1996 (3) TMI 446 - SC - VAT and Sales Tax

Interpretation of sub-section (5)(c) of section 4-A of the U.P. Sales Tax Act, 1948 (as substituted by Act 28 of 1991) Held that - The High Court points out that it was averred in paragraph 3 of the writ petition that where the number of workers in a new unit is less than ten at the time it goes into production, such a unit would not be required to be registered under the Factories Act since under section 2(m) thereof, only those factories in which the number of workers are ten or more can be registered. His submission was that if the benefit is relatable to the date of the registration then such new units would be totally out of the exemption purview and that is the reason why, according to him, clause (c) of sub-section (5) of section 4-A was ultra vires. That question has not been squarely dealt with by the High Court. It is, therefore, necessary to remit the matter to the High Court for a fresh consideration.

Summary

Issues:
Interpretation of sub-section (5)(c) of section 4-A of the U.P. Sales Tax Act, 1948 - Whether requirements are mandatory or directory, Discrimination under Article 14 of the Constitution, Ultra vires the Constitution, Challenge regarding registration under the Factories Act for new units with less than ten workers.

Analysis:
The Supreme Court addressed the interpretation of sub-section (5)(c) of section 4-A of the U.P. Sales Tax Act, 1948, focusing on whether the requirements were mandatory or directory. The High Court had examined this provision and raised concerns about potential discrimination under Article 14 of the Constitution. The High Court found that the provision could lead to discrimination between units granted registration under the Factories Act quickly and those facing delays, leading to a curtailed period of exemption for the latter. The High Court suggested that the provision could be read down as directory instead of mandatory to avoid constitutional issues. However, the Supreme Court disagreed, emphasizing that even if the provision was read as directory, authorities could still act arbitrarily in granting or refusing benefits based on registration dates. The Supreme Court found no basis to deviate from the ordinary meaning of the word "shall" in the provision.

The Court also considered a submission by the respondent's counsel regarding the registration of new units with less than ten workers under the Factories Act. The counsel argued that such units might be excluded from the exemption if benefits were linked to registration dates, making clause (c) of sub-section (5) of section 4-A ultra vires. The Court noted that the High Court had not adequately addressed this argument and decided to remit the matter for fresh consideration. The Supreme Court allowed the appeal, set aside the High Court's order, and directed a reconsideration based on the language of section 2(m) of the Factories Act and the alleged discrimination between registrable and non-registrable new units. The High Court was instructed to review the matter promptly without any cost implications.