MODIPON FIBRES CO Vs. SURYA ROSHINI LTD

JUDGEMENT

(1.) P. K. JAIN, J. The revisionist-company, M/s. Modipon Fibres Co. , revisionist T. T. R. Nos. 1071 of 1997 and 1072 of 1997 deals in production and sale of nylon and polyester yarn. It was granted an eligibility certificate under 73ection 4-A of the U. P. Trade Tax Act, 1948 under notification No. 1093 dated July 27, 1991. For the assessment year under consideration the revisionist disclosed total production at 1,22,22,826 metric tonnes. It disclosed sales of 3,13,206 metric tonnes in State of U. P. and 1,008. 55 metric tonnes as inter-State sales, 10,461,189 metric tonnes of goods were shown as stock transfer. The assessee thus claimed that total sale of the goods was equal to 1,17,82,945 metric tonnes. The base production according to the eligibility certificate granted to the dealer was 9,460 metric tonnes. It claimed exemption from payment of tax on turnover of sales of goods weighing 23,22,945 metric tonnes. The assessing authority however, granted exemption to the extent of turnover from the sale of 13,21,756 metric tonnes of goods. The claim of the revisionist was rejected on the ground that the base production was obtained till 4th January, 1993 and, therefore, the exemption from payment of tax can be granted only after base production is achieved. The admitted tax liability in U. P. was enhanced to Rs. 14,48,125 and in Central sales tax the admitted tax liability of Rs. 4,10,357 was enhanced to Rs. 55,50,712. The revisionist filed two appeals before the Deputy Commissioner (Appeals) which were allowed by the first appellate authority by order dated February 4, 1997 and declared tax liability was accepted. The department felt aggrieved and filed two appeals being Appeal No. 70 of 1997 for U. P. and Central, which were allowed by the Trade Tax Tribunal, Ghaziabad, by judgment and order dated September 24, 1997. By setting aside the orders passed by the first appellate authority the assessment orders were restored by the Tribunal. The dealer feeling aggrieved by the orders of the Tribunal has filed these two revisions. The dealer-opposite party in T. T. R. Nos. 682 of 1999, 702 of 1999, 703 of 1999 and 704 of 1999 carried on business of manufacture and sale of bulbs, etc. In view of the provisions contained in Notification No. 1093 of July 27, 1991 issued by the State of Uttar Pradesh under section 4-A of the U. P. Trade Tax Act, the dealer was granted eligibility certificate on the ground that the unit had undertaken expansion after April 1, 1990. In assessment year 1994-95 the assessee admitted U. P. tax liability of Rs. 41,88,937 and Central tax liability of Rs. 27,51,217 which was enhanced by the assessing authority to Rs. 85,15,050 and Rs. 39,96,534 respectively. In assessment year 1995-96 the dealer admitted tax liability of Rs. 44,21,789 in U. P. and Rs. 12,69,798 in Central which was enhanced to Rs. 1,15,81,829 in U. P. and Rs. 42,31,076 in Central. The dealer filed First Appeal Nos. 60 of 1998 and 61 of 1998 for assessment year 1994-95 (U. P.) and Central and First Appeal Nos. 518 of 1998 and 519 of 1998 for U. P. and Central respectively. The Deputy Commissioner of Appeals, Haldwani dismissed both the appeals for the assessment year 1994-95 and U. P. appeal for assessment year 1995-96. He allowed appeal Central No. 519 of 1998 and remanded the matter to the assessing authority for reassessment according to the directions given in its order. The dealer felt aggrieved and filed Second Appeal Nos. 187 of 1998 and 189 of 1998 for assessment years 1994-95 and 1995-96 U. P. and Second Appeal Nos. 188 of 1998 and 190 of 1998 for assessment years 1994-95 and 1995-96 (Central ). The Tribunal allowed all the appeals and directed the assessing authority to reassess the revisionist in the light of the observations made in the body of the judgment. The dispute before the Tribunal in four-second appeals was as to from which date the dealer was entitled to exemption. The dealer had expanded his unit from the middle of the assessment year 1994-95. The Tribunal took the view that dealer will be entitled to exemption considering the total turnover of the assessment year. The Tribunal further took the view that if closing stock of a particular assessment year has already been added in the first year and has been assessed to tax then the said closing balance cannot be carried forward. In this regard the Tribunal relied upon circular letter of Commissioner of Trade Tax dated February 27, 1993. Tribunal also took the view that for the purposes of arriving at the quantum of benefit, date of production in excess of base production shall not be relevant, the calculations for purposes of granting benefit shall be made on turnover of entire year including the production in excess of base production. In Central appeals the dispute related to the sales made against the form C. The assessing authority as well as the Deputy Commissioner of Appeals did not grant benefit. The Tribunal, however, in view of the correction made by the State Government by notification dated July 18, 1998 took the view that the correction in the notification dated July 27, 1991 by the said notification dated July 18, 1998 shall be deemed to be from the date of earlier notification dated July 27, 1991 and the dealer shall be entitled to benefit of sales against form C. Aggrieved by the orders of the Tribunal in the second appeals the department has filed the aforesaid revisions. In Trade Tax Revision Nos. 1071 of 1997 and 1072 of 1997 Sri Bharat ji Agrawal, learned Senior Counsel assisted by Sri Piyush Agrawal, has been heard for the revisionist and Sri R. D. Gupta, learned Standing Counsel appearing for the Revenue has been heard. In T. T. R. Nos. 082 of 1999, 702 of 1999, 703 of 1999 and 704 of 1999 Sri B. K. Pandey, learned Standing Counsel appearing for the department and Sri Bharat Ji Agrawal, learned Senior Counsel appearing for the dealer assisted by Sri Piyush Agrawal have been heard at length. The submission of Sri Agrawal in all revisions is that the purpose of granting of exemption by issuing notification dated July 27, 1991 was to promote the development of certain industries in the State and by the said notification exemption from payment of tax or reduction in rate of tax was granted to new units as also to the units which had undertaken expansion, diversification or modernisation. The units of the dealers in all the revisions are units, which had undertaken expansion/modernisation. It is submitted that the units of the dealers are covered by clause (1-B) (a) of the notification; exemption granted is on the turnover of the sales of quantity of goods manufactured in excess of base production; that under clause 6 (a) of the said notification turnover of sale of goods in any assessment year to the extent of the quantity covered by base production of that year and balance stock of base production of previous years shall be deemed to be turnover of the base production. Under clause 6 (b) of the notification the facility of exemption can be availed only on the turnover of goods in any assessment year in excess of the quantity referred to in sub-clause (a) of clause 6. Submission of Sri Agrawal is that the exemption is granted on consideration of the turnover of the whole of the assessment year. Therefore, the limit of exemption can be arrived at only at the end of the assessment year and the view taken by the assessing authority in all the cases that the exemption under the said notification shall be granted only from the date, the production in excess of base production is achieved, is not correct. His submission is that the base production has to be seen at the end of the assessment and the extent of actual exemption will depend on the results of the whole year and the dealer can reasonably estimate that his turnover would exceed the base production and make a rational estimate and claim exemption on a month to month estimated basis. The claim of the department on the other hand is that the question of claiming exemption would arise only when the base production is achieved. The department's contention is that it is only after reaching the base production that the dealer is entitled to claim exemption in respect of turnover in excess of the base production. The assessing authority has, therefore, taken a right view that till the base production is not achieved the dealer is not entitled to any exemption. Sri Pandey has vehemently argued that combined reading of clause (1-B) and clause (2) (ii) of the notification dated July 27, 1991 would show that the base production has to be achieved first, and it is only thereafter that the question of exemption on the turnover of production in excess of base production can be considered. To supplement his argument Sri Pandey, has referred to the provisions of section 7 (1) read with rule 41 (1) and has submitted that the dealer is required to file monthly returns on the basis of actual turnover and not on hypothetical basis. He is also required to deposit the admitted tax at the time of filing of monthly return. He also submits that in case the contention of the assessee is accepted then the provisions of section 7 (1) read with rule 41 (1) and the notification under consideration cannot be interpreted harmoniously. In T. T. R. Nos. 1071 and 1072 of 1997 following questions of law are framed : (i) Whether the turnover in excess of base production and in excess of quantity referred to in clause 6 (a) of the notification dated July 27, 1991 has to be seen at the end of year and if in any assessment year turnover of goods after March 31, is found to be in excess of base production then the manufacturer is entitled for exemption ? Whether the Tribunal was not justified in restricting the exemption on the turnover from January 4, 1993 to March 31, 1993 ? (ii) Whether Tribunal was not justified in upholding the levy of interest under section of the U. P. Trade Tax Act in respect of the decision of a division Bench of this Court in the case of Annapurna Biscuit Factory v. State of U. P. [1982] 50 STC 56; 1980 UPTC 1320 ? In Trade Tax Revision Nos. 682 of 1999, 702 of 1999, 703 of 1999 and 704 of 1999 the questions of law which arise for determination are : (i) Whether, in the facts and circumstances of the case, the Trade Tax Tribunal was justified : (a) to accept the tax liability of the admitted tax in respect of the goods under expansion Scheme as disclosed by the dealer which was calculated by him in contravention of the provisions of Notification No. 1093 of July 27, 1991, clause 6 (b) as well as the principles laid down by the Tribunal in its judgment ? (b) to grant exemption on turnover of certain goods in the absence of the mandatory declaration forms even without its mention in its judgment ? To appreciate the arguments advanced by the learned counsel for the parties it would be proper to reproduce the relevant provisions of the notification dated July 27, 1991 and some of the circulars relied upon by the parties. Relevant provisions of notification dated July 27, 1991 being Notification No. ST-2-1094/xi-7 (42)/86-Act, 74/56 - Order-91 are reproduced as below : Whereas the State Government is of the opinion that for promoting the development of the 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 modernisation; Now, therefore, in exercise of the powers under sub-section (5) of section 8 of the Central Sales Tax Act, 1956 (Act No. 74 of 1956) (hereinafter referred to as "the Act") the Governor is pleased to declare that - (1-A ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1-B) 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' on or after April 1, 1990 but not 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 specified 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 the goods manufactured in excess of the base production in the case of units undertaking expansion or modernisation.

(2.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (i) to (iii ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3.) BASE production of a 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.