2006 (11) TMI 560 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility for exemption under Section 4A of the U.P. Trade Tax Act.
2. Use of new versus used machinery.
3. Legal implications of leasing machinery.
4. Applicability of Section 4A(2B) of the U.P. Trade Tax Act.

Issue-wise Detailed Analysis:

1. Eligibility for Exemption under Section 4A of the U.P. Trade Tax Act:
The revisionist-assessee, a private limited company, applied for an exemption certificate under Section 4A of the U.P. Trade Tax Act for six years. The exemption was initially granted but later canceled by the Commissioner, Trade Tax, on the grounds that the assessee had installed used machinery and engaged in trading rather than manufacturing. The Tribunal upheld this cancellation, leading to the present revision. The court examined whether the assessee met the definition of a "new unit" as per the relevant period's Explanation to Section 4A, which excluded factories using previously used machinery.

2. Use of New Versus Used Machinery:
The assessee argued that the machinery obtained on lease was new and had not been used in any other factory. However, the Commissioner and the Tribunal found that the machines had been used by M/s. Glossica Laminates Pvt. Ltd. for manufacturing tiles and thus did not qualify as new. The court noted that the findings of fact by the Commissioner and the Tribunal were not successfully challenged and were based on substantial evidence, including statements and documents proving the prior use of the machinery.

3. Legal Implications of Leasing Machinery:
The assessee leased the factory and machinery from M/s. Glossica Laminates Pvt. Ltd. and M/s. Northern India Tiles Corporation. The court observed that the machines obtained on lease were previously used by the original owners. The Tribunal concluded that the transfer of used machinery disqualified the assessee from claiming exemption as a "new unit." The court upheld this conclusion, emphasizing that the exemption under Section 4A is granted to the industrial unit, not the legal person, and the use of previously utilized machinery disqualifies the unit from being considered new.

4. Applicability of Section 4A(2B) of the U.P. Trade Tax Act:
The assessee contended that under Section 4A(2B), introduced retrospectively from October 12, 1983, the unit should be reconsidered for exemption even if it used old machinery. The court noted that this plea was raised for the first time in the revision and not before the Tribunal. The court held that revisional jurisdiction could not entertain new pleas requiring fresh facts and that the assessee had ample opportunity to raise this issue during the Tribunal proceedings. Additionally, the court highlighted that the exemption under Section 4A(2B) is limited to the unexpired portion of the period for which the former manufacturer was eligible, which the assessee did not apply for.

Conclusion:
The court dismissed the trade tax revision, affirming the cancellation of the exemption certificate. It held that the findings of fact by the Commissioner and the Tribunal were neither perverse nor based on no evidence. The court emphasized that the use of previously used machinery disqualified the unit from being considered new, and the assessee's late invocation of Section 4A(2B) could not be entertained at the revisional stage. The judgment underscores the importance of adhering to statutory definitions and procedural timelines in tax exemption cases.