special Steels Ltd.: This unit is engaged in manufacturing of ingots/blooms/rolled product, etc., and submitted its application for the benefit under Sales Tax Incentive Scheme, 1987 on the basis of expansion and diversification . Here italicised. SLC in its meeting held on January 8, 1991 had sanctioned the benefit to the unit on the basis of diversification , subject to the condition that the record of the unit as regards to the date of commencement of commercial production be verified by Commercial Taxes Department. While no report was received from Commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing ingots, billets, blooms, rounds, channels, angles, flats and bars, etc. The unit had submitted its application for the benefit under Sales Tax Incentive Scheme, 1987 on the basis of expansion and diversification on July 21, 1987. The case was submitted in SLC meeting held on October 16, 1989 and January 16, 1990 but the same was deferred for want of necessary information from the unit. SLC in its meeting held on January 8, 1991 had sanctioned the benefit to the unit on the basis of diversification subject to the condition that the record of the above unit as regards to the date of commencement of commercial production be verified by Commercial Taxes Department. While not receiving any report from Commercial Taxes Department the case of this unit was again put up before the SLC in its meeting held on September 9, 1991, October 7, 1991 and November 4, 1993. In the meeting dated November 4, 1993 representative of Commercial Taxes Department informed the SLC that they have no dispute regarding the date of commencement of commercial production but unit does not appear to be eligible on the basis of diversification. SLC after discussions decided that the Member-Secret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der expansion programme and was completed on February 26, 1987. As per annual report of the unit actual production before expansion (i.e., 1984-85) was 44,307 M.T. (steel ingots 27,832 + rolled steel 16,445 M.T.) and as per annual report of the year 1987-88 actual production figure after expansion is as under: In this way by the result of this expansion it seems that actual production of the unit is not increased as per provisions of the Scheme. Hence vide this office letter dated July 15, 1994 unit was intimated to submit month-wise production figures for a period of at least one year after completion of expansion programme. Two reminders were also given to unit on October 20, 1994 and December 2, 1994. In reply to the above letters unit has intimated vide his letter dated December 9, 1994 that they have already submitted all the required details long back. They have also informed that their application has already been sanctioned by the SLC as a diversification case in its meeting held on January 8, 1991 subject to the verification of the date of commencement of commercial production by the CTD. The CTD has already verified the above date. Hence they further request to gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n eligibility to this unit on the basis of a sick industrial unit on its following investment under RST and CST both the Acts: As regards another agenda of the unit for the benefit on the basis of expansion/diversification under the Sales Tax Incentive Scheme, 1987. SLC in its meeting held on April 23, 1994 decided to examine this case on the basis of expansion and the unit did not furnish the month-wise actual production figures for a period at least one year after completion of expansion programme. SLC after discussions did not find the unit eligible for the benefit on the basis of expansion under Sales Tax Incentive Scheme, 1987 as the eligibility on the basis of sick industrial unit under Sales Tax New Incentive Scheme, 1989 was sanctioned and as per clause 1(f) of Sales Tax New Incentive Scheme, 1989 no industrial unit should be allowed to take the benefit of both old and new incentive scheme simultaneously. (emphasis* added) Here italicised. 24. The petitioner had accordingly been informed by a letter of June 26, 1995 that its application for benefits under the 1987 Schemes on the basis of expansion had been rejected by the SLSC in its meeting held on June 6, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rise to the impression that expansion and diversification is a composite category. The petitioner had in its application for grant of EC originally mentioned that the basis of eligibility was expansion and diversification. Yet when asked to choose between the two it opted for diversification and it was on this basis that the SLSC agreed to sanction the benefits on January 8, 1991. The only point that was left open was the date of commencement of commercial production. This too was not the subject of controversy and has been deemed to be April 27, 1987. This is clear from the chronological recital of the developments in the case. As is the fact that the Director of Industries was clearly of the view even when required by the SLSC to reconsider the matter as a case of expansion that the petitioner s unit was eligible for benefits under the 1987 Schemes on the basis of diversification. The Director has given details of the licences held by the petitioner, which clearly establish a new product line. The Director has also asserted that the increase in fixed capital investment is more than 25 per cent. The petitioner s unit, therefore, satisfied the requirements of the Schemes to qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... versification are two different categories of cases entitled for benefits under the Schemes, each with its own qualifying requirements. It is not as if an applicant for benefits on the basis of diversification must also satisfy the qualifying requirements for expansion. A case of diversification need not also be one of expansion. The qualifying requirements in the case of diversification were that there must be a new product line and the fixed capital investment in the diversification must be more than 25 per cent of the value of the net fixed assets of the original project. The petitioner s units satisfied both these requirements. The definition of diversification adopted in the Schemes does not require that the diversified products must necessarily be sold and not be used by the unit in the manufacture of its other products. Therefore, details of the quantum of sales made by the petitioner were not relevant. 35.. That leaves the question of what is to be made of the provision in clause 1(f) of the 1989 Schemes to the effect that no industrial unit shall be allowed to take the benefits of both the 1987 Schemes and the 1989 Schemes simultaneously. 36.. It is matter of record t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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