1995 (11) TMI 342 - SC - VAT and Sales Tax

Whether the respondent-unit qualifies as a new unit within the meaning of Explanation (i) to sub-section (2) of section 4-A of the U.P Sales Tax Act? Held that - Appeal allowed. There is no room for contention of Sri Dhaon in view of the specific language of clause (a). The clause uses all the three words-machinery, accessories or components. The use of the word or indicates that use of either of them, which are already used or acquired for use in any other factory or workshop in India, would disqualify the factory or workshop from being called a new unit within the meaning of section 4-A. The clause does not say or indicate in any manner that only where the entire machinery installed in the unit (claiming to the new unit) has already been used or was acquired for use in any other factory or workshop in India, that the disqualification contained therein gets attracted. In the face of the clear language of the clause, it is not possible to entertain the submission of substantial compliance urged by Sri Dhaon.

Issues Involved:
1. Eligibility for tax exemption under section 4-A of the U.P. Sales Tax Act.
2. Interpretation of the term "new unit" under Explanation (i) to sub-section (2) of section 4-A.
3. Validity of the machinery acquired for use in another factory or workshop.
4. Procedural fairness in rejecting the review application on new grounds.

Detailed Analysis:

1. Eligibility for Tax Exemption under Section 4-A of the U.P. Sales Tax Act:
The primary issue in the appeal was whether the respondent-unit qualifies as a "new unit" under section 4-A of the U.P. Sales Tax Act, which provides for tax exemption for new industrial units. The Divisional Level Committee had denied the eligibility certificate on the ground that part of the machinery used was acquired from M/s. Modi Steels, which had purchased it for their own use. The High Court had set aside this decision, directing a re-examination of whether the machinery was actually used by M/s. Modi Steels.

2. Interpretation of the Term "New Unit" under Explanation (i) to Sub-section (2) of Section 4-A:
Explanation (i) to sub-section (2) of section 4-A defines a "new unit" and lists exceptions where a unit cannot be considered new. The relevant clause (a) disqualifies any factory or workshop using machinery "already used or acquired for use in any other factory or workshop in India." The Supreme Court emphasized that the terms "already used" and "acquired for use" must be given their plain and ordinary meaning. The court held that it is sufficient if the machinery was acquired for use in another factory, regardless of whether it was actually used. This interpretation avoids unnecessary factual disputes and aligns with the legislative intent to simplify the exemption process.

3. Validity of the Machinery Acquired for Use in Another Factory or Workshop:
The respondent had acquired machinery worth Rs. 4,59,575 from M/s. Modi Steels, who had purchased it for their own use but did not utilize it. The Supreme Court held that the respondent's case is directly hit by clause (a) of the Explanation because the machinery was acquired for use in another factory. The court rejected the argument that the machinery must have been actually used to attract the disqualification, emphasizing that the clause creates a conclusive presumption of use once it is shown that the machinery was acquired for another factory.

4. Procedural Fairness in Rejecting the Review Application on New Grounds:
The High Court had noted that the review application was rejected on a new ground (regarding an old hydraulic machine) without giving the petitioner an opportunity to respond, which is a procedural error. The Supreme Court did not address this procedural issue in detail but focused on the substantive interpretation of section 4-A. The High Court's direction to re-examine the material was based on the need for procedural fairness, but the Supreme Court's interpretation rendered this re-examination unnecessary.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's judgment and dismissing the writ petition. The court held that the respondent-unit does not qualify as a "new unit" under section 4-A due to the acquisition of machinery for use in another factory, irrespective of actual use. This decision underscores the importance of adhering to the plain language of tax exemption provisions and avoiding interpretations that introduce ambiguity or factual disputes.

← Previous Next →