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TMI Blog2019 (11) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... t material part of the evidence relied upon by the assessee. In that, it had relied on the original approval letters issued by the Government of India dated 29.1.1997 and 4.11.1997 wherein it clearly disclosed its intent to set up a unit to manufacture, amongst others, refrigerators and PC monitors. Then the assessee is a public limited company. The contention of the assessee that there was evidence existing on record to establish that the entire diversification exercise to manufacture refrigerators and PC monitors was a single step diversification, is prima facie found to be based on evidence on record before the Tribunal. It is not a case where the assessee may not have led any evidence in support of its case. The observations and conclusions of the Tribunal, to the contrary, are found to be perverse. At present, the entire evidence appears to indicate at least on prima facie basis that the decision to diversify and its implementation was a single effort made by the assesse, which for unexplained reasons, came to be described as joint-venture - However, that word description is of no legal consequence. The Tribunal has misdirected itself in approach and, therefore, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption to 'new units' established inside the State and to units engaged in expansion, diversification and modernisation, during the period 01.04.1995 and 31.03.2000. It is a common case between the parties that the aforesaid notifications came to be amended on 16.11.1995, by notification nos. 2760 and 2761, whereby instead of providing for exemption by way of monetary limit, with respect to other than electronic goods, exemption was provided only with reference to time from the date of start of production. Again, by notification nos. 640 and 641, both dated 21.02.1997, the scheme for exemption was supplemented. Thereby, the State Government notified further exemptions to 'new units' undertaking expansion, diversification, backward integration and modernisation between 01.12.1994 and 31.03.2000, subject to they are having invested ₹ 50 crores or more. 4. It is not in dispute that initially, the assessee did establish a 'new unit' to manufacture colour televisions, washing machines and air conditioners. Upon application made in that regard, DLC granted exemption to the assessee on a total fixed capital investment of ₹ 51,37,35,446/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure refrigerators. Accordingly, the investment of ₹ 8.13 crores, made by the assessee, was found to be below the qualifying limit of 25% of the original fixed capital investment (₹ 51,37,35,446/-). This order was sought to be reviewed. However, the review application was rejected by the DLC on 24.05.2006. Upon appeal, the Tribunal allowed the assessee's appeal and remitted the matter to the DLC with a finding to the effect that it was clear that the purchases regarding machineries to manufacture both products (that is refrigerators and monitors) was carried out during the same period. Also, the Tribunal found that the DLC had not taken into consideration this material fact while rejecting the application for grant of exemption with respect to investment made to manufacture PC monitors. Accordingly, the Tribunal directed the DLC to record a clear finding considering the relevant material that was also referred to in that order, by describing it as Annexure No.1 to the paper book at paper nos. 73-86 and other documents as well. 8. Upon remand, the DLC again rejected the application filed by the assessee by its order dated 25.04.2008. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has given rise to the present revision. 13. Heard Sri Tarun Gulati, learned Senior Counsel assisted by Sri Nishant Mishra, learned counsel for the assessee and Sri B.K. Pandey, learned Standing Counsel for the revenue. 14. Present revision was itself admitted on the following questions of law: A. Whether under clause (d) of Explanation (5) of the Section 4A of UPTT Act additional fixed capital investment of ₹ 42 crores in refrigerator and ₹ 8,13,30,080/- in monitor should be treated as joint diversification in terms of the judgment of Hon'ble Supreme Court in the case of DSM Group of Industries and according the Applicant should be granted exemption under Section 4A? B. Whether for the purposes of clause (d) of Explanation (5) of Section 4-A of the Act, additional fixed capital investment of the 'industrial undertaking' as a whole has to be taken into account or item-wise additional fixed capital investment has to be seen? C. Whether the Applicant can be denied the benefit of exemption under Section 4-A, when admittedly the Applicant's industrial undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in three separate districts of the State. It had been claimed that investments made by the company which owned all the three units exceeded the prescribed limit of 50 crores. Therefore, that fact alone was held to be determinative to hold the assessee eligible to exemption. The exact investment made in individual units was found to affect the determination of the limit of exemption available on goods manufactured by each unit. That law is stated to have been followed by the Supreme Court till as late as in G.P. Ceramics Private Limited Vs. Commissioner, Trade Tax, Uttar Pradesh, (2009) 2 SCC 90 . 18. Also, the principle of purposive construction has been invoked by relying on the decision of the Supreme Court in Commissioner of Sales Tax Vs. Industrial Coal Enterprises, (1999) 2 SCC 607 and Bajaj Tempo Ltd., Bombay Vs. Commissioner of Income Tax, Bombay City-III, Bombay, (1992) 3 SCC 78 to submit that the rule of strict construction may be applied only for the purposes of determining the eligibility to exemption and no further. 19. In so far as there exists credible and sufficient evidence to establish that the assessee had en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee simultaneously carried out the diversification work to set up a manufacturing unit for manufacture of refrigerators and monitors, by way of a single diversification exercise. 22. Relying on a list of details of plants, machinery, equipment, apparatus and component to manufacture refrigerators and monitors, it has been submitted that the diversification into manufacture of refrigerators and PC monitors was carried out simultaneously during the year 2000-01. Emphasis has been laid on the fact that the assembly lines that were the main component of the plant and machinery used to manufacture those goods were purchased by two separate invoices raised on the assessee on same date, being February 26, 2001. All these documents are claimed to be existing on the record of the Tribunal. Then referring to the written arguments that were placed before the Tribunal, it has been further emphasised that this issue was specifically raised by disclosing (based on evidence on record), the date of Commercial Invoice to purchase separate assembly lines for the two products as common i.e. 26.02.2001 and the date of first investment in plant and machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26. Having heard learned counsel for the parties and having perused the record, in the first place, as a rule, it cannot be disputed that at the threshold i.e. to determine whether the assessee was eligible to exemption a strict rule of interpretation had to be enforced. However, undisputedly, the assessee did engage in diversification upon establishing manufacturing facility to manufacture refrigerators and PC monitors. No goods similar to those were being manufactured by it, earlier. Thereafter, a purposive construction has to be made. In paragraph nos. 11 and 12 of the Supreme Court decision in Industrial Coal (supra) held as: 11. In CIT v. Straw Board Mfg. Co. Ltd. [1989 Supp (2) SCC 523 : 1990 SCC (Tax) 158] this Court held that in taxing statutes, provision for concessional rate of tax should be liberally construed. So also in Bajaj Tempo Ltd. v. CIT [(1992) 3 SCC 78] 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the assessee s application could not be rejected merely because two separate applications had been filed. Thus, it is to be seen whether thereafter, the Tribunal has correctly dealt with the matter. 28. It is here that the Tribunal s approach is lacking. The Tribunal appears to have completely over-looked the most material part of the evidence relied upon by the assessee. In that, it had relied on the original approval letters issued by the Government of India dated 29.1.1997 and 4.11.1997 wherein it clearly disclosed its intent to set up a unit to manufacture, amongst others, refrigerators and PC monitors. Then the assessee is a public limited company. In its annual report for the period ending 31 March, it appears, it had been specifically stated as under: Despite increased competition, your Company is confident of garnering a higher growth in its products during the year 2001. The Company is planning to introduce many new models, thus making the company with the widest range of models in all its product category. During the year 2000, the Company has started work to add a Refrigerator Plant to its existing production facilities which wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on during the period 12.08.1988 to 28.03.1994. Such claim came to be rejected by the DLC, which order was rejected by the Tribunal, however, this Court had allowed the claim made by Kajaria Ceramics (supra) . Upon appeal filed by the State before the Supreme Court framed issue no.2 as below: II. Whether the respondent's claim of one integrated expansion from 12,000 TPA to 60,000 TPA during the period 12-8-1988 to 28-3-1994 is sustainable in fact or in law? 32. Dealing with that issue, the Supreme Court had held that it was never the onus of the revenue to prove that there were three separate expansions. Admittedly Kajaria Ceramics had later changed its stand and claimed existence of a single scheme of expansion carried out in three phases as against its earlier stand of having engaged in three separate expansions. Considering that crucial fact, the Supreme Court reasoned that the onus to establish a single expansion in three phases remained undischarged at the hands of that assessee/Kajaria Ceramics. 33. It was in that factual context, the Supreme Court further observed that the scheme of expansion would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence made by the order of the Tribunal to the minutes of the Board of Directors, though relevant, but as noted above, the same was not the only evidence to be considered by it. On the face of it, the minutes of the meeting, as extracted in the order of the Tribunal, referred to the date of start of production of two items, namely refrigerators and PC monitors. However, the same are not such as may lead to the conclusion that, two mutually exclusive or separate diversification had been taken by the assessee to manufacture those items. 37. There is also no apparent self-contradiction in the claim made by the assessee. It had consistently stated that it had filed two applications under legal advice owing to different treatment of the two items, namely refrigerators and monitors under the relevant exemption notifications. It had also referred to the own interpretation/treatment offered by the State authorities in granting exemption, specific to the investment made to manufacture each commodity. Thus, the assessee had relied on the certificate issued with respect to the diversification to manufacture PCB and Microwave Ovens vide eligibility certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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