PRANAV RAJ PAPER MILLS Vs. STATE OF GUJARAT

JUDGEMENT

(1.) Brief facts which led to filing of this petition are that the petitioner is private limited company incorporated under the Indian Companies Act by the certificate of incorporation dated 30.5.1982. It has been allotted three plots bearing Nos. 188, 189 and 190 on lease by GIDC, Vapi in 1984. In the first instance, the petitioner started manufacturing of plastics materials in January 1988 in Plot No. 188. At that time Sales Tax Incentive Scheme for Industries 1986 introduced by Government Resolution dated 6.5.1986 was in force which inter alia provided for sales tax exemption of eligible units under the scheme, subject to a maximum limit on the basis of capital investment to be computed under the detailed provisions of the scheme by competent authority. The provisions applied for grant of such exemption vide application dated 2.8.1988 which was ultimately granted in respect of that unit in 1991. Thereafter the petitioner established another unit for manufacturing of paper on the remaining plots Nos. 189 and 190 which commenced production on 1/4.6.1993. The period of operation of Sales Tax Incentive Scheme for Industries 1986 which was originally to last upto 31.3.1991 had been extended to 30.6.93, that is to say, the eligible units which commenced production before 30.6.1993 became eligible units to avail the benefit under the scheme. For establishing its unit for the manufacture of paper which commenced production on 1.6.1993, the petitioner made an application for grant of exemption certificate in respect of it as new unit on 4.7.1993. On 18.9.96, the petitioner were granted eligibility certificate for exemption as new industrial unit by the competent authority. In the first instance by his order dated 25.3.1997, the Additional Industries Commissioner issued an amendment in the certificate for sales tax exemption in the case of the petitioner by substituting the exemption in respect of a new industrial unit that the company is an existing unit which has carried out diversification involving an increase in the value of fixed capital investment by not less than 25%. Accordingly, the new original exemption limit computed as is available in the case and new industrial unit was reduced to the percentage exemption of new capital investment applicable in the case of diversification to Rs.31,41,300.00 from 41,58,400/-. This order had been made without affording any opportunity of hearing to the petitioner. The petitioner challenged that order by way of Special Civil Application No. 2978 of 1997. Petition was allowed on the limited ground that the order affecting the right of the petitioner is made without affording an opportunity of hearing and was thus in violation of principles of natural justice. Treating the impugned order as show cause notice, respondent was directed to decide the question afresh. Pursuant to this opportunity, the petitioner appeared before the Industries Commissioner, who, by his order dated 23.12.1997 held the case of the petitioner as of diversification and not of new unit, and reduced the exemption limit to Rs.31,41,300.00 at the rate of 30% of the eligible new capital investment. The amendment was primarily founded on the fact that the GSFC while considering the case of grant of subsidy under the capital investment subsidy scheme for new industries 1986 dated 5.5.1986 had considered the petitioner's case as of diversification and on the definition of diversification given in the scheme itself. It is this order dated 23.12.1997, which is under challenge in this petition.

(2.) Two fold contentions have been raised before us. Firstly, that the determination of eligibility and fixing the exemption limit by issue of certificate of exemption under the incentive scheme of 1986 is quasi judicial function of the competent authority, unless there is a power of review conferred under any relevant provisions, it had no jurisdiction to review its earlier order. Secondly, on merit of the issue, petitioner contended that the scheme read as a whole leaves no room of doubt that the diversification can only be referrable to such new products which are connected with and in the same line of business as of the existing project of the manufacture and not altogether a new product. Any other interpretation would lead to serious anomalous position making the interpretation look absurd.

(3.) Having carefully considered, we find substance in the contention. The exemption from sales tax which is levy authorised by the Sales Tax Act is also creature of statute and flows from provisions of the Act itself, notwithstanding that the policy in the matter of grant of exemption may be formulated by different Government authorities according to the requirement of State policy. The Government resolution dated 6.5.1986 delineating the sales tax incentive scheme of Industries 1986 offered two alternative incentives, firstly, exempting from payment of tax and secondly deferring the payment of tax. Both operate in different fields. So far as exemption from payment of tax is concerned, it squarely comes within the provisions of Section 49 of the Sales Tax Act. Section 49(1) are exemptions granted by legislative fiat itself. Subsection (2) of Section 49 enables Government, if it considers necessary to do so in the public interest, to exempt in specified class of sales or of specified sales or of purchases from payment of the whole or any part of the tax payable under the provisions of this Act by notification under official gazetted.