STATE OF ORISSA AND ORS. versus VIJAY LAXMI OIL INDUSTRIES

Citation: [1998] SUPP. 1 S.C.R. 659 · Decided: 18-09-1998 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

STATE OF ORISSA AND ORS. 
v. 
VIJA Y LAXMI OIL INDUSTRIES 
SEPTEMBER 18, 1998 
' 
I 
[S.P. BHARUCHA AND V.N. KHARE, J.T.] 
Orissa Industrial Policy Resolution, I989, Part If Clauses 7.2.3, 2.17 
and 2.I8. 
A 
B 
Sales Tax--Exemption-Small-scale industrial unit.1~Set up under C 
I986 policy but not eligible for sales tax exemption-Eligibility under 1989 
policy-..;.Held : Only those small scale continuing units of 1986 policy which 
were eligible and received concessions/incentives, entitled to sales tax exemp-
tion 011 finished products for an additional period of two yew~'"--l-Ience, the 
said units not entitled for sales tax exemption under Cl. 7.2.3 of I989 
PolicJ-Said unit:~ are not continuing industry under Cl. 2.18 of I989 D 
policy-Therefore, High Cowt erred in holding otherwise--Orissa Industrial 
Policy Resolution, I986 Part B. definition (f). 
Sales Tax-Clause 7. I. I-Exemption under-Smull-scale indusllial 
wzits-Set up under IPR 1986 but commenced production under IPR E 
1989--Eligibilitr-Held : Only those new Units set up under IPR 1989 eligible 
for exemption under Pt. I Cl. 7. I.1-Hence, said units not eligible for sales 
tax exemption. 
Sales ta>.-Exemption-Small-scale industrial wzits---Set up under IPR 
I986 but commenced production under IPR I989--Entitlcment to-State 
F 
Govcmment Notification dated 23.4.I976-Item 30-FF (as amended by 
notification dated I6.8.I990f-Provided for exemption for a period of seven 
years from date of commencement of production for industries having a 
capacity of more than JO MT-Held : The said notification has to be read 
along with IPR I989--17zeref ore, only those units having capacity and of more G 
than JO MT which were set up under IPR 1989 eligible for sales tax exemption 
under item 30-FF---Hence, units set up under IPR 1986 not entitled to sales 
' · 
tax exemption. 
lndust1ial Policy Resolutions-Object and purpos~Held : To main-
tain and enhance the growth of indust1ialization in the State by giving incen-
H 
659 
660 
SUPREME COURT REPORTS (1998) SUPP. 1 S.C.R. 
A tives/co11cessions to the i11dust1ies set up within the State. 
The respondent set up an industry and made the first investment in 
fixed capital (land, building, plant and machinery) on 17.7.1989 when the 
Industrial Policy Resolution (IPR), 1986 was operative. The respondent 
commenced commercial production on 9.6.1990 with an input capacity of 
B more than 10 MT when IPR 1989 was operative. 
The respondent's application for concessions/incentives in the form 
of sales tax exemption under IPR 1989 was rejected. The respondent filed 
a writ application before the High Court challenging the aforesaid rejec-
C tion. The High Court held that the respondent was eligible for sales tax 
exemption under Part II (Clause 7.2) of IPR 1989 as the respondent-unit 
was a continuing industry as it was covered by Clause 2.18 of IP,R 1989 
and directed the appellants to issue sales tax exemption certificate to the 
respondent. Hence this appeal. 
D 
On behalf of the appellant it was contended that the continuing 
small-scale industrial units of IPR 1986 which were otherwise eligible for 
sales tax exemption for a period of five years were only allowed to avail of 
the concessions for additional 2 years i.e. in all 7 years under Clause 7.2.2 
of IPR 1989 and since the respondent-unit was not eligible for sales tax 
E exemption under IPR 1986 it was not entitled for sales tax exemption under 
IPR 1989. 
On behalf of the respondent it was contended that since respondent-
unit commenced commercial production on 9.6.1990, it was entitled to 
sales tax exemption under Part-I Clause 7 .1.1 of IPR 1989; and that in view 
F of the notification dated 16.8.1990 amending Item 30-FI<' under the exemp-
tion notification dated 23.4.1976, the respondent-unit was entitled to have 
exemption from sales tax for a period of seven years from the date of 
commercial production under the said amended notification. 
G 
Allowing the appeal, the Court 
HELD : 1.1. The High Court's finding that the respondent- unit is a 
continuing unit under Clause 2.18 of the Industrial Policy Resolution 
(IPR), 1989 is factually incorrect. Clause 2.18 of IPR 1989 provides that 
any industrial unit where fixed capital investment commenced on or after 
H 1.8.1980 and prior to 1.4.1986 could be given the status of "Continuing 
STATEv. VIJAYLAXMIOILINDUS.[V.N.KHARE,J.] 
661 
industry of1980 Policy". In the present case, the respondent made the first A 
inve

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