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TMI Blog2012 (11) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... of the plant was increased from 5.6 to 7.6 LTPA. Thereafter, the company again contemplated an increase in the manufacturing capacity of cement by 10 LTPA but finally instead of increasing the capacity of the old unit, it set up another unit (hereinafter referred to Unit No. II). The company invested more than Rs. 200 crores and gave employment to more than 200 people in the second unit. In earlier litigation in LPA No. 23 of 2004 decided by this court on April 10, 2008, this court clearly held that the two units were separate units and were not one unit. This judgment of the court was upheld by the apex court by dismissing special leave petition on August 2, 2010. Therefore, there is no dispute that the two units are separate units. 3. The second unit was set up sometime in the year 1994 and commercial production started on September 15, 1994. The main dispute in this case is that while granting sales tax exemption to the company, the State laid down a condition that this incentive of sales tax exemption to the second unit would be available to the company only if the production of the first unit does not fall below the level of 922692 MT of cement. It is this condition which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incentives and now that the period of incentives of unit No. I is over, there is every possibility that the production of unit No. I is lowered and transferred to unit No. II only with the purpose of taking tax benefits of unit No. II and hence the need to impose such a condition. 6. To appreciate the rival contention of the parties it would be appropriate to refer to certain documents. The first incentive policy referred to by the petitioner is the policy issued initially in the year 1980 and revised in the year 1991. In this policy with regard to sales tax, the incentives given are only of sales tax deferment and not of exemption as is apparent from clause 11.1 of the policy which reads as follows: "11. Sales Tax Incentives: 11.1 Sale Tax Deferment Scheme: (a) Eligibility: Except for industries as notified in annexure II or as notified by the State Government from time to time, the following sales tax incentives shall be admissible to a new industrial unit which is register as a dealer under the Himachal Pradesh General Sales Tax Act, 1968/Central Sales Tax Act, 1956, and com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively. The repayment of deferred amount of sales tax shall commence from the fourth year and shall be repaid in one instalment on the due date." It is thus apparent that as per the incentive policy, the prestigious cement units were entitled only to sales tax deferment for the various periods reflected in the policy. 12. On December 31, 1994, the State of Himachal Pradesh issued a comprehensive exemption notification in exercise of the powers vested in it under section 42(1) of the Act. In fact, this is not one notification but a compendium of various notifications which have been published together. No doubt, certain portions of this notification are carbon copies of the incentive policies referred to above. We are concerned with clause 2(1C) of the policy, which reads as follows: "2(1C)(1) The Governor of Himachal Pradesh in exercise of the powers conferred by sub-section (1) of section 42 of the Himachal Pradesh General Sales Tax Act, 1968 (Act No. 24 of 1968) is pleased to order exemption from tax, subject to their being eligible as per the terms of this para to the following other industries from the payment of tax leviable on the sale of cem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g each financial year of the period of exemption in respect of the new components of this unit, established as a result of expansion on the quantity respectively of 551664 metric tons and 3,71,028 metric tons sold during the year 1994-95; and (b) the level of manufacture of 922692 metric tons of cement in the old component of M/s. Associated Cement Companies Limited, Barmana, District Bilaspur (H.P.) is also maintained unchanged throughout each financial year during the period of exemption in respect of the new component of this unit established as a result of expansion." 13. There is no manner of doubt that the second unit of the petitioner-company fulfils all the requirements mentioned in sub-clause (2) of clause 2(1C) and is entitled to the exemption which has been granted to it. The petitioner is aggrieved with the proviso added at the end of sub-clause (2) whereby an additional condition has been laid down that the old component of the unit must maintain its level of production at 9226922 MT of cement, i.e., the amount of cement produced and sold during the year 1994-95. 14. The main argument made on behalf of the petitioner-company is that this con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titionercompany were not granted the benefit of the sales tax exemption probably because they were old units. 17. Certain conditions were laid down and admittedly the petitionercompany fulfils conditions Nos. 1 to 6 and is entitled to the benefit granted under the scheme. The proviso to sub-clause (2) of clause 2(1C) lays down an additional condition as far as the petitioner-company is concerned. The second condition is that the second unit would not be entitled to the benefit of the exemption if the first unit does not produce 9226922 MT of cement which it was producing when the second unit came into being. There are valid reasons for laying down such a condition. The benefit has been given under this notification not to the second unit but to the petitioner-company as a whole. The second unit may be a separate unit but the State in its wisdom decided to give benefit to M/s. Associated Cement Companies Ltd. and further laid a condition that the benefit would only be given if the old unit continued to maintain its production at the last years level. If this condition was not laid down, then as urged by Sh. Vivek Thakur, the company can stop or reduce production of the unit which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policy itself. As clearly held by us above, the benefit of exemption from payment of sales tax was not available to the petitioner-company under the incentive policy. This benefit was given by the same notification which lays down an additional condition that production in unit-I should not be lowered and the said condition in our opinion is just and reasonable. 21. As far as Vadilal Chemicals' case [2005] 142 STC 76 (SC); [2005] 6 SCC 292 is concerned, the same also has no application because there also the Government Order of 1993 had granted sales tax holidays but the DCCT gave its own opinion about the definition of the term "manufacture" to reduce the benefit which the apex court struck down. Therefore, this judgment is also not at all applicable to the facts of the present case. 22. We are of the considered view that the benefit of sales tax exemption was granted only under the notification issued under section 42 of the Himachal Pradesh General Sales Tax Act, 1968 and not under the incentive policies issued by the State. The State by the same notification also imposed a condition that the benefit to the petitioner-industry would be available only if the old unit mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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