TMI Blog1997 (3) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... started its production on February 18, 1989. In September, 1990 it set up a new plant with a view to increasing its production. Finally from June, 1992 onwards its production was increased from 7 to 14 M.T. guar gum powder per day. In September, 1992 it decided to convert itself into a public limited company. The idea was not only to go public but also to increase its installed capacity for production from 14 M.T. to 42 M.T. guar gum powder per day. It started functioning under the name and style of Vikas WSP Limited, Sri Ganganagar. On September 8, 1992 it moved an application before the Directorate of Ministry of Industries, Government of India, stating therein that it wanted to establish a 100 per cent export oriented unit for the manufacture of 42 tonnes of guar gum powder per day and praying for the issuance of letter of permission. A new plant for the production of 28 tonnes guar gum powder per day was to be set up at plot No. B-86. It was, inter alia, mentioned in the application that the transfer of previously used plant and machinery to the extent of 20 per cent as permitted under Chapter V of the Import and Export Policy 1992-97 was proposed. A separate building would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed under this notification shall stand disallowed from the very beginning, as if there was no exemption from tax, and such unit shall be liable to pay tax with interest on the purchase price of the raw material purchased by it without paying tax, in accordance with the provisions of the Act ; and (iii) That such unit shall issue a declaration to this effect in form ST-17 appended to the RST Rules, 1955, to the selling dealer. Explanation.-A 100 per cent export oriented new manufacturing unit shall be a new industrial unit registered as 100 per cent EOU with Government of India. SCHEDULE S. No. Category of unit Extent of exemption of tax 1. Unit having an investment of Rs. 15 crores of more in land, new factory building and new plant and machinery. 100 per cent of tax payable 2. Unit having an investment of Rs. 5 crores or more but lass than Rs. 15 crores in land, new factory building and new plant and machinery. 50 per cent of tax payable. 3. Ageo-based industrial unitd investment an investment of Rs. 1 crore or more but less than Rs. 15 crores in land, now factory building and new plant and machinery. 50 per cent of tax payable. This shall have effect from June 15, 1994. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order for the assessment year 1994-95 by withholding the exemption granted earlier as per the notification dated June 13, 1994. 6.. The petitioner-company has further averred that though an appeal lies against the impugned order to the Rajasthan Tax Board, Ajmer, but it has chosen to file this petition because the Tax Board under section 85(8) of the RST Act has no power or jurisdiction to stay the further proceedings before respondent No. 2 during pendency of appeal before it. The decision of the appeal is likely to take a lot of time. The very purpose of filing an appeal shall be frustrated because the respondent No. 2 is left with no alternative but to act upon the directive of the respondent No. 1 and thus to deny the benefit of the notification dated June 13, 1994. The petitioner-company will thus be burdened with the liability to satisfy the illegal demand which is unsustainable in law. The benefit of the notification is for a period of 5 years from the date of first purchase. It will come to an end on June 24, 1999. The decision of this Tribunal will set at rest the entire controversy. It has been prayed that the impugned order dated February 19, 1997 be set asid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rguments on all the points, we have proceeded to decide the petition finally. 9.. Before we enter upon the discussion on the merits of the case we think it proper to address ourselves to the preliminary point raised on behalf of the Revenue to the maintainability of the petition itself. This preliminary point has no life in it for the reasons to be stated here. In the first place, a substantial question of law with regard to the interpretation of the notification dated June 13, 1994 has arisen for our consideration. In the second place, the respondent No. 1 by his order dated February 19, 1997 has taken up a particular stand which has the effect of putting a strait-jacket on respondent No. 2 with regard to the levy of tax on the purchase of the raw material. In the third place, the Tax Board has no power or authority to stay the assessment proceedings before respondent No. 2 during the pendency of the appeal before it. We do not know how much time will be taken up by the Tax Board in deciding the appeal before it. Lastly, the failure on our part to decide the question raised in this petition will result in the multiplicity of the proceedings which is to be avoided for the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case the position is that at the very outset the notification provides that exemption from the payment of tax on the sale to or purchase by the 100 per cent EOU shall be granted only to a new manufacturing unit. Thus this exemption can be claimed only for a unit which falls within the ambit of the expression new manufacturing unit . This is a fact which cannot be glossed over. To permit this exemption to 100 per cent EOU, which is not a new manufacturing unit, is to travel beyond the scope of the notification. The explanation appended to the notification provides that a 100 per cent export-oriented new manufacturing unit shall be a new industrial unit registered as 100 per cent EOU with Government of India. When we interpret this explanation in a just and reasonable manner in the light of the surrounding circumstances, we find that mere registration of a unit with the Government of India as a 100 per cent EOU will not entitle it to claim the benefit of tax exemption unless it is shown that such a unit is a new manufacturing unit. Such an interpretation is necessary because the entire notification is to be read in a harmonious manner. Mere registration of the unit as a 100 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (7) of section 10B provides that a 100 per cent export-oriented undertaking is one which may be adjudged as such by a Board appointed in this behalf by the Central Government. No such provision is made in the notification dated June 13, 1994. Lastly, the notification provides for tax exemption which can be claimed subject to the conditions specified therein. Those conditions must be satisfied before an industrial unit can lay claim to such exemption. 14.. Shri Mehta has pressed into service the decision in Bajaj Tempo Ltd. v. Commissioner of Income-tax [1992] 196 ITR 188 (SC). This decision involved the consideration of the provisions of section 15C of the Indian Income-tax Act, 1922 which provided for exemption from tax in the case of certain industrial undertakings to which that section applied. Transfer of tools and implements worth Rs. 3,500 used in an earlier business was considered to be a minor matter. The transfer of such tools and implements worth Rs. 3,500 could not be made the basis for the denial of the benefit of exemption to a new industrial unit. The transfer, to take the new undertaking out of the purview of section 15C(1), must be such that, but for the transfer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment in the new factory was of the order of Rs. 1,04,104. It was held that the old machinery did not constitute a substantial part of the factory machine in the new unit. It was further held that a provision in a taxing statute granting exemption is not to be interpreted in a narrow or pedantic manner, nor should it be given a literal interpretation. The same proposition of law was laid down in the decision in Star Wood v. State of U.P. [1997] 104 STC 576 (All.). The decision in Gorakhpur Oxygen Private Limited v. State of U.P. [1997] 104 STC 470 (All.), concerned the question as to whether the benefit of exemption could be withheld on the ground that the registration of the new unit under the Factories Act did not have a separate number of its own. It was held that nowhere was it laid down that such a registration had to be separate and independent. All these decisions relied upon by Shri Rajendra Mehta are of no assistance to the case of the petitioner-company because they are based on facts which are distinguishable on facts from the case in hand. 15.. A few decisions have also been relied upon by the learned counsel for the department, Shri Sanjeev Johari. These decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. But the question is whether it would be reasonable to read the said Explanation literally which would mean that if a manufacturer uses the brand name or trade mark of an existing industrial unit even in respect of a small portion of its production, it would be totally deprived of the benefit of the said exemption. We are of the opinion that having regard to the object and purpose underlying the said rule, it would be reasonable to say that the respondent shall not be entitled to the benefit of the said exemption in respect of the goods, for which the trade mark or brand name of an existing industrial unit is used. But in so far as other products for which the brand name is not used are concerned, it will be entitled to claim the benefit of the aforesaid sub-rule. The burden of clearly establishing that in respect of certain goods manufactured by it, the trade mark or brand name of an existing industrial unit is not being used, shall be squarely upon the manufacturer. This decision and the principle of law laid down therein serve as a guiding star for us in our journey to what we call a just and proper decision in this petition. There was an old industrial unit which had an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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