TMI Blog2010 (10) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited Vs. State of U.P. and others [2007 (9) TMI 541 - ALLAHABAD HIGH COURT] and in the case of M/s IFFCO Ltd. does not lay down the correct law and as such both the aforesaid decisions stand overruled. - Civil Misc. Writ Petition N0. 1664 of 2004, Civil Misc. Writ Petition N0. 253 of 2003 Civil Misc. Writ Petition N0. 316 of 2003 Civil Misc. Writ Petition N0. 317 of 2003 Civil Misc. Writ Petition N0. 328 of 2003 Civil Misc. Writ Petition N0. 358 of - - - Dated:- 27-10-2010 - Hon'ble Amitava Lala, Hon'ble Rajes Kumar And Hon'ble Pankaj Mithal,JJ. ORDER (Delivered by Hon'ble Rajes Kumar, J.) In all the above writ petitions, a common issue is involved. The Writ Petition No. 1664 of 2004, M/s Hindustan Lever Limited Vs. State of U.P. and others, is treated as the leading case and for the purposes of the decision the facts of only the leading case are being referred herein below. The petitioner M/s Hindustan Lever Limited is a Public Limited Company incorporated under the Indian Companies Act, established a unit at Orai for the manufacture of toilet soap, fatty acid, etc. The unit had undergone expansion by making an additional investment of more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... base production and was entitled for the exemption only on the quantity over and above the production in excess of the base production and the goods transferred by way of stock transfer and by consignment sale would not be included in the base production. With the aforesaid view the assessing authority calculated the quantity and the turnover of exemption. Being aggrieved by aforesaid view of the assessing authority the petitioner filed the present writ petition. The writ petition was entertained and an interim order was granted in the year 2004. During the pendency of the aforesaid writ petition, the Writ Petition no. 278 (Tax) of 2004 Ambika Steel Private Limited Vs. State of U.P. and others came up for consideration before a Division Bench involving similar issue. The said writ petition was decided on 28.9.2007 wherein it has been held that stock transfer and branch transfer are not included in the turnover of sales under the notification and the contention of the assessee that the turnover of sales used in the notification do include stock transfer and transfer of goods from one branch to another cannot be accepted. The object of the State Government in issuing these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch, 1990 and under the aforesaid provisions, the notifications have been issued time to time. Section 4-A of the Act has undergone to a major change by Act No. 28 of 1991. Initially an amendment was made by Ordinance but subsequently it has been finally made by Act No. 28 of 1991. The amended Section 4-A of the Act provided exemption to the new units as well as to the existing units undertaking expansion, diversification or modernization and for this purposes the notifications have been issued. The first notification was notification no. 1093 dated 27.7.1991 granting certain exemption to such unit which has undertaken expansion, diversification or modernization on or after 1st April, 1990 but not later than March 31st, 1995. This was followed by notification no. 780 dated 31st March, 1995. By this notification the benefit under Section 4-A of the Act was conferred on such units which have undertaken expansion, diversification or modernization on or after 1st of April, 1995 but not later than 31st of March, 2000 in the areas mentioned in column-2 of Annexure-1 of the notification. The latest notification is dated 21st of February, 1997 being notification no. 640. It provides 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 and in either case (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 or which are manufactured in a unit which has undertaken expansion, diversification or modernization on or April 1, 1990 and which in the case of diversification, are different from the goods manufactured before diversification, and in the case of expansion or modernization are additional production as a result of such expansion or modernization: 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. (e) ..................................... (2-A) ...................................... (2-B) ...................................... (3) ....................................... (4) ..................................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ....................................... Explanation ................................................ (1) ................................................................... (a)................................................................... (b)............................................................... (c)............................................................. (e)........................................................... (i).......................................................... (ii).......................................................... ............................................................. (i).......................................................... (ii)........................................................ .............................................................. (i)............................................................ (ii)............................................................... (iii)............................................................. (iv)............................................................ (2)...................................................................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five per cent, as a result of expansion or modernization, or wherein goods of a nature different from these manufactured earlier are manufactured after diversification; (d) wherein an additional fixed capital investment of at least 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 any one of the preceding five consecutive assessment years or if the unit were in production for less than five years, the maximum production achieved during any one of the preceding assessment years, whichever is higher: Provided that where a unit manufacturing more than one goods has not undertaken expansion or modernization in respect of all such goods, its base production will be determined on the basis of production of goods in respect of which expansion or modernization has been undertaken: Provided further that where investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )................................. (iv)..................................... 3.................................................................................. (a).................................................... (b)..................................................... (c) ................................................... 4....................................................................... 5. Base production of unit undertaking expansion or modernization shall be deemed to be- (a) maximum production achieved during any one of the preceding five consecutive assessment years, or (b) 80 per cent of the installed annual production capacity, whichever is higher. 6.(a) Turnover of sale of goods in any assessment year to the extent of the quantity covered by production of that year and the stock of base production of previous years shall be deemed to be the turnover of base production. (b) Only the turnover of goods in any assessment year in excess of the quantity referred to in clause (a) shall be entitled to the facility of exemption from or reduction in the rate of tax. Notification N0. TT-2-780/XI-9(226)/94-U.P. Act-15/48- Order-95, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ...... 6........................................................ 7.(a) turnover of sale of goods in any assessment year to the extent of the quantity covered by base production of that year and the stock of base production of previous years shall be deemed to be the turnover of base production; (b) only the turnover of goods in any assessment year in excess of the quantity referred to in clause (a) shall be entitled to the facility of exemption from or reduction in the rate of tax. NOTIFICATION MISCELLANEOUS No. TT-2-640/94-Act-15-48-Order-97 dated February 21, 1997 (460) WHEREAS the State Government 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, modernization, diversification or backward integration, to grant exemption from or reduction in rate of tax to such units; Now, therefore, in exercise of the powers under section 4-A of the Uttar Pradesh Trade Tax Act, 1998 (U.P. Act No. XV of 1948), hereinafter referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... (b).............................................. (c) ............................................. (i)................................................ 4................................................................. (a)....................................................... (b)....................................................... (c) ......................................................... 5............................................................................... (a)............................................................... (b)................................................................ (c)......................................................... 6................................................................... 7 (1) Turnover of sale of goods in any assessment year to the extent of the quantity covered by base production of that year and the stock of base production of previous years shall be deemed to be the turnover of base production. (2) Only the turnover of goods in any assessment year in excess of the quantity referred to in sub-para (1) shall be entitled to the facility of exemption from, or reduction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stock transfer does not fall within the purview of turnover of sales of goods. He submitted that the issue involved in Modipan Fibres (Supra) and Commissioner of Trade Tax, U.P. Vs. M/s Malviya Chemical and Pharmaceutical Private Limited, Ghaziabad (Supra) was entirely different than the facts and issue involved in the present case. In the said case the issue involved was whether the production in excess of the base production is to be computed with the reference to the entire assessment year or not, while in the present case the dispute is whether the base production includes the stock transfer/consignment transaction. He submitted that the observation of the apex Court in the case of Modipan Fibres (Supra), namely, a conjoint reading of Clauses (1-B) (a), Clause 6(2) (b) makes it clear that the dealer is entitled to claim exemption in respect of the turnover of sale of goods of an assessment year of the base production and further, the exemption is to be given on the turnover of sale of goods in an assessment year in excess of the base production, are to be read in the light of the issue involved and cannot be taken as a precedent laying down the law for the purposes of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of Punjab v. Punjab Fibres Ltd. 2004 AIR SCW 6988, dealing with the similar nature of the notification it has been held that party must strictly comply with the conditions of the notification. This situation is not available in the present case as it is not the case that the condition of the notification has not been complied with. It is true that the facts and the issue involved in the case of Modipan Fibres (Supra) and Commissioner of Trade Tax, U.P. Vs. M/s Malviya Chemical and Pharmaceutical Private Limited, Ghaziabad (Supra) were different than the facts and issue involved in the present case but undoubtedly the apex Court has examined the language of the notification in these cases. The clause 1(B) (a), clauses (6) (a) and (b) of Notification No. 1093 dated 27.7.1991 (which are similar to clause (b) and 7 (a) clause 7(b) of the notification no. 780 dated 31.3.1995 and notification no. 640 dated 21.2.1997 were under consideration. On the consideration of the aforesaid clauses, the apex Court observed as follows: A conjoint reading of Clauses (1-B) (a), Clause 6(2) (b) makes it clear that the dealer is entitled to claim exemption in respect of the turnover of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the turnover. It is contemplated only with reference to the quantity of the goods manufactured in excess of the quantity of the base production . Any other interpretation of clause 7 of the notification will be in conflict of clause (b) of the notification. There is nothing in the notification which provides that in the quantity of base production, the quantity of production disposed of otherwise than by way of sale, would not be included. namely, the quantity transferred by way of stock transfer or consignment transaction, would not be included. The value of the quantity transferred by way of stock transfer or for consignment sale is not liable to tax under the Act as well as Central Act as they are not sale by operation of law. The exemption is not provided under Section 4-A and the notification issued thereunder. The object of granting the benefit of exemption to the existing unit, which has undergone expansion after making an additional investment, is to allow the exemption on the excess production over and above its production which was the maximum production in one of the year of five preceding consecutive years, which the unit has achieved. The object behind is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in excess of the base production. Therefore, the conclusion drawn by the Division Bench is not legally correct. It is to be noted, that the quantity of base production is determined only once on the consideration of the capacity of the production and maximum production of one year of preceding five consecutive years. Such determined quantity of base production is the basis for the exemption for the period for which the unit is entitled for exemption. Conclusion In view of the foregoing discussion, we are of the view that under the notification no. 640 dated 21.2.1997 the unit undergone expansion is entitled for the exemption on the turnover of the quantity in excess of the quantity of base production plus stock of the base production of the previous years. The base production includes the quantity of the stock transfer/consignment transaction. In view of above, we are of the considered opinion that the view taken by the Division Bench in the case of Ambika Steel Private Limited Vs. State of U.P. and others (Supra) and in the case of M/s IFFCO Ltd. Vs. State of U.P. others does not lay down the correct law and as such both the aforesaid decisions stand overruled. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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