JUDGMENT Rajes Kumar, J.
1. These two revisions under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") are directed against the order of Tribunal dated 23.07.1996 relating to the assessment years 1992-93 both under the U.P. Trade Tax Act and Central Sales Tax Act.
2. Brief facts giving rise to the present revisions are that the applicant is a Private Limited Company incorporated under the Indian Companies Act, 1956 having its registered office at B-67, South Extension, Part-II, New Delhi and the factory at plot No. 34-A/2, Site No. 4, Sahibabad in the district Gluziabad. Applicant was engaged in the business of manufacture of bulk drugs. Applicant was granted eligibility certificate under Section 4-A of the Act under notification No. ST-II-1093/XI-7(42)-86-U.P. Act-XV/48-Order-91, dated 27.07.1991 for the expansion undertaken by the applicant to manufacture paracetamole, which is bulk drug. The exemption was granted to the extent of 125% of the fixed capital investment, invested by the applicant in the expansion on the turn over of the goods manufactured in excess of the base production in an assessment year. The base production was fixed at 172.8 MT, thus, the applicant was entitled for the benefit of exemption under Section 4-A of the Act in an assessment year on the production exceeding the base production 172.8 MT. During the assessment year 1992-93 total sales made by the applicant from 01.04.1992 to 31.03.1993 was 382 125 MT both within the State of the U.P. as well as outside the State of U.P. including the central sales. Thus, according to the applicant, it was entitled for the benefit of exemption under Section 4-A of the Act on the turn over of the production of 209.325. MT. Applicant claimed that during the assessment year in dispute, applicant filed the return disclosing the total sales made by it and had claimed exemption from payment of tax both under the U.P. Trade Tax Act and Central Sales Tax Act only to the extent of sales made by it to the extent of 140.75 MT during the whole year. Assistant Commissioner, Trade Tax, Ghaziabad vide his assessment order dated 01.03.1995 accepted the books of account and the disclosed turn over but had restricted the claim of exemption to the extent of 70.325 MT instead of 140.75 MT. Aggrieved by the order of the assessing authority, applicant filed appeals before Deputy Commissioner (Appeals). Deputy Commissioner (Appeals) vide order dated 31.7.1995 dismissed both the appeals. Deputy Commissioner (Appeals) held that the exemption can not claimed from payment of tax upto the period till the base production turn over has not been achieved. He was of the view that exemption was available only after the date on which base production is achieved, i.e. if the base production is achieved in third month then the applicant would be entitled for exemption from the fourth month. Aggrieved by the orders of the Deputy Commissioner (Appeals), applicant filed appeals before the Tribunal, which were partly allowed vide order dated 23.7.1996. Tribunal has held that base production has been achieved on 23 09.1992 and. therefore, whatever the sale was made by the applicant upto 23.09.1992 shall not be entitled for exemption and the applicant was entitled for exemption only after 23.09.1992 on the production in excess of the base production.
3. Heard learned counsel for the parties.
4. Learned counsel for the applicant submitted that the view of the Tribunal and the authorities below are erroneous. According to his submission turn ever of the base production in accordance with clause (6) of the notification No. 1093 dated 27.07.1991 has to be taken for the whole of the assessment year and if it is found that the unit undertaking expansion has exceeded the base production turn over in the whole of the assessment year then unit shall be entitled to avail the benefit of exemption from payment of tax only in respect of turn over, which is in excess of base production for the whole of the assessment year, which has to be declared under Rule 41(8). He submitted that object of Section 4-A of the Act and notification in grant of exemption was to increase and promote the industrial growth of the State but that purpose is being frustrated by. the approach by the Tribunal and the authorities below. Learned Standing Counsel supported the order of the Tribunal,
5. To adjudicate the issue involved in the present revision, it is necessary to refer Section 4-A of the Act, notification No. No. ST-11-1093/XI-7( 42)-86-U.P. Act-XV/48-Order-9l, dated 27.07.1991, Rule 41 and Section 7 (1-A) of the Act.
Section 4-A. Exemption from trade tax in certain cases.
(1) Notwithstanding anything contained in this Act, where the State Government is of the opinion that it is necessary so to do for increasing the production of any goods or for promoting the development of any industry in the State generally or any district or part of district in particular, it may on application or otherwise, in any particular case or generally by notification, declare that the turnover of sales in respect of such goods by the manufacturer thereof shall, during such period not exceeding twelve years from such date on or after the date of starting production as may be specified by the State Government in such notification, which may be the date of the notification or a date prior or subsequent to the date of such notification, and where no date is so specified from the date of first sale by such manufacturer if such sale takes place within six months from the date of starting production and in any other case from the date following the expiration of six months from the date of starting production, and subject to such conditions as may be specified be exempt from trade tax on sale of goods whether wholly or partly or be liable to tax at such reduced rate as it may fid:
Provided that no exemption shall be granted where the facility of concession or exemption has been availed under Section 4-AAA.
(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) generally 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 (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 only which are manufactured in a unit which has undertaken expansion, diversification or modernisation on or after April I, 1990, and which, in case of diversification are different from the goods manufactured before such diversification, and in the case of expansion or modernisation are additional production as a result of such expansion or modernisation; 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 he specified;
(e) with effect from a date prior to the date of the notification.
(5) "Unit which has undertaken expansion, diversification or modernisation" means an industrial undertaking-
(a) of a dealer who is not a defaulter in payment of any dues under this Act or the Central Sales Tax Act, 1956 or under any loan, scheme, administered by the Pradeshiya Industrial and Investment (Corporation of Uttar Pradesh regarding trade tax sale or purchase of goods;
(b) whose first date of production of goods,-
(i) of a nature different from those manufactured earlier by such undertaking in case of units undertaking diversification, and
(ii) manufactured in excess of base production in such undertaking in case of units undertaking expansion or modernisation, falls at any time after March 31, 1990;
(c) the production capacity whereof has increased by at least twenty five percent as a result of expansion or modernisation, or wherein goods of a nature different from those manufactured earlier are manufactured after diversification;
(d) wherein an additional fixed capital investment of at least twenty-five percent of such original fixed capital investment (without providing for depreciation) is made.
Notification No.ST-II-1093/XI-7(42)-86-U.P. Act-XV/48-Order-91, dated 27.02.1991.
WHEREAS the state Government is of the opinion that for promoting the development of certain industries in the state, it is necessary to grant exemption from or reduction in rate of tax to new units and also to units which have undertaken expansion, diversification or modernization:
NOW, THEREFORE, in exercise of the powers under Section 4-A of the Uttar Pradesh Sales Tax Act, 1948 (U.P. Act No. XV of 1948), hereinafter referred to as the "Act" the Governor is pleased to declare that :-
1(A) In respect of any goods manufactured in a 'new unit', other than the units of the type mentioned in Annexure II established in the areas mentioned in Column 2 of Annexure I, the 'date of starting production' whereof falls on or after first day of April, 1990 but not later than 31st day of March, 1995, no tax shall be payable, or, as the case may be, the tax shall be payable at the reduced rates, as specified in Column 4 of Annexure I, by the manufacturer thereof on the turnover of sales of such goods, for the period specified in Column 3 of the said Annexure I, or till the maximum amount of tax relief by such exemption from or reduction in the rate of tux as specified in Column 5 of annexure I is achieved, whichever is earlier. The period specified in Column 3 of the said Annexure shall be reckoned from the date of the first sale, or the date following the expiration of six months from the date of starting production, whichever is earlier.
(B) (I) in respect of any goods manufactured in a unit other than the units of the type mentioned in Annexure II, which 'has undertaken expansion, diversification or modernisation' or of after April 1, 1990 but no later than March 31, 1995, in the areas mentioned in Column 2 of annexure I, no tax shall be payable or, as the case may be, the tax shall be payable at the reduced rates specified in Column 4 of Annexure I, by the manufacturer thereof for the period in Column 3 of the said Annexure I, or till the maximum amount of tax relief by such exemption from or reduction in rate of tax as specified in Column 5 of annexure I is achieved, whichever is earlier, on the turnover of sales;
(a) of the quantity of goods manufactured in excess of the base production in the case of units undertaking expansion or modernisation; and
(b) of goods manufactured by the unit which are of a nature different from those manufactured earlier by such unit in the case of units undertaking diversification.
(2) the period of such facility shall be reckoned from the first date of production.
(i) of goods of a, nature different from those manufactured earlier by such unit in case of diversification; and
(ii) of goods manufactured in excess of the base production in the case of units undertaking expansion or modernization.
2. The facility of exemption from or reduction in the rate of tax shall be subject to the following conditions in addition to the conditions referred to in Section 4-A of the Act:
(i) that the 'new unit' is licenced or in respect whereof a letter or intent has been issued, or which is registered, permanently or otherwise, by the appropriate authority in accordance with any law for the time being in force relating to licencing or registration of such units;
(ii) that the new unit is established on land or building or both owned or taken on lease for a period of not less than fifteen years by such unit or allotted to such unit by the State or the Central Government or any Government Company or any Corporation owned or controlled by the Central or the State Government;
(iii) that the exemption from tax or, as the case may be, reduction in the rate of tax shall be admissible only in respect of such goods manufactured by the unit and such by-products and waste products as are mentioned in the eligibility certificate issued to such unit under Section 4-A of the Act;
(iv) that the said unit furnishes to the assessing authority concerned an eligibility certificate granted in this behalf by the General Manager, District Industries Centre, Area Development Officer (Industry) of the concerned Industrial Development Authority, Additional or Joint Director of Industries of the range or Additional or Joint Director of Industries of the concerned Industrial Development Authority, as the case may be.
3. 'Fixed capital investment' may, unless otherwise established, be determined in the case of an industrial undertaking financed by a term loan advanced by a public financial institution or a Scheduled Bank according to the certificate to that effect issued by such institution or the Bank and in any other case, according to-
(a) the value of the land certified by the Collector in accordance with the procedure laid down for determination of the value of land for the purpose of payment of, stamp duty under the Indian Stamp Act, 1899,
(b) the value of building certified by an evaluator approved by the Income Tax Department for the purpose,
(c) the value of plant, machinery, equipment, apparatus and components certified by a Chartered Accountant.
4. In determining the fixed capital investment as defined in clause (4) of the Explanation in case of 'new units' or 'additional fixed capital investment' referred to in sub-clause (d) of clause (5) of the Explanation in case of 'units which have undertaken expansion, diversification or modernisation' the investment in only such land, building, plant, machinery, equipment, apparatus and component or, as the case may be, such additional land, building, plant, machinery, equipment, apparatus and component shall be taken into account as were acquired on or before the relevant date of commencement of the period of facility notified under Sub-section (1) of Section 4-A of the Act,
5. Base production of unit undertaking expansion or modernisation 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.
ANNEXURE I ...............
ANNEXURE II ...............
RULE 41. Submission of returns and assessment of tax -
(1) Every dealer liable to tax, the aggregate of whose turnover, of purchases and sales in any assessment year exceeds rupees five lakhs, shall, before the expiry of the next succeeding month, submit to the Trade Tax Officer a monthly return of his turnover in Form IV, giving Annexure-1 and II thereof, detailed information, according to Code numbers notified by the State Government from time to time, in respect of each category of goods in which he carries on business:
Provided that the return for the month of February shall be submitted to the Trade Tax Officer on or before the twentieth day of March:
Provided further that the dealer may, instead of submitting a return as aforesaid, estimate his turnover for the years on the basis of the turnover admitted by him in his return, or disclosed in his account books, whichever is greater, for the immediately preceding year, calculate the amount of tax payable thereon and deposit a sum equal to one-twelfth thereof during each of the first two months of every quarter, and deposit the balance of tax due on the turnover admitted by him in his return for the relevant quarter, which shall be prepared and submitted in the manner laid down in this rule.
(8) Upon the expiry of the assessment year, the Assessing Authority shall, after such enquiry, as he may deem necessary, determine the turnover of sales or of purchases, or both, as the case may be, of the dealer in respect of the assessment year and shall assess the tax payable thereon;
Provided that in the case of a dealer to whom Sub-section (1) of Section 18 applies or owner or incharge of the vehicle to whom Sub-section (1) of Section 28-B applies, the assessing authority may make an assessment order and assess the tax payable thereon before the expiry of the assessment year:
Provided further that, before determining the turnover of the dealer to the best of his judgment, the assessing authority shall cause a notice to be served on the dealer, stating the reasons, for non-acceptance of the turnover of sales or purchases or both, as disclosed in the returns, if any, submitted by him and shall give him a reasonable opportunity of furnishing his reply thereto.
Section 7.
Determination of turnover and assessment of tux. (I) Every dealer who is liable to pay tax under this Act shall submit such return or returns of his turnover at such intervals, within such period, in such form and verified in such manner, as may be prescribed; but the Assessing Authority may in its discretion, for reasons to be recorded, extend the date for the submission of the return by any person or class of persons.
(1-A) Before submitting the return under Sub-section (1) or along with such return, the dealer shall deposit, in such manner as may be prescribed, the amount of tax due on the turnover shown in such return."
6. Under notification no tax shall be payable on the turn over of sales of the quantity of the goods manufactured in excess of the base production in the case of units undertaking expansion or modernisation. The base production has been defined in clause (5) of the notification means maximum production achieved during any one of the preceding five consecutive assessment years, or 80% of the installed annual production capacity, whichever is higher. Clause (6) of the notification says that a turn over of sale of goods in any assessment year to the extent of the quantity covered by production of that year and stock of base production of previous years shall be deemed to be the turn over of base production; b) only the turn over 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.
7. The only question for consideration is whether the exemption is permissible form the date on which unit achieved the base production, on the production in excess of base production in an assessment year. Further it is open to the unit to allocate the excess production on the basis of the estimated production to twelve months of the assessment year and claim exemption in the return filed for the each month as required under Rule 41. According to the applicant the date on which base production is achieved is not relevant and the total claim of exemption under Section 4-A of the Act on the excess production after base production should be allowed. In other word under the notification the claim is permissible under Section 4-A of the Act on the production in excess of base .production in an assessment year which can be claimed by the applicant from the very beginning itself. The submission is that if the exemption is allowed for the period after the date on which base production is achieved, the very object granting the exemption will be frustrated Submission is that before the date on which the base production is achieved, the applicant may have made sales within the Slate of U.P. against the declaration form on which there is no liability or the goods may have despatched the goods outside the State of U.P. by way of stock transfer or to its consignment agent for sale which are exempted from tax and for the subsequent period after the base production is achieved, the sales may made within the State of U.P. or in the course of inter-State sales may not be sufficient or less than the quantity of excess production alter base production and in that situation manufacturer would not be able to avail the full exemption. According to applicant this is not the object of the provision and the purpose of granting the exemption would be frustrated. Thus he submitted that the exemption in whole year to be considered and not during the period alter achieving the base production.
8. Let us look into the history of the exemption to the new unit. Initialy by the Government Order dated 01.10.1982 exemption was allowed on the turnover of the new unit only. Thereafter, the exemption to the new unit was allowed by introducing the new Section 4-A of the Act w.e.f. 12.10.1983 by U.P. Act No. 22 of 1984 under the said provision the benefit of exemption to the unit established upto 31.03.1990 was available only to the new unit. No benefit was available to the old unit. After 01.04.1990 Section 4-A of the Act was amended by Act No. 28 of 1991 and the benefit of exemption was also extended to the old unit undertaking the expansion or diversification, on the fixed capital investment invested for expansion or for diversification. The exemption was allowed only on the production in excess of the base production. Base production means maximum production in five consecutive years. This background shows that the intent of the Legislature was to give incentive to the old industry on the additional investment to increase the production. The exemption was however, confined to the production in excess to the base production. Now the point for consideration is that whether the exemption has to be considered at the end of the assessment year and the exemption under Section 4-A of the Act is attributed to the product on in excess of the base production which can be availed from the very beginning. Can it be said that under the provisions of the Act granting exemption under the expansion scheme on the production in excess to the base production the intent is to get tax on the turn over which falls within the limit of the base production. Answer appears to be in negative because the base production which may be considered as the production relating to the old unit or may from old machines if otherwise not taxable can not be held to be taxable. Namely, that if it is not taxable against the declaration form or the goods are despatched by way of stock transfer to own depot or to consignment agent, it can not be taxed under any provisions of the Act. Therefore, it appears that object of granting the exemption to the unit under gone expansion is to grant exemption on the production in excess of the base production which is to be considered at the end of the year and not to be considered from the date on which base production is achieved.
9. In the case of Modipon Ribres Co. v. CTT, reported in 2000 UPTC, 319. This Court has held that the exemption to the unit undergone expansion on the production in excess of base production is to be considered at the end of the year and not from the date on which base production is achieved. Relevant paragraph of the said decision is referred to herein below:
At the out set it may be pointed out that though several questions of law are framed in the memo of revision but the arguments have been advanced only in respect of the question whether the facility of exemption under Clause 6 (b) of the Notification dated 27th July, 1991 could be arrived at only at the end of the assessment year as submitted by Sri Bharatji Agarwal or from the date in any assessment year the base production is achieved. Perusal of clause 6 (b) as reproduced above would show that benefit of exemption to a unit is to be granted on turnover of goods in any assessment year in excess of the turnover of the quantity under sub-clause (a) of Clause (6). Sub-clause (a) of Clause (6) of the Notification provides that for the purpose of grant of facility under the Notification, the turnover of base production in any assessment year shall be the base production of that year as also the balance stock of base production of the previous year. For example sake as in the case of revisionist M/s Modipon Limited the base production according to the eligibility certificate was 9460 M.T. If this base production is achieved in any assessment year but the entire production is not sold then for the purposes of next year the turnover base production shall be balance of base production of previous year and the base production to the extent of 9460 M.T. of the assessment year for which assessment is being made. For example sake if in the Assessment Year 1993-94 the unit achieved base production of 9460 M.T. but is could sell only 9000 M.T. and 460 M.T. is closing balance of the Assessment Year 1994-95 then this closing balance of 460 M.T. shall be added to the base production of Assessment Year 1994-95 and turnover in respect of base production for the Assessment Year 1994-95 9460 M. T. plus balance of unsold base production of previous Assessment Year viz, 460 M. T. i.e. total turnover sale of 9920 M.T. in the Assessment Year 1995-96 shall be the turnover of base production. The facility of exemption from payment of tax shall be available at the end of the Assessment Year 1994-95 in respect of turnover in excess of the turnover of 9920 M. T. There is no dispute with regard to this proposition us emerges-out from reading of Clause 6. The only dispute is whether the facility of exemption can be availed after base production in the assessment year under consideration is achieved or the extent of exemption be worked out only at the end of the assessment year. It is note-worthy that in both sub-clauses (a) and (b) of Clause 6 of the Notification the words used are 'turnover of sale of goods in any assessment year.' The expression 'assessment year' means the twelve months ending on 31st March. From bare reading of Clause 6 of the Notification it is amply clear that the benefit of exemption is in respect of turnover of sale of goods in any assessment year in excess of the quantity as provided under sub-clause (a) of Clause 6. When assessment year means the period of twelve months, the extent of facility in any assessment year is completed. Therefore, it has to be held that the extent of facility of exemption which can be availed by a unit under the Notification can be worked out only at the end of the year."
10. In the case of case of Commissioner of Income Tax, Amritsar v. Straw Board Manufacturing Co. Ltd., reported in 1989 UPTC, 1300. Apex Court held that provision for concession for the purpose of encouraging industrial activity should be liberally construed.
11. In the case of Bajaj Tempo Ltd. v. Commissioner of Income Tax, Bombay City-III. Bombay, reported in 1992 UPTC, 857 Apex Court held as follows:
"The Section, read as a whole, was a provision, directed towards encouraging industrialization by permitting an assessee setting up a new undertaking to claim benefit of not paying tax to the extent of six per cent in a year on the capital employed. Rut the Legislature took care to restrict such benefit only to those undertakings which were new in form and substance, by providing that the undertaking should not be, 'formed' in any manner provided in Clause (I) of Sub-section (2) of Section 15-C. Each of these requirements, namely, formation of the undertaking by splitting up or reconstruction of an existing business or transfer to the undertaking of building, raw material or plant in any previous business results in denial of the benefit contemplated under subsection (I). Since a provision intended for promoting economic growth has to be interpreted liberally the restriction on it, too, has to be construed so as to advance the objective of the section and not to frustrate it. Hut that turned out to be the, unintended, consequence or construing the clause literally, as was done by the High Court for which it cannot be blamed, as the provision is susceptible of such construction if the purpose behind its enactment, the objective it sought to achieve and the mischief it intended to control is lost sight of. One way of reading it is that the clause excludes any undertaking formed by transfer to it of any building, plant or machinery used previously in any other business. No objection could have been taken to such reading but when the result of reading in such plant and simple manner is analysed then it appears that literal construction would not be proper."
12. In the case of CST v. Industrial Coal Enterprises, reported in 1999, reported in UPTC, 250. Apex Court while considering the provisions of Section 4-A of the Act held as follows:
"In Commissioner of Income Tax, Amristar v. Straw Hoard manufacturing C. Ltd., 1989 Suppl (2) SCC 523: 1989 U.P.T.C. 1300 (SC) this Court held that in taxing statutes, provision for concessional rate of tax should be liberally construed. So also in Bajaj Temp Ltd., Bombay v. Commissioner of Income Tax, Bombay City-III, Bombay, (1992) 3 S.C.C. 78: 1992 U.P.T.C. 857 (SC), it was held that provision granting incentive for promoting economic growth and development in taxing statues should be liberally construed and restriction placed on it by way of exception should be construed in a reasonable and purposive manner so as to advance the objective of the provision.
We find that the object of granting exemption from payment of sale tax has always been for encouraging capital investment and establishment of industrial units for the purpose of increasing production of goods and promoting the development of industry in the State. If the lest laid down in Bajaj Tempo Ltd. case (supra) is applied, there is no doubt whatever that the exemption granted tot he respondent from 9th August, 1985 when it fulfilled all the prescribed conditions will not cease to operate just because the capital investment exceeded the limit of Rs. 3 lakhs on account of the respondent becoming the owner of land and building to which the unit was shifted. If the construction sought to he placed by the appellant is accepted, the very purpose and object of the grant of exemption will be defeated."
13. In the result, all the revisions are allowed. Order of the Tribunal is set aside.