M/S Pramod Telecom Pvt Ltd. Thru ... vs State Of U.P. Thru Prin. Secry. Tax ...
2013 Latest Caselaw 5186 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

A.F.R.
 
RESERVED
 
Court No. - 24
 
Case :- MISC. BENCH No. - 5542 of 2005
 

 
Petitioner :- M/S Pramod Telecom Pvt Ltd. Thru M.D Prahlad Chandra
 
Respondent :- State Of U.P. Thru Prin. Secry. Tax & Registration & 2 Ors
 
Counsel for Petitioner :- N C Misra,Manish Kumar
 
Counsel for Respondent :- C S C,Rakesh Bajpai,Vishal Dixit
 
ALONGWITH
 
Case :- MISC. BENCH No. - 8884 of 2007
 

 
Petitioner :- M/S Anmol Bakers (P) Limited, Gautam Budh Nagar
 
Respondent :- State Of U.P. Thru Secy. Tax & 2 Ors.
 
Counsel for Petitioner :- S.M.K. Choudhary,Bharat Ji Agrawal
 
Counsel for Respondent :- C.Sc..,Vishal Dixit
 
ALONGWITH
 
Case :- MISC. BENCH No. - 8754 of 2007
 

 
Petitioner :- M/S Ankur Udyog Ltd.
 
Respondent :- State Of U.P. Thru Prin. Secy. Tax & 2 Ors.
 
Counsel for Petitioner :- N.C. Misra,Chandra Has Mishra
 
Counsel for Respondent :- C.S.C.,Vishal Dixit
 
ALONGWITH
 
Case :- MISC. BENCH No. - 1278 of 2007
 

 
Petitioner :- M/S Bharti Electronic
 
Respondent :- State Ofu.P.Thr. Prin Secy Tax And Registration And 2 Ors
 
Counsel for Petitioner :- S.M.K.Chaudhary,Shubham Agarwal
 
Counsel for Respondent :- C.S.C.,Vishal Dixit
 

 
Hon'ble Rajiv Sharma,J.

Hon'ble Dr. Satish Chandra,J.

The petitioner has filed the present writ petition with the following main relief :-

"1. That a suitable writ, order or direction be issued quashing the Circular dated 11.07.2005 and letter dated 12.02.2004 issued by the Commissioner, Trade Tax, U.P., Lucknow (enclosed as Annexure 1 & 1A to the present writ petition).

2. That a suitable writ, order or direction in the nature of mandamus or prohibition be issued directing the respondents not to realize any amount on the additional production and sale made on account of the additional investment as directed in the circular dated 11.07.2005 by the Commissioner, Trade Tax, U.P. Lucknow."

In all the petitions, law point is common though facts like amounts, dates, products are different. For the purpose of adjudication, facts of the leading case i.e. M/s. Pramod Telecommunication (P) Ltd. are taken up.

The brief facts of the case are that the petitioner has its registered office at 5, Ashok Nagar, Gautam Budh Nagar, Aishbagh, Lucknow and factory at Plot No. 6-B, Malviya Nagar, Aishbagh, Lucknow. It carries on business of manufacture and sale of electronic push button telephones, electronic energy meters and their parts. The unit was established in 2001-02. The first date of production and sale was 30.12.2001 and 31.12.2001 respectively.

For establishing a new unit, State Government has provided an exemption under Section 4A of the U.P. Trade Tax Act, 1948 for the purpose of encouragement to establish the industrial units in the State of U.P. as well as for increasing the production of the goods in the existing units undertaken expansion, diversification and modernization depending upon the fixed capital or additional fixed capital investment. The assessee has installed new machines for enhancement of the production and claimed an exemption on the said extra production. But the same was denied by the Government in view of the impugned circular dated 11.07.2005; and letter dated 12.02.2004 (Annexure-1 & 1A to the writ petition)

Being aggrieved, the petitioner has approached this Hon'ble Court by preferring a Writ Petition No. 4896 (MB) of 2005, assailing the said circulars as well as assessment orders for the assessment years 2002-03 & 2003-04 and also the recovery certificate. In the said writ petition, the petitioner has alleged that the eligibility certificate under Section 4A(2)-(d) of the Trade Tax Act was granted by the Divisional Level Committee. So, the tax on the enhanced production is exempted from the payment of Trade Tax.

This Hon'ble Court vide order dated 03.08.2005 has dismissed the said writ petition on the ground of alternative remedy available to the petitioner against the assessment orders. Liberty was also granted to challenge the impugned circular of the Commissioner either before this Hon'ble Court or appropriate forum, in accordance with law, if so advised.

Being aggrieved, the petitioner has filed the present writ petition with the above-mentioned prayer.

With this background, Sri Bharatji Agarwal, learned Senior Advocate assisted by Sri Manish Kumar and Sri Piyush Agarwal, learned counsel for the assessee submits that under Section 4A notifications were issued from time to time granting exemption from payment of tax. In the earlier notifications dated 27.08.1984 and 26.12.1985, the unlimited exemption was granted to the units making investment of Rs.3 lacs or more for a period of 5 years, 6 years and 7 years depending upon the district in which it was established with no monetary limit of exemption.

Learned counsel also submits that on account of change in the industrial policy in 1990, the benefit of exemption was granted to the new industrial units as well as the existing units undertaking expansion, diversification and modernization depending upon the fixed capital investment or additional fixed capital investment made by them for a period of 8 years, 10 years and 12 years depending upon the district in which they are situated or up to the certain monetary limit of exemption. He also submits that in accordance with the said new industrial policy, a Notification No. 780 and 781 dated 31.03.1995 was issued by the State Government granting exemption from payment of tax to the industrial units for a period of 8 years, 10 years or 12 years depending upon the district in which the units are situated and also to the extent of 75%, 100% and 150% of the fixed capital investment. However, so far as the electronic industry is concerned, no monetary limit of exemption was fixed by the State Government in pursuance of the Notification No. 2760 and 2761 dated 16.11.1995.

Learned counsel for the petitioner also submits that the petitioner has established a unit for the manufacture of electronic push button telephones and electronic energy meters which are electronic goods hence irrespective of the investment made, the petitioner was entitled for grant of exemption for a period of 8 years without any monetary limit of exemption since the unit of the petitioner is situated in the district of Lucknow.

In the instant case, he submits that eligibility certificate has been granted to the petitioner for a period of 10 years with effect from 21.02.2001 to 20.02.2011 or to the extent of the monetary limit of Rs.12,80,44,940/- whichever expires earlier. Hence, the petitioner is entitled to get the benefit of exemption from payment of tax to the extent this amount or for a period of ten years from 21.02.2001 to 20.02.2011, whichever expires earlier. Whatever tax was assessed in the assessment orders only that has been adjusted/set off from the monetary limit available during the said assessment order.

On specific query from the Bench, he admits that the new unit was established to avail an exemption under Section 4A of the Act. Later, new machines were installed for enhancement of the production. The petitioner is entitled for exemption on the entire enhanced production. It has no meaning whether it was produced by the earlier machines or by the new machines. He also submits that necessary direction may be issued to allow an exemption on surplus production. For this purpose, he relied on the ratio laid down in the case of Aditiya Chemical vs. State of U.P., 1988 UPTC 1348 (All.).

Learned counsel placed reliance on the notifications issued pursuant to Section 4A of the Act, dated 27th August, 1984 and 08.07.2004.

According to the learned counsel, an exemption was granted by the State Government since 1982 and the same is applicable in respect of electronic goods which are produced by the assessee.

Thus, the learned counsel submits that the petitioner manufacturers electronic goods. Notification No. 2760/2761 grants benefit of exemption without any monetary limit for the notified period. In the case of petitioner, exemption was granted for eight years w.e.f. 30.12.2001 without any monetary limit.

According to the learned counsel neither Section 4A nor Rule 25 or notifications issued under the Act provides for any restriction that the units shall not be entitled for an exemption on the turnover of same goods manufactured out of the investment made after the date of eligibility for the same period. For this purpose, he submits that the circular dated 17th March, 2004 is binding on the department in view of the decision of the three Judges Bench of the Supreme Court in the case of Commissioner of Sales Tax vs. Indira Industries, 2000 UPTC Page 472. He also submits that the Hon'ble Supreme Court in the case of Ranadey Micronutrients vs. Collector of Central Excise, 1996 (10) SCC 387 has held in paragraph 16 as under :

"The whole objective of such circulars is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of excise duty. It does not lie in the mouth of the Revenue to repudiate a circular issued by the Board on the basis that it is inconsistent with a statutory provision. Consequently and discipline are of far greater importance than the winning or losing of Court proceedings."

He also relied on the ratio laid down in the following cases:-

(i) Commissioner, Trade Tax, U.P. Lucknow vs. S/S S.R. Ice & Cold Storage Pvt. Ltd., Agra, 2006 NTN (Vol. 29) 297;

(ii) Assam Company Ltd. & Anr. vs. State of Assam & Ors., 2001 UPTC 751 (SC);

(iii) Commissioner of Sales Tax vs. Industrial Coal Enterprises, 1999 UPTC 250 (SC);

(iv) Commissioner of Trade Tax vs. M/s. D.S.M. Group of Industries, 2005 UPTC 121 (SC);

(v) Venlon Polyester Film Ltd. vs. Joint Commissioner of Commercial Taxes (Admn.) & Anr., (2003) 133 STC 539; and

(vi) Jyoti Phoschem vs. State of Punjab & Ors., (2002) 128 STC 466.

Learned counsel for the petitioners also submits that the Assessing Authority is bound by the eligibility certificate. It is also a submission that the interpretation sought to be given by the answering respondents to the provisions of Section 4A(6)(2)(c) of the U.P. Trade Tax Act is highly misconceived and misplaced as well as contrary to the legislative intents as clarified by the State Government.

Sri N.C. Mishra, Sri Manish Kumar and Sri S.M.K. Chaudhary, learned counsel for remaining petitioners, by adopting above-mentioned arguments, made similar request.

Thus, in short the submissions are that the Circular dated 8/11.07.2005 issued by the Commissioner of Trade Tax, Lucknow and the notice for provisional assessment for April, 2006 to December, 2006 and from April, 2007 to July, 2007 for imposition of tax on the turnover of goods manufactured out of the investment made after the date of grant of eligibility certificate, has been issued/proceeded with on totally misconception and misinterpretation of the provision of the Act and notification issued there under which do not prescribe any such limitation as mentioned in the circular. The same are also averred in Paragraphs 19,20,21,22 and 23 of the writ petition and the legal opinion of the Government on the interpretation as mentioned in Annexure-6 to the writ petition is to be taken into account then not only the Circular dated 08/11.07.2005 is contrary to the opinion given by the Government itself but also run counter to the scheme of exemption under Section 4A of the Act and in view of which the petitioner is not liable to tax on the turnover of goods produced/manufactured out of the investment made after the date of grant of eligibility certificate to the extent of amount/period mentioned in the eligibility certificate. Lastly, learned counsel for the petitioners made a request that the exemption as claimed may kindly be allowed to the petitioners.

On the other hand, Sri H.P. Srivastava, learned Additional Chief Standing Counsel submits that all the petitioners above-named have enlarged their production capacity after the date of issuance of eligibility by purchasing and installing new machines. He also submits that any extra production made out from new machines so installed are not entitled to any exemption or reduction in tax. Any production which made out within the help of additional investment after the cut of date is not liable for any exemption as the notification under which the eligibility certificate was granted does not contemplate exemption in such manner. The eligibility clause of a notification and terms of notification have to be strictly construed and no benefit can be given beyond what is prescribed in the notification. For this purpose, he relied on the ratio laid down on the following cases:

(i) Novopan India Ltd., Hyderabad vs. Collector of Central Excise and Customs, Hyderabad, (1994) Supp. (2) SCC 606;

(ii) State Level Committee and another vs. Morgardshammar India Ltd., (1996) 1 SCC 108;

(iii) G.P. Ceramics Private Limited vs. Commissioner, Trade Tax, Uttar Pradesh, (2009) 2 SCC 90;

(iv) State of Gujarat and others vs. Essar Oil Limited and another, (2012) 3 SCC 522;

(v) Sriniwas Cable Components vs. State of Madhya Pradesh and others, (2012) 10 SCC 421;

(vi) State of Jharkhand and others vs. Ambay Cements and another, (2005) 1 SCC 368.

(vii) Sushila Chitra Mandir, Delhi vs. State of U.P., and others, 2005 UPTC 44; and

(viii) Oudh Sugar Mills Ltd. vs. State of U.P. and others, Writ Petition No. 7433 of 2002, decided on 14.10.2011.

It is also a submission of learned counsel for the department that the Assessing Officer/Authority is bound by the eligibility certificate issued to the petitioners in respect of exemption granted on the basis of fixed capital investment made by the petitioner company and which is categorically mentioned in the eligibility certificate issued on the basis of application submitted on behalf of the petitioner as a new unit. The fixed capital investment, time period and monitory limit are related to each other. The monetary limit and the time period cannot be violated. The petitioners are not allowed to breach the fixed capital investment, that is to say addition of land/plant and machinery is not allowed for the same monetary limit as mentioned in the eligibility certificate of exemption. Once a monetary limit of exemption is allowed on the basis of declared fixed capital investment by issuing eligibility certificate then declared fixed capital cannot be changed by additions of land/plant, machinery etc., only to get monitory benefit on the basis of same eligibility certificate.

Under Section 4-A(6)(2)(c) of the U.P. Trade Tax Act, the 'new unit' does not contemplates any addition to or extension of existing factory within the meaning of clause 5 of the explanation. The existing industrial undertaking who increase their production capacity by making additional fixed capital investment would be entitled for the benefit of tax exemption when the exemption is sought in that behalf by moving appropriate application under Section 4-A(5) of the Trade Tax Act read with Rule 25 of the Trade Tax Rules and a fresh eligibility certificate is obtained from the competent authority in respect of additional fixed capital investment made by it.

Learned counsel also submits that it is a settled proposition of law that when a law requires certain thing is to be done in a particular manner it has to be done in that manner only or not at all. Since the petitioners have enhanced their production capacity by making further investment in respect of plant and machinery, without seeking prior permission for making additional fixed capital investment as prescribed under the aforesaid provision of the Act and Rules namely Section 4-A(5) of the Trade Tax Act read with Rule 25 of the Trade Tax Rules. Hence, the petitioners are not entitled for any tax benefit in respect of goods which were manufactured out of the new machinery purchased after the date of eligibility certificate.

He also submits that the petitioners have challenged the circular dated 08/11.07.2005, which is nothing but a simple communication of the decision taken by the State Government after considering the relevant provisions of the Act as well as their relevant notifications vide letter dated 08.06.2005. By means of letter dated 08.06.2005, the State Government has communicated its decision to the effect that in case any unit has been issued eligibility certificate under Section 4A and relevant notification issued in that behalf then if such unit after the grant of eligibility certificate has increased the production capacity through new machines then such units shall not be entitled for any exemption on the additional goods produced from such new machines. The State Government has further directed that the Commissioner to ensure the compliance of the decision of the State Government. The Government Order dated 08.06.2005 as stated is only clarificatory and explanatory in nature. It provides guidelines for proper and fair implementation of Section 4-A read with Rule 25 and the notifications in question so that it does not cause adverse effect upon any one including prospective new units. Hence, there is no infirmity and illegality in the Government Order dated 08.06.2005 in pursuance of which the Circular dated 8/11.07.2005 has been issued by the Commissioner. In support of the same, learned Additional Chief Standing Counsel has relied on the ratio laid down in the case of Nagarjuna Construction Company Limited vs. Union of India and another, (2013) 1 SCC 721. The petitioners have not challenged the decision of the State Government dated 08.06.2005 and without assailing the said Government order, which is binding on the subordinate officers, the circular dated 08/11.07.2005 issued in pursuance thereof cannot be declared to be untenable and the writ petitions filed by the petitioners may kindly be dismissed.

We have heard learned counsel for the parties and gone through the material available on the record.

Section 4A of the Act was introduced in the Act for the purposes of promoting the development of industry in the State. Under Section 4-A sub-section (1) the State Government may by notification, declare that the turnover of the goods produced thereof be exempted from trade tax for a particular period not exceeding 12 years subject to such conditions as may be specified in the notification. The basis for grant of the exemption or reduction on tax is to be calculated on the fixed capital investment-the quantum of relief being a percentage of such investment. The phrase "fixed capital investment" will have to be read harmoniously not only with the other provisions of the Notification itself but also in the light of section 4A.

'Fixed Capital Investment' has been defined in paragraph 3 of the 1991 Notification as being determinable 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 a bank and in any other case according to (a) value of the land certified by the Collector; (b) 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.

Paragraph 4 of 1991 notification provides that :

"In determining the fixed capital investment as defined in clause (4) of the Explanation in case of 'New units' or 'Additional Fixed Capital Investment' referred to in sub-clause (d) of clause (5) of the Explanation in case of 'unit 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 4-A of the Act."

(Emphasis supplied).

This paragraph therefore links original fixed capital investments to new units and additional fixed capital investments to already established units undertaking expansion, modernization etc. for the purposes of Clauses (4) and clause (5) (d) of the Explanation. There appears to be no clause (4) or (5) to any Explanation in the 1991 Notification. Clearly the reference is to the Explanation in Section 4A of the Act which has defined "fixed capital investment" and "unit which has undertaken expansion diversification or modernization" in clauses (4) and (5) respectively. The relevant extracts of these clauses read as follows:-

"(4) 'Fixed capital investment' means investment in land and building and such plant, machinery, equipment apparatus, components, moulds, dyes, jigs and fixtures as have not been used or acquired for use in any other factory or workshop in India:

(5) 'unit which has undertaken expansion, diversification or modernization' means an industrial undertaking-

(a) of a dealer who is not a defaulter in payment of any due 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 on sale or purchase of goods;

(b) whose first date of production of goods,

(i) Of a nature different from those manufactured earlier by such undertaking in case of units undertaking diversification, and (or)

(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 has increased by at least twenty five percent as a result of expansion of modernization or wherein goods of a nature different from these 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.

It is significant to mention that a distinction is made between 'additional' and 'original' fixed capital investment' not only in clause (d) of clause (5) to the Explanation in Section 4A of the Act but in the body of the entire clause - the first relating to old units undertaking expansion etc. and the second to new units.

Paragraph 4 of the Notification also refers only to the additional fixed capital investment in determining the fixed capital investment as far as units which have undertaken expansion, diversification or modernization are concerned. The emphasised portions of the paragraph as quoted earlier indicate the mode of determination of additional fixed capital investment as far as units which have undertaken expansion etc. and original fixed capital investment as far as new units are concerned.

Hon'ble Supreme Court in the case of Commissioner of Trade Tax vs. Kajaria Ceramics Ltd., (2005) 11 SCC 149 observed that the three notifications namely the one issued in 1985, 1991 and 1995 form part of a pattern. The 1985 notification granted benefit to new units provided their original investment exceeded Rs. 3 lacs of their entire turnover. The 1991 Notification extended the benefit to old units undertaking expansion and which may have already got the benefit, like the respondent, of the original investment made under the 1985 Notification subject to the old unit making a further investment and the benefit was limited to a percentage of that investment. Similarly the 1995 Notification further extended the benefit to units which had undertaken backward integration again limiting the benefit to the investment made. All the three notifications were issued under the same section and for the same purpose of effecting development and were part of a chain of progress without any overlapping. Not only would the contents of each notification derive its meaning from Section 4A as each is derived from and refers back to the section, but also if a phrase used in one of the notifications is still ambiguous, then for the purpose resolving the ambiguity the contents of the previous or subsequent notifications can be looked into, as per the ratio laid down in the case of Pappu Sweets & Biscuits vs. CTT, U.P. (1998) Supp 2 SCR 119. Because the 1995 notification explicitly states in Annexure 1 to that notification that the exemption is calculatable on the fixed capital investment or as the case may be 'additional fixed capital investment'.

In Collector vs. Andhra Sugar [1988 ] 3 Supp (SCR) 543 Mukharji, J (as His Lordship then was ) said-

"It is well settled that the meaning ascribed by the authority issuing the Notification, is a good guide of a contemporaneous exposition of the position of law. Reference may be made to the observations of this Court in K.P. Varghese v. The Income Tax Officer, Ernakulam [1982]1 SCR 629. It is a well settled principle of interpretation that courts in construing a Statute will give much weight to the interpretation put upon it at the time of its enactment and since, by those whose duty has been to construe, execute and apply the same enactment."

(See also in Karnataka SSIDCL Vs. CIT (2002) Supp 4 SCR 453, 460.)

From the records, it appears that the petitioners were allowed tax benefit by virtue of certificates issued under Section 4A of the Trade Tax Act, 1948. Section 4A of the Act, on reproduction reads as under:-

"Section 4A. Exemption from trade tax in certain cases.-(1) Notwithstanding anything contained in any other provisions except the provisions of section 3H of 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 in any districts or parts of districts 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) ... ... ...

(3) ... ... ...

(4) ... ... ...

(5) ... ... ...

(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:

For the purposes of this section:-

(1) 'new unit' during the period ending with March 31st, 1990 means an industrial undertaking set-up by a dealer on or after October 1, 1982 but not later than March 31, 1990:-

(a) which is licenced 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 industrial undertakings;

(b)(i) which is registered under the Factories Act, 1948, or

(ii) an application for registration in respect whereof has been made under that Act, or

(iii) after making an application for a Term Loan from any Financial Corporation or Company owned or controlled by the Central or the State Government or any Bank whether such Term Loan is sanctioned and disbursed before or after the undertaking is set up (where the capital investment in the undertaking does not exceed three lakh rupees),

(c) on land or building or both owned or taken on lease for a period of not less than seven years by such dealer or allotted to such dealer by any Government company or any corporation owned or controlled by the Central or the State Government,

(d) using machinery, accessories or components not already used, or acquired for use, in any other factory or workshop in India;

(e) fulfilling all the conditions specified in this Act or rules or notification made thereunder in regard to grant of facility under this section on the date from which such facility may be granted to him,

and includes an industrial undertaking fulfilling the conditions laid down in clauses (a) to (e) set-up by a dealer-

(i) already having an industrial undertaking manufacturing the same goods at any other place in the State, or

(ii) on or adjacent to the site or an existing factory or workshop manufacturing any other goods,

but does not include :-

(i) any factory or workshop manufacturing the same goods established by a person on or adjacent to the site of an existing factory or workshop wherein such person has interest as proprietor or partner or agent or managing director or promotor director or as holding company or subsidiary company, if such existing factory or workshop is closed, so however, that where the date of starting production of such factory or workshop falls before January 19, 1985, this clause shall be construed as if the words "or adjacent to" were omitted; or

(ii) any addition to or extension of an existing factory or workshop:

Provided that -

(i) in relation to a new unit whose date of starting production falls before March 24, 1984, in clause (d) for the words "in India" the words "in Uttar Pradesh" shall be deemed to have been substituted;

(ii) in relation to a new unit whose date of starting production falls before August 27, 1984 and the capital investment wherein is not less than three lakh rupees, the condition of registration or application for registration under the Factories Act, 1948, shall not apply;

(iii) in relation to a new unit whose date of starting production falls before March 6, 1986, the condition regarding lease for a period of not less than seven years shall not apply;

(iv) the unit which has fulfilled all or any of the conditions specified in clause (a) or (d) of the Explanation (1) on a date later than the date of commencement of the period of facility notified under sub-section (1), shall be deemed to be new unit for entitlement to the facility of exemption from tax only for part of the period, notified under sub-section (1), to be computed from the date on which all the conditions specified in clauses (a) to (d) of the said Explanation (1) are fulfilled, or July 20, 1992, whichever be later till the end of the period of such facility.

(2) 'New Unit' after March 31, 1990 means a factory or workshop set-up by a dealer after such date and satisfying the conditions laid down under this Act or Rules or Notifications made thereunder with regard to such factory or workshop and includes an industrial unit manufacturing the same goods at any other place in the State or an industrial unit manufacturing any other goods on or adjacent to the site of an existing factory or workshop, but does not include-

(a) any factory or workshop using machinery, plant, equipment, apparatus, or components already used in other factory or workshop in India other than boilers, generators, moulds and dyes and other than any machinery, plant, equipment, apparatus or components sold to it by any Government Company or any Corporation owned or controlled by the Central or State Government:

Provided that the onus of providing that such machinery, plant, equipment, apparatus or components have not been used in or the value thereof have not been included in fixed capital investment for obtaining benefit under this section by any other factory or workshop in India, shall be on the new unit; or

(b) any factory or workshop manufacturing the same goods established by a person on or adjacent to the site of an existing factory or workshop manufacturing the same goods wherein such person has interest as proprietor or partner or agent or managing director or promotor-director or as holding company or subsidiary company if such existing factory or workshop is closed; or

(c) any addition to or extension or an existing factory or workshop not being an extension, diversification or modernization within the meaning of clause (5) of this Explanation.

From the aims and objects attached to the bill pertaining to the U.P. Trade Tax Act, 1948, it appears that the intention of the State Government, as expressed under Section 4-A itself is to encourage investment, it is unlikely that the investment already made would entitled an industry to any further benefit again.

In the instant cases, the certificates under Section 4A were issued for the exemption of the tax on the fixed capital investment for a particular period. In the FORM XLVI, the investment will have to be disclosed. The format of the said FORM is as under:-

FORM XLVI

(See Rule 25)

Application for exemption from or reduction in rate of tax to new units the date of starting production whereof falls on or after 1st day of April, 1990 or to units which have undertaken expansion, diversification or modernization on or after April 1, 1990 under Section 4-A of the U.P. Trade Tax Act.

General Manager,				Area Development Officer (Industry),
 
District Industries Centre			Industrial Development Authority______
 
						________________________________
 
Sir,
 
	I/we have established a new unit/undertaken a programme of expansion, diversification or modernization on or after April 1, 1990.
 

 

My/our unit M/s._______________________ is licenced or registered as industrial unit with the appropriate authority and is entitled to exemption from or reduction in rate of tax under Section 4-A of the U.P. Trade Tax Act/Section 8 of the Central Sales Tax Act. I/We are submitting this application in 6/8 copies along with following particulars for issue of eligibility certificate:-

1. Name and complete address with telephone numbers, if any, of the Unit

(a) Office _______________________________________________

(b) Factory ______________________________________________

(c) Godowns ____________________________________________

2. Status of the unit, whether -

(a) Proprietorship

(b) Partnership (Enclose attested copy of the partnership

deed and registration certificate issued

under Indian Partnership Act).

(c) Corporation or Limited (Enclose attested copy of the Articles of

Company Association, Memorandum of

Association and certificate of Incorporation

issued under Indian Companies Act).

(d) Co-operative Society (Enclose attested copy of by-laws and

certificate of registration issued by

Registrar, Co-operative Societies)

(e) Government Department

or Local Authority.

3. Name and complete address of the Proprietor/Partners/Karta/Directors/ President/ Secretary/head of the officer authorised by the Principal officer.

4. Details of goods manufactured and its by-products and waste products.

5. Licence number/Registration number [Enclose attested copy of the Industrial licence or letter of intent or registration certificate (permanent or otherwise) issued by the appropriate authority in accordance with any law for the time being in force relating to licencing or registration of industrial units or for expansion, diversification or modernization of the units].

6. In case of unit undertaking programme of expansion, diversification or modernization the details of:

(a) Fixed Capital Investment -

Particulars

Original investment (without giving margin for depreciation)

Additional investment in expansion, diversification or modernization on the date of commencement of the period of facility

Certificate of valuation of additional fixed capital investment

(i) Land ________________ Collector of District.

(ii) Building______________ Evaluator approved by

the Income Tax Department.

(iii) Plant, machinery, equipment,

apparatus and components

Chartered Accountant

_________________________________________________________________

Note: A certificate from Chartered Accountant about original fixed capital investment shall also be enclosed.

(b) Production Capacity -

Commodity

Annual Production capacity prior to such expansion or modernization

Increase in production capacity due to expansion and modernization

(i)

...

...

...

(ii)

...

...

...

(iii)

...

...

...

From Para 6 of the above, it appears that exemption is granted on the fixed capital investment made by the entrepreneur. Further, if any further investment is made by installing new machines then the benefit of exemption to the production of goods from such new machines is not available. It was expected that the petitioners will apply for fresh certificate regarding the installation of the new machines/investment, which resulted into extra production. But the same was not done in the instant cases.

Moreover, provisions of Section 4A relates to Rule 25 and Form-XLVI, which is statutory form and is to be filled along with requisite documents are to be read in composite and not separate. The aforesaid provision also makes it abundantly clear that while applying for eligibility certificate necessary documents such as loan amount, land and machines are to be disclosed. After the grant of eligibility certificate, production from new machines are not eligible for grant of exemption of goods from payment of trade tax.

Nothing is permissible under the garb of the certificate issued under Section 4-A of the Act by hiding the facts like the fixed capital investment from the DLC. Section 4A(5)(a) provides that a manufacturer shall be entitled to the facility of exemption from, or reduction in the rate of tax, notified under sub-section (1). Admittedly, in the instant cases, the petitioners produced goods in excess by installing new machines subsequently to the issuance of eligibility certificate and the same was not based production as a result of the establishment of its original units. So, the petitioners cannot claim the tax benefit on the extra production manufactured from new machines which were never disclosed before DLC who has issued the certificates. The assessee cannot interpret law in its own way. One cannot take advantage of his wrongs as per the maxim COMMODUMEX INJURIA SUA MEMO HABERE DEBET. Similar views were expressed by Hon'ble Supreme Court in the case of Mrutunjay Pani v Narmada Bala Saimal AIR 1961 SC 1353.

In view of above and by considering the totality of the facts and circumstances of the case, we find no reason to interfere with the impugned Circular dated 11.07.2005 and letter dated 12.02.2004 issued by the Commissioner, Trade Tax, U.P. The same are hereby sustained along with reasons mentioned therein.

In the result, all the writ petitions filed by the petitioners are devoid of merits and dismissed accordingly.

Order Date :- 26th August, 2013

Rakesh/-