TMI Blog2004 (12) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent-company or any of its units earlier. It must be mentioned that under an earlier notification dated August 13, 1991 various units of the respondent-company had applied for exemption and had been granted exemption to certain extent. Thus set aside that portion of the impugned order which directs issuance of the eligibility certificate and directs reimbursement & remit the matter back to the Divisional Level Committee which shall decide the application on its merit within a period of six months from today. The committee, among the other things, will consider whether the Company was in arrears of tax. It is again clarified that during the period of stay orders the Company cannot be said to be in arrears of tax. - Civil Appeal No. 6635 of 2003 - - - Dated:- 9-12-2004 - VARIAVA S.N. AND LAKSHMANAN AR. JJ. Sudhir Chandra, Senior Advocate (Ashok Sagar, Achintya Dvidedi and Rajesh Kumar, Advocates, with him), for the respondent. Sunil Gupta, Senior Advocate (Additional Solicitor-General for State of U.P.) (Punit Dutt Tyagi, Vivek Vishnoi, Mukesh Verma and Ram Kishore Singh Yadav, Advocates, with him), for the appellant. ----------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation can be filed or each unit of an industrial undertaking needs to file an application; (b) whether the application filed on May 17, 2000 can be said to be time-barred; and (c) whether the Company was in arrears of tax for Rs. 1,742.25 lakhs or in any other amount. 7.. To answer these questions, one needs to notice various provisions as well as the concerned notification. Under section 8A of the U.P. Trade Tax Act, 1948 every dealer who commences business, during the course of an assessment year and whose average monthly estimated turnover is as set out in sub-clause (d) thereof, must get himself registered. Rule 6 of the U.P. Trade Tax Rules, 1948 provides that the assessing authority will be the one within whose jurisdiction the dealer carries on business. It further provides that if a dealer carries on business within the limits of jurisdiction of more than one Trade Tax Officer then he may declare one of the places of his business as his principal place of business with an intimation to all other Trade Tax Officers, within whose jurisdiction his other places of business are situated, that the Trade Tax Officer where the principal place of business is situate shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in respect of all such goods manufactured subsequent to the date of such notification; or (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 (bb) in respect of those finished goods which are manufactured in a unit which has undertaken backward integration; or (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 such 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. ..................................................... ..................................................... (5) A manufacturer shall be entitled to the facility of exemption from, or reduction in the rate of tax, notified under sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such plants including captive power plant, machinery, equipment, apparatus, components, moulds, dyes, jigs and fixtures as have not been used in any other factory or workshop in India: Provided that- (a) for the purposes of determining value of land and building only the following shall be taken into account,- (i) value of only such portion of land and building as is necessary for the establishment or running of the factory or workshop of the unit; (ii) expenses incurred in registration of land and building under the provisions of the Registration Act, 1908 and in development of land as development charges payable to any statutory body; (iii) the value of land or building already owned and given by the proprietor, partner, managing director, promoter-director or holding company as his or its share in the capital in case the unit is established in such land or building; (iv) the amount or proportionate amount paid or payable as premium during the period for which exemption under section 4A is granted on account of lease and the expenses incurred on registration of the lease deed under the Registration Act, 1908 in case the unit is established in land or building taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isation, falls at any time after March 31, 1990; (c) the production capacity whereof except as provided in the proviso to sub-section (1) has increased by atleast twenty-five per cent as a result of expansion or modernisation, or wherein goods of a nature different from those manufactured earlier are manufactured after diversification; (d) wherein an additional fixed capital investment of atleast twenty-five per cent of such original fixed capital investment (without providing for depreciation) is made; (e) which has been established within the same district in which the existing industrial unit is established. (6) For the purposes of this section the expression "base production" means,- (a) eighty per cent of the installed annual production capacity; or (b) maximum production achieved during anyone of the preceding five consecutive assessment years or if the unit were in production for less than five years, the maximum production achieved during anyone of the preceding assessment years whichever is higher: Provided that where a unit manufacturing more than one goods has not undertaken expansion or modernisation in respect of all such goods, its base production wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction in the rate of tax as specified in column 3 of the annexure is achieved, whichever is earlier. The period shall be reckoned from the date of the first sale or the date following the expiration of six months from the date of starting production, whichever is earlier; (b) in respect of goods manufactured in a unit which has undertaken expansion, modernisation or diversification on or after December 1, 1994 but not later than March 31, 2000, in the areas mentioned in column 2 of the annexure, no tax shall be payable or, as the case may be, the tax shall be payable at a reduced rate by the manufacturer thereof for the period of twelve years or till the maximum amount of tax relief by such exemption from, or reduction in rate of tax as specified in column 3 of the annexure is achieved, whichever is earlier, on the turnover of sales- (i) of the quantity of goods, manufactured in excess of the base production in the case of unit undertaking expansion or modernisation; and (ii) of goods manufactured by the unit which are of a nature different from those manufactured earlier by such unit in the case of unit undertaking diversification; (c) in respect of goods manufactured in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a letter of intent has been issued, or which is registered, permanently or otherwise, by the appropriate authority in accordance with any law for the time being in force relating to licensing or registration of such units; (d) 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 Central or the State Government or any Government Company or any Corporation owned or controlled by the Central or the State Government; (e) that the exemption from tax or as the case may be, reduction in the rate of tax shall be admissible only in respect of such goods manufactured by the unit and such by-products and waste-products as are mentioned in the eligibility certificate issued to such unit under section 4A; (f) that the said unit furnishes to the assessing authority concerned an eligibility certificate granted in this behalf by the General Manager, District Industries Centre, Area Development Officer (Industry) of concerned Industrial Development Authority, Additional or Joint Director, Industries of the range or Additional Director or Joint Director, Industries of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication shall not be available to such industrial unit as are notified by the State Government. 4.. That the period of facility of exemption from, or reduction in the rate of tax shall be reckoned from the first date of production,- (a) of goods of a nature different from those manufactured earlier by such unit in case of diversifica (b) of goods manufactured in excess of the base production in the case of unit undertaking expansion, modernisation; and (c) of such raw material, parts, intermediates or components as were earlier imported from outside the State and not manufactured by the unit which has undertaken backward integration. 5.. Fixed capital investment or additional fixed capital investment, as the case may be, may, unless otherwise established, be determined in the case of an industrial undertaking financed by a term-loan advanced by a public financial institution or a Scheduled bank according to the certificate to that effect issued by such institution or the bank and in any other case, according to- (a) the value of the land certified by the Collector in accordance with the procedure laid down for determination of the value of land for the purpose of payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the case may be, the additional fixed capital investment. (ii) The area of Allahabad District in South of the river Jamuna and Confluent Ganga (excluding the area included under Municipal Corporation, Allahabad). (iii) The Taj Trapezium area. (iv) Greater NOIDA Industrial Development area. 3. The Districts of Agra (excluding Taj Trapezium area), Aligarh (excluding Taj Trapezium area), Allahabad (excluding the area in south of rivers Jamuna and Confluent Ganga but including the area included under Municipal Corporation, Allahabad), Bareilly, Bhadohi, Bijnore, Firozabad (excluding Taj Trapezium area), Ghaziabad excluding (Greater NOIDA Industrial Development Area), Gorakhpur, Haridwar, Kanpur (Nagar), Lakhimpurkheri, Lucknow, Maharajganj, Meerut, Mirzapur, Muzaffarnagar, Saharanpur, Sonbhadra and Varanasi. 150 per cent of the fixed capital investment or as the case may be, the additional fixed capital investment." 11. Mr. Sunil Gupta, Additional Solicitor-General for the State of U.P., submitted that the reading of the above provisions and the notification along with form XLVI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n business in more than one place then the assessing authority for that dealer can be one where his principal place of business is. 15.. It is undisputed fact that the principal place of business of the Company is Dhampur, District Bijnore. The exemption claimed by the respondent, under the notification dated February 21, 1997, was for expansion, modernisation or diversification. What is a "unit" for purposes of expansion, diversification or modernisation has been defined in section 4A(6), (5) which has been set out hereinabove. Under this "unit" means an "industrial undertaking" of a dealer who is not a defaulter and who meets the requirements as set out in sub- clause (b) thereof. The dealer, indisputably, is the respondent-company. The industrial undertaking of the respondent is the Company. It is the Company which will be paying the tax and which will get the benefit of exemption, if entitled to it. 16.. Mr. Sunil Gupta, the learned Additional Solicitor-General however submitted that a reading of the various sub-clauses indicates that the term "unit" refers not to the industrial undertaking as a whole but to a unit of the Company. He submitted that clause (b) requires t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing figure of "base production" of that concern only. In our view it is not necessary for us to decide whether the production capacity of the undertaking or a unit is to be considered. Even if production capacity of only the unit/s, in which expansion, modernisation or diversification has taken place, is to be taken into account then also it would not show that the entire investment is to be only in one unit. The very fact that this clause is dealing with all 3 aspects, i.e., expansion, modernisation and diversification shows that in most cases they would be in separate units. 18.. We are also unimpressed by the submission that in cases of diversification if the meaning given is that the goods manufactured should not have been manufactured by the dealer anywhere in any concern of his, whether the present concern applied for or any other concern at any other place, then again the provision would be deprived of all its sensibility and reasonableness would serve no purpose. It is the industrial undertaking which is diversifying in some or one of its units. Undoubtedly the industrial undertaking may diversify in anyone of its units. But that does not mean that it is the unit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y possibly be located even in different districts. 21.. We are unable to accept this submission. This sub-clause merely sets out that the expansion, diversification or modernisation must be in respect of a unit, which has been established within the same district in which the industrial unit is established. In this case, the expansion, diversification or modernisation is not claimed in respect of any new unit. It is claimed in respect of existing units at Dhampur, Agwanpur, Rozagaon and Asmoli. That the term "unit" in the context of expansion, diversification and modernisation refers to the industrial undertaking and not to a unit of an industrial undertaking. Thus an expansion of one unit at the same location or a modernisation of any unit or a diversification in an existing unit would suffice. All that this clause is ensuring is that there is distinction between a new unit and an expansion, modernisation and diversification. A new unit may be at a different place but expansion, modernisation or diversification must be at the place/places where the existing units of the industrial undertaking are situated. 22.. Mr. Sunil Gupta, learned Additional Solicitor-General next submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is of the opinion that it is necessary for increasing the production of certain goods in the State, manufactured by industrial units, having a fixed capital investment of rupees fifty crore or more as new units, or making an additional fixed capital investment of rupees fifty crore or more in expansion, modernisation, diversification or backward integration, to grant exemption from or reduction in rate of tax to such units." 26.. Thus, the Preamble shows that the capital investment of Rs. fifty crore or more has to be in a new unit or in expansion, modernisation and diversification. To be noted that to the words "expansion, modernisation and diversification", there are no qualifying words. It is not stated that these must be in one unit of the industrial undertaking. The Preamble, therefore, clearly supports the case of the respondents that the expansion, diversification and modernisation need not be only in one of the units of the industrial undertaking. This becomes further clear that if one looks at clause (1) of the notification. Under sub-clause (a) the benefit is in respect of a new unit but under sub-clause (b) it is in respect of a unit which has undertaken expansion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction and the starting date of production could be in respect of those units. However, it is the Company which has made the investment. It is the Company which is paying the tax. It is the Company which would be getting the benefit of the exemption. The manner in which the Company gets the benefit would be as set out hereinabove. 28.. The second question is whether the application could have been rejected on the ground that it is time-barred. The relevant portion of section 4A(5) reads as follows: "(5) A manufacturer shall be entitled to the facility of exemption from, or reduction in the rate of tax, notified under sub-section (1),- (a) if he applies for such facility within six months from the relevant date of commencement of the period of facility referred to in that sub-section or within six months from the date of notification issued under that sub-section or by September 30, 1992, whichever, expires later, for the entire period notified under that sub-section; (b) if he applies for such facility later than the date specified in clause (a) only for part of the period notified under sub-section (1), which shall be computed form the date of the application and not f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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