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TMI Blog2015 (2) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... ad often invoked power under section 4-A to provide impetus to setting up of industries in various backward areas, which it felt could be developed by attracting capital investment in form of new industrial units. It not only creates new job avenues for the local populace, but also results in strengthening of the infrastructure in the area, as a result of increased industrial activity. The Government, while attracting capital investment, is not concerned with the person or individual who sets up the industry, as the object is to "promote the development of industries in the State, generally and in certain district and parts of district in particular", as mentioned in the opening lines of notification dated 29.1.1985 itself. The provision to extend tax benefits for certain years, is thus, linked to the new unit irrespective of the person who runs it. The judgement of this Court in the case of M/s. Jagat Industries (1987 (10) TMI 368 - ALLAHABAD HIGH COURT) and M/s. Panchsheel Industries (2005 (1) TMI 670 - ALLAHABAD HIGH COURT) when takes the view that the change in constitution of partnership firm will not defeat the entitlement to exemption from tax with respect to goods manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferred or not. The use of phrase "in any other manner" exhausts all cognate modes of transfer, where there is change of management and not necessarily the title. Exemption is thus linked to new units and its benefits devolves on the successor, running the unit. 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. - that impugned orders cannot be sustained and are hereby set aside. The State Level Committee or whoever be the Competent Authority, is directed to issue the eligibility certificate to the revisionist for remaining period, treating it to be successor manufacturer and extend all benefits flowing out of such exemption to the revisionist. - Decided in favour of Appellants. - Trade Tax Revision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ee) and relevant part of section 4-A as were in existence prior to the amendment reads as under :- Sec. 2(ee) 'Manufacturer' in relation to any goods means the dealer who makes the first sale of such goods in the State after their manufacture. Sec. 4-A. Exemption from sales tax of certain goods for specified period : (1) Notwithstanding anything contained in Section 3 or Section 3-A, where the State 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 industry in the State generally or in any districts or parts of districts in particular, it may on application or otherwise, by notification, declare that the turnover of sales in respect of such goods by the manufacturer thereof shall, during such period not exceeding seven years 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 sales tax or be liable to tax at such reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Act No.10 of 1990, followed by U.P. Ordinance No.17 of 1990, 29 of 1990, 19 of 1991 and 26 of 1991 and ultimately by U.P. Act No.28 of 1991. As a result of the aforesaid legislative exercise, section 2(ee) and relevant part of section 4-A reads as under :- Sec. 2(ee) 'Manufacturer' in relation to any goods means the dealer who makes the first sale of such goods in the Sate after their manufacture and includes a dealer who sells bicycles in completely knocked down form. Sec. 4-A. Exemption from sales tax of certain goods for specified period. (1) Notwithstanding anything contained in this Act, where the State 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 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 ten years from such date on or after the date of starting production as may be specified by the State Government in suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 25, 1990 such application may be made by September 25, 1990. Provided further that the Commissioner of Sales Tax may, in his discretion and for adequate and sufficient reason to be recorded in writing, entertain an application moved within six months of the date of the expiration of the period specified in this sub-section. ------------------- 5. It is noticeable that the amendments brought within its sweep certain more industries, by extending the period of exemption to those units which are established upto 31.3.1990. The benefits was further extended to those existing units which have undertaken expansion, diversification or modernisation on or after 1.4.1990. Vide section 4-A (2-B) provision was made for extending the benefit of exemption to a successor manufacturer, if the former manufacturer was eligible for it. If exemption was already granted, the successor manufacturer can avail the same for the unexpired period. 6. It is not in dispute that Pashupati Bottling Pvt. Ltd. (hereinafter referred to as 'PBL') was already having eligibility certificate in respect of its new unit at C-3A, Site I, Industrial Area, Unnao for period of six years w.e.f. 9.7.1986 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Act no. 11 of 1997 and after such amendment, section 2 (ee) defines manufacturer as under :- Section 2(ee) 'Manufacturer' in relation to any goods means the dealer who makes the first sale of such goods in the State after their manufacture and includes :- (i) a dealer who sells bicycles in completely knocked down form.; (ii) a dealer who makes purchases from any other dealer not liable to tax on his sale under the Act other than sales exempted under section 4, 4-A and 4-AAA. In sub section (2-B) of section 4-A of the Principal Act, the words if he is succeeded by another manufacturer, such successor manufacturer the words if he is succeeded by another manufacturer, by means of sale, licence, contract, lease, managing agency or in any other manner, such successor manufacturer may stood substituted. Thus, section 4-A (2-B), after amendment, reads as under :- 4-A(2-B). If there is discontinuation of business, within the meaning of sub-section (1) of section 18, of the manufacturer who was eligible for exemption from or reduction in rate of tax under sub-section (1), whether such exemption from or reduction in the rate of tax was already granted or not, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y amended by U.P. Act no. 11 of 1997 is only procedural in nature. The benefit was available to the successor manufacturer, even before insertion of section 4-A(2-B). Thus, in any view, the impugned orders are erroneous and are liable to be set aside. On the other hand, Sri Sanjeev Shankhdhar, learned counsel appearing on behalf of Revenue supported the stand taken by the Tribunal. He placed reliance on the judgement of Apex Court in the case of Novapan India Ltd. vs. Collector of Excise 1994 Suppl (3) SCR 549. 11. The main question which thus falls for consideration by this Court is whether the amend to sub-section (2-B) of Section 4-A by U.P. Act No.11 of 1997 is retrospective or prospective in nature. Justice Sri G.P. Singh in his treatise Principles of Statutory Interpretation 11 Edn. 2008 has explained the criterion for judging whether a statute is retrospective or not, as follows :- ..................In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nserting first proviso to be retrospective. The special leave petition from this decision of the Patna High Court was dismissed (see [1991] 191 ITR (St.)8). The view of the Delhi High Court, therefore, that the first proviso to section 43B will be available only prospectively does not appear to be correct. 14. In R.B. Jodha Mal Kuthiala vs. CTI (1971) 82 ITR 570, the Apex Court said that one should apply the rule of reasonable interpretation. A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requiring to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole. 15. In K.P. Varghese vs. Income Tax Officer, Ernakulam and another (1981) 4 SCC 173, on which reliance was placed by Sri Bharatji, Agarwal, learned counsel for the revisionist, it is held that a statute should be construed having regard to the object and purpose, which the legislation had in view in enacting the provision and in the context of the setting in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by existing unit or a new unit. On the other hand, the second objective is secured by issuing notification exempting only the goods which are manufactured in a new unit or which have undergone expansion, diversification or modernisation. The exemption is available generally in respect of all goods manufactured by any such unit, as the objective is to encourage development of industry in particular area and not to increase production of any specified good. Explanation (i) to section 4-A defines new unit as industrial undertaking set up by a dealer on or after October 01, 1982 but not later that March, 31, 1990, subject to fulfillment of certain conditions. 17. In the instant case, Government had invoked its power under latter part of section 4-B, which empowers it to exempt sales tax on goods manufactured by new units, set up in particular area, in order to promote development of industries in such areas. Notification dated 29.1.1985 issued in this regards reads as under :- Where as the State Government is of the opinion that it is necessary so to do for promoting the development of industry in State generally and in certain district and parts of districts in particular ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner who was re-constituted as a Private Limited Company. Under the relevant provisions of law, the benefit is available to the unit only if first sale takes place within 6 months of starting production. Date of starting production interalia means the date of installation of power connection. It was held that change of ownership from partnership firm to Private Limited Company, was immaterial as the object of granting exemption is to promote setting up of new industries and not to extend benefit to any person or individual. It is of no consequence as to who owns the unit. The judgement is based on interpretation of section 4-A as it stood prior to insertion of sub-section (2-B). It was held as under :- 13. One aspect of the matter, which was emphasised by the learned Standing Counsel, was that the power connection, according to the finding of the Divisional Level Committee, was in the name of the partnership firm and not in the name of the petitioner Company and, as such the petitioner could take no advantage of the date of the power connection in the present case. This argument overlooks the basic object for which Section 4-A has been enacted. The object is to grant exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rules out the view, strenuously canvassed for by the learned Standing Counsel, that the ownership of the unit is the predominant factor for determining the question whether it was a new unit entitled to exemption from tax and that the change in ownership would alter the character of the unit as a 'new unit The emphasis clearly is upon the nature of the Unit being a new unit and not upon the ownership of the unit. If the legislature wished to exclude availability of exemption from tax on the ground of ownership of the new unit, It would have specifically said so in some clause of the definition of 'new unit'. The matter would not have been left for speculation. 16. If one looks at Section 3-C of the U.P. Sales Tax Act, one finds it provided in sub-section (2) that where the ownership of the business of any dealer liable to pay tax is transferred, the transferor and the transferee shall jointly and severally be liable to pay the tax including penalty, if any, payable in respect of such business till the time of such transfer, whether the assessment is made or the penalty is imposed prior to or after such transfer. As a necessary corollary, it must follow that where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption granted to the respondent from 9th August, 1985 when it fulfilled all the prescribed conditions will not cease to operate just because the capital investment exceeded the limit of ₹ 3 lakhs on account of the respondent becoming the owner of land and building to which the unit was shifted. If the construction sought to be placed by the appellant is accepted, the very purpose and object of the grant of exemption will be defeated. After all, the respondent had only shifted the unit to its own premises which made it much more convenient and easier for the respondent to carry on the production of the goods undisturbed by the vagaries of the lessor and without any necessity to spend a part of its income on rent. It is not the case of the appellant that there was any mala fides on the part of the respondent in obtaining exemption in the first instance as a unit with a capital investment below ₹ 3 lakhs and increasing the capital investment subsequently to an amount exceeding ₹ 3 lakhs with a view to defeat the provisions of any of the relevant statutes. The bona fides of the respondent have never been questioned by the appellant. 21. It is seen that the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g tax holiday to successor manufacturers, a meaning which was otherwise implicit in the existing legislation itself. 24. Sub-section (2-B) which extends benefits to all past successions, reinforces the aforesaid legislative intendment. The only rider is that application in this regard is to be made by 25.9.1990, which time was extended to 31.12.1991, vide U.P. Act no.8 of 1992. Even thereafter, the Commissioner of Sales Tax is invested with power to entertain application for adequate and sufficient reasons. Sub (2-B) thus only provides for the mechanism for availing tax holiday by a successor manufacturer. It does not create any new right, but only clarifies and declares the existing provisions of law. It thus fulfills the object of enactment viz remove difficulty experienced by successor manufacturer in availing benefit of exemption, clarifies existing position of law that tax exemption is linked to a new unit, irrespective of the person running it. 25. Sub section (2-B) of section 4-A was further amended by U.P. Act no. 11 of 1997. Amendments seeks to define the words successor manufacturer which was hitherto not defined anywhere in the Act, thus removing confusion re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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