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TMI Blog1995 (11) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... ualification contained therein gets attracted. In the face of the clear language of the clause, it is not possible to entertain the submission of substantial compliance urged by Sri Dhaon. X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not become disentitled to get the facility of tax exemption under section 4-A of the Act, merely because the machinery installed in the unit was acquired for use in any other factory or workshop. The view we are taking finds support from a Division Bench decision in Amit Plastic Industry, Ghaziabad v. Divisional Level Committee, Meerut [1995] 96 STC 538 (All.); 1994 UPTC 121. In our opinion, therefore, the State Level Committee has to re-examine the material on record and record a categorical finding as to whether or not the machinery purchased by the petitioner from M/s. Modi Steels, Modinagar vide bill No. 234 dated April 27, 984, was actually used in any other factory or workshop in India. In case it is found that the machinery was not actually used in any factory or workshop before its installation in the petitioner's unit, then such machinery would be treated to be "new machinery" and clause (a) of Explanation to section 4-A of the Act would not apply. So far as the second ground is concerned, it was admittedly a new ground which did not find mention in the earlier order dated March 25, 1989. The petitioner is entitled to have its say with regard to the second ground wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in Amit Plastic Industry, Ghaziabad v. Divisional Level Committee, Meerut [1995] 96 STC 538 (All.); 1994 UPTC 121. The High Court has set aside the orders impugned in the writ petition and remitted the matter to the State Level Committee with a direction to re-examine the material on record and to record a categorical finding as to whether or not the machinery purchased by the petitioner from M/s. Modi Steels was actually used in any other factory or workshop in India. If it is found that the said machinery was not actually used in any factory or workshop before its installation in the respondent-unit, the High Court opined, the respondent-unit would be entitled to be treated as a new unit for the purpose of section 4-A. The respondent-unit had applied for issuance of an eligibility certificate under section 4-A of the Act on the ground that it has set up a new unit for manufacturing rolling mill guide system equipment. It had acquired machinery worth about Rs. 25 lakhs, out of which machinery worth Rs. 4,59,575 was acquired from M/s. Modi Steels under bill No. 244 dated April 27, 1984. Admittedly, the said machinery was acquired by M/s. Modi Steels for setting up a unit of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, accessories or components "already used or acquired for use in any other factory or workshop in India", it does not and cannot qualify as a "new unit". (d) Any factory or workshop established on or adjacent to the site of an existing factory or workshop manufacturing same goods as are being manufactured in the existing factory or workshop cannot be called a "new unit" for the purposes of the Explanation. (e) Any addition to or extension of an existing factory or workshop cannot and does not qualify as a new unit. The definition of "new unit" in Explanation (i) thus comprises of two clauses [mentioned as (a) and (b) above] to which three exceptions [mentioned as (c), (d) and (e) above] are appended. The ground upon which the respondent-unit has been denied the eligibility certificate under section 4-A by the appropriate authorities is that part of the machinery used in setting up the respondent-unit was "acquired for use in any other factory or workshop in India" and, therefore, the respondent-unit does not qualify as a "new unit". According to the authorities, it is enough that the machinery or part of the machinery installed in the new factory or workshop is "acquired for u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for use" must be understood in their plain and ordinary meaning. It is enough that the machinery/accessories/ components which are used in the factory or workshop (claiming the benefit of section 4-A) are acquired for use in any other factory or a workshop in India. It is not necessary to go further and enquire whether that machinery/accessories/ components were actually used in any other factory or workshop in India. In this case, admittedly, a part of the machinery installed in the respondent's unit was acquired by M/s. Modi Steels for use in the factory or workshop proposed to be set up by them. According to the certificate issued by M/s. Modi Steels, their project did not materialise because it was found to be not viable. For that reason, they say, the machinery purchased by them for the said purpose was lying in packed and unused condition and was sold to the respondent. Thus, on their own showing, the respondent's case is directly hit by clause (a) in the Explanation and is not entitled to the exemption provided by section 4-A. It is submitted by Sri S.K. Dhaon, learned counsel for the respondent, that the aforesaid interpretation would not be a reasonable one and would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4-A must be literally construed to further the object underlying it. In case of any ambiguity, it is submitted, the construction favouring the assessee should be adopted. We cannot agree. Section 4-A provides for exemption from tax. It is repeatedly held by this Court that a provision providing for an exemption or an exception, as the case may be, has to be construed strictly. In Mangalore Chemicals Fertilizers Limited v. Deputy Commissioner of Commercial Taxes [1991] 83 STC 234 (SC); (1992) Supp 1 SCC 21 which case dealt with an exemption notification, M.N. Venkatachaliah, J. (as the learned Chief Justice then was) and S.C. Agrawal, J., stated the principle in the following words: "Shri Narasimhamurthy again relied on certain observations in Collector of Central Excise v. Parle Exports (P.) Ltd. [1989] 75 STC 105 (SC); (1989) 1 SCC 345; 1989 SCC (Tax) 84 in support of strict construction of a provision concerning exemptions. There is support of judicial opinion to the view that exemptions from taxation have a tendency to increase the burden on the other unexempted class of tax-payers and should be construed against the subject in case of ambiguity. It is an equally well-known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood and sound-does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals [1991] 83 STC 234 and other decisions, viz., each such exception/ exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is found applicable to him, full effect must be given to it. As observed by a Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave, Assistant Collector of Central Excise and Customs [1969] 2 SCR 253; AIR 1970 SC 755 that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It must, however, be borne in mind that absurd results of construction should be avoided. 18.. In Hindustan Aluminium Corporation Ltd. v. State of Uttar Pradesh [1981] 48 STC 411; [1982] 1 SCR 129; AIR 1981 SC 1649 this Court emphasised that the notification should not only be confined to its grammatical or ordinary parlance but it should also be construed in the light of the context. This Court reiterated that the expression should be construed in a manner in which similar expressions have been employed by those who framed relevant notification. The court emphasised the need to derive the intent from a contextual scheme." We agree with the above statement of law except in so far as it states that where two views of the exemption notification are possible, it should be construed in favour of the subject since it is contrary to the decisions aforementioned including the three-Judge Bench decision in Novopan India Limited (1994) Supp 3 SCC 606. It may be noted that this decision was referred to in Mangalore Chemicals and Fertilizers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyed in the clause. It cannot also be said that such addition of word(s) is necessary to avoid an absurdity. Lastly, Sri Dhaon submitted that the respondent-unit has substantially complied with the requirement of the said clause in the definition inasmuch as the value of the machinery acquired from M/s. Modi Steels is only about Rs. 4.5 lakhs as against the value of the entire machinery at Rs. 25 lakhs. In our opinion, there is no room for such a contention in view of the specific language of clause (a). The clause uses all the three words-machinery, accessories or components. The use of the word "or" indicates that use of either of them, which are already used or acquired for use in any other factory or workshop in India, would disqualify the factory or workshop from being called a "new unit" within the meaning of section 4-A. The clause does not say or indicate in any manner that only where the entire machinery installed in the unit (claiming to the new unit) has already been used or was acquired for use in any other factory or workshop in India, that the disqualification contained therein gets attracted. In the face of the clear language of the clause, it is not possible to en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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