M/S.VIJAY ENTERPRISES vs. SALES TAX OFFICER

SLP(C) No.-008543-008543 - 1990Supreme Court11 February 1992Bench: REDDY K. JAYACHANDRA (J)6 pages
For Petitioner: AJIT SINGH PUNDIRFor Respondent: ASHOK K. SRIVASTAVA
AI SummaryAllowed

What did the Supreme Court hold?

The Supreme Court held that the petitioners are entitled to sales tax exemption under Section 4-A of the U.P. Sales Tax Act, 1948, for five years from March 30, 1985. The Court reasoned that the diesel set was purchased on March 4, 1985, which was prior to the date of the first sale (March 30, 1985). Therefore, its cost of Rs. 72,800 should be included in the capital investment. With this inclusion, the total capital investment exceeded Rs. 3,00,000 as of the date of the first sale. According to the notification, units with a capital investment exceeding Rs. 3,00,000 are eligible for a five-year exemption. The Court found the reasoning of the Joint Director, which excluded the diesel set cost solely because it was purchased after starting production, to be erroneous, especially in light of the High Court's finding that the production start date was March 1, 1985, and the first sale date was March 30, 1985. The benefit of exemption for five years from March 30, 1985, was granted.

What were the facts?

The petitioners, Vijay Enterprises, a small-scale industrial unit manufacturing cycle stands and carriers, applied for power connection in December 1984, which was sanctioned on January 19, 1986, and provided on May 20, 1986. They commenced manual production on March 1, 1985, and made their first sale on March 30, 1985. They purchased a diesel set for Rs. 72,800 on March 4, 1985. The Divisional Joint Director granted them a three-year sales tax exemption from March 1, 1985. The petitioners sought a review, arguing for exemption from May 20, 1986, for five years, including the diesel set cost in their capital investment of over Rs. 3,00,000. The authorities accepted March 30, 1985, as the first sale date but rejected the claim for a later production start date and inclusion of the diesel set cost. The High Court upheld the three-year exemption from March 30, 1985.

What were the issues?

1. Whether the cost of the diesel set purchased on March 4, 1985, should be included in the capital investment for determining the period of sales tax exemption under Section 4-A of the Uttar Pradesh Sales Tax Act, 1948, and the relevant notification dated January 29, 1985. Assessee's Contention: The petitioners argued that the diesel set was purchased before the first sale date (March 30, 1985) and its cost should be included in the capital investment. If included, the total capital investment would exceed Rs. 3,00,000, entitling them to a five-year exemption as per the notification. Revenue's Contention: The revenue authorities initially rejected the inclusion of the diesel set cost on the ground that it was purchased after the date of starting production (March 1, 1985). The High Court also rejected the plea for a later production start date. The State Government's counter-affidavit before the High Court, however, acknowledged the bill for the diesel set purchase.

Which sections of the Income-tax Act were involved?

Section 4-A

AI-generated summary — verify with the full judgment below

http://JUDIS.NIC.IN SUPREME COURT OF INDIA PETITIONER: VIJAY ENTERPRISES AND ORS.

Vs. RESPONDENT: SALES TAX OFFICER AND ORS. DATE OF JUDGMENT11/02/1992 BENCH: REDDY, K. JAYACHANDRA (J) BENCH: REDDY, K. JAYACHANDRA (J) PATNAIK, R.C. (J) CITATION: 1992 AIR 760 1992 SCR (1) 594 1992 SCC (2) 55 JT 1992 (1) 579 1992 SCALE (1)304 ACT: Uttar Pradesh Sales Tax Act, 1948: Section 4-A and Notification dated 29.1.1985-Exemption of Sales tax to new industrial units-First sale of manufactured goods made within six months from date of production-Diesel set purchased before date of first sale- Whether cost of diesel set to be included in capital investment and exemption granted for five years from date of first sale. HEADNOTE: The petitioners were a small scale industrial unit manufacturing cycle stands and carriers. They applied for power connection in December, 1984, but it was given only on 20.5.86, though it was sanctioned on 19.1. 86. Meanwhile, the petitioners started production manually with effect from 1.3.85 and effected first sale of the manufactured goods on 30.3. 85. On th

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