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TMI Blog2015 (7) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... ber of units and try to club together the production of all of them to get the benefit for all. It would be well nigh unacceptable, for what is required is that each unit must meet the condition to avail the benefit. 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 notification and further if there are conditions and violation thereof are provided, then the concept of liberal construction would not arise. Exemption being an exception has to be respected regard being had to its nature and purpose. There can be cases where liberal interpretation or understanding would be permissible, but in the present case, the rule position being clear, the same does not arise. - clubbing is not permissible. It amounts to a violation of the conditions stipulated under Rule 11(a)(i) of Rule 28A and, therefore, the consequences have to follow and as a result, the assessee has to pay the full amount of tax benefit and interest. The approach of the High Court is absolutely erroneous and it really cannot withstand close scrutiny.- Decided in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Deputy Excise and Taxation Commissioner concerned as being due to reasons beyond the control of the unit. 3. As the facts would uncurtain, on 3.05.1997, the assessee submitted an application seeking amendment in the eligibility certificate so as to include certain other items but it was rejected vide order dated 22.7.1997 by the High Level Screening Committee. On an appeal being filed, the Commissioner of Industries accepted the same and remitted the matter to the High Level Screening Committee to revise the eligibility certificate allowing the benefit of sales tax exemption by inclusion of additional items. However, the period of exemption remained unaltered. Be it noted, the assessee was granted the full benefit of exemption for the entire period. 4. After the expiry of the period of exemption, the Deputy Excise and Taxation Commissioner (Gurgaon), the 2nd appellant herein, while monitoring the production level of the respondent unit, noticed that it was not maintaining the level of production of the preceding five years and, accordingly, initiated a proceeding against it on the foundation that it had violated the conditions enumerated under Rule 28A (11) (a) (i) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Spare Parts 481813 1735691 (+) 1253878 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 unacceptable because it could not be given the same weightage as its individual parts inasmuch as a complete telephone set could not, for the exemption purpose, be equated with its number of parts which constituted its assembly. Being of this view, the 2nd appellant came to hold that it was obligatory on the part of the assessee industrial unit, having availed the benefit of tax exemption for the specified period, to continue its business and to respect the conditions enumerated in the prescription in the rule. The said authority ruled that the assessee, having failed to meet the production level, was liable to be visited with the consequences and, accordingly, directed for making full payment along with interest. 8. Grieved by the aforesaid order, the assessee preferred an appeal before the appellate authority who came to hold that the explanation for loss in production was due to outdated machinery and, hence, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 placed reliance on R.K. Mittal Woolen Mills v. State of Haryana and others[1] and came to hold that the tribunal ought to have set aside the orders of the Deputy Excise and Taxation Commissioner and Joint Excise and Taxation Commissioner instead of upholding their action on totally erroneous consideration. It opined that the approach of the tribunal was erroneous inasmuch as without pointing out to the violation of the rules, it had passed the order solely on the basis of conjecture. The High Court further observed that even if the factum of reduction of production as stated by the tribunal was accepted as correct, still the exemption on tax could not have been withdrawn as it was not a ground mentioned in sub-rule II (a) (i) of Rule 28A for withdrawal of exemption. 11. Questioning the defensibility of the order passed by the High Court, Mr. Manjit Singh, learned counsel appearing for the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tax-exemption/deferment under this rule shall be subject to the condition that the beneficiary/industrial unit after having availed of the benefit, - (i) shall continue its production at least for the next five years not below the level of average production for the preceding five year; and (ii) shall not make sales outside the State for next five years by way of transfer or consignment of goods manufactured by it. (b) In case the unit violates any of the conditions laid down in clause (a), it shall be liable to make, in addition to the full amount of tax-benefit availed of by it during the period of exemption/deferment, payment of interest chargeable under the Act as if no tax exemption/ deferment was ever available to it; PROVIDED that the provisions of this clause shall not come into play if the loss in production is explained to the satisfaction of the Deputy Excise and Taxation Commissioner concerned as being due to the reasons beyond the control of the units: PROVIDED FURTHER that a unit shall not be called upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nceived 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 Rule 28A of the Rules. It is also the undisputed position that the production of the expanded unit has been computed and clubbed with the first unit to reflect the meeting of the criterion. The competent authority has come to a definite conclusion that the expanded capacity had been created to show that the rate of production is maintained but it is fundamentally a subterfuge. The authority has also taken into consideration the different items produced and how there has been loss of production of EPBT in the first unit. The High Court has failed to appreciate the relevant facts and, without noticing that the respondent-assessee had clubbed the production of the units, lancinated the orders passed by the forums below. 17. Mr. Jain, learned counsel for the respondent has drawn our attention to clause (f) of sub-rule (2) of Rule 28A which defines eligible industrial unit . The de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 concerned. We are disposed to think so as the grant of exemption has a sacrosanct purpose. The concept of exemption has been introduced for development of industrial activity and it is granted for a certain purpose to a unit for certain types of good. Exemption can be granted under the Rules or under a notification with certain conditions and also ensure payment of taxes post the exemption period. The concept of exemption is required to be tested on a different anvil, for it grants freedom from liability. In the case at hand, as we understand, it is unit specific. The term unit has not been defined. The grant of exemption unit wise can be best understood by way of example. An entrepreneur can get an exemption of a unit and thereafter establish number of units and try to club together the production of all of them to get the benefit for all. It woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest. 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 notification and further if there are conditions and violation thereof are provided, then the concept of liberal construction would not arise. Exemption being an exception has to be respected regard being had to its nature and purpose. There can be cases where liberal interpretation or understanding would be permissible, but in the present case, the rule position being clear, the same does not arise. 23. At this juncture, it is apposite to refer to the pronouncement in State of Haryana and others v. A.S. Fuels Private Limited and another[(2008) 9 SCC 230]. In the said case, the State of Haryana had approached this Court as the High Court had construed the effect of sub-rule 10 (v) of Rule 28A of the Rules which authorises the department to withdraw the tax exemption certificate but had granted liberty to the State to scrut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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