STATE OF KERALA Vs. ECOWOOD LTD

JUDGEMENT

(1.) The question raised in the revision filed by the State is whether the Tribunal was justified in granting exemption on purchase turnover of rubber wood by the respondent for the year 2001-2002. We have heard Government Pleader appearing for the petitioner and counsel appearing for the respondent.

(2.) Respondent was approved as a 100% Export Oriented Unit (EOU) by the Central Government on 20-2-1995. The approval was for a period of 5 years ending on 20-2-2000. Respondent claimed exemption on purchase turnover of rubber wood under notification SRO No. 1090/99, which provided for exemption for five years for purchase of industrial raw materials by 100% EOU from the date of approval of such EOU by the Central Government. The Notification was later amended whereby exemption for 5 years was to commence from date of commencement of commercial production instead of date of approval as an EOU. In the course of assessment, the assessing officer did not grant exemption for purchase during the year 2001-2002, for the reason that exemption was over on 20-2-2000. Even though first appeal was also dismissed, respondent filed second appeal before the Tribunal contending that the renewal of recognition as 100% EOU subsequently granted will entitle them for exemption for another 5 years. Tribunal accepted this argument and allowed the appeal holding that the respondent will be entitled to exemption for a period of 5 years from the date of renewal of recognition granted by the Central Government to the respondent as a 100% EOU. Government Pleader contended that the interpretation placed to the notification by the Tribunal is erroneous. However, counsel for the respondent contended that recognition granted by the Central Government takes in periodical renewal granted and so much so, exemption has been considered with reference to the recognition granted each time. The relevant clause, namely item 11 of the Third Schedule to Notification, SRO No. 1090/99, is as follows: <FRM>NP_810_ILR(KER)2_2009.htm</FRM>

(3.) Admittedly for the first time the respondent was granted approval as a 100% EOU by the Central Government, by order dated 20-2-1995. The approval was valid up to 20-2-2000. However, later the Central Government again granted approval to the respondent on 7-6-2000 for another period of 5 years. The question to be considered is whether the subsequent approval granted entitles the respondent for exemption for a period of 5 years from the date of approval granted a second time. We are unable to uphold the order of the Tribunal because, the exemption granted under the Notification is only for a period of 5 years, from the date of approval of the unit as 100% EOU by the Central Government. In fact, it is seen that by subsequent amendment to the Notification with effect from 1-1-2002, the period of limitation for exemption is changed from the date of approval to the date of commencement of commercial production. There may be cases where industry may be set up and commence commercial production after obtaining approval as EOU. Therefore, if exemption is granted with effect from the date of approval, it will not give any real benefit to the industry because raw material is required only after the commencement of commercial production. Therefore, in order to give effective relief for 5 years as per Notification, the date of commencement of exemption is changed from the date of approval to the date of commencement of commercial production. The original Notification and the amendment establish beyond doubt that exemption is available only for a period of 5 years and it is available from the date of first approval which in this case is 20-2-1995. If the argument raised by the respondent which found acceptance by the Tribunal is upheld, the result will be that a unit getting renewal of the registration will get perpetual exemption, which is against the letter and spirit of the Notification. The benefit visualised under Notification is only for 5 years which is from the date of first approval of the industry as 100% EOU no matter whether the original approval granted is for 5 years or for lesser period or renewed thereafter. In other words, the condition of the Notification is such that exemption is available to the industry so long as it remains as a 100% EOU and such exemption is only for a period of 5 years and that it should be reckoned from the date of first approval and the period cannot be extended by renewals of approval. The tax revision petition is consequently allowed, reversing the order of the Tribunal and by restoring the assessment. However, we make it clear that the industrial unit is entitled to claim any other exemption or concession if available under any other Notification. Respondent is free to claim the same and while revising the assessment, the assessing officer should consider alternate claims, if any, made.