Summary
A Kerala notification of 1993 exempted hundred per cent export oriented units from sales tax on raw materials, plant and machinery 'for a period of five years on the date of approval of such units by the Central Government'. The Revenue reckoned the five years from a Central Government letter of 16 December 1993, while the assessee, a spice extract manufacturer, claimed the period ran from commencement of production in October 1995. The Supreme Court partly allowed the appeals: the 1993 letter was a conditional letter of intent, and the unambiguous approval was the 'Green Card' issued on 27 October 1994, so exemption runs from that date; the date of commencement of production cannot be the reckonable date because a unit holder's delay in setting up production should not be rewarded and such a test would inject subjectivity into assessment.
Issues
- Whether the five-year sales tax exemption under Kerala notification SRO 1727 of 1993 for export oriented units commences from the Central Government's letter of permission, from its formal approval, or from the date the unit commences production.
Provisions considered
- Schedule VI exemption for 100 per cent export oriented units, read with item 97 of the First Schedule, Kerala General Sales Tax Act, 1963 and Notification SRO 1727 of 1993Exemption is for five years from the date of approval of the unit by the Central Government; 'approval' means the unambiguous approval of the unit, here the Green Card of 27.10.1994, and not an earlier conditional letter of permission or the later commencement of production. (¶¶ 7, 8, 9, 10, 11, 12, 15)
Held
- The letter of 16.12.1993 set out conditions including full export of production and minimum value addition and described itself as a letter of intent; it was a mere permission conditioned on compliance, and the actual approval enabling exemption was the Green Card issued on 27.10.1994. (¶¶ 8, 9, 10, 11)
- The date of commencement of production is not the reckonable date: a unit holder who delays production after approval should not be rewarded with a longer exemption, and such a test would make the exemption period depend on the diligence of each unit holder. (¶¶ 13, 14)
Result
Appeals partly allowed; the date of approval under notification SRO 1727 of 1993 held to be 27.10.1994, from which the five-year exemption is to be reckoned; leave granted in SLP (C) No. 36394 of 2011.