1993 (11) TMI 220 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Modification of the eligibility certificate u/s 4-A of the U.P. Sales Tax Act.
2. Effective date of exemption from sales tax.
3. Interpretation of sub-section (5)(c) of section 4-A.
4. Compliance with the Factories Act.
5. Constitutionality of sub-section (5)(c) under Article 14 of the Constitution of India.

Summary:

Issue 1: Modification of the eligibility certificate u/s 4-A of the U.P. Sales Tax Act
The petitioner sought a directive for the respondent to modify the eligibility certificate granted u/s 4-A of the U.P. Sales Tax Act, 1948, to be effective from the date of the first sale.

Issue 2: Effective date of exemption from sales tax
The petitioner's unit began production on November 30, 1986, and the first sale occurred on December 3, 1986. The eligibility certificate granted exemption from December 3, 1986, to December 2, 1993, but the effective exemption was from November 24, 1988, the date of registration under the Factories Act. The petitioner challenged the assessment orders for 1986-87 and 1987-88.

Issue 3: Interpretation of sub-section (5)(c) of section 4-A
The court examined whether sub-section (5)(c) of section 4-A is mandatory or directory. The provision states that exemption is granted from the date of registration under the Factories Act. The court held that sub-section (5)(c) is directory, not mandatory, citing that not all conditions for tax exemption are mandatory as per the Supreme Court's judgment in Mangalore Chemicals & Fertilizers Limited v. Deputy Commissioner of Commercial Taxes.

Issue 4: Compliance with the Factories Act
The petitioner could not initially register under the Factories Act due to having fewer than 10 workers. Registration was obtained on November 24, 1988, when the number of workers exceeded 10. The court noted that insisting on registration under the Factories Act as a sine qua non would be over-technical and against the legislative intent to encourage new industries.

Issue 5: Constitutionality of sub-section (5)(c) under Article 14 of the Constitution of India
The petitioner argued that sub-section (5)(c) is violative of Article 14 due to discrimination between units based on the speed of registration under the Factories Act. The court found prima facie discrimination but did not declare the provision ultra vires, instead interpreting it as directory.

Conclusion:
The court directed the respondents to rectify the eligibility certificate to be effective from the date of the first sale, December 3, 1986, and to rectify/cancel the assessment orders accordingly. The petition was allowed with no order as to costs.