2013 (8) TMI 807 - HC - VAT and Sales Tax

Investment based exemption - The assessee had installed new machines for enhancement of the production and claimed an exemption on the extra production - Revenue denied the exemption in view of the circular dated 11.07.2005 - Held that - The petitioners cannot claim the tax benefit on the extra production manufactured from new machines which were never disclosed before DLC who had issued the certificates - The petitioners produced goods in excess by installing new machines subsequently to the issuance of eligibility certificate and the same was not based production as a result of the establishment of its original units - the assessee cannot interpret law in its own way - One cannot take advantage of his wrongs as per the maxim COMMODUMEX INJURIA SUA MEMO HABERE DEBET following Mrutunjay Pani v Narmada Bala Saimal 1961 (3) TMI 88 - SUPREME COURT . The exemption was granted on the fixed capital investment made by the entrepreneur - Further, if any further investment was made by installing new machines then the benefit of exemption to the production of goods from such new machines was not available - It was expected that the petitioners will apply for fresh certificate regarding the installation of the new machines/investment, which resulted into extra production, but the same was not done - Provisions of Section 4A relates to Rule 25 and Form-XLVI, which was statutory form and was to be filled along with requisite documents were to be read in composite and not separate - The aforesaid provision also makes it abundantly clear that while applying for eligibility certificate necessary documents such as loan amount, land and machines were to be disclosed - After the grant of eligibility certificate, production from new machines were not eligible for grant of exemption of goods from payment of trade tax. Nothing was permissible under the garb of the certificate issued under Section 4-A of the Act by hiding the facts like the fixed capital investment from the DLC - Section 4A(5)(a) provided that a manufacturer shall be entitled to the facility of exemption from, or reduction in the rate of tax, notified under sub-section (1) - There was no reason to interfere with the Circular dated 11.07.2005 and letter dated 12.02.2004 issued by the Commissioner, Trade Tax, U.P - The same were hereby sustained along with reasons mentioned - Decided against Assessees.

Summary

Issues Involved:
1. Quashing of Circular dated 11.07.2005 and letter dated 12.02.2004 by the Commissioner, Trade Tax, U.P.
2. Entitlement to tax exemption on additional production due to new investments under Section 4A of the U.P. Trade Tax Act, 1948.

Issue-wise Detailed Analysis:

1. Quashing of Circular dated 11.07.2005 and letter dated 12.02.2004 by the Commissioner, Trade Tax, U.P.:

The petitioner sought to quash the Circular dated 11.07.2005 and letter dated 12.02.2004 issued by the Commissioner, Trade Tax, U.P., which denied tax exemption on additional production resulting from new investments. The petitioner argued that the circular and letter were based on a misinterpretation of Section 4A of the U.P. Trade Tax Act, 1948, and the relevant notifications. The petitioner contended that the eligibility certificate granted under Section 4A(2)-(d) exempted the tax on enhanced production.

The court, however, found that the circular and letter were consistent with the statutory provisions and the intent of Section 4A. The court emphasized that the exemption was linked to the initial fixed capital investment and did not extend to additional investments made after the issuance of the eligibility certificate. The court upheld the circular and letter, stating that they were in line with the legislative intent and the scheme of exemption under Section 4A.

2. Entitlement to tax exemption on additional production due to new investments under Section 4A of the U.P. Trade Tax Act, 1948:

The petitioner argued that the new machines installed for enhancing production should be entitled to tax exemption under Section 4A. The petitioner relied on various notifications and previous judgments to support their claim that the exemption should apply to the entire enhanced production, regardless of whether it was produced by the original or new machines.

The court examined the provisions of Section 4A, the relevant notifications, and the eligibility certificate issued to the petitioner. It noted that the exemption was granted based on the fixed capital investment at the time of establishing the unit. The court highlighted that any additional fixed capital investment made after the issuance of the eligibility certificate required a fresh application and eligibility certificate for the new investment.

The court referred to the statutory form (Form XLVI) and the requirement to disclose the fixed capital investment, including land, building, and machinery, at the time of applying for the eligibility certificate. The court observed that the petitioner did not apply for a fresh certificate for the new machines and additional investment, which resulted in extra production. Consequently, the court concluded that the petitioner was not entitled to tax exemption on the additional production from the new machines.

The court also cited various judgments to support its interpretation that the exemption was limited to the fixed capital investment disclosed at the time of the initial application and did not extend to subsequent investments. The court emphasized that the eligibility certificate and the exemption were based on the original fixed capital investment, and any additional investment required a separate eligibility certificate.

In conclusion, the court dismissed the writ petitions, upholding the circular and letter issued by the Commissioner, Trade Tax, U.P., and denying the tax exemption on the additional production resulting from new investments. The court found that the petitioner's interpretation of the law was incorrect and that the exemption was limited to the fixed capital investment disclosed at the time of the initial application.