Full Judgment Text
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CASE NO.:
Appeal (civil) 6635 of 2003
PETITIONER:
Commissioner, Trade Tax, U. P.
RESPONDENT:
M/s D. S. M. Group of Industries
DATE OF JUDGMENT: 09/12/2004
BENCH:
S. N. Variava & Dr. AR. Lakshmanan
JUDGMENT:
J U D G M E N T
S. N. VARIAVA, J.
This Appeal is against the Judgment of the Allahabad High Court
dated 24th May, 2002.
Briefly stated the facts are as follows.
M/s Dhampur Sugar Mills Limited [hereinafter called the
‘Company’] is having its Registered Office at Dhampur, Bijnore
District, U. P. It carried on business of manufacturing sugar. In 1991
it opened, at Dhampur, a unit manufacturing Chemicals. In 1993, it
opened a unit manufacturing Particle Board at Agwanpur, Moradabad
District, U.P. In 1993, it established another unit manufacturing
Sugar at Rozagaon, Barabanki District and in 1995 it established a unit
manufacturing Sugar at Asmoli, Moradabad District, U. P.
By a Notification dated 21st February, 1997 certain exemptions
were granted to an undertaking which made a fixed capital investment
of Rs.50 crores or more in expansion, modernization or diversification
or backward integration.
On 17th May, 2000 the Company styling itself as Dhampur Sugar
Mills Group of Industries filed an application before the General
Manager, District Industries Centre, District Bijnore. It claimed
exemptions under the Notification dated 21st February, 1997 on
grounds of expansion, diversification and modernization. This
application was rejected by an Order dated 31st October, 2000 on
three grounds, namely, (a) A joint application for multiple units is not
permissible under the Rules; (b) The application was time-barred; and
(c) the Company was in arrears of tax for Rs.1742.25 lakhs. The
Company filed an Appeal to the Trade Tax Tribunal, against this Order.
This Appeal was rejected by an Order dated 20th March, 2001. The
Trade Tax Tribunal held that every unit was a separate unit and that a
joint application could not be made.
The Company then filed a Trade Tax Revision before the High
Court. The High Court has allowed the Revision and set aside the
Orders dated 30th October, 2000 and 20th March, 2001. The High
Court has directed the concerned authority to issue an Eligibility
Certificate under Section 4-A for the benefit of tax rebate on all goods
manufactured as well as on the waste products. The High Court has
further directed reimbursement of amounts paid earlier with interest
thereon at 9% from the date of deposit.
The questions for consideration by us are (a) whether one
application can be filed or each unit of an industrial undertaking needs
to file an application; (b) whether the application filed on 17th May,
2000 can be said to be time-barred; and (c) whether the Company
was in arrears of tax for Rs.1742.25 lakhs or in any other amount.
To answer these questions, one needs to notice various
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provisions as well as the concerned Notification. Under Section 8-A of
the U.P. Trade Tax Act, 1948 every dealer who commences business,
during the course of an assessment year and whose average monthly
estimated turnover is as set out in sub-clause (d) thereof, must get
himself registered. Rule 6 of the U.P. Trade Tax Rules, 1948 provides
that the Assessing Authority will be the one within whose jurisdiction
the dealer carries on business. It further provides that if a dealer
carries on business within the limits of jurisdiction of more than one
Trade Tax Officer then he may declare one of the places of his
business as his principal place of business with an intimation to all
other Trade Tax Officers, within whose jurisdiction his other places of
business are situated, that the Trade Tax Officer where the principal
place of business is situate shall be the Assessing Authority in respect
of such dealer. Thus, in cases like the present where a Company has
more than one unit in different localities, the Company can if it so
desires have the Trade Tax Officer of the principal place of business as
the Assessing Authority of that Company.
Relevant portion of Section 4-A of the U.P. Trade Tax Act, 1948
reads as follows:-
"4-A. Exemption from trade tax in certain
cases.- (1) Notwithstanding anything contained
in this Act, where the State Government is of
the opinion that it is necessary so to do for
increasing the production of any goods or for
promoting the development of any industry in
the State generally or any district or part of
district in particular, it may on application or
otherwise, in any particular case or generally by
notification, declare that the turnover of sales in
respect of such goods by the manufacturer
thereof shall, during such period not exceeding
fifteen years from such date on or after the date
of starting production as may be specified by the
State Government in such notification, which
may be the date of the notification or a date
prior or subsequent to the date of such
notification, and where no date is so specified
from the date of first sale by such manufacturer
if such sale takes place within six months from
the date of starting production and in any other
case from the date following the expiration of six
months from the date of starting production,
and subject to such conditions as may be
specified be exempt from trade tax on sale of
goods [whether wholly or partly] or be liable to
tax at such reduced rate as it may fix :
Provided that in respect of goods manufactured
in a new unit having a fixed capital investment
of five crore rupees or more or in an existing
unit which may make fixed capital investment of
five crore rupees or more in expansion,
diversification, modernization and backward
integration or in any one of them, within such
period not exceeding five years as may be
specified in the notification, the exemption from
or reduction in the rate of tax may be granted.
(2) It shall be lawful for the State Government
to specify in the notification under sub-section
(1) that the exemption from, or reduction in the
rate of tax, shall be admissible\027
(a) generally in respect of all such goods
manufactured subsequent to the date of such
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notification; or
(b) in respect of such of those goods only as are
manufactured in a new unit, the date of starting
production whereof falls on or after the first day
of October, 1982; or
(bb) in respect of those finished goods which are
manufactured in a unit which has undertaken
backward integration; or
(c) in respect of those goods only which are
manufactured in a unit which has undertaken
expansion, diversification or modernization on or
after April 1, 1990, and which, in case of
diversification are different from the goods
manufactured before such diversification, and in
the case of exemption or modernization are
additional production as a result of such
expansion or modernization; and
(d) only if the manufacturer furnishes to the
assessing authority an Eligibility Certificate
granted by such officer, in accordance with such
procedure, as may be specified."
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.......................................................
(5) A manufacturer shall be entitled to the
facility of exemption from, or reduction in the
rate of tax, notified under sub-section (1) --
(a) if he applies for such facility within six
months from the relevant date of
commencement of the period of facility referred
to in that sub-section or within six months from
the date of notification issued under that sub-
section or by September 30, 1992, which ever,
expires later, for the entire period notified under
the sub-section;
(b) if he applies for such facility later than the
date specified in Clause (a) only for part of the
period notified under sub-section (1), which
shall be computed from the date of the
application till the end of the period of facility;
....................................................................
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(6) Where the State Government is of the
opinion that the purpose for which the facility of
exemption from or reduction in the rate of tax
was granted under this section has been fulfilled
or that the continuation of such facility is no
longer in public interest or is against the public
interest, it may, by notification, withdraw such
facility granted to any industry, dealer or class
of dealers :
Provided that no such facility shall be withdrawn
with retrospective effect.
Explanation.\027For the purposes of this Section--
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(3) ‘Date of starting production’ means, the
later of the following dates, namely :
(a) the date of which any raw material (which
term includes accessories, components, parts
and packing material) required for use in the
manufacturing (whether on trial or commercial
basis) or as the case may be, packing of the
goods is purchased for the first time; or
(b) where the manufacture of goods is not
possible without power, the first date on which
power supply for manufacturing (whether on
trial or commercial basis) from whatever source
is obtained by the Unit :
Provided that in respect of such raw material or
packing material purchased on or after April 1,
1990 from outside India, the date of clearance
by the Customs Authorities under the Customs
Act, 1962, shall be reckoned as the date of its
purchase for the purposes of Clause (a) :
Provided further that where any stage of
manufacture is commenced before any of the
dates referred to above, the date of such
commencement shall be the date of starting
production.
(4) "Fixed capital investment" means value of
land and building and such plants including
captive power plant, machinery, equipment,
apparatus and components, moulds, dyes, jigs,
and fixtures as have not been used in any other
factory or workshop in India :
Provided that\027
(a) for the purposes of
determining value of land and building
only the following shall be taken into
account\027
(i) value of only such portion of land
and building as is necessary for the
establishment or running of the
factory or workshop of the unit;
(ii) expenses incurred in
registration of land and building under
the provisions of the Registration Act,
1908 and in development of land as
development charges payable to any
statutory body;
(iii) the value of land or building
already owned and given by the
proprietor, partner, managing
director, promoter director or holding
company as his or its share in the
capital in case the unit is established
in such land or building;
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(iv) the amount or proportionate
amount paid or payable as premium
during the period for which expansion
under Section 4-A is granted on
account of lease and the expenses
incurred on registration of the lease
deed under the Registration Act,
1908, in case the unit is established in
land or building taken on lease;
(v) the value of land or building
which is necessary for establishing or
running the unit under some statutory
obligation.
(b) for the purposes of
determining value of plant including
captive power plant, machinery,
equipment, apparatus and
components only the following shall
be taken into account :
(i) investment whether by means of
purchase, hire or lease in such plant,
equipment, apparatus, components
and machinery as is necessary for the
establishment or running of the
factory or workshop;
(ii) investment as is necessary under
some statutory obligation;
(iii) expenses incurred in erection
and installation of such plant and
machinery and bringing it to the site.
(c) the State Government may be
notified order specify the procedure
for determining fixed capital
investment.
(d) if a unit has made fixed
capital investment under two or more
heads of expansion, diversification,
modernization and backward
integration but fixed capital
investment made under each such
head is not as certainable, then the
break up of fixed capital investment
furnished by the unit will be accepted.
(e) The facility of exemption
from or reduction in the rate of tax on
the basis of fixed capital investment in
a captive power plant will be available
when the unit does not sell the power
which is in excess of its consumption
to any person other than the Uttar
Pradesh State Electricity Board and in
case the unit sells such excess power
to person other than the said board,
the unit will be liable to pay the tax on
the sale of its manufactured goods on
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pro-rata basis alongwith the interest
in accordance with the provisions of
sub-section (1) of Section 8.
(5) "Unit which has undertaken expansion,
diversification or modernization" means an
industrial undertaking\027
(a) of a dealer who is not a defaulter in payment
of any dues under this Act or the Central Sales
Tax Act, 1956 or under any loan, scheme,
administered by the Pradeshiya Industrial and
Investment Corporation of Uttar Pradesh
regarding trade tax sale or purchase of goods;
(b) whose first date of production of goods\027
(i) of a nature different from those
manufactured earlier by such
undertaking in case of units
undertaking diversification, and
(ii) manufactured in excess of base
production in such undertaking in case
of units undertaking expansion or
modernization, falls at any time after
March 31, 1990;
(c) the production capacity whereof except as
provided in the proviso to sub-section (1) has
increased by at least twenty-five per cent as a
result of expansion or modernization, or wherein
goods of a nature different from those
manufactured earlier are manufactured after
diversification;
(d) wherein an additional fixed capital
investment of at least twenty-five per cent of
such original fixed capital investment (without
providing for depreciation) is made.
(e) which has been established within the same
district in which the existing industrial unit is
established.
(6) For the purposes of this section the
expression "base production" means,--
(a) eighty per cent of the installed annual
production capacity;
(b) maximum production achieved during any
one of the preceding five consecutive
assessment years or if the unit were in
production for less than five years, the
maximum production achieved during any one of
the preceding assessment years whichever is
higher:
Provided that where a unit manufacturing more
than one goods has not undertaken expansion
or modernization in respect of all such goods, its
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base production will be determined on the basis
of production of goods in respect of which
expansion or modernization has been
undertaken :
Provided further that where investment made
during certain period is clubbed together for the
purpose of determining the fixed capital
investment, the production immediately prior to
the date on which such investment was first
started to be made in respect of expansion or
modernization shall be taken into account for
determining the base production."
Section 25 of the U. P. Trade Tax Act provides that an application
for grant of Eligibility Certificate is to be made to the General
Manager, District Industries Centre of the district in which the unit
is situated. This Section also provides that the State Government
may constitute Committees for disposal of applications for grant of
Eligibility Certificate. It further provides that an application of a
unit having a fixed capital investment exceeding Rs.5 lakhs shall be
disposed of by the Divisional Level Committee. Once the
Committee decides then the Eligibility Certificate is to be issued by
the Additional or Joint Director of Industries of the concerned
range.
The concerned Notification dated 21st February, 1997 reads as
follows:
"Whereas the State Government is of the
opinion that it is necessary for increasing the
production of certain goods in the State,
manufactured by industrial units, having a fixed
capital investment of rupees fifty crore or more as
new units, or making an additional fixed capital
investment of rupees fifty crore or more in
expansion, modernization, diversification or
backward integration, to grant exemption from, or
reduction in rate of tax to such units:
Now, therefore, in exercise of the powers under
Section 4-A of the Uttar Pradesh Trade Tax Act,
1948 (U. P. Act No. XV of 1948), hereinafter
referred to as the Act, the Governor is pleased to
declare that :--
1. (a) in respect of goods manufactured in a new
unit established in the areas mentioned in
Column 2 of the Annexure the date of the starting
production whereof falls on or after December 1,
1994 but not later than March 31, 2000, no tax
shall be payable, or, as the case may be, the tax
shall be payable at the reduced rates by the
manufacturer thereof on the turnover of sales of
such goods for the period of twelve years or till the
maximum amount of tax relief by such exemption
from, or reduction in the rate of tax as specified in
Column 3 of the Annexure is achieved, whichever is
earlier. The period shall be reckoned from the date
of the first sale or the date following the expiration
of six months from the date of starting production,
whichever is earlier;
(b) in respect of goods manufactured in a unit
which has undertaken expansion, modernization or
diversification on or after December 1, 1994 but
not later than March 31, 2000, in the areas
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mentioned in Column 2 of the Annexure, no tax
shall be payable or, as the case may be, the tax
shall be payable at a reduced rate by the
manufacturer thereof for the period of twelve years
or till the maximum amount of tax relief by such
exemption from, or reduction in the rate of, tax as
specified in Column 3 of the Annexure is achieved,
whichever is earlier, on the turnover of sales\027
(i) of the quantity of goods,
manufactured in excess of the base
production in the case of unit undertaking
expansion or modernization; and
(ii) of goods manufactured by the unit
which are of a nature different from those
manufactured earlier by such unit in the
case of unit undertaking diversification;
(c) in respect of goods manufactured in a unit,
which has undertaken ‘backward integration’ on or
after December 1, 1994 but not later than March
31, 2000, in the areas mentioned in Column 2 of
the Annexure, no tax shall be payable, or as the
case may be, the tax shall be payable at the
reduced rates by the manufacturer thereof on the
turnover of sales of such finished goods, for the
period of twelve years or till the maximum amount
of tax relief by such exemption from, or reduction
in the rate of, tax as specified in Column 3 of the
Annexure is achieved whichever is earlier on the
turnover of sales. The benefit of exemption from,
or reduction in, the rate of tax to the unit which
has undertaken backward integration, shall be
admissible only if the unit starts manufacturing
such raw material, parts, intermediates or
components as were not manufactured by it to
such backward integration.
2. The facility of exemption from, or reduction in,
the rate of tax including additional tax to any unit
on any transaction of sale shall not exceed five per
cent of the sale price. The tax including additional
tax in excess of five per cent shall be payable by
such unit according to law.
3. The facility of exemption from, or reduction in
the rate of tax shall be subject to the following
conditions in addition to the conditions referred to
in Section 4-A of the Act:--
(a) that the unit will have a fixed capital
investment of rupees fifty crore or
more as a new unit or making an
additional fixed capital investment of
rupees fifty crore or more in
expansion, modernization,
diversification or backward
integration. The fixed capital
investment which is made during the
period of five years commencing from
the first day of such investment in the
case of expansion, modernization,
diversification or backward integration
and from the date of starting
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production in the case of new units
will be included in fixed capital
investment for the purpose of this
notification and also for the purpose
of exemption from, or reduction in the
rate of, tax benefit;
(b) that the facility of exemption from, or
reduction in the rate of, tax on the
basis of new units expansion,
modernization, diversification or
backward integration, as the case
may be, under this notification shall
not be simultaneously be available to
a unit availing such tax facility on the
same basis under Section 4-A.
(c) that the new unit is licensed or in
respect whereof a letter of intent has
been issued, or which is registered,
permanently or otherwise, by the
appropriate authority in accordance
with any law for the time being in
force relating to licensing or
registration of such units;
(d) that the new unit is established on
land or building or both owned or
taken on lease for a period of not less
than fifteen years by such unit or
allotted to such unit by the Central or
the State Government or any
Government Company or any
Corporation owned or controlled by
the Central or the State Government;
(e) that the exemption from tax or as the
case may be, reduction in the rate of
tax shall be admissible only in respect
of such goods manufactured by the
unit and such by-products and waste-
products as are mentioned in the
eligibility certificate issued to such
unit under Section 4-A;
(f) that the said unit furnishes to the
assessing authority concerned an
eligibility certificate granted in this
behalf by the General Manager,
District Industries Centre, Area
Development Officer (Industry) of the
concerned Industrial Development
Authority, Additional or Joint Director
Industries of the range or Additional
Director or Joint Director Industries of
the concerned Industrial Development
Authority, as the case may be:
(g) that the exemption from, or reduction
in the rate of, tax under this
notification shall be available to a unit
only when fixed capital investment or
as the case may be, an additional
fixed capital investment of at least
rupees fifty crore is made by it as
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specified in clause (a) of Para 3. If
the investment is not so made by a
unit, it shall be liable to pay penalty, if
any, imposed and the entire tax
benefit availed by the unit together
with interest thereon shall become
due and be payable by the unit as
admitted tax, such unit shall however
before it starts availing facility under
this notification creates first or second
charge on its property in the favour of
the State Government, sufficient to
cover its aforesaid liability;
(h) that the total amount of tax
exemption under the Act as also
under the Central Sales Tax Act, 1956
(Act No. 74 of 1956) in any
assessment year shall not exceed the
amount which is equal to the multiple
of percentage mentioned in Column 3
of the Annexure and the fixed capital
investment, made by the unit during
the said assessment year, but the
amount of exemption under both the
aforesaid Acts up to the end of any
assessment year shall not exceed the
amount equal to multiple of
percentage mentioned in Column 3 of
the Annexure and the fixed capital
investment in the case of a new unit
or additional fixed capital investment,
as the case may be, made up to the
end of that assessment year;
(i) that the unit shall after close of every
assessment year during which
exemption from, or reduction in the
rate of tax is admissible but not later
than thirty days of the approval of its
balance sheet by concerned authority
of the unit submit to the assessing
authority a certificate from a
chartered accountant in respect of
each assessment year. Such
certificate shall contain the following
details :--
(a) additional fixed capital
investment made during the
assessment year;
(b) cumulative additional fixed
capital investment made from or
after December 1, 1994 up to the
close of such assessment year; and
(c) amount of tax exemption
from, or reduction in the rate of,
tax availed by the unit during the
assessment year and from or after
December 1, 1994 up to the close
of such assessment year;
(d) the facility of exemption from,
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or reduction in the rate of, tax
under this notification shall not be
available to such industrial units as
are notified by the State
Government.
4. That the period of facility of exemption from, or
reduction in the rate of tax shall be reckoned
from the first date of production,--
(a) of goods of a nature different from
those manufactured earlier by such
unit in case of diversification;
(b) of goods manufactured in excess of
the base production in the case of unit
undertaking expansion modernization;
and
(c) of such raw material, parts,
intermediate or components as were
earlier imported from outside the
State and not manufactured by the
unit which has undertaken backward
integration.
5. Fixed capital investment or additional fixed
capital investment, as the case may be, may,
unless otherwise established, be determined in
the case of an industrial undertaking financed
by a term-loan advanced by a public financial
institution or a Scheduled Bank according to the
certificate to that effect issued by such
institution or the Bank and in any other case,
according to \026
(a) the value of the land certified by the
Collector in accordance with the
procedure laid down for determination
of the value of land for the purpose of
payment of stamp duty under the
Indian Stamp Act, 1899;
(b) the value of building certified by an
evaluator approved by the Income
Tax Department for the purpose;
(c) the value of plant, machinery,
equipment, apparatus, components,
moulds, dyes, jigs and fixtures
certified by a Chartered Accountant.
6. In determining the fixed capital investment in
case of new units or additional fixed capital
investment referred to in clause (d) of
explanation (5) or clause (ii) of explanation (7)
of Section 4-A in case of units which have
undertaken expansion, diversification or
modernization or backward integration, the
investment in only such land, building, plant,
machinery, equipment, apparatus, components,
moulds, dyes, jigs, and fixtures shall be taken
into account as were acquired on or before
expiration of the period specified in sub-clause
(a) of Para 3 of this notification.
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7. (1) Turnover of sale of goods in any
assessment year to the extent of the quantity
covered by base production of that year and
the stock of base production of previous years
shall be deemed to be the turnover of base
production.
(2) Only the turnover of goods in any
assessment year in excess of the quantity
referred to in sub-para (1) shall be entitled to
the facility of exemption from, or reduction in
the rate of, tax.
ANNEXURE
_______________________________________________
Sr.No. Location of units Monetary limit up to which the
Limit benefit of exemption from
or reduction in the rate
of tax under the Act together
with the benefit of exemption
from, or reduction in the
rate, of tax under the Central
Sales Tax Act, 1956 is
admissible.
__________________________________________________________
1. 2 3
1. The districts of Almora, Banda, 250 per cent of the fixed capital
Chamoli, Dehradun,Fatehpur, investment or as the case may
Hamirpur, Jalaun, Jaunpur, be the additional fixed capital
Kanpur(Dehat), Mahoba, investment.
Nainital, Pauri Garhwal,
Sultanpur, Uttar Kashi,
Pithoragarh, Tehri Garhwal,
Udham Singh Nagar and
Growth Centres.
2. (i) The districts of Azamgarh, 200 per cent of the fixed capital
Ambedkar Nagar,Bahraich, investment or as the case may
Balia, Barabanki, Basti, be, the additional fixed capital
Badaun, Bulandshahr,Deoria, investment.
Etah,Etawah,Faizabad,Farrukhabad,
Ghazipur, Gonda, Hardoi, Jhansi,
Lalitpur, Mainpuri,Mathura, Mau,
Moradabad, Padrauna, Pilibhit,
Pratapgarh, Rae Bareli, Rampur,
Shahjahanpur, Siddarth Nagar,
Sitapur and Unnao.
(ii)The area of Allahabad District in
South of the river Jamuna and
Confluent Ganga (excluding the
Area included under Municipal
Corporation, Allahabad).
(iii) The Taj Trapezium area.
(iv) Greater NOIDA Industrial
Development Area.
3. The Districts of Agra (excluding 150 per cent of the fixed
Taj Trapezium area), Aligarh capital investment or as
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(excluding Taj Trapezium area), the case may be, the
Allahabad (excluding the area in additional fixed capital
South of rivers Jamuna and investment.
Confluent Ganga but including the
Area included under Municipal
Corporation, Allahabad), Bareilly,
Bhadohi, Bijnore,Firozabad (excluding
Taj Trapezium area), Ghaziabad
excluding (Greater NOIDA Industrial
Development Area), Gorakhpur,
Haridwar, Kanpur (Nagar),Lakhimpur
Kheri, Lucknow, Maharajganj, Meerut,
Mirzapur, Muzaffarnagar, Saharanpur,
Sonbhadra and Varanasi.
Mr. Sunil Gupta, Additional Solicitor General for the State of
U.P., submitted that the reading of the above provisions and the
Notification along with Form 46 (being the form in which an application
for exemption is to be made) clearly indicate that for the purposes of
exemption each unit is considered to be a separate entity. He submits
that to avail the benefits of the Notification, an investment of Rs. fifty
crores or more must be in respect of one unit only. He submitted that
the Company making a capital investment of Rs. fifty crores or more in
its various units cannot, by clubbing the units, claim an exemption
under the said Notification. He further submitted that, in any event,
the application was made belatedly and, therefore, deserved to be
dismissed. He submitted that even otherwise the Company was in
arrears of tax approximating Rs.1742.25 lakhs and, therefore, also
they were not entitled to the benefit of the Notification.
On the other hand, Mr. Sudhir Chandra, on behalf of the
Company, submitted that a reading of the provisions and the
Notification make it clear that it is the Company which is to make the
investment and get the benefit of tax exemption. He submitted that,
therefore, so long as the Company makes a capital investment of Rs.
fifty crores or more even though such investment is spread over
various units of the Company it becomes entitled to the benefit of the
Notification.
Mr. Sudhir Chandra cited a number of authorities for the
proposition that Notifications have to be interpreted keeping in view
the object. He submitted that the object was to encourage
investments and production. He submitted that a liberal interpretation
which advances the object of the Notification should be given. Mr.
Sudhir Chandra relied upon the authorities in the cases of Oblum
Electrical Industries Pvt. Ltd., Hyderabad vs. Collector of
Customs, Bombay, reported in (1997) 7 SCC 581; Commissioner
of Sales Tax vs. Industrial Coal Enterprises, reported in (1999) 2
SCC 607 and K. R. Steel Union Ltd. vs. Commissioner of Customs,
Kandla (Gujarat), reported in (2001) 4 SCC 736. In our view, there
can be no dispute with the above mentioned proposition of law.
Therefore, there is no necessity to consider in detail the authorities
relied upon.
In our view, the answer depends on the wording of the
Notification read along with Section 4-A of the U. P. Trade Tax Act.
One must also keep in mind Rule 6-A of the U.P. Trade Tax Rules
which provides that if a dealer is carrying on business in more than
one place then the Assessing Authority for that dealer can be one
where his principal place of business is.
It is undisputed fact that the principal place of business of the
Company is Dhampur, District Bijnore. The exemption claimed by the
Respondent, under the Notification dated 21st February, 1997, was for
expansion, modernization or diversification. What is a "Unit" for
purposes of expansion, diversification or modernization has been
defined in Section 4-A (6) (5), which has been set out hereinabove.
Under this "unit" means an "industrial undertaking" of a dealer who is
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not a defaulter and who meets the requirements as set out in sub-
clause (b) thereof. The dealer, indisputably, is the Respondent
Company. The industrial undertaking of the Respondent is the
Company. It is the Company which will be paying the tax and which
will get the benefit of exemption, if entitled to it.
Mr. Sunil Gupta , the learned A.S.G. however submitted that a
reading of the various sub-clauses indicates that the term "Unit" refers
not to the industrial undertaking as a whole but to a unit of the
Company. He submitted that Clause (b) requires that the ’first date of
production of the goods’ consequent upon the expansion,
modernization or diversification of the undertaking in question should
be a date falling at any time after March 31, 1980. He submitted that
the expression the ’first date of production of the goods’ can have
reference to the production of goods by only one manufacturing
concern or entity at a time. It cannot refer to multiple manufacturing
concerns of the dealer taken collectively because all of them would not
be expected to have a common first date of production of the goods.
In our view clause (b) clearly indicates that the referance is to the
industrial undertaking as a whole and not a unit of the industrial
undertaking. There could be diversification in one unit in respect of
which the first date of production would be as per clause (b)(i). Clause
(b)(ii) puts the matter beyond any doubt. It uses the words "in such
undertaking in case of units undertaking expansion or modernization".
Thus now there is clear referance not just to the undertaking i.e. the
Company but also to Units of that Company. The term "units" clearly
refers to more than one unit. This shows that the expansion and
modernization can be in more than one unit.
Mr. Sunil Gupta , the learned A.S.G. next relied on clause (c)
and submitted that in cases of expansion or modernization clause (c)
required that the production capacity of the undertaking should
increase by at least 25%. He submitted that this increase is relative
and has to be achieved in comparison to the pre-existing figure of
’base production’. He submitted that the increase contemplated is not
in the enhanced production of all the manufacturing concerns taken
collectively together in comparison with their collective pre-existing
’base production’. He submitted that there would be no sense in
comparing the over-all production capacity of all the manufacturing
concerns of the dealer regardless of the goods (products) they are
manufacturing at different places (possibly in different States) and by
means of different kinds of plant, machinery etc. He submitted that
such an interpretation would render the provision both implausible and
unworkable. He submitted that the increase in production in respect of
any one particular manufacturing concern under expansion or
modernization can and should be compared with the pre-existing
figure of ’base production’ of that concern only. In our view it is not
necessary for us to decide whether the production capacity of the
undertaking or a unit is to be considered. Even if production capacity
of only the unit/s, in which expansion, modernization or diversification
has taken place, is to be taken into account then also it would not
show that the entire investment is to be only in one unit. The very
fact that this clause is dealing with all 3 aspects i.e. expansion,
modernization and diversification shows that in most cases they would
be in separate units.
We are also unimpressed by the submission that in cases of
diversification if the meaning given is that the goods manufactured
should not have been manufactured by the dealer anywhere in any
concern of his, whether the present concern applied for or any other
concern at any other place, then again the provision would be deprived
of all its sensibility and reasonableness and would serve no purpose.
It is the industrial undertaking which is diversifying in some or one of
its unit. Undoubtedly the industrial undertaking may diversify in any
one of its units. But that does not mean that it is the unit and not the
industrial undertaking which is diversifying.
Mr. Sunil Gupta , the learned A.S.G. next submitted that clause
(d) brings out the necessity of giving the narrow meaning to the
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expression ’industrial undertaking’. In our view clause (d) makes it
clear that it is the industrial undertaking and not a unit which is
making the additional fixed capital investment. It could not be denied
that the provision for depreciation would necessarily be made by the
Company. Thus it is the Company who has to make an additional
investment of at least 25% without providing for depreciation.
Mr. Sunil Gupta, the learned A.S.G., placed very strong reliance
on sub-clause (e), which reads as follows:-
"which has been established within the same
district in which the existing industrial unit is
established."
He submitted that clause (e) proves beyond any doubt that the
expression ’industrial undertaking’ envisages only one manufacturing
concern at a time and not all such concerns belonging to the dealer.
He submitted that the expression ’the existing industrial unit’ brings
about the much wanted connectivity between the old existing
manufacturing concern and its enhancement (expansion,
modernization or diversification) in terms of establishment of both
being required in one and the same district. He submitted that this
clause required that the enhanced portion (expansion, modernization
and diversification) of an undertaking should be located in the same
district as the original ’existing industrial unit’ of that undertaking. He
submitted that if it is located outside that district, the law would not
treat it as expansion, modernization or diversification of that
undertaking. In that event, it would be more akin to a new unit rather
than an expanded or modernized unit or a unit undergoing
diversification. He submitted that the requirement as to location,
namely, that the enhanced portion of the undertaking should be
’established within the same district in which the existing industrial
unit is established; can have reference only to one manufacturing
concern (the existing industrial unit) at a time i.e. the one particular
concern which is undergoing expansion etc. and the district in which it
is located and not to all the concerns (all the existing industrial units)
belonging to the dealer for they may possibly be located even in
different districts.
We are unable to accept this submission. This sub-clause
merely sets out that the expansion, diversification or modernization
must be in respect of a unit, which has been established within the
same district in which the industrial unit is established. In this case,
the expansion, diversification or modernization is not claimed in
respect of any new unit. It is claimed in respect of existing units at
Dhampur, Agwanpur, Rozagaon and Asmoli. That the term "Unit" in
the context of expansion, diversification and modernization refers to
the Industrial Undertaking and not to a unit of an Industrial
Undertaking. Thus an expansion of one unit at the same location or a
modernization of any unit or a diversification in an existing unit would
suffice. All that this clause is ensuring is that there is distinction
between a new unit and an expansion, modernization and
diversification. A new unit may be at a different place but expansion,
modernization or diversification must be at the place/places where the
existing units of the industrial undertaking are situated.
Mr. Sunil Gupta, learned A.S.G. next submitted that the
definition of the expression ’base production’ in Explanation (6) further
underscores the individual identity of each manufacturing concern. He
submitted that one of the two figures, whichever is higher, is taken as
the base production \026 either eighty percent of the installed annual
production capacity or the maximum production achieved during any
one of the preceding five consecutive assessment years. He submitted
that this can have reference only to the production capacity or
production figures in respect of the one ’existing industrial unit’ which
is undergoing expansion etc. He submitted that the concept of ’base
production’ has relevance only to expansion and modernization and
not to diversification. He submitted that if a wide meaning of
’industrial undertaking’ viz. multiple concerns belonging to a dealer is
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applied, the production capacity and production figures of the other
manufacturing concern or concerns of the dealer, producing possibly
even some other kind of goods, shall have to be taken into
consideration even though it would be wholly irrelevant for the
purposes of determining the base production of the particular concern
undergoing expansion for there would be no rational basis or linkage
for comparison between the two. He submitted that this is also in
consonance with the first proviso to Explanation (6). He relied on the
first proviso and submitted that whilst dealing with one unit
manufacturing more than one goods but not undertaking expansion
etc. in respect of all such goods, requires the base production to be
determined only on the basis of production of goods in respect of
which the expansion etc. has been undertaken. He submitted that in
such a case, the comparison is made even more specific. It is
determined not merely unit-wise but even goods-wise.
We are unimpressed by these submissions. As stated above even if the
figures are to be in respect of only one unit it still would not mean that
the entire investment of Rs. 50 crores or more must be in one unit
only. Separate figures of each unit in which expansion, modernization
or diversification has taken place may and can be worked out.
That the expansion, modernization or diversification need not be
in one unit is also clear from the wording of the Notification.
The Preamble to the Notification reads as follows :-
"Whereas the State Government is of the
opinion that it is necessary for increasing the
production of certain goods in the State,
manufactured by industrial units, having a fixed
capital investment of rupees fifty crore or more
as new units, or making an additional fixed
capital investment of rupees fifty crore or more
in expansion, modernization, diversification or
backward integration, to grant exemption from,
or reduction in rate of tax to such units."
Thus, the Preamble shows that the capital investment of Rs. fifty
crore or more has to be in a new unit or in expansion, modernization
and diversification. To be noted that to the words "expansion,
modernization and diversification", there are no qualifying words. It is
not stated that these must be in one unit of the Industrial
Undertaking. The Preamble, therefore, clearly supports the case of the
Respondents that the expansion, diversification and modernization
need not be only in one of the units of the Industrial Undertaking.
This becomes further clear that if one looks at Clause (1) of the
Notification. Under sub-clause (a) the benefit is in respect of a new
unit but under sub-clause (b) it is in respect in a unit which has
undertaken expansion, modernization or diversification between 1st
December 1994 and 31st March 2000. As seen above, the term ‘Unit’
has the meaning as defined in Section 4-A. As we have already seen,
Section 4-A defines the term ‘Unit’ to mean an industrial undertaking,
which has undertaken expansion, modernization and diversification.
Even under the General Clauses Act, where the context so requires the
singular can include the plural. A plain reading of the Notification
shows that for "expansion, modernization and diversification" it is the
industrial undertaking which is considered to be the "Unit". This is also
clear from fact that in the Notification wherever the words "expansion,
modernization or diversification" are used, there is no qualifying words
to the effect "in any one Unit". In none of the clauses is there any
requirement of the investment being in one unit of the Industrial
Undertaking. Words to the effect "in a particular unit" or "in one unit"
are missing. To accept Mr. Sunil Gupta’s submission would require
adding words to a Notification which the Government purposely
omitted to add.
Even otherwise, the purpose of Notification being to encourage
increased production and to give benefit to industries which have
invested Rs. fifty crore or more in the State and whose production has
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thus increased, an interpretation must be given which would extend
benefit to such industries. There would be no purpose in denying, an
industry which has invested Rs. fifty crore or more and whose
production in the State has as a result increased, the benefit of the
exemption granted by this Notification merely because the whole of
the investment is not in any particular unit. Thus even where the
investment is made by the Company in more than one units, so long
as the total investment is Rs. fifty crore or more, the benefit of the
Notification would be available. Such benefit would then be distributed
in the manner set out in the Schedule depending on where a unit in
which expansion, diversification or modernization has taken place, is
situated. Thus, for example, in respect of the units situated in
Barabanki and Moradabad, the benefit would be to the extent of 200%
of the fixed capital investment in those units, whereas in respect of
units in Bijnore the benefit would be to the extent of 150% of the fixed
capital investment in that unit. Similarly, the base production and the
starting date of production could be in respect of those units. However,
it is the Company which has made the investment. It is the Company
which is paying the tax. It is the Company which would be getting the
benefit of the exemption. The manner in which the Company gets the
benefit would be as set out hereinabove.
The second question is whether the application could have been
rejected on the ground that it is time-barred. The relevant portion of
Section 4-A(5) reads as follows:
"(5) A manufacturer shall be entitled to the
facility of exemption form, or reduction in the
rate of tax, notified under sub-section (1) --
(a) if he applies for such facility within six
months from the relevant date of
commencement of the period of facility
referred to in that sub-section or within six
months from the date of notification issued
under that sub-section or by September 30,
1992, which ever, expires later, for the
entire period notified under the sub-section;
(b) if he applies for such facility later than
the date specified in Clause (a) only for part
of the period notified under sub-section (1),
which shall be computed from the date of
the application till the end of the period of
facility;
Thus, even if an application is made at a later date it does not
preclude the dealer from getting the benefit of the exemption. If an
application is made at a later date the benefit of exemption will be
limited. It will be computed from the date of the application till the
end of the period of facility. This, therefore, was no ground for
rejecting the application.
The third ground on which the application was rejected was that
the Respondents were in arrears of tax. We, however, find that the
Respondents had obtained stay orders from the High Court. Neither
side could enlighten us, whether for any period when there were no
stay orders the Respondents were still in arrears of tax. During the
period the stay orders were in operation the Respondents cannot be
said to be in arrears of tax. During the period of the stay the
Respondents were not bound to pay. Therefore, they cannot be said
to be in arrears. These are matters of fact which need to be looked
into by the Assessing Authority.
We are, therefore, of the opinion that the Assessing Authority
was wrong in rejecting the application on the ground that a joint
application was not permissible. As stated above, a joint application is
permissible. As the principal place of business is at Bijnore, the
Assessing Authority would be the General Manager, District Industries
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Centre, Bijnore. If this Officer or the concerned Committee requires
any further information from any other District, it can always call for
information from the concerned Officer of the other District/s or even
call upon the Company to furnish relevant information.
We, however, find that the High Court was wrong in directing
issuance of an Eligibility Certificate as well as directing reimbursement
of the amounts paid. Whether, factually, there has been any
expansion, modernization or diversification has to be ascertained by
the concerned Committee. The Committee will also have to determine
to what extent there has been expansion, modernization and/or
diversification after ist December 1994 and before 31st March 2000.
The Assessing Authority will also require to consider whether Clause
3(b) of the Notification is applicable and whether the expansion,
modernization and diversification now claimed is not in respect of any
exemption already claimed and made available to the Respondent-
Company or any of its units earlier. It must be mentioned that under
an earlier Notification dated 13.8.1991 various units of the
Respondent-company had applied for exemption and had been granted
exemption to certain extant.
Thus, we set aside that portion of the impugned Order which
directs issuance of the Eligibility Certificate and directs reimbursement.
We remit the matter back to the Divisional Level Committee which
shall decide the application on its merit within a period of six months
from today. The Committee, among the other things, will consider
whether the Company was in arrears of tax. It is again clarified that
during the period of stay orders the Company cannot be said to be in
arrears of tax.
With these observations, the Appeal stands disposed of. There
will be no order as to costs.