2026-VIL-1175-RAJ
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VAT High Court Cases

Central Sales Tax – Concessional rate of tax on inter-State sales for Micro and Small Enterprise under notification issued under Section 8(5) of the Central Sales Tax Act, 1956 - Respondent-assessee established an industrial unit and, a few years later, another unit at a different place more than 500 kms away, both registered as small enterprises under the MSMED Act, 2006, and the assessing authority clubbed the investment in plant and machinery of both units, held that the limit was exceeded, denied the concessional rate under the notification, and levied differential tax, interest and penalty, which the Tax Board set aside - Whether the unit set up at a different place would be a different enterprise so as not to club its investment in plant and machinery for determining the status of Micro and Small Enterprise - HELD - The Explanation inserted in the notification by the amendment provides that, for ascertaining the status of Micro and Small Enterprise, the investment made in plant and machinery in different enterprises set up under the same ownership shall not be clubbed. The Industries Department had also clarified that the MSMED Act does not provide for clubbing of investments of different enterprises set up by the same person or company for classification as micro, small and medium enterprises, and the provisions for clubbing of investment of units had been withdrawn. Unless mutual dependence between two units is established, they cannot be clubbed together, and the absence of common funding and financial flow-back makes clubbing unjustified. An exemption notification should be liberally construed once the entrepreneur fulfils the eligibility criteria, and no condition should be read into it when there is none. The Petitioner failed to establish that the two units had common interest in the business of each other or common funding and financial flow-back, and mere ownership by the same assessee does not establish mutuality of business interest - The investments in the two enterprises are to be treated as separate, and since neither enterprise exceeded the prescribed investment limit, the assessment orders denying the concessional rate are legally unsustainable - The order of the Tax Board suffers from no illegality, perversity or jurisdictional error, and the revision petitions are dismissed
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