Heard Shri S.D.Singh, counsel for the revisionist and Shri B.K.Pandey, counsel for the department.
This trade tax revision under Section 11 of the U.P. Trade Tax Act is directed against the order of the Trade Tax Tribunal dated 11.10.2001 passed in Second Appeal No. 152 of 2000 insofar as it directs that the applicant shall not be entitled to the benefit of Section 4-A of the U.P. Trade Tax Act, 1948 (herein after referred to as the Act, 1948) qua the investment of Rs.16,74,368/- made towards purchase of dyes and moulds, as also in respect of expenditure made towards purchase of Hydraulic Oil to the tune of Rs.61,468/-.
Before this Court, the relief prayed for in this Revision has been confined to the first part of the order of the Tribunal insofar as it refuses benefit of Section 4-A in respect of the investment made towards dyes and moulds only. Therefore, facts recorded hereunder are with reference to the relief as has been pressed before this Court.
The Revisionist before this Court is a Company incorporated under the Companies Act. It has set up a manufacturing unit at plot no. 59 Birthyan-Mandhana, Kanpur Dehat. The unit is engaged in manufacture of plastic ware and thermo ware. The Company claiming to be a new unit, made an application for grant of exemption in terms of Section 4-A read with the notification published on 27.07.1991 for the period 01.04.1990 to 31.03.1995. For the purposes of claiming the said exemption, the assessee disclosed a total investment of Rs.1,01,32,466.82 in plant and machinery. As against this amount of investment and fixed asset claimed by the revisionist, a sum of Rs.16,74,368/- said to be the price of dyes and moulds has been excluded there from under the impugned order.
The Divisional Level Committee under its order dated 22.09.2000 refused to provide the benefit of the investment qua the said sum of Rs.16,74,368/- as the same has been made towards moulds and dyes. Under Explanation 4 to Section 4-A of the Act, 1948 the words ?dyes, moulds, zigs and fixtures? have been added only by the U.P. Amendment Act, 1995 (herein after referred to as the Amendment Act, 1995) enforced on 25.08.1995. Such subsequent amendment being prospective in nature could, therefore, necessarily mean that the fixed capital investment made towards dyes, moulds, zigs and fixtures were not to be taken into consideration for working out the total value of fixed capital investment on the relevant date.
It is on similar reasoning that the Tribunal has rejected the Second Appeal filed by the revisionist and has refused the benefit of the investment made towards dyes, moulds, zigs and fixtures.
It would be appropriate to reproduce the relevant part of the order of the Tribunal which reads as follows :
?Ubhay Pakshon Ko Sunne Tatha Patravali Per Uplabdh Lekh Patron Ke Parisheelan Se Samiti Ka Aadesh Purntaya Suvicharit Pratit Nahi Hota Hai. Uttar Pradesh Adhiniyam 31/1995 Dwara Dhara 4-A Ke Spashtikaran (4) Mein Sanshodhan Karke Dinank 01.04.1995 Se Lagu ?Vyapaar Kar Chhoot? Yojna Mein Dyes/Moulds Per Vinidhan Ko Sthir Punji Viniyam Mein Sammilit Kiya Gaya Hai/ Apeelkarta Ka Yathaparibhashit Utpadan Prarambh Karne Ka Dinank Ukt Ke Purva Ka Hone Ke Karan Uprokt Sanshodhan Appelkarta Per Lagu Nahi Hota Hai. Atah Dyes/Mould Per Vinidhan Ke Sambandh Mein Appelkarta Ko Koi Labh Anumanya Karna Sambhav Nahi Hai.?
Challenging the findings so recorded by the Divisional Level Committee as well as by the Tribunal, counsel for the revisionist submits that it is no doubt true that the words ?dyes, moulds, zigs and fixtures? have been added to Explanation 4 to Section 4-A vide Amendment Act, 1995 and further that the amendment is prospective in nature, yet the dyes and mould used in the manufacturing process by the revisionist were essential part of the plant and machinery for carrying on his manufacturing activity in the goods referred to above. Therefore, the investment did answer the description of plant and machinery under Explanation 4 to Section 4-A as it stood prior to its amendment. Both Divisional Level Committee as well as Tribunal failed to appreciate the aforesaid aspect of the matter and refused the benefit of investment only on the ground that the words ?dyes, moulds, zigs and fixtures? have been subsequently introduced to Explanation 4 to Section 4-A vide Amendment Act, 1995. He clarifies that the investment made towards ?dyes and moulds, in the facts of the case were essential and integral part of plant and machinery used for manufacture of the goods in terms of the notification dated 27.07.1991, same would be a fixed capital asset, the value whereof had to be added for the purposes of Section 4-A.
Mere adding of the words ?dyes, moulds, zigs and fixtures? by the said Amendment Act, 1995 will not have the effect of denying to the revisionist the benefit of investment so made. For the proposition so raised, reliance has been placed upon the judgment of the Apex Court in the cases of M/s. Pappu Sweets & Biscuits etc. vs. Commissioner of Trade Tax, U.P. reported in 1998 U.P.T.C., 1086, Scientific Engineering House (P) Ltd. vs. Commissioner of Income Tax, Andhra Pradesh reported in (1986) 1 SCC, 11 and lastly upon the Single Judge judgment of the Rajasthan High Court in the case of Commissioner, Commercial Taxes Department vs. R.B.Garg and Brothers and another reported in Sales Tax Cases (Vol. 128), 508.
Counsel for the Department in reply submits that it is well settled that Explanation 4 to Section 4-A of the Act, 1948 is in the nature of an exemption to the liability to pay the tax. This exemption clause should be strictly interpreted as has been repeatedly laid down by the Apex Court. He placed reliance upon the judgment of the Apex Court in the case of State of U.P. and others vs. Mahindra & Mahindra Ltd. reported in JT 2011 (5) SC, 448 specifically paragraph 10. He further contends that Explanation 4 to Section 4-A of the Act, 1948 starts with the word 'means', therefore, it necessarily follows that the definition is exhaustive. No words can be added to the said Section by interpretation. He clarifies that it is within the domain of the State Government to provide exemption only in respect of such investments as the State Government may deem fit and proper. It is not a part of judicial discipline to extend the benefit of exemption on equitable consideration by the Court. According to the counsel for the department the Explanation 4 to Section 4-A as it stood on the relevant date did not contain the words ?dyes, moulds, zigs and fixtures?, therefore, any investment in that regard had rightly not been taken into consideration by the Divisional Level Committee as well as by the Tribunal. The legal position in that regard stands clarified with the adding of the words ?dyes, moulds, zigs and fixtures? to Section 4 by the Amendment Act, 1995. He, therefore, submits that no interference be made against the order of the Tribunal.
I have heard learned counsel for the parties and have gone through the records of the present writ petition.
It is an admitted position that on the date fixed capital assets was to be computed qua the revisionist, the relevant Explanation 4 to Section 4-A reads as follows :
?(4) ?Fixed Capital Investment? means investment in land and building and such plant, machinery, equipment, apparatus and components as have not been used or acquired for use in any other factory or workshop in India.?
Clause B of the proviso to Explanation 4 in turn provided as follows :
?(b) for the purposes of determining investment in plant, machinery, equipment, apparatus and components and machinery as is necessary for the establishment or running of the factory of workshop;?
It is further not in dispute that by Amendment Act, 1995, the change introduced in Explanation 4 relevant for our purposes reads as follows :
?for the words ?plants, machinery, equipment, apparatus and components?, wherever occurring, the words ?plants, machinery, equipment, apparatus, components, moulds, dyes, jigs and fixtures? shall be substituted.?
From the aforesaid, it cannot be disputed that up to the date of enforcement of U.P. Act No. 31 of 1995 the words ?dyes, moulds, zigs and fixtures? did not form part of Explanation 4 to Section 4-A and similarly did not form part of the notification dated 27.07.1991. Further such amendment has been introduced on a date which is subsequent to the relevant date in the facts of the present case and that the amendments are prospective in nature.
The issue to be examined by this Court as has been canvassed by the counsel for the revisionist is whether the moulds and dyes qua which investment has been made by the revisionist and is claimed as capital fixed asset, answers the description of plant and machinery or not with reference to the language of Section 4-A read with Explanation 4 and the notification dated 28.07.1991as it then stood or not.
The Apex Court in the case of M/s. Pappu Sweets & Biscuits etc. (Supra) in paragraph 8 as laid down reads as follows :
?It is true that dictionary meaning of the word 'sweetmeat' is very wide and any food which is sweet and rich in sugar can be described as 'sweetmeat'. Toffee is a confection of sugar and other materials and being rich in sugar would be 'sweetmeat' in its wider sense. But for deciding whether toffee is 'sweetmeat' as contemplated by the exemption Notification, what is required to be considered is the object of the notification and the context in which that word is used in the notification.?
The Apex Court dealt with an identical contention as raised by counsel for the appellant in the case of M/s. Pappu Sweets & Biscuits etc. (Supra) in paragraph 13 is being quoted herein below :
? I think it is clearly established in Attorney General vs. Clarkson that subsequent legislation may be looked at in order to see the proper construction to be put upon an earlier Act where that earlier Act is ambiguous. I quite agree that subsequent legislation if it proceeded on an erroneous construction of previous legislation cannot alter that previous legislation; but if there be any ambiguity in the earlier legislation, then the subsequent legislation may fix the proper interpretation which is to be put upon the earlier Act.?
It may also be noticed that the Apex Court in the case of Scientific Engineering House (P) Ltd. (Supra) in paragraph 11 considered the meaning to be attached to the expression 'plant' and after referring to the various judgments on the subject, it proceeded to hold that whether a particular thing answers the description of plant or not, functional test is essential and necessary. The Apex Court in last part of paragraph 12 held as follows :
?In other words the test would be : Does the article fulfil the function of a plant in the assessee's trading activity? Is it a tool of his trade with which he carries on his business ? If the answer is in the affirmative it will be a plant.?
Counsel for the revisionist elaborating on the issue submitted before this Court that there may be dyes and moulds which may not be said to be an integral and essential part of plant and machinery used for manufacture of the goods and may, therefore, be said to be not included therein. At the same time in manufacturing unit like that of the revisionist, dyes and moulds are integral part of plant and machinery as no manufacturing activity can be carried on unless the dyes and moulds are provided for. He submits that in such case the investment made towards dyes and moulds would be an investment covered by the definition of plant and machinery as per Section 4-A Explanation 4 read with notification dated 27.07.1991. Therefore, the subsequent amendment by Act of 1995 is not of much consequence for examining the entitlement of the revisionist for computing the fixed capital assets in terms of the provisions applicable on the relevant date.
The Divisional Level Committee and the Tribunal have refused the benefit of investment so made towards dyes and moulds only because of introduction of the words 'dyes and moulds' by a subsequent amendment in Section 4-A which under the order impugned has been held to be a conclusive proof of the fact that investment towards dyes and moulds will not be taken into account for the purposes of calculating the fixed capital assets for any earlier period.
This Court may record that absolutely no findings have been recorded by the Divisional Level Committee or by the Tribunal as to whether the dyes and moulds, investment whereof has been made by the revisionist, form an integral and necessary part of the plant and machinery of the petitioner manufacturing unit or not and as to whether in absence of such dyes and moulds, could it be said that the plant and machinery was complete in itself.
This Court is of the opinion that no doubt the definition as contained in Explanation 4 to Section 4-A of the Act, 1948 is inclusive in view of the use of the word 'means' and further no addition can be made thereto by this Court, yet the Tribunal should have examined as to whether the investment made towards dyes and mould in the facts of the case would be covered by investment towards plant and machinery or not.
Merely because there has been mention of the words dyes and moulds in the details furnished by the revisionist towards capital fixed investment, it can not be said that the same were not an essential part of plant and machinery. Relevant facts did require examination for the purpose which has not been done. The Apex Court in the case of M/s. Pappu Sweets & Biscuits etc. (Supra) has explained that the object of the notification and the context in which that words are used in the notification have to be examined. The Tribunal has failed to do so.
At this stage the Court may refer to the judgments relied upon by the counsel for the Department. There can be no two opinions about the definitions as contained in Explanation 4 to Section 4-A being inclusive and exhaustive because of the use of the word ?means' as has been explained by the Apex Court in the case of Commissioner Trade Tax vs. Kajaria Ceramics (P) Ltd. reported in 2006 U.P.T.C., 85. Similarly, there cannot be any quarrel with the proposition that it is within the domain of the State Government to provide exemption to such extent and in respect of such items as it may so desire. The legal position in that regard has also been well settled by the Apex Court. (Reference: State of U.P. and others vs. Mahindra & Mahindra Ltd. (Supra).
Yet the factual aspect of the matter as noticed herein above had to be examined by the Tribunal in light of what has been held above. The issue as to whether the investment made towards dyes and moulds by the revisionist in the facts of the case would answer the description of investment towards plant and machinery as was provided for under the un-amended act has to be gone into with reference to the material fact relevant for deciding the same. Accordingly, the order of the Tribunal dated 11.10.2001 is hereby set aside. The second appeal no. 152 of 2000 is restored to its original number. Let the Tribunal re-examine the matter in light of the observations made herein above, preferably within three months from the date a certified copy of this order is filed before it.
Trade Tax Revision is allowed.
Dated : 18.07.2011 VR/TTR 612/2002