Heard Sri Bharat Ji Agrawal learned senior counsel appearing on behalf of the revisionist assessee and Sri B.K. Pandey learned standing counsel for the department. This revision under section 11 of the U.P. Trade Tax Act has been filed by the assessee against the order passed by the tribunal dated 14.5.2002.
The questions of law referred are as under: "(i) Whether in a large beverages manufacturing unit having high speed automatic machines and manufacturing aerated beverages or marketing in consumer convenient glass bottles, running of the factory or workshop is impossible unless such glass bottles and shells are used simultaneously in the machine itself for filling the beverages and under the circumstances whether the Tribunal was justified in overlooking this important aspect of the word 'fixed capital investment' under section 4A of the U.P. Trade Tax Act by merely relying upon the decision under the Bihar Act, namely, Bihar Deferment Rules, where the definition of 'fixed capital investment' is not identical and is restricted to 'fixed assets'?
(ii) Whether the Trade Tax department having allowed the investment made in bottles and crates to other beverages manufacturing units, namely, Brindaban Agro Industries Ltd., there is no justification whatsoever for the Tribunal in reversing the order of the Divisional Level Committee as the Divisional Level Committee has taken unanimous and identical decision in the case of the other beverages manufacturing units?
(iii) Whether the appeal filed on behalf of the Commissioner, Trade Tax being confined only to investment made in bottles and crates being included in the fixed capital investment and no other grievance having been made with regard to the period having been increased from ten years to fifteen years by the order dated 10th April, 2001 and the investment to be clubbed within five years, as contemplated in the notification dated 21st February, 1997 and the correction of the products description in the eligibility certificate, the Trade Tax Tribunal was not justified in setting aside the entire order of the Divisional Level Committee dated 10th April, 2001 allowing the review application on various other aspects also?
(iv) Whether the appeal filed on behalf of the Commissioner, Trade Tax having not been verified in accordance with rule 66 (2) of U.P. Trade Tax Rules, was liable to be dismissed on this ground alone, specially when paragraph 4 of the memorandum of appeal contains absolutely wrong facts while referring to the letter of 21st June, 1999 in the case of Moon Beverages by overlooking the fact that the said letter could not have been written in the present review proceedings before the Divisional Level Committee inasmuch as the eligibility certificate itself was granted on 26th May, 2000 and the review application was filed thereafter in 2000 which came up for consideration in March, 2001?
(v) Whether in any view of the matter, the order passed by the Trade Tax Tribunal dated 14th May, 2002 is illegal and is liable to be quashed?"
The facts of the case are that the assessee is a public limited company, which established a new industrial unit at 107 kms. Distance stone, Agra-Delhi Highway at Village Dautana, Tehsil Chhatta in the district of Mathura. The new unit established by the assessee applied for the grant of eligibility certificate under section 4A of the U.P. Trade Tax Act read with notification no. 640 dated 21.2.1997. According to the assessee, it made an investment of more than Rs.50 crores.
The assessee was granted an eligibility certificate on 26.5.2000 by the Divisional Level Committee constituted under section 4A of the Act. The exemptions were granted to the assessee for a period of ten years running from 15.4.1999 to 14.4.2009 or to the extent of 200% of the fixed capital investment of Rs.53,79,49,612/-, whichever was earlier.
The exemption certificate granted on 26.5.2000 stipulates that it was granted for the goods, which were manufactured by the assessee as mentioned in the eligibility certificate. The goods described in the eligibility certificate are mentioned as "carbonated Soft Drinks, Aerated Drinks packed in glass containers". Subsequently the assessee applied for a review of the eligibility certificate and sought extension of the period from ten years to fifteen years as the same was being allowed at that time. In this review application, the assessee also sought exemptions for fixed capital investment made by it in glass bottles and crates claiming that these items were essential for the manufacture of soft drinks and for running a beverage unit.
It was also brought to the notice of the reviewing authority that in the case of other similarly placed manufacturers such as Brindaban Agro Industries and others, exemptions have been allowed on bottles and crates as fixed capital investment.
The assessee has claimed exemptions on bottles and crates as 'fixed capital investment' under the provisions of Explanation (4)(b)(i) to section 4-A of the Act, which reads as hereinunder:
"(4) "Fixed capital investment" means value of land and building and such plants including captive power plant, machinery, equipment, apparatus, components, moulds, dyes, jigs and fixtures, as have not been used in any other factory or workshop in India :
Provided that -
(a) .....
(b) for the purposes of determining value of plants including captive power plant, machinery, equipment, apparatus, components, moulds, dyes, jigs and fixtures only the following shall be taken into account :- i. investment, whether by means of purchases, hire or lease in such plant, equipment, apparatus, components and machinery, as is necessary for the establishment or running of the factory or workshop;"
The review application of the assessee was allowed by the order of the Divisional Level Committee on 10.4.2001. It is the assessee's case that even though the Trade Tax department made no demur before the Divisional Level Committee nor any dissent, yet the Commissioner, Trade Tax filed an appeal against the order dated 10.4.2001 being appeal no. 95 of 2001.
The appeal of the Commissioner, Trade Tax has been allowed on the basis of a judgment given by the apex court in the case of State of Bihar versus Sarveshree City Beverages Limited reported in 12 STC 185, wherein the apex court has given meaning to the definition of 'fixed capital investment' under Rules 2 and 3 of the Bihar Deferment Rules and has confined the ;fixed capital investment' to plant and machinery.
Learned counsel for the assessee has argued that the decision in the Bihar case will not apply to the facts and circumstances of the present case as the definition of the fixed capital investment in the Bihar Deferment Rules, is completely different from the definition of the 'fixed capital investment', which is given in Explanation (4)(b) of section 4-A of the U.P. Trade Tax Act.
Sri Bharat Ji Agrawal has argued that the above provisions of the U.P. Trade Tax Act includes not only plants and machinery but also includes apparatus, components, moulds, dyes, jigs and fixtures. His argument is that the glass bottles and crates are the absolutely necessary for the unit of soft drink as without the use of these apparatus, the manufacture of soft drink would not be complete. He has also argued that unit of the assessee is the captive industry which is a one-line process in which liquid is being manufactured by way of the continuous process and bottled in the glass bottles and thus, the bottles and crates which are used for collecting the liquid soft drink are absolutely essential for the running of the beverage factory and therefore should be included within the meaning of "apparatus" used for the Explanation itself. Learned counsel for the assessee has relied on a decision in the case of Commissioner of Income-Tax versus Saurashtra Bottling Pvt. Ltd. reported in (1998) 147 CTR Reports) 115 wherein also the Gujarat High Court has come to the conclusion that bottles and shells (crates) were essential for the manufacture of soft drink and therefore they would be treated as "fixed capital investment".
Learned standing counsel on the other hand has relied on Bihar's case and has said that "bottles and crates" cannot be treated or either plants and machinery nor are they are essential for the manufacture of soft drink nor essential for running of a factory setting up for manufacture of soft drink.
Having heard learned counsel for both sides and having perused the material on record as well as the Statute, I am of the view that for the manufacture of soft drink, the bottles and crates are essential apparatus especially in a captive industry where the liquid which is prepared and collected by way of a continuous process in the bottles and thereafter kept it in crates and therefore they (bottles and crates) are to be accepted as "apparatus" within the meaning of Explanation (4)(b)(i) to section 4-A of the U.P. Trade Tax Act.
Thus the questions in respect of it being treated as "fixed capital investment" are to be answered in favour of the assessee and against the department.
In so far as the issue of setting aside the entire order including the order passed in the review to the extent of time period from ten years to 15 years is concerned, the order passed by the tribunal enveloping that part of the order passed by the Divisional Level Committee also is bad as there is no discussion why the review order on this point has been set aside, especially in view of the fact that the department when it went in appeal had made no prayer that the period of exemption should be cut down from 15 years as granted in the review to any other period. Therefore this part of the order in appeal is also bad and is set aside. However the exemptions granted for 15 years will continue.
Thus all questions are answered in favour of the assessee and against the department. The order of the tribunal dated 14.5.2002 is set aside.
The revision is allowed as above. No costs. Dated 19.1.2010 rk.
Order Date :- 19.1.2010 rk