Full Judgment Text
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CASE NO.:
Appeal (civil) 5252 of 2007
PETITIONER:
Commissioner of Trade Tax, U.P.
RESPONDENT:
Malviya Chemical and Pharmaceutical Private Limited, Ghaziabad
DATE OF JUDGMENT: 15/11/2007
BENCH:
Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
(Arising out of S.L.P. (C) No. 7291 of 2006)
Dr. ARIJIT PASAYAT, J.
1. Leave granted.
2. Challenge in this appeal is to the order passed by a
learned Single Judge of the Allahabad High Court disposing of
two revision petitions, i.e. Trade Tax Revision No.723 of 1996
and Trade Tax Revision No.724 of 1996 preferred by the
respondent (hereinafter referred to as ’the Assessee\022) under
Section 11 of the Uttar Pradesh Trade Tax Act, 1948 (in short
’the Act’). The revision petitions related to the assessment year
1992-93 in respect of assessments framed under the Act and
the Central Sales Tax, 1956 (in short ’the Central Act’). By the
impugned order, the High Court held that the turnover of the
base production in accordance with Clause (6) of the
Notification No.1093 dated 27.07.1991 (hereinafter referred to
as ’the Notification’) has to be taken up for the whole of the
assessment year.
3. Stand of the Assessee before the High Court was that
such turnover has to be taken for the whole of the assessment
year and if it is found that the Unit undertaking expansion has
exceeded the base production turnover in the whole of the
assessment year, then the Unit shall be entitled to avail the
benefit of exemption from payment of tax in respect of the
turnover which is in excess of the base production for the
whole of the assessment year which has to be declared under
Rule 41 (8) of the Uttar Pradesh Trade Tax Rules, 1948 (in
short the \021Rules\022).
4. Stand of the revenue, on the other hand, was that such
interpretation goes against the very object of Section 4-A of the
Act.
5. Brief facts giving rise to the present revisions are that the
assessee is a Private Limited Company incorporated under the
Companies Act, 1956 having its registered office at B-67,
South Extension, Part-II, New Delhi, and factory at Plot No.34-
A/2, Site No.4, Sahibabad in the district Ghaziabad. Applicant
was engaged in the business of manufacture of bulk drugs. It
was granted eligibility certificate under Section 4A of the Act
under Notification No. ST-II-1093/XI-7(42)-86-UP Act-XV/48-
Order 91, dated 27.07.1991 in respect of the expansion
undertaken by the assessee to manufacture paracetamole,
which is bulk drug. The exemption was granted to the extent
of 125% of the fixed capital investment, invested by the
assessee in the extension on the turnover of the goods
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manufactured in excess of the base production in an
assessment year. The base production was fixed at 172.8 MT.
thus, the assessee was entitled for the benefit of exemption
under Section 4-A of the Act in assessment year on the
production exceeding the base production of 172.8 MT. During
the assessment year 1992-93 total sales made by the assessee
from 01.04.1992 to 31.03.1993 was 382.125 MT. both within
the State of the UP as well as outside the State of UP including
the central sales. Thus, according to the assessee, it was
entitled for the benefit of exemption under Section 4-A of the
Act on the turnover of the production of 209.325 MT. It
claimed that during the assessment year in dispute, returns
had been filed disclosing the total sales made by it and had
claimed exemption from payment of tax both under the Act
and Central Act only to the extent of sales made by it to the
extent of 140.75 MT. during the whole year. Assistant
Commissioner, Trade Tax Ghaziabad, vide his assessment
order dated 01.03.1995 accepted the books of account and the
disclosed turnover but restricted the claim of exemption to the
extent of 70.325 MT instead of 140.75 MT. Aggrieved by the
order of the assessing authority, assessee filed appeals before
Deputy Commissioner (Appeals), who vide order dated
31.07.1995 dismissed both the appeals. Deputy Commissioner
(Appeals) held that the exemption cannot be claimed from
payment of tax upto the period till the base production
turnover has not been achieved. He was of the view that
exemption was available only after the date on which base
production is achieved, i.e. if the base production is achieved
in third month then the applicant would be entitled for
exemption from the fourth month. Aggrieved by the orders of
the Deputy Commissioner (Appeals), assessee filed appeals
before the Trade Tax Tribunal, Ghaziabad (in short the
\021Tribunal\022) which were partly allowed vide order dated
23.07,1996. Tribunal held that base production has been
achieved on 23.09.1992 and, therefore, whatever the sale was
made by the applicant upto 23.09.1992 shall not be entitled
for exemption and the applicant was entitled for exemption
only after 23.09.1992 on the production in excess of the base
production. Against Tribunal\022s order, assessee moved the High
Court in revision.
6. The High Court found substance in the plea of the
assessee and as noted above, set aside the order of Tribunal.
7. In support of the appeal learned counsel for the appellant
submitted that the interpretation given by the High Court goes
against the very object of the Notification and Section 4-A of
the Act. Learned counsel for the respondent-Assessee, on the
other hand, supported the judgment of the High Court.
8. To adjudicate the issue involved in the appeal, it is
necessary to refer to Section 4A, Section 7(1-A) of the Act,
Notification No.ST-II-1093/XI-7(42)-86-U.P. Act-XV/48-Order-
91, dated 27.7.1991 and Rule 41. They read as follows:
\023Section 4A. 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
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manufacturer thereof shall, during such period
not exceeding twelve 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 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 fit:
Provided that no exemption shall be
granted where the facility of concession or
exemption has been availed under Section 4-
AAA.
(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 -
(a) generally in respect of all such goods
manufactured subsequent to the date of
such 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 1st, 1990,
and which, in case of diversification are
different from the goods manufactured
before such diversification, and in the
case of expansion or modernization are
additional production as a result of such
expansion or modernization; and
(d) only if the manufacturer furnishes to the
assessing authority and Eligibility
Certificate granted by such officer, in
accordance with such procedure, as may
be specified;
(e) with effect from a date prior to the date of
the notification.
(5) "Unit which has undertaken expansion
diversification or modernization" means an
industrial undertaking \026
(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 -
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(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 31st, 1990
(c) the production capacity whereof has
increased by at least twenty five percent
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 percent
of such original fixed capital investment
(without providing for depreciation) is
made.
Notification No. ST-II-1093/X1-7(42)-86-U.P. Act-
XV/48Order-91, dated 27.2.1991:
Whereas the State Government is of the
opinion that for promoting the development of
certain industries in the state, it is necessary to
grant exemption from or reduction in rate of tax to
new units and also to units which have undertaken
expansion, diversification or modernization:
Now, therefore, in exercise of the powers under
Section 4A of the Uttar Pradesh Sales 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 any goods manufactured in a \021new
unit\022, other than the units of the type mentioned n
Annexure II established in the areas mentioned in
Column 2 of Annexure I, the \021date of starting
production’ whereof falls on or after first day of
April, 1990 but not later than 31st day of March,
1995, no tax shall be payable, or, as the case may
be, the tax shall be payable at the reduced rates, as
specified in Column 4 of Annexure I, by the
manufacture thereof on the turnover of sales of
such goods, for the period specified in Column 3 of
the said Annexure 1, or till the maximum amount of
tax relief by such exemption from or reduction in
the rate of tax as specified in Column 5 of annexure
1 is achieved, whichever is earlier. The period
specified in Column 3 of the said Annexure 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, which ever is earlier.
(B) (1) in respect of any goods manufactured in a
unit other than the units of the type mentioned in
Annexure II, which \021has undertaken expansion,
diversification or modernization’ or of after April 1,
1990 but no later than March 31st, 1995, in the
areas mentioned in Column 2 of annexure 1, no tax
shall be payable or, as the case may be, the tax
shall be payable at the reduced rates specified in
Column 4 of Annexure 1, by the manufacturer
thereof for the period in Column 3 of the said
Annexure 1, or till the maximum amount of tax
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relief by such exemption from or reduction in rate of
tax as specified in Column 5 of annexure 1 is
achieved, which ever is earlier, on the turnover of
sales;
(a) of the quantity of goods manufactured in
excess of the base production in the case
of units undertaking expansion or
modernization; and
(b) of goods manufactured by the unit which
are of a nature different from those
manufactured earlier by such unit in the
case of units undertaking diversification.
(2) the period of such facility shall be
reckoned from the first date of
production.
(i) of goods of a nature different from
those manufactured earlier by such
unit in case of diversification; and
(ii) of goods manufactured in excess of
the base production in the case of
units undertaking expansion or
modernization.
2. 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 4A of the Act.
(i) that the \021new unit\022 is licensed or in
respect whereof a letter or 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;
(ii) 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 State or the Central
Government or any Government
Company or any Corporation owned or
controlled by the Central or the State
Government;
(iii) 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 4A of the Act;
(iv) that the said unit furnishes to the
assessing authority concerned and
eligibility certificate granted in this behalf
by the General Manager, District
Industries Centre, Area Development
Officer (Industry) of the concerned
industrial Development Authority,
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Additional or Joint Director of Industries
of the range or Additional or Joint
Director of Industries of the concerned
Industrial Development Authority, as the
case may be.
3. \021Fixed capital investment’ 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 Schedule Bank according to
the certificate to that effect issued by such
institution or the Bank and in any other case,
according to -
(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 and components certified by a
Chartered Accountant.
4. In determining the fixed capital investment as
defined in clause (4) of the Explanation in case
of \021new units’ or \021additional fixed capital
investment’ referred to in sub clause (d) of
clause (5) of the Explanation in case of \021units
which have undertaken expansion,
diversification or modernization’ the
investment in only such land, building, plant,
machinery, equipment, apparatus and
component or, as the case may be, such
additional land, building, plant, machinery,
equipment, apparatus and component shall be
taken into account as were acquired on or
before the relevant date of commencement of
the period of facility notified under sub-section
(1) of Section 4A of the Act.
5. Base production of unit undertaking
expansion or modernization shall be deemed to
be -
(a) maximum production achieved during any one
of the preceding five consecutive assessment
years, or
(b) 80 per cent of the installed annual production
capacity, whichever is higher.
6.(a) Turnover of sale of goods in any assessment
year to the extent of the quantity covered by
production of that year and the stock of base
production of previous years shall be deemed
to be the turnover of base production.
(b) Only the turnover of goods in any assessment
year in excess of the quantity referred to in
clause (a) shall be entitled to the facility of
exemption from or reduction in the rate of tax.
ANNEXURE I
\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005
\005\005
\005\005\005
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ANNEXURE II
.................................................................................
.......
RULE 41- Submission of returns and assessment of tax
(1) Every dealer liable to tax, the aggregate of
whose turnover, of purchases and sales in any
assessment year exceeds rupees five lakhs, shall
before the expiry of the next succeeding month,
submit to the Trade Tax Officer a monthly return of
his turnover in Form IV, giving Annexure I and II
thereof, detailed information, according to Code
numbers notified by the State Government from time
to time, in respect of each category of goods in which
he carries on business:
Provided that the return for the month of
February shall be submitted to the Trade Tax
Officer on or before the twentieth day of
March:
Provided further that the dealer may, instead
of submitting a return as aforesaid, estimate
his turnover for the years on the basis of the
turnover admitted by him in his return, or
disclosed in his account books, whichever is
greater, for the immediately preceding year,
calculate the amount of tax payable thereon
and deposit a sum equal to one twelfth thereof
during each of the first two months of every
quarter, and deposit the balance of tax due on
the turnover admitted by him in his return for
the relevant quarter, which shall be prepared
and submitted in the manner laid down in this
rule.
(8) Upon the expiry of the assessment year, the
Assessing Authority shall, after such enquiry,
as he may deem necessary, determine the
turnover of sales or of purchases, or both, as
the case may be, of the dealer in respect of the
assessment year and shall assess the tax
payable thereon;
Provided that in the case of a dealer to whom
sub-section (1) of Section 18 applies or owner
or incharge of the vehicle to whom sub-section
(1) of Section 28-B applies, the assessing
authority may make an assessment order and
assess the tax payable thereon before the
expiry of the assessment year:
Provided further that, before determining the
turnover of the dealer to the best of his
judgment, the assessing authority shall cause
a notice to be served on the dealer, stating the
reasons, for non-acceptance of the turnover of
sales or purchases or both, as disclosed in the
returns, if any, submitted by him and shall
give him a reasonable opportunity of
furnishing his reply thereto.
Section 7.-Determination of turnover and
assessment of tax.
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(1-A) Before submitting the return under sub-
Section (1) or alongwith such return, the
dealer shall deposit, in such manner as may
be prescribed, the amount of due on the turn-
over shown in such return.\024
9. A similar issue came up for consideration in
Commissioner of Trade Tax, U.P. Vs. Modipan Fibres Co.
(2006 (6) SCC 577). In that case, this Court was considering
an appeal filed by the present appellant where challenge lay to
the decision rendered by the High Court in Modipan Fibres Co.
Vs. C.T.T. (2000 UPTC 319).
10. The said case was relied upon by the High Court in
support of its conclusions which are challenged in the present
appeal. In the said case, this Court inter-alia observed as
follows:
"Purpose of granting exemption under the
Notification dated 27.7.1999 was to promote
the development of certain industries in the
State. By the said Notification exemption from
payment of tax or reduction in rate of tax was
granted to new units as also to the units which
had undertaken expansion, diversification or
modernization. The units of dealers in all the
revisions are units, which had undertaken
expansion/modernization. The units of the
dealers (respondents) are covered by Clause (1-
B) (a) of the Notification. Exemption granted is
on the turnover of sales of quantity of goods
manufactured in excess of base production.
Under clause 6(a) of the said Notification,
turnover of sale of goods in any assessment
year to the extent of quantity covered by the
base production of that year and balance stock
of base production of’ previous years, shall be
deemed to be turnover of the base production.
Under clause 6(b) of the Notification, the
facility of exemption can be availed on the
turnover of goods in \023any assessment year" in
excess of the quantity referred to in sub-clause
(a) of clause 6. A conjoint reading of Clause (1-
B) (a), clause 6(a) and 6 (b) makes it clear that
the dealer is entitled to claim exemption in
respect of the turnover of sale of goods of an
assessment near in excess of the base
production. "Assessment Year" has been
defined in Section 3 (j) to mean the twelve
months ending on March 31. If that be the
case then the extent of entitlement to
exemption will depend on the sale of goods in
the assessment year minus the base
production determined under the Act. Simply
because dealer has to file returns from month
to month and deposit the admitted tax at the
time of filing of the return does not mean that
question of exemption on the turnover of the
production in excess of the base production
can be considered only after the base
production is achieved. Returns filed every
month and the tax paid would be subject to
adjustment at the time of the finalization of the
assessment. Intention of the legislature is clear
and unambiguous. Exemption is to be given on
the turnover of sale of goods in an assessment
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year in excess of the base production. We do
not find any substance in the submission
advanced on behalf of the appellants.\024
11. In view of what has been stated in Modipan\022s case (supra)
while dismissing the appeal, the inevitable result is that the
present appeal is without merit and deserves dismissal which
we direct. No costs.