2013 (1) TMI 713 - HC - VAT and Sales Tax

Curtailment of exemption period - exemption granted under section 4A of the U.P. Trade Tax Act - Held that - Set aside the impugned order as well as the impugned certificate issued by the Divisional Level Committee for curtailment of the period. The assessee will get the consequential relief. Revision allowed.

Summary

Issues:
1. Validity of curtailment of exemption period under section 4A of the U.P. Trade Tax Act.
2. Interpretation of eligibility criteria for exemption under section 4A.
3. Authority's power to curtail exemption period based on registration under the Factories Act.

Analysis:
1. The case involved a challenge to the curtailment of the exemption period granted under section 4A of the U.P. Trade Tax Act. The assessee had established a new unit for processing rice from paddy and was granted an exemption certificate for six years. However, the competent authority curtailed the exemption period from January 22, 1987, to July 11, 1990, due to the factory's registration under the Factories Act. The Tribunal rejected the claim, leading to the present revision before the High Court.

2. The High Court analyzed section 4A of the Act, which provides for exemption from trade tax in certain cases to promote industry development. Referring to previous judgments, the Court emphasized that once an eligibility certificate is granted to a new unit, the authorities cannot curtail the statutory period of exemption based on subsequent events like registration under the Factories Act. The Court cited cases such as Mahaveer Paints and Adhesive Pvt. Ltd. and Kuchchal Industries to support the principle that the exemption period should not be altered once eligibility is established.

3. In a significant decision, the Supreme Court dismissed a special leave petition filed by the Department against a judgment of the Allahabad High Court. The Supreme Court upheld the High Court's ruling that registration under the Factories Act at a later date cannot curtail the eligibility certificate granted under section 4A for a specific period. This decision reinforced the principle that the exemption period should be determined from the date of production, irrespective of subsequent registrations or events. Based on these precedents and the facts of the case, the High Court set aside the curtailment of the exemption period and granted relief to the assessee, allowing the revision.

In conclusion, the High Court's judgment in this case reaffirmed the importance of upholding the statutory period of exemption under section 4A of the U.P. Trade Tax Act and clarified that authorities cannot curtail this period based on events occurring after the grant of eligibility. The decision provided clarity on the interpretation of exemption criteria and underscored the need for consistency in applying such provisions to promote industrial development.