State of Gujarat & Ors Vs Essar Oil Ltd. & Anr (Supreme Court) – This appeal is directed against the judgment of the High Court of Gujarat dated 22.04.2008 in Special Civil Application No.24233/2007, whereby the Respondent No. 1 herein, Essar Oil Limited (hereinafter ‘Essar’) was given the benefit of Sales Tax incentive under the Government of Gujarat ‘Capital Investment Incentive to Premier/Prestigious Unit Scheme, 1995-2000’ (hereinafter ‘the said Scheme’).
SUPREME COURT OF INDIA
Date: Date: 17th January 2012
CIVIL APPEAL No. 599 OF 2012
(Arising out of SLP (C) No.17130/2008)
STATE OF GUJARAT & ORS
Vs
ESSAR OIL LTD. & ANR
J U D G M E N T
GANGULY, J.
1. Leave granted.
2. This appeal is directed against the judgment of the High Court of Gujarat dated 22.04.2008 in Special Civil Application No.24233/2007, whereby the Respondent No. 1 herein, Essar Oil Limited (hereinafter “Essar”) was given the benefit of Sales Tax incentive under the Government of Gujarat “Capital Investment Incentive to Premier/Prestigious Unit Scheme, 1995-2000″ (hereinafter “the said Scheme”)
3. The State Government in the Industries and Mines Department vide Resolution dated 11.09.1995 introduced the said scheme to accelerate development of the backward area of the State and to create large-scale employment opportunities.
4. The operative period of the said scheme was from 16.08.1995 upto 15.08.2000, during which new units have to go into commercial production.
5. The Scheme envisaged grant of Sales Tax incentives by way of Sales Tax Exemption or Sales Tax Deferment or Composite Schemes, for Premier/Prestigious Units according to the location, investment and status of the project. Essar fell in the category of premier unit i.e. new industrial unit having a project cost of more than Rs. 1,000/- crores and employing 100 workers on a regular basis and following the employment policy of the State Government. Clause (v) of the Scheme defined premier unit in the following terms:-
“(v) PREMIER UNIT
A new industrial unit or industrial complex fulfilling the following criteria will be considered for granting status of a “Premier Unit”.
(a) The industrial unit shall have a project cost of Rs.500 crores or more. Such units having project cost of Rs.1,000 crores and above shall be entitled for extended period to avail incentive as provided under para 6 B.
(b) Only one unit per taluka will be eligible for the Premier Unit status. In banned area no unit is permitted.
(c) The unit shall employ at least 100 workers on a regular basis and shall follow the employment policy of the State Government.”
6. Part II of the said Scheme provided that the rate of incentive would depend on the location, investment and status of the project. The incentives offered were sales-tax exemption or sales-tax deferment or composite scheme. There is no dispute about the fact that Essar opted for sales-tax deferment scheme. As per clause 6(i)(B), the rate of incentive applicable to Essar was the rate available for the most backward area. The extent of exemption was 125% of eligible fixed capital investment.
7. Part II Clause (iii) (b) provided that Under the Sales Tax Deferment incentive scheme, the recovery of sales tax connected by the unit on sale of goods manufactured by it including intermediate products, by products and scrap/waste generated as incidental to manufacturing activities and turnover tax, leviable to Government will be deferred and amount so deferred will be recovered in six equal annual installments by Sales Tax Department beginning from the financial year subsequent to the year in which the unit exhausts limit of incentive granted to it under the scheme or after the expiry of relevant period or time limit during which deferment is available or whichever is earlier.
8. Since Essar’s investment was going to be more than Rs.1,000 crores, the duration of incentive of sales-tax deferment was to be for a period of 17 years from the date of commercial production.
