VIJAY ENTERPRISES AND ORS. versus SALES TAX OFFICER AND ORS.

Citation: [1992] 1 S.C.R. 594 · Decided: 11-02-1992 · Supreme Court of India · Bench: K. JAYACHANDRA REDDY, R.C. PATNAIK · Disposal: Disposed off

Judgment (excerpt)

A 
VUA Y ENTERPRISES AND ORS. 
v. 
SALES TAX OFFICER AND ORS. 
FEBRUARY 11, 1992 
B 
[K. JAYACHANDRA REDDY AND R.C. PATNAIK; JJ.) 
Uttar Pradesh Sales Tax Ac4 1948: 
Section 4-A and Notification dated 29.J.1985-Exemption of Sales tax 
c to new industrial units-First sale of manufactured goods made within six 
-r-
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. 
The petitioners were a smail scale industrial unit manufacturing 
D cycle stands and carriers. They applied for power connection in December, 
1984, but it was given only on 20.S.86, thongb 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 their 
application for e.xemption from the payment of sales tax under Section 4-A 
E of t~e U.P. Sales Tax Act, 1948, and. the Notifications issued thereunder 
from time to time, the Divisional Joint Director of the Sales Tax Depart-
men! granted exemption for a period of three years only commencing from 
1.3.85. 
The petitioners filed a review application contending that the exemp· 
F lion should be with effect from 20.S.86, on which date the power connection :4
was given and production commenced with the help of electricity and that 
the exemption should be for five years from 20.S.86; since on that date their 
capital investment was more than Rs. 3,00,000 including Rs. 72,800, the 
cost of diesel set purchased by them. The petitioners' plea that 30.3.85 as 
G the date of first sale was accepted, but their plea that the date of starting 
of production should be 20.S.86 was rejected. Hence. the petitioners filed a 
Writ Petitio~ before the High Court. 
Rejecting the petitioners' pleas that the date or getting power con· 
nection, i.e. 20.S.86 should be taken as the date of starting production, and 
H that the capital investment in the unit was more than Rs. 3,00,000 during 
....
594 
VUAY EN1ERPRISES v. S.T.O. 
595 
the period between 1.3.85 i.e. the date of starting production, and 30.3.85, A 
i.e. the date of first sale, the High Court held that the date of first sale, i.e. 
30.3.1985, should be taken as date of commencement of the period of 
exem.Ption and that the petitioners were entitled for exemption only for a 
priod of three years from that c,late in view of Section 4-A of the Act and 
the relevant notifications. 
B 
In the special leave Petition before this Court, the petitioners con· 
tended that once it .yas accepted that the date of first sale was 30.3.85, the 
cost of-diesel unit amounting to Rs. 72,800 should also be included in the 
capital investment, in which case the total capital investment would be 
above Rs. 3 lakhs and accordingly, the exemption should be for five years C 
as per the relevant provisions. 
Disposing of the Special I.eave Petition, this Court, 
HELD: 1. :I'he petitioners are entitled for exemption under Section 
4-A of the U.P. Sales Tax Act, 1948, for five years from 30.3.1985 and D 
accordingly they should be given the benefit. 
2.1. Section 4-A of the Act provides for granting exemption to the 
new industrial units with a view to increase the production of any goods 
and the period of exemption should be from the date of first sale within E 
the six months' time from the date of starting production. The Notification 
dated 29.1.1985 issued by .the State Government under Section 4-A 
specified the date of commencement of the period of exemption as the date 
of first sale, if such sale took place not later than six months from the date 
of starting production, or, in other cases, from the date following the 
expiration of six months from the date of starting production. Column 3 F 
of the Table appended to the Notification shows that in respect of the nnits 
mentioned therein in Serial No. 3, the exemption should be for three years 
if the total capital investment does not exceed Rs. 3,00,000 and if it exceeds 
Rs. 3,00,000 it should be five years. [598A-B, El 
2.2. In the instant case, the petitioners' case has been that they G 
purchased and installed a diesel unit on 4.3.1985 amounting to Rs. 72,800 
and as such, it must be held that the cost of the diesel unit should be 
included in the capital investment, in which case the total capital invest· 
ment would be more than Rs. 3,00,000 on the date of first

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