2007 (11) TMI 397 - SC - VAT and Sales Tax

Whether turnover of the base production in accordance with clause (6) of the Notification No. 1093 dated July 27, 1991 has to be taken up for the whole of the assessment year? Held that - Appeal dismissed.Intention of the Legislature is clear and unambiguous. Exemption is to be given on the turnover of sale of goods in an assessment year in excess of the base production. We do not find any substance in the submission advanced on behalf of the appellants

Summary

Issues Involved:
1. Interpretation of the turnover of base production for the whole assessment year.
2. Eligibility for exemption from payment of tax under section 4A of the U.P. Trade Tax Act, 1948.
3. Assessment of the base production and entitlement to exemption.

Issue-wise Detailed Analysis:

1. Interpretation of the turnover of base production for the whole assessment year:
The High Court held that the turnover of the base production in accordance with clause (6) of the Notification No. 1093 dated July 27, 1991, has to be taken up for the whole of the assessment year. The assessee contended that the turnover should be considered for the entire assessment year, and if the unit exceeds the base production turnover, it should be entitled to an exemption from payment of tax on the excess turnover. The Revenue argued that this interpretation goes against the object of section 4A of the Act. The Supreme Court referenced the case of Commissioner of Trade Tax, U.P. v. Modipan Fibres Company, where it was established that exemption is to be given on the turnover of sales in an assessment year in excess of the base production.

2. Eligibility for exemption from payment of tax under section 4A of the U.P. Trade Tax Act, 1948:
The assessee, a private limited company engaged in the manufacture of bulk drugs, was granted an eligibility certificate under section 4A of the Act for the expansion undertaken to manufacture paracetamol. The exemption was granted to the extent of 125% of the fixed capital investment on the turnover exceeding the base production of 172.8 MT. During the assessment year 1992-93, the assessee claimed exemption on the turnover of the production of 209.325 MT. The Assistant Commissioner restricted the exemption to 70.325 MT, which was upheld by the Deputy Commissioner (Appeals). The Tribunal later allowed the exemption from September 23, 1992, onwards, which was then challenged in the High Court.

3. Assessment of the base production and entitlement to exemption:
The High Court found merit in the assessee's plea and set aside the Tribunal's order. The Supreme Court examined section 4A, section 7(1A) of the Act, Notification No. ST-II-1093/XI-7(42)-86-U.P. Act-XV/48-Order-91, and rule 41. The Court noted that the purpose of the exemption under the notification was to promote industrial development. The Court reaffirmed that the exemption is to be given on the turnover of sales in an assessment year in excess of the base production. The Court concluded that the High Court's interpretation aligns with the legislative intent, and thus, the appeal by the Revenue was dismissed.

Conclusion:
The Supreme Court upheld the High Court's decision that the turnover of base production should be considered for the entire assessment year, and the assessee is entitled to an exemption on the turnover exceeding the base production. The appeal was dismissed, affirming the assessee's eligibility for the tax exemption under section 4A of the U.P. Trade Tax Act, 1948.