1994 (8) TMI 291 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to rejection of exemption application under section 4-A of U.P. Sales Tax Act based on old machinery usage.

Analysis:
The judgment concerns a writ petition challenging the rejection of an exemption application under section 4-A of the U.P. Sales Tax Act based on the use of old machinery in the unit. The Divisional Level Committee rejected the exemption application on the premise that old machinery worth Rs. 1,453 was utilized in the unit out of a total investment of Rs. 1,04,104. The court examined whether the benefit of exemption could be denied due to a small portion of old machinery. It referenced a notification aimed at promoting industrial growth by granting exemptions to new units meeting specific criteria. Citing precedents, the court emphasized interpreting provisions liberally to encourage industrial activities and growth.

The court analyzed clause (1)(d) of the Explanation to section 4-A, referencing a previous case where a liberal and positive approach was advocated, cautioning against denying eligibility on narrow grounds. It highlighted that a strict interpretation could hinder the objective of promoting industrial development. The court emphasized that the clause should not be construed narrowly and that the benefit of exemption should not be denied based on minimal old machinery usage. It was held that a substantial part of the factory machinery should not have been used in any other factory to qualify for the exemption.

Consequently, the court allowed the writ petition in part, quashing the order rejecting the exemption application. The Divisional Level Committee was directed to reconsider the eligibility certificate application in line with the court's interpretation and observations. The court also instructed the Committee to examine the unit's closure since April 1988 in light of a clarificatory circular and a previous court decision. The Committee was given a timeline of two months to reconsider the application and make a decision.

In conclusion, the court's judgment focused on interpreting the provisions of section 4-A liberally to promote industrial growth and development, emphasizing that the benefit of exemption should not be denied based on insignificant old machinery usage. The decision underscores the importance of considering the overall industrial objectives while applying tax incentives and exemptions.