9911796707
Advanced Search 
TMI Blog2015 (2) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... her in view of the definition of the word "manufacturer" as given under Section 2(ee) which has to be read under Section A (2-B) of the Act, the Applicant Company has to be treated as manufacturer succeeding Pashupati Bottlers to whom the Eligibility Certificate was granted for the purpose of getting the exemption from payment of sales tax ? b) Whether all the licences and registration which are mandatory for running the industrial unit having been granted only to the Applicant after the unit was taken over by the Applicant in continuation of the earlier licence granted to Pashupathi Bottlers, the Applicant Company as the "successor manufacturer" of the new unit entitled for the benefit of exemption for the remaining period mentioned in the Eligibility Certificate? c) Whether in view of the specific amendment under Section 4-A (2-B) of the Act, even if the Application has succeeded by means of licence or lease and not by way of sale, the Applicant should be treated as "successor manufacturer" for the purpose of Section 4-A(2-B) during the relevant period for which Eligibility Certificate was granted ? 3. For appreciating the controversy, relevant provisions of the Act may be not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been misused in any manner whatsoever, he may, by order in writing, cancel the Eligibility Certificate from such date, whether before or after the date of such order, as may be specified therein : Provided that no order under this sub-section shall be passed without giving the dealer concerned a reasonable opportunity of being heard. Explanation : (i) 'new unit' means a factory or workshop whether set up by a dealer already having an industrial unit manufacturing the same goods at any other place in the State or an industrial unit manufacturing any other goods on, or adjacent to the site of an existing factory or workshop; but does not include ; (a) any factory or workshop using machinery, accessories or components already used or acquired for use in any other factory or workshop in India ; (b) any factory or workshop established on, or adjacent to the site of an existing factory or workshop manufacturing the same goods ; or (c) any addition to or extension of an existing factory or workshop; and (ii) date of starting production' means the date on which any raw material required for use in the manufacture or packing of the specified goods is purchased for the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (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 different from the goods manufactured before diversification, and in the case of expansion or modernisation are additional production as a result of such expansion or modernisation; and (d) only if the manufacturer furnishes to the assessing authority an Eligibility Certificate granted by such officer, in accordance with such procedure as may be specified. (e) with effect from a date prior to the date of the notification. Explanation : ----------------- (2A) ----------------------------- (2B) If there is discontinuation of business, within the meaning of sub-section (1) of section 18, of the manufacturer who was eligible for exemption under sub-section (1) whether such exemption was already granted or not, and if he is succeeded by another manufacturer, such successor manufacture may, subject to the provisions of sub-section (3), apply to the Commissioner of Sales Tax within 60 days of such succession, for the grant, under this section, of exemption for the unexpired po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred and renewed in the name of revisionist upto 31.12.1994; it also obtained licence under the Food Product Control Order in its own name on 9.4.1994. 7. It is not disputed that the eligibility certificate granted to PBL was valid till 8.7.1992. Thus, in case Meghdoot Hotel had itself run the unit, it would have been entitled for exemption for the remaining period being a 'successor manufacturer'. There is no dispute about it. Accordingly, Meghdoot Hotels gave disclaimer certificate, to enable the revisionist to avail benefit of tax exemption for the remaining period. However, the department is not ready to extend such benefits to the revisionist who had admittedly run the unit during this period, in pursuance of the licence agreement. This is in view of the stand that the successor manufacturer can only be a person who itself owns the unit and not one who merely is a lessee or licensee. Accordingly, application of the revisionist for substituting its name in the eligibility certificate, as a 'successor manufacture' has been rejected by the State Level Committee and was communicated vide letter dated 11.4.1996 and appeal filed before the Tribunal, affirmed the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ludes licensee and lessee as well, thus, the successor manufacturer can also be a person who does not own the manufacturing unit but runs it as a lessee or a licensee. However, the tribunal refused to extend the benefit of the amendment to the revisionist, being of the opinion that the relevant provision of the amended Act, is prospective in nature and will apply w.e.f. 8.8.1997, the date on which the Governor gave its assent. 10. Sri Bharatji Agarawal, learned Senior Advocate, appearing on behalf of the revisionist, submitted that the view taken by the tribunal is manifestly illegal, in as much as, the amendment is retrospective in nature. It does not confer any new rights, it only make the existing provision more explicit. The amendment is thus clarificatory in nature. He urged that the object of granting exemption is to promote setting up of new industries irrespective of the person who owns it. It is contended that even Industries Department of the State had accepted that the revisionist is entitled to benefit of exemption being a successor manufacturer. The Tribunal was not justified in overlooking the view of the Industries Department and in accepting the stand of the Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to section 271(1)(c) of the Income Tax Act, by Finance Act 2002 was only clarificatory in nature, as penalty in addition to tax was payable even earlier, if the assessee concealed and /or furnished incorrect particulars. It was held that the amend was made to remove confusion, to make things more explicit and is thus retrospective. 13. Applying the same principle of statutory interpretation, the Apex Court in Allied Motors (P) Ltd. vs. Commissioner of Income Tax, 224 ITR 677 (SC) upheld the view of the Patna High Court that first proviso to section 43-B of the Income Tax Act, inserted by amendment is retrospective in nature. It was observed as under :- "The amendment which was made by the Finance Act of 1987 in section 43B by inserting inter alia, the first proviso, was remedial in nature designed to eliminate unintended consequences which may cause undue hardship to the assessee and which made the provision unworkable or unjust in a specific situation. ...............The Gujarat High Court in the above case held the amendment to be curative and explanatory and hence retrospective. The Patna High Court has also held the amendment inserting the first proviso to be explanatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be liable to tax. There cannot be any doubt about the above proposition of law. However, in the instant case, the question is slightly different. The legislature by Act No.11 of 1997 has spelled out the meaning of "successor manufacturer."The question is whether the amendment is prospective or retrospective. This, as held by various decision of Apex Court, has to be judged by ascertaining whether the amendment is declaratory/clarificatory in nature, enacted with intent to supply an obvious omission, in which case it would be retrospective, or it creates new rights and liabilities, and thus generally prospective. It therefore becomes necessary to cull out the legislative intent behind section 4A and the amendments made from time to time. A perusal of section 4-A reveals that it has twin objects, first to encourage the production of any goods, and second, to promote the development of any industry in the State generally, or in any district or part of district in particular. A conjoint reading of section 4A(1) and (2) reveals that the first objective is achieved by exempting or reducing sale tax/trade tax, on such good(s), of which the production is sought to be increased. The bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the date of starting production subject to the condition that the said industrial unit has not discontinued production of such foods for a period exceeding six months as a stretch in any assessment year :- Location of Unit Period of exemption In case of units with capital investment not exceeding 2 lakh rupees In case of units with capital investment exceeding 2 lakh rupees 2. The Districts of Azamgarh, Bahraich, Ballia, Barabanki, Basti, Badaun, Bulandshahr, Deoria, Etah, Etawah, Faizabad, Farrukhabad, Ghazipur, Gonda, Hardoi, Jhansi, Mainpuri, Mathura, Moradabad, Pilibhit, Pratapgarh, Rai Bareli, Rampur, Shahjahanpur, Sultanpur and Unnao Four years Six years 18. A Division Bench of this Court in M/s. Jagat Machinery Manufacturers Pvt. Ltd. Ghaziabad vs. State of U.P. and another 1987 UPTC 1358 had the occasion to consider the object of section 4-A. In that case, exemption was refused to the petitioner therein, on the ground that electric connection was in the name of erstwhile partnership firm and not in the name of petitioner who was re-constituted as a Private Limited Company. Under the relevant provisions of law, the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased by the old partnership firm prior to November 1, 1982 and only two had been purchased in the name of the Company after that date. There is no finding that 16 machines had been purchased by the partnership firm for use in any other factory or workshop in India and that they were not acquired for use in the factory/workshop that was now being set up. The impugned order of the Divisional Level Committee proceeds upon an erroneous impression about the legal position. This Court has repeatedly observed that the object of Section 4-A is to grant exemption to manufacturers with a view to promote setting up of new industrial units. Irrespective of the reconstitution of a firm, the industrial unit run by it was entitled to exemption. (see Commissioner of Sales Tax, U.P. v. M/s U.P. Leather Board, Agra, 1980 U.P.T.C. 287, Commissioner of Sales Tax, U.P. v. M/s. Goodluck Rubber & Allied Industries, Lucknow, 1983 U.P.T.C. 909 and Commissioner of Sales Tax v. General Engineering Corporation, 1986 U.P.T.C. 305). 15. The object and purpose with which Section 4-A has been enacted rules out the view, strenuously canvassed for by the learned Standing Counsel, that the ownership of the unit is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as under :- "11. In Commissioner of Income Tax, Amritsar v. Straw Board Manufacturing Co. Ltd., [1989] Supp. 2 S.C.C. 523: 1989 U.P.T.C. 1300 (SC) this Court held that in taxing statutes, provision for concessional rate of tax should be liberally construed. So also in Bajaj Tempo Ltd. Bombay v. Commissioner of Income Tax, Bombay City-Ill, Bombay, [1992] 3 S.C.C. 78 : 1992 U.P.T.C. 857 (SC), it was held that provision granting incentive for promoting economic growth and development in taxing statutes should be liberally construed and restriction placed on it by way of exception should be construed in a reasonable and purposive manner so as to advance the objective of the provision. 12. We find that the object of granting exemption from payment of sales tax has always been for encouraging capital investment and establishment of industrial units for the purpose of increasing production of goods and promoting the development of industry in the State. If the test laid down in Bajaj Tempo Ltd. case (supra) is applied, there is no doubt whatever that the exemption granted to the respondent from 9th August, 1985 when it fulfilled all the prescribed conditions will not cease to operate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and reason for introducing the Bill as under :- "In order to remove the difficulty experienced in the implementation of certain provisions of the Uttar Pradesh Sales Tax Act 1948 and to clarify certain provisions, raise financial resources of the State, grant in the interest of development of industries exemption from the tax to certain units and to validate certain Acts". 23. Section 8(c) of U.P. Act No.28 of 1991 provides that sub-section (2-B) shall be deemed to be inserted to Section 4-A on 12.10.1983. The relevance of 12.10.1983 is that the provision of exemption in substantially its existing form was substituted w.e.f. such date, by U.P. Act 22 of 1984. Thus, to cover all past transfers, it is made retrospective since 12.10.1983. The use of words "is deemed to have been inserted on 12.10.1983", is suggestive of the fact that the amendment is merely curative or declaratory of the previous law, and is thus to be applied retrospectively. It has been passed to supply an obvious omission, i.e. it provides the procedure for extending tax holiday to successor manufacturers, a meaning which was otherwise implicit in the existing legislation itself. 24. Sub-section (2-B) which e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above was not defined earlier. The definition provided by the amendment is not a new definition, but an attempt by the legislature to make matters logical, sensible and reasonable. It makes the things more explicit and clear, thus obviating unintended consequences. It supplies obvious omission, i.e., by providing the definition of successor manufacturer. Thus, the legislation in this respect is explanatory or clarificatory in nature rather than creating new rights. 27. Accordingly, I am of the considered opinion that the amendment has to be applied retrospectively, otherwise, the object of amendment will stand defeated. So construed, there is no scope from the conclusion that the revisionist herein will be covered by the phrase "successor manufacturer" and would thus, be entitled to benefit of tax exemption for the remaining period under the eligibility certificate. The questions of law are answered accordingly. The view taken by the Tribunal is illogical, irrational, leading to consequences never intended by the legislation and cannot be accepted. 28. The result of foregoing discussion is that impugned orders cannot be sustained and are hereby set aside. The State Level Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
