TMI Blog2023 (1) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... re such diversification [Section 4-A(2)(c)] - In the case of expansion or modernization , the exemption shall be available, if there is an additional production as a result of such modernization or expansion. In the present case, we are concerned with the case of diversification . Therefore, the goods manufactured after diversification must be different goods from the goods manufactured before such diversification. As per the settled position of law, in case of an exemption notification/exemption provision, the same is required to be construed literally and the person claiming the exemption must satisfy all the conditions of exemption provision. In the present case, the appellant was manufacturing / producing Spun Line Crown Cork used for sealing the glass bottles. With the use of modern technologies, now the appellant is manufacturing Double Lip Dry Blend Crowns , which is also used for sealing the glass bottles. The earlier product being manufactured by the appellant was used for sealing glass bottles and subsequently the additional product produced with the use of modern technology is also being used for the same purpose namely, sealing glass bottles . Therefore, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... einafter referred to as Tribunal ) and the Assessing Officer holding that for the goods manufactured, the appellant is not entitled to the exemption under Section 4-A (5) of the U.P. Trade Tax Act (hereinafter referred to as Act ), the manufacturer original revisionist has preferred the present appeal. 3. The facts leading to the present appeal in nutshell are as under:- 3.1 The appellant herein established the unit for manufacture of Spun Line Crown Cork in the year 1986, used as one of the packing materials of the 'glass bottles'. The appellant submitted an application on 24.05.2000 for granting eligibility certificate under Section 4-A of the Act before the Divisional Level Committee for manufacture of double Lip Dry Blend Crown under the program of diversification. 3.2 On the basis of the joint spot inquiry consisting of two members committee, the appellant was granted the eligibility certificate under modernisation instead of eligibility certificate under diversification scheme. 3.3 At this stage, it is required to be noted that if the goods manufactured would have been considered as a new product under the diversification scheme, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported new plant and machinery and invested a fixed capital cost of Rs. 4.5 crores. 4.2 It is submitted that the new product being manufactured by the appellant is an eco-friendly product using PVC granules as raw materials. The new product is different from the Spun Line Crown Corks manufactured earlier. 4.3 It is submitted that the new product is an entirely different product from what was manufactured earlier and the use of the product was also different. It is submitted that the new product was an entirely different product in commercial parlance. It is submitted that the mere fact that both the products are commonly known as Corks would have no relevance. It is submitted that similarly the fact that both the products are used for sealing glass bottles would also not be a relevant criterion. The test which was to be applied is whether the goods were different from those manufactured earlier. It is submitted that the appellant was entitled to claim exemption from trade tax since it has undertaken diversification and the goods i.e., Double Lip Dry Blend Crowns now being manufactured are of a nature different from those manufactured earlier by the appellant being a dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lished a unit for manufacture of the Spun Line Crown Corks used as one of the packing materials of the glass bottles, to be sold to the glass bottlers. It is submitted that after modernisation , the appellant manufactured Corks also used as one of the packing materials of the glass bottles. 5.2 It is submitted that under Section 4-A(5) of the Act and the notification, exemption from trade tax shall be available to a unit, which has undertaken expansion, diversification or modernization and manufactures the different goods from those manufactured earlier by such undertaking. It is submitted that therefore, the issue involved in the present appeal is as to whether the investment of the appellant can be said to be in the unit, having undergone diversification or is in a unit having undergone modernization and whether the goods manufactured by the appellant s unit has undergone diversification or modernization ? 5.3 It is submitted that therefore under Section 4-A(5) of the Act, the requirement for availing the benefits under the head of diversification therefore is that the goods of different nature is required to be produced . It is submitted that the exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured earlier and the new are used as Corks , it is prayed to dismiss the present appeal. 6. Heard the learned counsel for the respective parties at length. 7. The short question which is posed for consideration of this court is:- Whether for the goods, manufactured by use of modern technologies can be said to be diversification , and manufacturing of the goods of a nature different from the goods manufactured earlier entitle the appellant to claim the exemption from trade tax as provided under Section 4-A (5) of the U.P. Trade Tax Act? 8. While considering the aforesaid issue, relevant provisions of Section 4-A are required to be referred to, more particularly, Section 4- A(2)(c), Section 4-A(5)(b)(i) (ii) and Section 4-A(5)(c), which reads as under:- Section 4-A - Exemption from trade tax in certain cases (1) .. (2) It shall be lawful for the State Government to specify in the notification under sub-section (1) that the exemption from, or reduction in the rate of tax, shall be admissible- (a) . (b) . (bb) . (c) in respect of those goods only which are manufactured in a unit which has undertaken expansion, dive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of modern technology is also being used for the same purpose namely, sealing glass bottles . Therefore, the same cannot be said to be manufacturing of goods different from being manufactured before such diversification. With the passage of time, due to advancement in technology, if there is a replacement of the old machinery with the new machinery for improvement in quality and quantity of a product, at the most, it can be said to be expansion and/or modernization, but it cannot be said to be diversification , which is manufacturing of goods different from the goods manufactured before such diversification . In a case of diversification , the effect has to be that the quality and quantity of the product should have been improved and/or increased but if the ultimate use is the same, the product manufactured on use of modern and/or advanced technology cannot be said to be manufacturing the different goods for claiming the exemption from payment of trade tax. The words used in Section 4-A are very clear and unambiguous. As per the settled proposition of law and as observed hereinabove, the Statute and more particularly, the exemption provisions are to be read as they are and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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