WINSTON OIL INDUSTRIES Vs. STATE OF U P

JUDGEMENT

(1.) This petition is directed against the decision of the Divisional Level Committee dated May 12, 1987, rejecting the review petition filed by the petitioner claiming exemption under section 4-A of the U. P. Sales Tax Act, 1948, on the ground that it was a new unit which fulfilled all the requirements entitling it to the grant of eligibility certificate under the provision. The review petition has been rejected by the Divisional Level Committee on two grounds : (i) that the petitioner's unit having already started production in May, 1985, whereas the term loan was obtained from the State Bank of India in July, 1985, it could not be contended that petitioner's unit was established after the loan had been obtained from the Bank within the meaning of sub-clause (a) of clause (1) of the explanation to the notification granting exemption under section 4-A. (ii) that the lease upon which the petitioner's unit had been established was for less than seven years and consequently the petitioner could not claim the benefit of the notification issued under section 4-A. Having heard the learned counsel for the petitioner and the learned Standing Counsel, we are of the opinion that neither of these two grounds is sustainable in law. The second ground is easily disposed of. The requirement that the lease of land on which the unit claiming the benefit of section 4-A is established should he for a period of more than seven years admittedly came into existence sometime in 1986, i. e. , subsequent to the date on which the petitioner's unit was established or even the application of the petitioner was filed. The Divisional Level Committee was hence clearly in error in rejecting the petitioner's request on that ground. Coming to the first ground, the position is that under sub-clause (a) of clause (1) of the explanation appended to the Notification dated January 29, 1985, whereunder exemption was granted in respect of units established with a capital investment of less than three lakhs, the requirement is that it should either be registered under the Factories Act, 1948, or established after obtaining a term loan from the U. P. Financial Corporation or a Scheduled commercial bank. The undisputed position is that though the petitioner had applied for a term loan in May, 1985, the same was sanctioned by the State Bank of India on July 11, 1985. Under the terms of the loan the payments were to be made by the State Bank of India directly to the sellers from whom the petitioner had purchased the machinery. The assertion of the petitioner is that he had purchased the machinery on credit from the persons to whom the payment was to be made by the State Bank directly after it sanctioned the loan. The further assertion is that the machinery was installed in the petitioner's unit only after he had obtained the loan whereupon the manufacture of grease commenced. These assertions have remained uncontroverted in the counter-affidavit which has been filed on behalf of the respondent. Indeed paragraphs 8, 9 and 10 in which these assertions have been made have been admitted in paragraph 3 of the counter-affidavit. Facts which emerge out of the pleadings of the parties, therefore, are that the machinery was purchased by the petitioner on credit before the actual sanction of the loan but the machinery was installed after the loan was disbursed whereupon the production of grease started. On these facts the petitioner's case clearly fell within the purview of explanation (1) (a ). In our opinion, the combined effect of all these facts is that the petitioner's unit would be deemed to have been established after the term loan was obtained. The petitioner was hence clearly entitled to the grant of eligibility certificate. The Divisional Level Committee, in our opinion, has committed a patent error in declining to grant the eligibility certificate to the petitioner. In the result the petition succeeds and is allowed. The impugned orders passed by the Divisional Level Committee dated August 22, 1986 and May 12, 1987 (annexures 8 and 11) are quashed. The Divisional Level Committee is also directed to grant the requisite eligibility certificate to the petitioner within one month of the date on which a certified copy of this order is submitted before the Joint Director of Industries, Meerut, the convenor of the Divisional Level Committee. A copy of this order may be given to the learned counsel on payment of requisite charges within a week. Writ petition allowed. .