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TMI Blog2018 (1) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... opment of any industry in the State generally or in any district or part of it. The idea is to encourage setting up of new units for the purpose in the specified areas. So far as establishment of new unit is concerned, it would have to be shown that the unit has land available with it for the purpose. Possessing of land is thus a mandatory or substantive condition in the exemption notification. The manner and mode of such acquisition has been specified from time to time. A notification dated 31st March, 1995 has been brought on record, issued for similar purposes, which was to apply in respect of production starting between the period 1.4.1995 and 31.3.2000. It was the notification dated 31st March, 1995, which was followed by the notification in question dated 15.1.2000. The condition of allotment of land specified in the notification dated 15.1.2000 has been substituted vide subsequent notification of 22.12.2001, as per which land could be obtained from any source. Possessing of land has a direct nexus with establishment of new unit, inasmuch as the new unit itself cannot come up in its absence. It has a direct nexus with the object sought to be achieved i.e. increase in produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in partial modification of all previous notifications issued in this behalf, under the said section 4-A, the Governor is pleased to direct that, no exemption from, or reduction in the rate of tax on sale of goods shall be admissible to units starting production on or after January 17, 2000 except the units which fulfill the following conditions on the said date. (a) the unit is registered under the said Act of 1948; (b) the unit has applied for a Term Loan from any Financial Corporation or Company owned or controlled by the Central or the State Government or any Bank; (c) the unit would start production upto March 31, 2000; and (d) the unit has been allotted land for the factory. The subsequent notification of 24th August, 2000 is also extracted hereinafter:- KA.NI.-2-2591/XI-9(116)/94-U.P. Act-15-48-Order(28)-2000 Dated: Lucknow : August 24, 2000 WHEREAS the State Government is of the opinion that for promoting the development of certain industries in the State, it is necessary to grant exemption from, or reduction in rate of tax to new units. NOW, THEREFORE, in exercise of the powers under section 4-A and section 25 of the Uttar Prade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotment of land was substituted with the condition that unit has obtained land from any source. Benefit of this notification, however, has not been extended apparently for the reason that the applicant had not claimed its benefit, nor had intimated in writing to the assessing authority within 20 days from the date of the notification that the applicant intends to rely upon it, for grant of exemption, as was required under the notification. The notification dated 22nd December, 2001 is also reproduced hereinafter:- UTTAR PRADESH SHASAN KAR AVAM NIBANDHAN ANUBHAG-2 The Governor is pleased to order the publication of the following English translation of Government Notification No. KA.NI. -2-3867/XI -9(116)/94 - U.P. Act -15-48 - Order -(74)- 2001 dated : December 22, 2001, for general information: NOTIFICATION No. KA.NI. -2-3867/XI -9(116)/94 - U.P. Act -15-48 - Order -(74)- 2001 Dated : Lucknow : December 22, 2001 WHEREAS the State Government is of the opinion that for promoting the development of certain industries in the State, it is necessary to grant exemption from, or reduction in rate of, tax to new units and also to units which have undertaken e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g for the revisionist contends that the exemption notification has to be read in the context of the object of Section 4-A of the Act, which is to secure increase in the production of any goods or for promoting industrial development in the State or in any area in particular. It is contended that the conditions contained in exemption notification can be categorized in two parts i.e. conditions which are substantive and conditions that are procedural. Contention is that possession of land with the unit forms part of the substantive condition, whereas mode of its acquisition is procedural and that attaching of importance to mode of acquiring land is not consistent with the object sought to be achieved by the Act and the notification. It is also contended that if mode of acquisition is given primacy, the very object of the provision contained under Section 4-A of the Act as well as the exemption notification would be frustrated. Learned counsel places reliance upon the decisions of the Apex Court in Mangalore Chemicals Fertilisers Ltd. Vs. Deputy Commissioner of Commercial Taxes and others, reported in AIR 1992 SC 152; Commissioner of Sales Tax Vs. Industrial Coal Enterprises, report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expiration of six months from the date of starting production, and subject to such conditions as may be specified, be exempt from trade tax on sale of goods whether wholly or partly or be liable to tax at such reduced rate as it may fix: Provided that in respect of goods manufactured in a new 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) ...... (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 * * * * * (d) only if the manufacturer furnishes to the assessing authority an Eligibility Certificate g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. 30. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave (1996) 2 SCR 253, held that- 16. ... such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption. 31. Of course, some of the provisions of an exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statute and accomplish the reasonable objectives for which it was passed. 33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non- compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. 34. The test for determining the applicability of the substantial co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gency and mandatory nature must be justified by the purpose intended to be served. The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve. In Kedarnath's case itself this Court pointed out that the stringency of the provisions and the mandatory character imparted to them were matters of important policy. The Court ob- served: ..... The object of s. 5(2)(a)(ii) of the Act and the rules made thereunder is self- evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers, it will wellnigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 15. In Commissioner of Sales Tax (supra), following observations are made in paras 6, 11 and 12 and are reproduced:- 6. Admittedly the provisions for exemption from sales tax have been introduced in the Act for the purpose of increasing the production of goods and for promoting the development of industries in the State. In fact, when the scheme called Grant of Sales-tax Exemption Scheme 1982 to industrial units under Section 4-A of the Sales-tax Act was originally framed, it was expressly stated that the Government granted the facility of exemption in order to encourage the capital investment and establishment of industrial units in the State. The Scheme contained various rules for grant of such exemption. The Section itself has referred to the purpose for which the Government could grant such exemption. Sub-s. (1) of Section 4-A prescribes the maximum period for which the exemption could be granted as 7 years. As per the section, such exemption should commence from the date of first sale by such manufacture 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 9.8.85 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 subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished. If the same subserved the statutory requirements, we do not see any reason as to why the appellant should not be held to be entitled to grant of exemption for the entire period of ten years beginning from 24.10.1992 to 23.10.2002. 35. It is not a case where the application was incomplete by itself. It was also not a case where having regard to the provisions of the Act, Rules, Notifications as also the information required to be furnished in terms of paragraph 10 of Form 46, any other or further information was necessary to be obtained or furnished. If the appellant, thus, had fulfilled the eligibility criteria for grant of exemption, it had acquired a right in respect thereof and we see no reason why it should have been deprived therefrom. It is in that sense the exemption notification was required to be construed liberally in favour of the appellant. {See State of Orissa Ors. V. TATA Sponge Iron Ltd. [(2007) (8) SCC 189 para 21]. 17. In State Level Committee (supra), whereupon reliance is placed by the revenue, following observations have been made in Para-14 and are reproduced:- 14. We agree with the above statement of law except insofar as it states ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.3.2000. The condition relating to availability of land was dealt with under Clause 4(ii), which reads as under:- 4. The facility of exemption from or reduction in the rate of tax shall be subject to the following conditions in addition to the conditions referred to in Section 4-A of the Act- (i) ..... (ii) that the new unit is established on land or building or both owned or taken on lease for a period of not less than fifteen years by such unit or allotted to such unit by the State or the Central Government or any Government Company or any Corporation owned or controlled by the Central or the State Government; 19. It was the notification dated 31st March, 1995, which was followed by the notification in question dated 15.1.2000. The condition of allotment of land specified in the notification dated 15.1.2000 has been substituted vide subsequent notification of 22.12.2001, as per which land could be obtained from any source. Possessing of land has a direct nexus with establishment of new unit, inasmuch as the new unit itself cannot come up in its absence. It has a direct nexus with the object sought to be achieved i.e. increase in production or development of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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