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TMI Blog2014 (3) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... availed by it during the concessional period, i.e., 13.12.1991 to 12.12.1998 of sale of Electronic Push Button Telephones (EPBT), the present appeal, by special leave, has been preferred by the State of Haryana and its functionaries. 2. The facts that are imperative to be stated are that the respondent assessee, namely, M/s. Bharti Teletech Limited, was allowed sales tax exemption under Rule 28A of the Rules for the period 13.12.1991 to 12.12.1998 for an amount of Rs. 498.80 lakhs. This benefit was granted subject to the conditions laid down in the said sub-rule 11 of Rule 28A of the Rules. The conditions postulated in sub-rule 11 (a) are that the industrial unit after availing of the benefit shall continue its production at least for the next five years not below the level of average production for the preceding five years. There is also stipulation in the sub-rule 11 that if the unit violates any of the conditions laid down in clause (a) of sub-rule 11, it shall be liable to make, in addition to the full amount of tax benefit availed of by it during the period of exemption, payment of interest chargeable under the Act as if no tax exemption was ever available to it. It is apt to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore it. It came to hold that the Gross Turn Over (GTO) during January 1999 and December 1999 was Rs. 9.06 crores as against the average GTO of Rs. 17.52 crores during the five years immediately preceding 12.12.1998. The said authority also considered the GTO for the assessment year 1999-2000 (1.4.1999 to 31.3.2000) which reflected the amount as Rs. 4,48,05,695.00 for the year immediately preceding, i.e., assessment year 1998-1999. 6. It may be noted that a contention was advanced that the unit during the five years preceding 12.12.1998 had produced 40,83,246 pieces giving yearly average of 8,16,649 pieces against which the average production in the post benefit period is 1898961 pieces which would show that the production actually increased after the expiry of the benefit period. The competent authority, upon perusal of the production chart for the period 13.12.1993 to 12.12.1998, analysed the same and arrived at the average production. The tabular chart prepared by the adjudicating authority is as follows:- Table 7. The reasoning adopted by the 2nd appellant basically was that the claim of the assessee that production had not come down in the post benefit period was wholly un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hence, it was clearly indicative that the expanded capacity had been created to coincide with the expiry of the benefit period in the first unit. Finally, the tribunal held:- "Though increase or decrease in the turnover by itself may not be of much consequence in the scheme but the turnover does have direct relationship with the production and since the production of higher value item i.e. EPBT was reduced, the total gross turnover in terms of value was also bound to decline and the spare capacity in the first unit was utilized by increasing the production of spare parts i.e. low value items. It is, therefore, obvious from the facts of the case that the production of EPBT was deliberately reduced in the first unit and increased in the second unit as the appellant company was hoped of getting the benefit of exemption again on the expanded capacity." 10. In view of the aforesaid analysis, the tribunal affirmed the conclusion recorded by the forums below. The aforesaid order of the tribunal came to be assailed before the High Court in a writ petition. The Division Bench of the High Court referred to the rule position and quantity manufactured in lacs and turnover of goods and pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolutely unimpeachable since the assessee was under an obligation to apply for exemption even in respect of expansion and in that background, there was no justification for the forums below not to take into consideration the production of the expanded unit. It is also urged by him that even assuming that there are two units, the same would be covered under the definition of Rule 28A (f) which defines "eligible industrial unit" and on a proper construction of the provision, the combined conclusion of the production of the units cannot really be found fault with. It is also put forth by him that the provisions relating to exemption and the exemption notifications are required to be liberally construed for industrial growth and the High Court, keeping in mind the said principle, has dislodged the orders passed by the forums below and, therefore, the order impugned should not be taken exception to. 13. To appreciate the rivalised contention raised at the bar, it is appropriate to refer to Rule 28A (11) which reads as follows:- "11(a) The benefit of taxexemption/ deferment under this rule shall be subject to the condition that the beneficiary/industrial unit after having availed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... add any other ground to the said sub-rule. We are, therefore, satisfied that the eligibility certificate granted to the petitioner could not be withdrawn only on the ground of nonproduction of the change of land use permission by the Town and Country Planning Department" 15. The said decision, as we perceive, was rendered in a totally different context. In the present case, we are not concerned with the withdrawal of eligibility certificate. We are concerned with the consequences that have been enumerated in clause (b) of sub-rule 11 of Rule 28A which clearly stipulates that in case of violation of clause 11 (a) (i) of Rule 11, the assessee shall be liable for making, in addition to the full amount of tax-benefit availed of by it during the period of exemption/deferment, with interest chargeable under the Act. Thus, reliance placed by the High Court on the said decision is misconceived and inappropriate. 16. The hub of the matter is whether production of two different units can be combined together to meet the requirement of the postulate enshrined under the Rule. The production of the beneficiary unit had failed to fulfil the stipulation incorporated in sub-rule 11 (a)(i) of Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion) or different products (diversification) at the same or new location - (i) in which the additional fixed -capital investment made during the operative period exceeds 25% of the fixed capital investment of the existing unit, and (ii) which results into increase in annual production by 25% of the installed capacity of the Existing Unit in case of expansion. On a careful reading of the aforesaid provisions, it is quite clear as day that they deal with the eligibility to get the benefit of exemption/deferment from the payment of tax. On a studied scrutiny of clause (f) (i) (I), it is manifest that it is incumbent on the unit to obtain certificate of registration under the Act. The submission of Mr. Jain is that the second unit has obtained the registration certificate under the Act and, hence, the production of the said unit, being eligible, is permitted to be included. Needless to say, obtainment of registration certificate is a condition precedent to become eligible but that does not mean that the production of the said unit will be taken into account for sustaining the benefit of the first unit. They are independent of each other as far as sub-rule 11 of the Rule 28A is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to it when there is none. If an entrepreneur is entitled to the benefit thereof, the same should not be denied. 21. In this context, reference to Tamil Nadu Electricity Board and Another v. Status Spinning Mills Limited and another (2008) 7 SCC 353 would be fruitful. It has been held therein :- "It may be true that the exemption notification should receive a strict construction as has been held by this Court in Novopan India Ltd. v. CCE and Customs 1994 Supp (3) SCC 606, but it is also true that once it is found that the industry is entitled to the benefit of exemption notification, it would received a broad construction. (See Tata Iron & Steel Co. Ltd. v. State of Jharkhand (2005) 4 SCC 272 and A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala (2007) 2 SCC 725). A notification granting exemption can be withdrawn in public interest. What would be the public interest would, however, depend upon the facts of each case." 22. From the aforesaid authorities, it is clear as crystal that a statutory rule or an exemption notification which confers benefit to the assessee on certain conditions should be liberally construed but the beneficiary should fall within the ambit of the rule or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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