2011 (7) TMI 1082 - HC - VAT and Sales Tax

Whether the applicant shall not be entitled to the benefit of section 4A of the U. P. Trade Tax Act 1948 qua the investment of 16, 74, 368 made towards purchase of dyes and moulds as also in respect of expenditure made towards purchase of hydraulic oil to the tune of 61, 468? Held that - Merely because there has been mention of the words dyes and moulds in the details furnished by the revisionist towards capital fixed investment it cannot be said that the same were not an essential part of plant and machinery. The issue as to whether the investment made towards dyes and moulds by the revisionist in the facts of the case would answer the description of investment towards plant and machinery as was provided for under the unamended Act has to be gone into with reference to the material fact relevant for deciding the same. Accordingly the order of the Tribunal dated October 11 2001 is hereby set aside. The second appeal No. 152 of 2000 is restored to its original number. Let the Tribunal re-examine the matter in the light of the observations made hereinabove preferably within three months from the date a certified copy of this order is filed before it.Trade tax revision is allowed.

Issues Involved:
1. Entitlement to the benefit of section 4A of the U.P. Trade Tax Act, 1948 for investment in dyes and moulds.
2. Interpretation of "plant and machinery" under Explanation 4 to section 4A of the Act prior to the Amendment Act, 1995.
3. Examination of whether dyes and moulds are integral and essential parts of plant and machinery for the manufacturing process.

Detailed Analysis:

1. Entitlement to the Benefit of Section 4A:
The core issue is whether the investment of Rs. 16,74,368 towards dyes and moulds qualifies for the benefit under section 4A of the U.P. Trade Tax Act, 1948. The Tribunal and Divisional Level Committee denied this benefit, as the words "dyes, moulds, zigs and fixtures" were added to Explanation 4 of section 4A only by the Amendment Act, 1995, which is prospective in nature. Thus, investments in dyes and moulds were not considered part of fixed capital investment before this amendment.

2. Interpretation of "Plant and Machinery" Under Explanation 4:
The court examined whether the dyes and moulds used in the manufacturing process could be considered part of "plant and machinery" under the unamended Explanation 4 to section 4A. The revisionist argued that dyes and moulds were essential parts of the manufacturing unit and should be included in the definition of plant and machinery. The court referred to the apex court's judgment in Pappu Sweets and Biscuits v. Commissioner of Trade Tax, U.P., and Scientific Engineering House (P) Ltd. v. Commissioner of Income-tax, Andhra Pradesh, which emphasized a functional test to determine if an item qualifies as plant and machinery. The court noted that the Tribunal failed to consider whether dyes and moulds were integral to the manufacturing process.

3. Examination of Whether Dyes and Moulds Are Integral Parts:
The court highlighted the necessity of examining whether dyes and moulds were essential for the manufacturing process. The Tribunal did not assess whether the plant and machinery were complete without these components. The court emphasized that the Tribunal should have evaluated if the investment in dyes and moulds met the criteria for plant and machinery under the unamended Act and the notification dated July 27, 1991.

Conclusion:
The court set aside the Tribunal's order dated October 11, 2001, and restored the second appeal No. 152 of 2000 to its original number. The Tribunal was directed to re-examine the matter, considering whether the investment in dyes and moulds qualifies as investment in plant and machinery under the unamended section 4A. The Tribunal must conduct this re-examination within three months from the date a certified copy of the order is filed. The trade tax revision was allowed.

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