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TMI Blog2008 (5) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... t to grant certain exemption/ concession from payment of tax/reduction in tax to certain industrial units by issuing a notification. The notification was issued on March 31, 1995 granting exemption from payment of trade tax to certain industrial units which are established as new units or have undergone expansion, modernisation, etc., after April 1, 1994 and before March 31, 2000. Section 8 of the Act provides for payment and recovery of tax and sub-section (2) thereof provides that the persons who have been found eligible for exemption in view of the notification under section 4A of the Act, if they so opt, in lieu of exemption or concessional rates of tax, they may be allowed deferment of tax subject to such conditions as may be prescribed. For the purpose of section 8(2A) of the Act, rule 43 has been enacted containing terms and conditions upon which moratorium under section 8(2A) can be provided. The petitioner, M/s. J.C.L. International Limited, established a manufacturing unit in the industrial area Sikandarabad for manufacturing of L.P.G. cylinders for oil companies like Indian Oil, Bharat Petroleum and Hindustan Petroleum Corporation, etc. The petitioner applied for and wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act and such a condition, if imposed, would be ultra vires of the spirit and objective of section 4A read with section 8(2A) of the Act. It is further contended that under section 4A(2)(b) of the Act, the successor-manufacturer can apply for exemption for the balance period and if that is so, then the same benefit must be available for granting moratorium under section 8(2A) of the Act and, therefore, rule 43(4)(a) which provides that on discontinuance of the business by the manufacturer he would be entitled to pay the entire tax in lumpsum is contrary to the spirit and object set out under section 4A of the Act. Reliance is placed on a Division Bench decision of this court in Jagat Machinery Manufacturers Private Limited, Ghaziabad v. State of Uttar Pradesh [1987] UPTC 1358 and a single judge decision in Commissioner of Sales Tax v. General Engineering Corporation [1986] UPTC 305. He lastly contended that in respect to the transfer of erstwhile U.P. Cement Corporation, a similar moratorium benefit has been allowed by the State Government and, therefore, denial thereof to the successor of the petitioner's unit is arbitrary and discriminatory. S.P. Kesarwani, on the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w unit having a fixed capital investment of five crore rupees or more or in an existing unit which may make fixed capital investment of five crore rupees or more in expansion, diversification, modernisation and backward integration or in any one of them, within such period not exceeding five years, as may be specified in the notification, the exemption from or reduction in the rate of tax may be granted. (2) It shall be lawful for the State Government to specify in the notification under sub-section (1) that the exemption from, or reduction in the rate of tax, shall be admissible- (a) generally in respect of all such goods manufactured subsequent to the date of such notification; or (b) in respect of such of those goods only as are manufactured in a new unit, the date of starting production whereof falls on or after the first day of October, 1982; or (bb) in respect of those finished goods which are manufactured in a unit which has undertaken backward integration; or (c) in respect of those goods only which are manufactured in a unit which has undertaken expansion, diversification or modernisation on or after April 1, 1990, and which, in the case of diversification, are differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns closed on account of an order passed by any court or Board for Industrial and Financial Reconstruction or Appellate Authority for Industrial and Financial Reconstruction shall be excluded. (3) Where the Commissioner is of the opinion that the facility of exemption from, or reduction in the rate of tax obtained on the basis of an eligibility certificate referred to in clause (d) of sub-section (2) or on the basis of any eligibility certificate issued under any executive orders of the Government issued before or after September 13, 1985 has been misused in any manner whatsoever or there is any legal or factual error in issuing such eligibility certificate or that the new unit has committed breach of any of the conditions, subject to which the facility of exemption from, or reduction in the rate of tax was granted or that the new unit to which the eligibility certificate has been granted in accordance with the provisions of this Act, is not entitled to facility under this section or is entitled to such facility for a lesser period or from a different date, he may, by order in writing passed before or after the expiration of the period of exemption or reduction, cancel or amend the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t manufacturing same goods established on or adjacent to the site of an existing factory or workshop by a person who has interest in the existing factory or workshop as proprietor or partner or agent or managing director or promoter director or as holding company or subsidiary company if the production of the existing factory or workshop is not less than the base production: Provided that if the production of the existing factory or workshop falls short of the base production the turnover of sale of the new unit to the extent of the quantity covered by such short fall from base production shall be liable to tax. . . . 8.. Payment and recovery of tax.-(1) . . . (2A) Notwithstanding anything contained in sub-sections (1), (1A), (1B), (1C) or (2), the Commissioner may, on the application of a manufacturer within such time and in such manner as may be prescribed grant in lieu of exemption, under section 4A, moratorium for payment of the admitted tax subject to such conditions as may be prescribed. The Commissioner may withdraw any such moratorium in the circumstances in which it could have withdrawn the exemption under section 4A, but no such withdrawal shall be made with retrospec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount shall be paid in lumpsum within three months of its so becoming payable. (5) the facility shall not be admissible in respect of the amount of tax assessed in excess of the tax admittedly payable by the manufacturer on the turnover admitted by him in the returns filed or in any proceeding under the Act, whichever is greater, whether the excess tax so assessed is due to detection of any evasion of tax made, or disallowance of any exemption claimed, by such manufacturer or for any other reason, and the amount of tax so assessed in excess shall be paid in accordance with the provisions of the Act and the Rules. (6) the facility shall be available to the manufacturer on creating first or second charge on its property in favour of the State Government, sufficient to cover the amount of tax in respect of which moratorium has been granted. (7) if the amount in respect of which moratorium has been granted is not paid within the period specified in clause (3) or (4), as the case may be, the manufacturer shall, in addition to any penalty which the assessing authority may deem fit to impose under section 15A be liable to pay interest in accordance with sub-section (1) of section 8 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stent or ultra vires of any provision of the Act as such. On the contrary, what he submits is that the spirit of the provision, with which a dealer is given exemption/concession under section 4A, that is violated by the conditions prescribed under rule 43(4)(a) of the Rules. We are afraid that this cannot be a reason to strike down an otherwise valid piece of delegated legislation, which has been made in exercise of statutory powers by competent authority. Such a vague concept of spirit of a provision will not be available to test the validity of statute. No doubt, it is true that a rule (delegated legislation) must be consistent with the provision of the Act (parent legislation) and if it is not so, it would be ultra vires of the Act. However, it does not mean that in order to judge the validity of a delegated legislation, the court can embark upon such aspects of the principle legislation, which are not expressly legislative but in the words of the petitioners it is spirit of the parent legislation, i.e., the inference and conjecture of the individual. Such vague allegations cannot be a basis to challenge a subordinate legislation. It is well-settled that rules made on matters pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rules, in any manner, as such, is inconsistent to any provision of the Act. Even otherwise, we find that the entire edifice of the argument that it is contrary to the spirit of the policy of exemption allowed under section 4A has no legs to stand and on closure scrutiny we find that even this argument is without any substance. When an unit is allowed exemption/concession, under section 4A subject to the conditions prescribed thereunder the exemption/concession goes with the time without any future liability of payment of tax to the State and, therefore, nothing is to be said with respect to the future conditions or circumstances, in which the tax is to be collected for the period the incumbent was availing of the exemption/concession. However, when he opts for deferment of tax in lieu of exemption/ concession in the rates of the tax, the person concerned enters into a contract with the State agreeing to pay tax at some later point of time and that is an agreement between the parties, namely, the State and person concerned. Such agreement, obviously, would be binding upon the parties, who have executed the agreement and if, there is any change in the parties, the agreement woul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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