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TMI Blog2004 (12) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... it opened a unit manufacturing particle board at Agwanpur, Moradabad District, U.P. In 1993, it established another unit manufacturing Sugar at Rozagaon, Barabanki District and in 1995 it established a unit manufacturing sugar at Asmoli, Moradabad District, U.P. 3.. By a Notification dated February 21, 1997 certain exemptions were granted to an undertaking which made a fixed capital investment of Rs. 50 crores or more in expansion, modernisation or diversification or backward integration. 4.. On May 17, 2000 the Company styling itself as Dhampur Sugar Mills Group of Industries filed an application before the General Manager, District Industries Centre, District Bijnore. It claimed exemptions under the notification dated February 21, 1997 on grounds of expansion, diversification and modernisation. This application was rejected by an order dated October 31, 2000 on three grounds, namely, (a) A joint application for multiple units is not permissible under the Rules; (b) The application was time-barred; and (c) the Company was in arrears of tax for Rs. 1,742.25 lakhs. The Company filed an appeal to the Trade Tax Tribunal, against this Order. This appeal was rejected by an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government is of the opinion that it is necessary so to do for increasing the production of any goods or for promoting the development of any industry in the State generally or in any districts or parts of districts in particular, it may on application or otherwise, in any particular case or generally, by notification, declare that the turnover of sales in respect of such goods by the manufacturer thereof shall, during such period not exceeding fifteen years from such date on or after the date of starting production as may be specified by the State Government in such notification which may be the date of the notification or a date prior or subsequent to the date of such notification and where no date is so specified from the date of first sale by such manufacturer, if such sale takes place within six months from the date of starting production and in any other case from the date following the expiration of six months from the date of starting production, and subject to such conditions as may be specified, be exempt from trade tax on sale of goods (whether wholly or partly) or be liable to tax at such reduced rate as it may fix: Provided that in respect of goods manufactured in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be computed from the date of the application till the end of the period of facility; ..................................................... (6) Where the State Government is of the opinion that the purpose for which the facility of exemption from or reduction in the rate of tax was granted under this section has been fulfilled or that the continuation of such facility is no longer in public interest or is against the public interest, it may, by notification, withdraw such facility granted to any industry, dealer or class of dealers: Provided that no such facility shall be withdrawn with retrospective effect. Explanation.-For the purposes of this section: ..................................................... ..................................................... (3) 'date of starting production' means, the later of the following dates, namely: (a) the date on which any raw material (which term includes accessories, components, parts and packing material) required for use in the manufacturing (whether on trial or commercial basis) or as the case may be, packing of the goods is purchased for the first time, or (b) where the manufacture of goods is not possible without power, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orkshop; (ii) investment as is necessary under some statutory obligation; and (iii) expenses incurred in erection and installation of such plant and machinery and bringing it to the site. (c) the State Government may, by notified order, specify the procedure for determining fixed capital investment. (d) if a unit has made fixed capital investment under two or more heads of expansion, diversification, modernisation and backward integration but fixed capital investment made under each such head is not ascertainable, then the break-up of fixed capital investment as furnished by the unit will be accepted. (e) The facility of exemption from or reduction in rate of tax on the basis of fixed capital investment in a captive power plant will be available when the unit does not sell the power which is in excess of its consumption to any person other than the Uttar Pradesh State Electricity Board and in case the unit sells such excess power to person other than the said board, the unit will be liable to pay the tax on the sale of its manufactured goods on pro rata basis along with the interest in accordance with the provisions of sub-section (1) of section 8. (5) 'unit which has underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant of eligibility certificate is to be made to the General Manager, District Industries Centre of the district in which the unit is situated. This section also provides that the State Government may constitute committees for disposal of applications for grant of eligibility certificate. It further provides that an application of a unit having a fixed capital investment exceeding Rs. 5 lakhs shall be disposed of by the Divisional Level Committee. Once the Committee decides then the eligibility certificate is to be issued by the Additional or Joint Director of Industries of the concerned range. 10.. The concerned Notification dated February 21, 1997 reads as follows: "Whereas the State Government is of the opinion that it is necessary for increasing the production of certain goods in the State, manufactured by industrial units, having a fixed capital investment of rupees fifty crore or more as new units, or making an additional fixed capital investment of rupees fifty crore or more in expansion, modernisation, diversification or backward integration, to grant exemption from or reduction in rate of tax to such units; Now, therefore, in exercise of the powers under section 4A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The benefit of exemption from, or reduction in the rate of tax to the units which has undertaken backward integration, shall be admissible only if the unit starts manufacturing such raw material, parts, intermediates or component as were not manufactured by it to such backward integration. 2.. The facility of exemption from, or reduction in the rate of tax including additional tax to any unit on any transaction of sale shall not exceed five per cent of the sale price. The tax including additional tax in excess of five per cent shall be payable by such unit according to law. 3.. The facility of exemption from, or reduction in the rate of tax shall be subject to the following conditions in addition to the conditions referred to in section 4A of the Act,- (a) the unit will have a fixed capital investment of rupees fifty crore or more as a new unit or making an additional fixed capital investment of rupees fifty crore or more in expansion, modernisation, diversification or backward integration. The fixed capital investment which is made during the period of five years commencing from first day of such investment, in the case of expansion, modernisation, diversification or backward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted tax, such unit shall however before it starts availing facility under this notification creates first or second charge on its property in the favour of the State Government, sufficient to cover its aforesaid liability; (h) that the total amount of tax exemption under the Act as also under the Central Sales Tax Act, 1956 (Act No. 74 of 1956) in any assessment year shall not exceed the amount which is equal to the multiple of percentage mentioned in column 3 of the annexure and the fixed capital investment, made by the unit during the said assessment year but the amount of exemption under both the aforesaid Acts up to the end of any assessment year shall not exceed the amount equal to multiple of percentage mentioned in column 3 of the annexure and the fixed capital investment in the case of a new unit or additional fixed capital investment, as the case may be, made up to the end of that assessment year; (i) that the unit shall after close of every assessment year during which exemption from, or reduction in the rate of tax is admissible but not later than thirty days of the approval of its balance sheet by concerned authority of the unit submit to the assessing authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kward integration, the investment, in only such land, building, plant, machinery, equipment, apparatus, components, moulds, dyes, jigs and fixtures shall be taken into account as were acquired on or before expiration of the period specified in sub-clause (a) of para 3 of this notification. 7 (1) Turnover of sale of goods in any assessment year to the extent of the quantity covered by base production of that year and the stock of base production of previous years shall be deemed to be the turnover of base production. (2) Only the turnover of goods in any assessment year in excess of the quantity referred to in sub-para (1) shall be entitled to the facility of exemption from, or reduction in the rate of tax. ANNEXURE Sr.No. Location of units Monetary limit up to which the benefit of exemption from or reduction in the rate of tax under the Act together with the benefit of exemption from or reduction in the rate of tax under the Central Sales Tax Act, 1956 is admissible. 1 2 3 1. The districts of Almora, Banda Chamoli, Dehradun, Fatehpur, Hamirpur, Jalaun, Janupur, Kanpur (Dehat), Mahoba, Nainital, Pauri Garhwal, Sultanpur, Uttar Kashi, Pithoragarh, Tehri Garhwal, Udham Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, also they were not entitled to the benefit of the notification. 12.. On the other hand, Mr. Sudhir Chandra, on behalf of the Company, submitted that a reading of the provisions and the notification makes it clear that it is the Company which is to make the investment and get the benefit of tax exemption. He submitted that, therefore, so long as the Company makes a capital investment of Rs. fifty crores or more even though such investment is spread over various units of the company it becomes entitled to the benefit of the notification. 13.. Mr. Sudhir Chandra cited a number of authorities for the proposition that notifications have to be interpreted keeping in view the object. He submitted that the object was to encourage investments and production. He submitted that a liberal interpretation which advances the object of the notification should be given. Mr. Sudhir Chandra relied upon the authorities in the cases of Oblum Electrical Industries Pvt. Ltd. v. Collector of Customs, Bombay, reported in (1997) 7 SCC 581, Commissioner of Sales Tax v. Industrial Coal Enterprises reported in See [1999] 114 STC 365 (SC). (1999) 2 SCC 607 and K.R. Steel Union Ltd. v. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication in one unit in respect of which the first date of production would be as per clause (b)(i). Clause (b)(ii) puts the matter beyond any doubt. It uses the words "in such undertaking in case of units undertaking expansion or modernisation". Thus now there is clear reference not just to the undertaking, i.e., the Company but also to units of that Company. The term "units" clearly refers to more than one unit. This shows that the expansion and modernisation can be in more than one unit. 17.. Mr. Sunil Gupta, the learned Additional Solicitor-General next relied on clause (c) and submitted that in cases of expansion or modernisation clause (c) required that the production capacity of the undertaking should increase by atleast 25 per cent. He submitted that this increase is relative and has to be achieved in comparison to the pre-existing figure of "base production". He submitted that the increase contemplated is not in the enhanced production of all the manufacturing concerns taken collectively together in comparison with their collective pre-existing "base production". He submitted that there would be no sense in comparing the overall production capacity of all the manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reads as follows: "which has been established within the same district in which the existing industrial unit is established." He submitted that clause (e) proves beyond any doubt that the expression "industrial undertaking" envisages only one manufacturing concern at a time and not all such concerns belonging to the dealer. He submitted that the expression "the existing industrial unit" brings about the much wanted connectivity between the old existing manufacturing concern and its enhancement (expansion, modernisation or diversification) in terms of establishment of both being required in one and the same district. He submitted that this clause required that the enhanced portion (expansion, modernisation and diversification) of an undertaking should be located in the same district as the original "existing industrial unit" of that undertaking. He submitted that if it is located outside that district, the law would not treat it as expansion, modernisation or diversification of that undertaking. In that event, it would be more akin to a new unit rather than an expanded or modernised unit or a unit undergoing diversification. He submitted that the requirement as to location, nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a wide meaning of "industrial undertaking", viz., multiple concerns belonging to a dealer is applied, the production capacity and production figures of the other manufacturing concern or concerns of the dealer, producing possibly even some other kind of goods, shall have to be taken into consideration even though it would be wholly irrelevant for the purposes of determining the base production of the particular concern undergoing expansion for there would be no rational basis or linkage for comparison between the two. He submitted that this is also in consonance with the first proviso to explanation (6). He relied on the first proviso and submitted that whilst dealing with one unit manufacturing more than one goods but not undertaking expansion, etc., in respect of all such goods, requires the base production to be determined only on the basis of production of goods in respect of which the expansion, etc., has been undertaken. He submitted that in such a case, the comparison is made even more specific. It is determined not merely unit-wise but even goods-wise. 23.. We are unimpressed by these submissions. As stated above even if the figures are to be in respect of only one unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the effect "in anyone unit". In none of the clauses is there any requirement of the investment being in one unit of the industrial undertaking. Words to the effect "in a particular unit" or "in one unit" are missing. To accept Mr. Sunil Gupta's submission would require adding words to a notification which the Government purposely omitted to add. 27.. Even otherwise, the purpose of notification being to encourage increased production and to give benefit to industries which have invested Rs. fifty crore or more in the State and whose production has thus increased, an interpretation must be given which would extend benefit to such industries. There would be no purpose in denying, an industry which has invested Rs. fifty crore or more and whose production in the State has as a result increased, the benefit of the exemption granted by this notification merely because the whole of the investment is not in any particular unit. Thus even where the investment is made by the Company in more than one units, so long as the total investment is Rs. fifty crore or more, the benefit of the notification would be available. Such benefit would then be distributed in the manner set out in the Sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d when there were no stay orders the respondents were still in arrears of tax. During the period the stay orders were in operation the respondents cannot be said to be in arrears of tax. During the period of the stay the respondents were not bound to pay. Therefore, they cannot be said to be in arrears. There are matters of fact which need to be looked into by the assessing authority. 30.. We are, therefore, of the opinion that the assessing authority was wrong in rejecting the application on the ground that a joint application was not permissible. As stated above, a joint application is permissible. As the principal place of business is at Bijnore, the assessing authority would be the General Manager, District Industries Centre, Bijnore. If this Officer or the concerned committee requires any further information from any other District, it can always call for information from the concerned officer of the other Districts or even call upon the Company to furnish relevant information. 31.. We, however, find that the High Court was wrong in directing issuance of an eligibility certificate as well as directing reimbursement of the amounts paid. Whether, factually, there has been any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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