2017 (9) TMI 61 - HC - VAT and Sales Tax

Application to grant moratorium for the unexpired portion of the period of exemption granted to original manufacturer from 23.12.2002 to 30.10.2006 - exemption under Section 5(4-A) of U.P. Trade Tax Act, 1948 - Notification dated 31.03.1995 - Petitioner as a successor manufacturer and transferree of ice-cream unit, moved application on 24.01.2003 to Additional Director, Industries, Agra with a request to issue fresh eligibility certificate incorporating petitioner s name therein so as to enable it to avail benefit of exemption/deferment for unexpired period of exemption and amount - Petitioner also requested to be permitted to honour payment obligation of deferred tax already availed by M/s DFL, Agra - Whether petitioner is entitled for deferment in payment of tax under Section 8(2-A) of Act, 1948 and Rule 43 of Rules, 1948? Held that - wherever benefit under sub-section (2-B) of Section 4-A is claimed that has to be read with sub-section (1) and (2) of Section 4-A - Section 8(2-A) read with Rule 43 has to be read with Section 4-A(2-B) as well for the reason that Successor Manufacturer when gets eligibility certificate, it is referable to Section 4-A(1) and (2) and said benefit could not have been denied by confining meaning of discontinuance of business under Rule 43(4)(a) to principal manufacturer and not to the successor one. In order to support the ground that benefit of deferment under Section 8(2-A) read with Rule 43 would be available to only original manufacturer and not to Successor, who is also held entitled for similar exemption under Section 4-A(1) and (2) of Act, 1948 by virtue of Section 4-A(2-B) inserted with retrospective effect of 1983, learned Standing Counsel could give no satisfactory reply at all. Competent Authority directed to reconsider petitioner s application and pass a reasoned order - petition allowed by way of remand.

Summary

Issues Involved:
1. Entitlement of the petitioner to deferment in payment of tax under Section 8(2-A) of the U.P. Trade Tax Act, 1948 and Rule 43 of the Trade Tax Rules, 1948.
2. Interpretation of Section 4-A(2-B) of the U.P. Trade Tax Act, 1948 in conjunction with Section 8(2-A) and Rule 43.
3. Applicability of Rule 43(4)(a) regarding the discontinuance of business by the original manufacturer.
4. Validity of the impugned orders dated 22.02.2007 and 14.03.2007 issued by the Commissioner Trade Tax, U.P. and Deputy Commissioner (Assessment), Trade Tax, Agra.

Detailed Analysis:

1. Entitlement of the Petitioner to Deferment in Payment of Tax:
The petitioner, M/s Universal Dairy Product Pvt. Ltd., sought deferment of tax payment under Section 8(2-A) of the U.P. Trade Tax Act, 1948, which allows the Commissioner to grant moratorium for payment of admitted tax in lieu of exemption under Section 4-A. The petitioner argued that as a successor manufacturer, it should be entitled to the same benefits of deferment as the original manufacturer, M/s Devyani Foods Ltd., Agra, for the unexpired portion of the exemption period.

2. Interpretation of Section 4-A(2-B) in Conjunction with Section 8(2-A) and Rule 43:
The court noted that Section 4-A(2-B) was inserted to grant benefits to successor manufacturers for the unexpired portion of the exemption period. The petitioner argued that Rule 43 should be interpreted to include successor manufacturers who meet the eligibility criteria under Section 4-A(2-B). The court agreed, stating that the provisions should be read together to ensure that the legislative intent of granting benefits to successor manufacturers is not rendered redundant.

3. Applicability of Rule 43(4)(a) Regarding Discontinuance of Business:
The respondents argued that the facility of deferment ceased upon the discontinuance of business by the original manufacturer, as per Rule 43(4)(a). The court, however, held that this rule should not be applied to deny benefits to successor manufacturers who have obtained eligibility certificates under Section 4-A(2-B). The court emphasized that the rule should be interpreted to allow the transfer of benefits to successor manufacturers to fulfill the legislative intent.

4. Validity of the Impugned Orders:
The impugned orders dated 22.02.2007 and 14.03.2007, which rejected the petitioner's application for deferment and demanded payment of interest on the tax amount, were found to be inconsistent with the interpretation of Section 4-A(2-B) and Section 8(2-A). The court set aside these orders and directed the Competent Authority to reconsider the petitioner's application in light of the court's discussion.

Conclusion:
The court allowed the writ petition, setting aside the impugned orders and directing the Competent Authority to reconsider the petitioner's application for deferment of tax payment. The court emphasized that the provisions of Section 4-A(2-B), Section 8(2-A), and Rule 43 should be read together to ensure that successor manufacturers are entitled to the same benefits as the original manufacturers for the unexpired portion of the exemption period. The Competent Authority was instructed to pass a reasoned order within three months.