Full Judgment Text
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CASE NO.:
Appeal (civil) 4944 of 2001
PETITIONER:
Commercial Taxes Officer, Jodhpur
RESPONDENT:
M/s Vishnu Metals
DATE OF JUDGMENT: 07/11/2006
BENCH:
Ashok Bhan, Altamas Kabir & Dalveer Bhandari
JUDGMENT:
J U D G M E N T
WITH
Civil Appeal No. 4701 /2006
(Arising out of SLP ) No.2165/2003)
Commissioner, Commercial Taxes, Jaipur ....Appellants
Versus
M/s Narpat Steels Private Ltd. ....Respondents
ALTAMAS KABIR,J.
Civil Appeal No. 4944 of 2001 is directed against the
judgment of the Rajasthan High Court at Jodhpur dated 18th
January, 2000, in S.B. Sales Tax Revision No. 1165 of 1999
under Section 86(2) of the Rajasthan Sales Tax Act, 1994. The
said revision was directed against the judgment dated 9th
February, 1999, passed by the Rajasthan Tax Board, Ajmer,
allowing the appeal preferred by the respondent/assessee and
setting aside the decision of the District Level Screening
Committee taken on 19th March, 1998, rejecting the
assessee’s application for Eligibility Certificate under the Sales
Tax New Incentive Scheme for Industries, 1989.
The assessee, which is the respondent in the present
appeal, manufactures stainless steel sheets. Its original
installed capacity was 1300 M.T. per annum prior to 16th
February, 1995. Subsequently, the assessee expanded its
production capacity to 1600 M.T. per annum and achieved the
production of more than 85% of the installed capacity between
16th February, 1995 and 16th June, 1996. According to the
materials on record, the production of the assessee between
April, 1994 to 15th February, 1995 was 1292.913 M.T. and
during the year following the date of expansion, the assessee
manufactured its own goods to the extent of 1447.489 M.T. It
is the case of the assessee that apart from manufacturing its
own goods, the assessee had also manufactured goods by
doing job work for others and the entire production, taking
into account the goods manufactured for its own purposes and
the job work, would amount to a total of 2193.76 M.T. In
other words, if the job work undertaken by the assessee for
others is also taken into consideration, along with the
production for its own purposes, such production would
constitute an increase in the production to more than 25% of
the original installed capacity.
On 6th July, 1989, the Rajasthan Government, in exercise
of its powers conferred by Section 4(2) of the Rajasthan Sales
Tax Act, 1954, notified the "Sales Tax New Incentive Scheme
for Industries, 1989" which exempted the industrial units from
payment of tax on the sale of goods manufactured by them
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within the State in the manner and to the extent and for the
period as covered by the notification. Clause 2(f) dealt with
expansion of units and defined such expansion in the
following terms:-
"2(f) Expansion means increase in the value of
fixed capital investment by not less than 25% of the
net fixed assets of the existing project and
accompanied by an increase in the production to
the extent of at least 25% of the original
licensed/registered capacity.
Explanation: The benefits of Sales Tax
incentive for Expansion shall be admissible to the
eligible units only after they have achieved at least
85% of their licensed/registered capacity before
expansion."
The assessee applied to the District Level Screening
Committee for grant of Eligibility Certificate under the
provisions of the said 1989 Incentive Scheme on account of
expansion of its installed capacity. The said Committee came
to the conclusion that since the production by the assessee
had been raised during the period in question from 1292.913
M.T. to 1447.489 M.T., it had utilized more than 85% capacity,
but the production had not increased to the extent of 25% of
the licensed/registered capacity and accordingly rejected the
claim of the assessee. Against the said decision of the District
Level Screening Committee, the assessee went before the
Rajasthan Tax Board by way of Appeal No.
798/98/S.T./Jodhpur, wherein it was contended that apart
from the production for its own purposes, the assessee had
also undertaken "job work" and that the two taken together
would far exceed the required increase in the production to the
extent of at least 25% of the licensed/registered capacity.
Accepting the submissions made on behalf of the
assessee that since the definition of the expression
"expansion" did not stipulate that the production had to be for
its own purposes, the Tax Board held that the assessee was
entitled to add the job work performed to its own production
for its own purposes to qualify for the Eligibility Certificate
under the 1989 Incentive Scheme.
The same view was reiterated by the High Court in the
revision preferred by the Department.
The question that, therefore, falls for determination in
this appeal is whether the job work performed by the assessee
in addition to its production for its own purposes can be taken
into consideration for the purposes of clause 2(f) of the 1989
Incentive Scheme, as had been held both by the Rajasthan Tax
Board and the High Court. Although, the Rajasthan Tax
Board was of the view that the job work performed by the
assessee would have to be added to the production capacity of
the assessee’s unit, there is no reasoning in support thereof.
The said lacuna has been addressed by the High Court by
holding that the expression used in the statute did not
indicate that the manufacture of goods for sale must be by any
particular individual and that the entire production in order to
make the unit eligible for grant of benefit under the 1989
Incentive Scheme must be on its own account and not by way
of doing job work. On such interpretation of clause 2(f) of the
1989 Incentive Scheme, the High Court affirmed the finding of
the Rajasthan Tax Board and directed the District Level
Screening Committee to issue necessary Eligibility Certificate
to the respondent-assessee.
While arriving at a conclusion that job work would also
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have to be taken into consideration for grant of eligibility
certificate under Clause 2(f), both the Rajastan Tax Board and
the High Court omitted to take into consideration the nature of
job work performed by the respondent-assessee and whether
the same would amount to production as contemplated in the
said clause. Learned counsel appearing for the respondent-
assessee was also unable to specify the nature of job work said
to have been undertaken by the respondent-assessee. Both
the Rajasthan Tax Board and the High Court laboured under
the presumption that the job work performed by the
respondent-assessee involved manufacture of goods which
were similar in nature to its own goods for sale. Such an
approach, in our view, was erroneous, since the very nature of
the incentive given under the aforesaid 1989 Incentive Scheme
involves calculation of the actual production of the unit in
question. In the absence of any material to indicate the
nature of job work undertaken, it would be improper to
proceed only on the basis of presumption.
The Department’s appeal must, therefore, succeed and is
allowed and the judgment of both the Rajasthan Tax Board
and the High Court dated 18th January, 2000 and 9th
February, 1999, respectively, are set aside.
There will, however, be no order as to costs.
Civil Appeal No. 4701 /2006
(Arising out of SLP ) No.2165/2003)
Leave granted.
The Civil Appeal arising out of S.L.P.(Civil) No. 2165 of
2003 involves the same question as in Civil Appeal No. 4944 of
2001 and is directed against the judgment of the Rajasthan
High Court at Jodhpur dated 14th August, 2002, in S.B.
Sales Tax Revision No. 457 of 2002 under Section 86(2) of the
Rajasthan Sales Tax Act, 1994. The said revision was directed
against the judgment dated 3rd October, 2001, passed by the
Rajasthan Tax Board, Ajmer, allowing the appeal preferred by
the respondent/assessee and setting aside the decision of the
District Level Screening Committee taken on 7th August, 1999.
Relying on its decision in the Vishnu Metals’ case in S.B.
Sales Tax Revision No. 1165 of 1999, the High Court
dismissed the revisional application of the appellant in the
instant appeal as well.
As the issue involved is the same in both these appeals,
the decision in Civil Appeal No. 4944 of 2001 will govern this
appeal as well. Consequently, the Department’s appeal
succeeds and the judgment of both the Rajasthan Tax Board
and the High Court dated 14th August, 2002, and 3rd October,
2001, respectively, are set aside.
There will be no order as to costs.