1995 (8) TMI 282 - HC - VAT and Sales Tax

Summary

Issues:
Petitioner seeks to quash an order granting eligibility certificate for 3 years instead of 5 years under the U.P. Sales Tax Act. The main issue is whether the petitioner is entitled to the benefit of the eligibility certificate for 3 years or 5 years based on the capital investment made.

Analysis:
The petitioner, a private limited company engaged in the business of manufacturing and selling bread, filed a petition under Article 226 challenging the order granting a 3-year eligibility certificate instead of 5 years. The eligibility for tax exemption under the U.P. Sales Tax Act is based on the capital investment made by the industrial unit. The relevant notification specifies a 5-year exemption for units with capital investment exceeding 3 lakh rupees. The petitioner claimed to have invested over 3 lakh rupees in land, building, and machinery, making them eligible for the 5-year exemption.

The Divisional Level Committee had granted a 3-year exemption based on the capital investment of Rs. 2,33,800 till the date of the first sale. However, the petitioner had also made advance payments for machinery before the first sale date, which were not considered in the capital investment. The court, citing a similar case precedent, held that the advance payments made before the production date should be included in the capital investment calculation. Receipts of advance payments totaling over 3 lakh rupees were submitted, leading the court to conclude that the petitioner was indeed eligible for the 5-year exemption period.

The court found the exclusion of advance payments from the capital investment calculation unsatisfactory and directed the inclusion of these amounts. Relying on the evidence provided, the court determined that the petitioner's capital investment exceeded 3 lakh rupees when advance payments were considered. Consequently, the court allowed the petition, quashed the 3-year eligibility certificate order, and directed the authorities to grant a 5-year eligibility certificate within a month. No costs were awarded in the judgment.