SHIVANI VANASPATI LTD Vs. STATE OF ORISSA

JUDGEMENT

(1.) VALIDITY of Finance Department notification dated July 30, 1999 (annexure 9) by which the State Government has withdrawn the sales tax exemption granted to the petitioner in the Finance Department notification dated January 25, 1999 (annexure 8) is the subject-matter of challenge in this writ petition.

(2.) THE petitioner's case is that it is a public limited company incorporated under the Indian companies Act, 1956. It has an authorised capital of Rs. 10 crores out of which the paid up capital is Rs. 8. 50 crores. The Industrial Promotion and Investment Corporation of Orissa Limited (IPICOL) has an equity participation of Rs. 50 lakhs in the company. Many investors have also invested money to the tune of Rs. 225 lakhs in the company by purchasing shares. It is engaged in manufacture of vanaspati which has a good market in the State of Orissa as well as outside the State. It is a fast selling consumer item but the competition being tough, the petitioner is not in a position to raise the price of its product above that of the competitors as price hike would virtually affect its existence. In the initial stage, the margin of profit was very low because the petitioner had to pay huge interest on the loans which it had availed from various financial institutions. Therefore, sales tax exemption is necessary for its very existence and if such concession by way of sales tax exemption is not granted, the petitioner's unit would not be viable. The industrial policy of the State Government taken from time to time extends various concessions including the exemption of sales tax.

(3.) THE State Government in the Finance Department, which is opposite party No. 1, has filed counter-affidavit and additional counter-affidavit justifying the withdrawal. Briefly stated its case is that the sales tax concession was made available to the petitioner under section 6 of the Orissa Sales Tax Act, 1947 (hereinafter referred to as "the Act") and in exercise of that power the State Government can withdraw the concession. The State Government had been considering ways and means for reviewing the sales tax incentives with a view to improve mobilisation of resources and accelerating economic development because of the fiscal situation of the State which is in dire straits and there is huge financial over-burden. The State is passing through a phase of grave fiscal imbalance because of mounting revenue and fiscal deficits. In the last few years, revenue expenditure has far exceeded the revenue receipts. To over-come the revenue deficit, a number of measures were taken in the past and some further new measures are being taken. Keeping the aforesaid factors in view, the Government decided that sales tax incentives granted should be withdrawn in public interest and accordingly the impugned notification dated July 30, 1999 has been issued. It has also been further pleaded in the counter-affidavit that the petitioner's unit was neither availing sales tax exemption under the Industrial Policy Resolution, 1992 nor the Industrial Policy Resolution, 1996. Hence, it cannot claim for continuance of the benefit which was enjoyed earlier.