Taxes Officer, Jodhpur Vs. M/S Vishnu Metals  Insc
751 (7 November 2006)
Bhan, Altamas Kabir & Dalveer Bhandari
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.
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.
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.
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 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
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
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
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.
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.
same view was reiterated by the High Court in the revision preferred by 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.
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
arriving at a conclusion that job work would also 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.
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.
will, however, be no order as to costs.
Appeal No. 4701 /2006 (Arising out of SLP) No.2165/2003) Leave granted.
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.
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.
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.
will be no order as to costs.