Full Judgment Text
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PETITIONER:
MUNICIPAL COMMISSIONER,CHINCHWAD NEW TOWNSHIP MUNICIPAL COUN
Vs.
RESPONDENT:
M/S CENTURY ENKA LTD.
DATE OF JUDGMENT12/09/1995
BENCH:
HANSARIA B.L. (J)
BENCH:
HANSARIA B.L. (J)
RAMASWAMY, K.
CITATION:
1996 AIR 187 1995 SCC (6) 152
JT 1995 (6) 542 1995 SCALE (5)359
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
HANSARIA. J.
These appeals by special leave raise the question of
exemption from octroi, inter alia, on initially imported
plant and machinery, pursuant to Resolution No.63 of
Chinchwad New Township Municipal Council adopted in its
meeting held on 4.7.1970. That Resolution reading as below
permits exemption :-
"(i)n the first two years of new
Industrial undertaking, initially
imported plant and machinery (including
spare and substitute parts) required in
the beginning and building materials
(i.e.) Iron, Steel, Cement or bricks are
necessary for erection of the premises.
Clarification: New Industry means
an Industry which is:
(i) Not formed by the splitting up or
the reconstruction of a business already
in existence:
(ii) Not formed by transfer to a new
business of a building, machinery or
plant previously used for any purpose
and
(iii) Which begins or has begun to
manufacture or produce goods within the
Municipal area for the first time on or
after the date on which the Council
levies the tax under these rules or at
any time within a period of 5 years
immediately proceeding such levy."
The respondents (though two in number, we would refer
to the facts of M/s Century Enka Ltd.) claim exemption under
the aforesaid resolution, which having been denied, the
Bombay High Court was approached, by filing writ petitions
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seeking direction on the Municipal Council to grant
exemption, as visualised by the resolution in question. The
High Court granted the prayer. Hense these appeals.
2. The only ground on which exemption was sought to be
denied to the respondents in the proceeding before the High
Court was that the importation of plant and machinery for
setting up of the units being by existing undertakings, the
same was not meant for "new industrial undertaking". This
stand was taken because of Clarification (i) appended to the
resolution, according to which, an industry would not be a
"new industry" which is formed by splitting up or re-
construction of a business already in existence. A perusal
of the impugned judgment of the High Court makes this stand
on behalf of the appellants abundantly clear inasmuch as the
counsel appearing for the appellants in the High Court, Shri
C.J. Sawant, had clearly stated that apart from the
aforesaid ground, "other contingencies set out in the
explanation (sic clarification) are not applicable in case
of unit No.2 (meaning the second unit set up by the
respondent-company in whose name new industrial licence had
been obtained and plant and machinery had been imported) and
in case it is found that unit No.2 is not formed by
reconstruction of business already in existence, then the
petitioner company would be entitled to exemption in respect
of payment of octroi duty".
3. We have highlighted the aforesaid aspect because the
learned counsel for the appellant sought to contend before
us that clause (iii) of the Clarification is also not
satisfied, because of which exemption cannot be claimed. We
did not permit this point to be raised for the first time
before us - the same being not a pure question of law but
one basically founded on fact of manufacturing for the first
time.
4. We would, therefore, confine our consideration to the
question as to whether respondents were entitled to
exemption or not because of what has been stated in clause
(i) of the Clarification. In so far as this aspect is
concerned, it is brought to our notice by learned counsel
for the respondents that as to when an industrial
undertaking can be said to have been formed by
reconstruction splitting up, has been a subject matter of
consideration by this Court itself in a number of decisions.
The first in point of time is by a three Judge Bench in
Textile Machinery Corporation Ltd. vs. The Commissioner of
Income Tax. 1977 (2) SCR 762. There, the Court was seized
with the question whether exemption from income-tax granted
by section 15C of the Indian Income Tax Act, 1922, was
available to the appellant. The section as it stood at the
material time, granted exemption, inter alia, to any
industrial undertaking which "is not formed by the splitting
up, or the reconstruction of, business already in
existence........" It would thus be seen that the language
of Clarification (i) of Resolution No.63 is in pari materia
with the languages of Section 15 (C) which had come up for
interpretation in the aforesaid case. The Bench opined that
once the new industrial undertaking is separate and
independent production unit in the sense that the
commodities produced or the results achieved are
commercially tangible products and the undertaking carried
on separately without complete absorption and loosing its
identity in the old business, it is not to be treated as
being formed by reconstruction of the old business.
5. This being the legal position, it cannot be held that
the unit No.2 (supra) set up for manufacturing of polyester
filament yarn has to be regarded as result of reconstruction
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of the business already in existence, merely because the
same had come into existence for effecting "substantial
expansion" of the business in existence. That the unit had
come into existence because of the result of substantial
expansion is brought home to us by referring, inter alia, to
a communication of the Government of India in the Ministry
of Industry bearing No. CIL 326 (76) dated 28th August,
1976, which is addressed to the respondent company and deals
with the subject of application for the grant of an
industrial licence for the manufacture of the commodity in
question. In this connection it is also urged by referring
to another communication of the Ministry dated 29.11.1975
that the company proposed to manufacture 360 tonnes of
polyester filament yarn per annum, by slicing its overall
capacity of 720 tonnes sanctioned for manufacture of nylon
filament yarn.
6. So, we are satisfied that unit No.2 had been set up to
effect substantial expansion of the existing business. That,
however, is not decissive in view of the aforesaid decision,
which was followed in Commissioner of Income Tax vs. Indian
Aluminium Co. Ltd., 108 ITR 367 and Commissioner of Income
Tax vs. Orient Paper Mills Ltd., 176 ITR 110. We have said
so, because according to these decisions, if the new
undertaking be separate and independent production units
were to come in existence in the sense of producing a
distinct commercial product and the undertaking could be
carried on separately, the same would not be treated as
being formed by reconstruction of the old business. From the
material on record, we are satisfied that unit No.2 did meet
these requirements, and so, exemption could not have been
denied, by taking a view that unit No.2 was not a new
industry, because of what has been stated in clause (i) of
the Clarification.
7. No other point being available to the appellant, we
uphold the impugned judgment and dismiss the appeals. We,
however, leave the parties to bear their own costs
throughout.