TMI Blog2010 (4) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... anded amounts have also been realized from the revisionist by adopting the coercive measure. In view of the above discussion, this court is of the opinion that the order dated March 26, 2008 deserves to be set aside and the revision deserves to be allowed. - 74 of 2008 - - - Dated:- 21-4-2010 - RAKESH SHAA RM , J. RAKESH SHARMA J. Heard Ms. Pushpila Bisht, learned counsel for the revisionist and learned standing counsel for the respondents. This value added tax (VAT) revision/trade tax revision is preferred under section 58 of the VAT Ordinance of 2007 assailing the order dated March 26, 2008 passed by the Full Bench of the Trade Tax Tribunal, U.P., Lucknow, the impugned order. The revisionist-corporation has been denied certain benefits accruing to it as spelt out in the notification dated February 21, 1997 issued under section 4A of the U.P. Trade Tax Act, 1948. Some other benefits for which the revisionist-company was entitled were also denied to it. The revisionist is a limited company, registered under the U.P. Trade Tax Act, 1948, Central Sales Tax Act, 1956 and the Value Added Tax (VAT) Act, etc. M/s. Dhampur Sugar Mills Ltd. (hereinafter referred as, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de during the period from December 1, 1994 to March 31, 2000 were covered. The production incentive, tax benefits, etc., were available to such industries in all the districts of the State of U.P. Being covered by the scheme M/s. Dhampur Sugar Mills Ltd., group of industries, the company filed an application before the General Manager, District Industry Centre, Bijnore on May 17, 2000 seeking the above benefits. It claimed exemptions under the notification dated February 21, 1997 on the ground of expansion, diversification and modernization. The application was rejected by an order dated October 31, 2000 on three grounds, namely, (a) a joint application for multiple units is not permissible under the Rules; (b) the application was time-barred; and (c) the company was in arrears of tax for Rs. 1,742.25 lakhs. The company filed an appeal to the Trade Tax Tribunal, against this order. This appeal was rejected by an order dated March 20, 2001. The Trade Tax Tribunal held that every unit was a separate unit and that a joint application could not be made. The company then filed a Trade Tax Revision No. 29 of 2001 before the High Court. The High Court had allowed the revision and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revisionist against the provisions of notification dated February 21, 1997 issued under section 4A and contrary to the admitted documents and record for expansion during the period covered by this notification? (d) Whether the Trade Tax Tribunal order is bad in law for denying the benefit of waste products and power by ignoring condition 3(e) of the notification dated February 21, 1997 issued under section 4A of the U.P. Trade Tax Act? (e) Whether the Trade Tax Tribunal is correct in law in not considering the claim of the appellant for Asmoli unit as a new unit against the dictum of the honourable Supreme Court order dated December 9, 2004(1)? (f) Whether the Trade Tax Tribunal is correct in law in not following its own principle adopted in the impugned order for calculating the base production of sugar and molasses in case of expansion of the Asmoli unit? (g) Whether the Trade Tax Tribunal is correct in law in denying the benefit to Mansurpur factory on any reason other than that mentioned in the order of the Divisional Level Committee? (h) Whether the Trade Tax Tribunal is correct in law in denying the benefit of Mansurpur Sugar Mills when the respondent for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re than 50 crores during the period December 1, 1994 to March 31, 2000 for purposes of expanding the capacity of their sugar mills at Dhampur District Bijnore, U.P., Rauzagaon, District Barabanki and for establishing a new unit in 1995 at Asmoli District, Moradabad as well as also undertook expansion of their existing capacity of Asmoli during the period from 1995 to March 31, 2000 as also making the investment for purposes of expansion for the product manufactured (alcohol, acetic acid, acetaldehyde and acetic anhydride) before December 1, 1994. The investment for purposes of producing diversified goods, namely, ethyl acetate, carbon dioxide and oxalic acid was also made during the period December 1, 1994 to March 31, 2000. Notification No. TT-2-640/11-9(460)94 dated February 21, 1997 as well as Notification No. 641 were issued in exercise of powers under section 4A of the U.P. Trade Tax Act, 1948 by the Trade Tax Department providing for exemptions in clause (6) of the Explanation of section 4A to be granted to an undertaking which made a fixed capital investment of Rs. 50 crores or more for expansion, modernization or diversification or backward integration. The revisionis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the application on merits within a period of six months. While deciding the matter the honourable Supreme Court has held and decided that M/s. Dhampur Sugar Mills Ltd., the company is an industrial undertaking and is manufacturer of the goods for all its factories within State of Uttar Pradesh and it is a dealer in terms of section 8A of the U.P. Trade Tax Act, 1948 read with rule 6A of the U.P. Trade Tax Rules, 1948 and Central Sales Tax Act, 1956 with the Sales Tax Department with its principal place of business at Dhampur for all its factories. The honourable Supreme Court further held in its judgment and order dated December 9, 2004(1) that it is the company which is paying the tax and therefore it is the company which would be getting the exemption from tax. Further the honourable Supreme Court in its order dated December 9, 2004 passed in Civil Appeal No. 6635 of 2003(1) had come to the conclusion that the rejection of application on the ground that a joint application cannot be submitted is wrong and a joint application is permissible. On the issue of arrear of tax, the honourable Supreme Court had directed the committee that during the period of stay order the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment ascertained by the Divisional Level Committee is less than Rs. 50 crore. (c) The company has not achieved the base production based on 80 per cent installed capacity. Being aggrieved by the decision of the Divisional Level Committee the revisionist preferred an appeal against this order dated May 24, 2005 before the Trade Tax Tribunal, Lucknow, i.e., Appeal No. 59/2005 under section 4A of the Act. The Trade Tax Tribunal by its order dated September 22, 2005 set aside the decision of the Divisional Level Committee as it found that the Divisional Level Committee had not analyzed the facts correctly and therefore, it directed the Divisional Level Committee to issue a show-cause notice on all the points and after affording opportunity of hearing to the revisionist pass a reasoned and speaking order on all the points mentioned in show-cause notice. The Divisional Level Committee in compliance with the direction of the Trade Tax Tribunal issued a show-cause notice to the revisionist vide its letter dated December 7, 2005. Pursuant thereto the revisionist submitted its detailed reply to all the points raised in the showcause notice. The Divisional Level Committee, thereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il 1, 1996, oxalic acid is May 25, 1995 and carbon di-oxide is June 16, 1997. The Divisional Level Committee taking note of the joint inspection report had not allowed the benefit of expansion on all types of alcohols, waste products and power. The Divisional Level Committee had also not allowed the benefit to Asmoli as a new unit being established in 1995, although the revisionist's claim was there for it as new unit in 1995, as investment of more than Rs. 50 crores was claimed in the application filed under notification dated February 21, 1997 and was also shown separately. The Divisional Level Committee had considered the investment up to December 22, 1999 in Rauzagaon factory; up to December 8, 1999 in Asmoli factory; up to 1998 in chemical division and up to March 2000 in sugar mill at Dhampur. The deduction which has been made by the Divisional Level Committee in the investment is against the benefit allowed under notification dated February 21, 1997. The notification allowed the total investment made from December 1, 1994 to March 31, 2000. The Divisional Level Committee has wrongly calculated the period of benefit for ethyl acetate and oxalic acid. It should ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of existing products being manufactured by them. Acetic acid, acetaldehyde, acetic anhydride and alcohols were manufactured earlier and the expansion of these products had undertaken after December 1, 1994. That the expansion on these products as per this report had started with effect from December 1, 1994 and the production of each commodity of the earlier five years was mentioned as under in the Joint report on page 21: 1990-91 1991-92 1992-93 1993-94 Chemicals (in qtls.) acetaldehyde 100 22706 54371 56726 Acetic acid 0 10517 23963 21805 Acetic anhydride 0 0 0 431 Rectified spirit . . . . . . 295580 1452280 Special denatured spirit Thus the impugned order of not allowing the benefit on all types of alcohol about the base production is against the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 4A. The learned counsel for the revisionist had read various paras and observations recorded by the honourable Supreme Court of India in its judgment and order dated December 9, 2004 See [2005] 139 STC 269.Directions and guidelines have been issued by the honourable Supreme Court as to how the decision is to be taken by the Divisional Level Committee and the tax authorities. She has read the judgment rendered by the Tribunal and various observations made by the Divisional Level Committee to submit that the Tribunal has not conceded the matter in the light of directions given by the honourable apex court. Unnecessary facts, i.e., restriction on expansion, etc., were imported in the order. In the present case expansion was not taken by the company during the period from December 1, 1994 to March 31, 2000. Detailed and sufficient material were placed before the Divisional Level Committee and the Tribunal to assist it in taking a just and proper decision. The benefit granted to each factory and commodity wise was also against the spirit and object of the notification dated February 21, 1997. The chartered accountant certificate was not dealt with, it was excluded from c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefits of exemptions arising out of notification dated February 21, 1997. He has read section 4A of the U.P. Trade Tax Act, 1948 and the relevant paras of the notification dated February 21, 1997. According to him for the purpose of exemption each unit is considered to be a separate entity to avail of the benefits of notification and investment of Rs. 50 crores or more must be in respect of one unit only. According to him the present company making a capital investment of Rs. 50 crore or more in its various units cannot be clubbing the units to claim an exemption under the said notification. The application itself was made belatedly. The company was in arrears of taxes and, therefore, was not entitled to the benefits of notification. As per learned standing counsel the term unit refers not to an industrial undertaking as a whole but to a unit of the company. The first date of production of goods consequent upon the expansion, modernization or diversification of the undertaking in question should be a date falling at any time after March 31, 1980. This cannot refer the multiple manufacturing concern of the dealer taken collectively. The small units application seeking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by the revisionist during the period December 1, 1994 to March 31, 2000 is to be considered for allowing the benefit. A perusal of the certificate issued by the Divisional Level Committee for chemical shows that it had considered the period of expansion up to March 31, 2000 and granted the benefit from May 15, 2000 to March 31, 2012 for acetic acid, acetaldehyde, acetic anhydride and alcohol. Therefore, the observations in the joint inspection report to this extent that the period of expansion is to be taken up to 1998 has not been accepted by the Divisional Level Committee while issuing eligibility certificate. The Divisional Level Committee taking the contrary view for the purpose of considering the additional fixed capital investment up to 1998 in chemical plant instead of considering the investment made up to March 31, 2000 the relevant period. Clear specific directions of the Supreme Court of India in its judgment have been excluded from consideration. It is noteworthy that the benefits granted to each factory and commodity wise is against the spirit of notification dated February 21, 1997 as also against the spirit of section 4A and this is clear from the decision ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable Supreme Court after considering the arguments advanced by the Revenue on the basis of production as per Explanation 6 of first provision that the base production is to be determined not merely unitwise but even goodswise, because one unit is manufacturing more than one goods but not undertaking expansion, etc., in respect of all such goods. The observations made by the apex court have been ignored. Further the honourable apex court has also provided that even if the figures are to be in respect of only one unit it should mean that the entire investment of Rs. 50 crores or more must be in one unit only. Separate figures of each unit in which expansion, modernization or diversification has taken places may be worked out. The preamble and the plain reading of the relevant notification shows that for expansion, modernization and diversification need not be in one unit. It is the undertaking which is considered to be the unit . As per the honourable Supreme Court judgment dated December 9, 2004 See [2005] 139 STC 269. which is quoted below (at page 291 of 139 STC): . . . A plain reading of the notification shows that for 'expansion, modernization and diversification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the period December 1, 1994 to March 31, 2000 duly certified by chartered accountant is erroneously done in the joint inspection report. The Divisional Level Committee in its earlier order of 2005 had categorically denied the exemption on the specific condition of not submitting the certificate of chartered accountant for the additional fixed capital investment made in plant and machinery. In the joint inspection report it is reported to the Divisional Level Committee that certificate from chartered accountant certifying the investment in plant and machinery had been submitted for the period December 1, 1994 to March 31, 2000. The relevant provisions contained in clause 3(i) of the notification which is reproduced as under: 3(i) that the unit shall after close of every assessment year during which exemption from, or reduction in the rate of tax is admissible but not later than thirty days of the approval of its balance sheet by concerned authority of the unit submit to the assessing authority a certificate from a chartered accountant in respect of each assessment year. Such certificate shall contain the following details, (a) additional fixed capital investment made duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt available to the company cannot be apportioned factory-wise or commodity-wise as already indicated in the foregoing paras. The revisionist is not claiming any additional fixed capital investment made on land and building during the period December 1, 1994 to March 31, 2000. The deduction made on account of effluent treatment plant and electric motor, transformers, fire fighting equipment is against the Explanation of clause (4)(b)(ii) or Explanation to section 4A(6). The clause (ii) reads investment as is necessary under some statutory obligation is to be allowed. Therefore, in view of the aforesaid, the effluent treatment plant is now a statutory requirement under (environmental laws), U.P. Pollution Control Board; electric motor and transformers and electrical panel are statutory requirement under the Electricity Act and fire-fighting equipment are statutory requirement under the Prevention and Safety Act. Therefore, the deduction made from the investment in this regard has been erroneously done and is against the provision of section 4A of the U.P. Trade Tax Act, 1948. In order to allow the benefit on equipment given on lease, the revisionist has replying on the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplied to UPSEB. In this regard it was explained by the counsel that surplus supply of power to UPSEB is not a disqualification for reducing the fixed capital investment. In support of this contention the revisionist has drawn attention of the court upon clause (4)(e) of Explanation 6 to section 4A which is reproduced above. The deduction made in additional fixed capital investment is not admissible under section 4A read with notification dated February 21, 1997. In the opinion of this court the Kajaria Ceramics case is based on different set of circumstances. The expenses disallowed in Kajaria Ceramics case are on four items of expenditure which are not the part of additional fixed capital investment claimed by the revisionist as per notification of 1997. The relevant para in Kajaria Ceramics Ltd. [2005] 141 STC 406 (SC) is as under (at page 430): The four items of expenditure which the High Court accepted, viz., interest paid on loans by financial institutions, expenses in connection with a right issue of shares, expenses on foreign technicians or foreign travel do not reflect the value of the items forming part of the fixed capital investment for the purposes of this Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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