TMI Blog2014 (3) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... rst unit to reflect the meeting of the criterion - The expanded capacity had been created to show that the rate of production is maintained but it is fundamentally a subterfuge - The authority has also taken into consideration the different items produced and how there has been loss of production of EPBT in the first unit - The High Court has failed to appreciate the relevant facts and without noticing that the assessee had clubbed the production of the units, lancinated the orders passed by the forums below. Clubbing is not permissible - It amounts to a violation of the conditions under Rule 11(a)(i) of Rule 28A and the assessee has to pay the full amount of tax benefit and interest -The appeal is allowed and the judgment and order passed by the High Court is set aside and those of the tribunal and other authorities are restored – Decided in favour of Revenue. - Civil Appeal No. 6791 of 2004 - - - Dated:- 20-1-2014 - H. L. Dattu, Dipak Misra And S. A. Bobde,JJ. JUDGMENT Dipak Misra, J. Calling in question the legal acceptability and propriety of the judgment and order dated 08.05.2003 passed by the High Court of Punjab and Haryana at Chandigarh in C.W.P. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1997 by the High Level Screening Committee. On an appeal being filed, the Commissioner of Industries accepted the same and remitted the matter to the High Level Screening Committee to revise the eligibility certificate allowing the benefit of sales tax exemption by inclusion of additional items. However, the period of exemption remained unaltered. Be it noted, the assessee was granted the full benefit of exemption for the entire period. 4. After the expiry of the period of exemption, the Deputy Excise and Taxation Commissioner (Gurgaon), the 2nd appellant herein, while monitoring the production level of the respondent unit, noticed that it was not maintaining the level of production of the preceding five years and, accordingly, initiated a proceeding against it on the foundation that it had violated the conditions enumerated under Rule 28A (11) (a) (i) and was thereby liable to make full payment of tax exemption benefit already availed by it along with interest. As required under the Rules, it issued a notice to show cause to explain non-maintenance of average production after the expiry of the benefit period inasmuch as it had drastically come down to ₹ 9.06 crores from 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions enumerated in the prescription in the rule. The said authority ruled that the assessee, having failed to meet the production level, was liable to be visited with the consequences and, accordingly, directed for making full payment along with interest. 8. Grieved by the aforesaid order, the assessee preferred an appeal before the appellate authority who came to hold that the explanation for loss in production was due to outdated machinery and, hence, the reasons for fall in production could not be held to be beyond the control of the assessee, for it was well within his control to replace the outdated machinery of the old unit instead of putting up a new unit. On the aforesaid bedrock, the appellate authority declined to interfere in appeal. 9. Failure in appeal led the assessee to file an appeal before the Sales Tax Tribunal which, on reappreciation of the factual matrix in entirety, came to hold that the average manufacturing of EPBT in the subsequent three years was approximately of 9.32 lacs as against an average of 3.79 in the preceding five years. That apart, the appellant had not taken the plea that the lower production was because of factors beyond their control. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it had passed the order solely on the basis of conjecture. The High Court further observed that even if the factum of reduction of production as stated by the tribunal was accepted as correct, still the exemption on tax could not have been withdrawn as it was not a ground mentioned in sub-rule II (a) (i) of Rule 28A for withdrawal of exemption. 11. Questioning the defensibility of the order passed by the High Court, Mr. Manjit Singh, learned counsel appearing for the appellants, has contended that the High Court in a laconic manner has arrived at the conclusion that the authorities as well as the tribunal has fallen into error by opining that there has been a violation of the rule in question though on a bare reading of the said orders there can be no shadow of doubt that the increased production in respect of the second unit could not have been taken into account for the first unit since the second unit was an individual unit having no concern with the first unit. It is his further submission that the High Court failed to appreciate that the respondent had tried to take recourse to an innovative subterfuge by establishing a new unit producing the same items as the earlier on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax-benefit availed of by it during the period of exemption/deferment, payment of interest chargeable under the Act as if no tax exemption/ deferment was ever available to it; PROVIDED that the provisions of this clause shall not come into play if the loss in production is explained to the satisfaction of the Deputy Excise and Taxation Commissioner concerned as being due to the reasons beyond the control of the units: PROVIDED FURTHER that a unit shall not be called upon to pay any sum under this clause without having been given reasonable opportunity of being heard. [Emphasis added] 14. On a bare reading of the said Rule, it is evincible that the conditions which are imposed have been enumerated in clause I (ii) of the said sub-rule 11 (a) of Rule 28A to the effect that in the event of nonmaintenance of the quality of production after the expiry of the exemption, the assessee has to pay the tax benefit availed with interest. In the case at hand, the revenue has pressed clause I (ii) into service. The Division Bench has relied on the decision in R.K. Mittal Woolen Mills (supra) wherein the High Court was dealing with the withdrawal of eligibility of certificate as prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration the different items produced and how there has been loss of production of EPBT in the first unit. The High Court has failed to appreciate the relevant facts and, without noticing that the respondent-assessee had clubbed the production of the units, lancinated the orders passed by the forums below. 17. Mr. Jain, learned counsel for the respondent has drawn our attention to clause (f) of sub-rule (2) of Rule 28A which defines eligible industrial unit . The definition reads as follows:- (f) 'eligible industrial unit' means:- (i) a new industrial unit or expansion or diversification of the existing unit, which- (I) has obtained certificate of registration under the Act; (II) is not a public sector undertaking where the Central Government held 51 per cent or more shares; (III) is not availing incentive of interest free loan from the Industries Department for investment after the 1st day of April, 1988; (IV) is not included in Schedule III appended to these rules except the tiny units set up in a rural area on or after 1-4-1992, in which capital investment in plant and machinery including market price of plant and machinery taken on base or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion period. The concept of exemption is required to be tested on a different anvil, for it grants freedom from liability. In the case at hand, as we understand, it is unit specific. The term unit has not been defined. The grant of exemption unit wise can be best understood by way of example. An entrepreneur can get an exemption of a unit and thereafter establish number of units and try to club together the production of all of them to get the benefit for all. It would be well nigh unacceptable, for what is required is that each unit must meet the condition to avail the benefit. 19. We will be failing in our duty if we do not address to a submission, albeit the last straw, of Mr. Jain that any provision relating to grant of exemption, be it under a rule or notification, should be considered liberally. In this regard, we may profitably refer to the decision in Hansraj Gordhanadas v. H.H. Dave, Assistant Collector of Central Excise and Customs, Surat and others AIR 1970 SC 755 wherein it has been held as follows:- ...It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear, the same does not arise. 23. At this juncture, it is apposite to refer to the pronouncement in State of Haryana and others v. A.S. Fuels Private Limited and another (2008) 9 SCC 230. In the said case, the State of Haryana had approached this Court as the High Court had construed the effect of subrule 10 (v) of Rule 28A of the Rules which authorises the department to withdraw the tax exemption certificate but had granted liberty to the State to scrutinize if it was a case for withdrawal of the eligibility certificate under sub-rule (8) of Rule 28A of the Rules and, thereafter, to proceed in accordance with the law. This Court, scanning the anatomy of Rule 28A, opined that under sub-rule (8)(b), when the eligibility certificate is withdrawn, the exemption/entitlement certificate is also deemed to have been withdrawn from the first day of its validity and the unit shall be liable to payment of tax, interest or penalty under the Act as if no entitlement certificate had ever been granted to it. Thereafter, the Court adverted to sub-rule 11 (a) and, in that context, it observed thus:- ...there are several conditions which are relevant; firstly, there is a requirement of con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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