PRIME CHEMICAL INDUSTRIES Vs. STATE OF UTTAR PRADESH

JUDGEMENT

(1.) SHORT but substantial question involved in this petition is whether the capital investment in respect of an industrial unit eligible for exemption under section 4-A of the U. P. Sales Tax Act made up to the date of "first sale", is to be taken into account for the purposes of determining the period of exemption in accordance with the table given in the relevant notification No. ST-II-7558/x-9 (208)-1981-U. P. Act XV-48-Order-85, dated December 26, 1985, or it is the investment up to the date of "first production" which alone is relevant for the purposes of determining the period of exemption ? We have heard Sri Bharatji Agarwal, learned counsel appearing for the petitioner and also the learned Standing Counsel appearing for the respondents. Matrix of facts is that the petitioner was granted exemption by order dated April 20, 1989 for a period of three years commencing from April 29, 1987 which was admittedly the date of "first sale". He applied for review claiming exemption for a period of five years on the ground that the total capital investment in the unit exceeded Rs. 3 lacs as on date of "first sale", i. e. , April 29, 1987. A perusal of the order dated September 30, 1989 annexed as annexure 7 to the writ petition, indicates that the review stood rejected on the ground that the petitioner's investment was less than Rs. 3 lacs on the date of "first production", namely, March 10, 1987 and therefore, it was entitled to exemption only for three years with effect from April 29, 1987-the date of "first sale". The order further indicates that the investment in the machinery made on March 24, 1987, that is to say, investment made before the date of "first sale", was ignored for the purposes of reckoning the period of exemption under the notification aforestated. The question as stated hereinbefore, arises as to whether the investment made up to the date of "first sale", has to be taken into consideration for the purposes of determining the period of exemption provided in the table mentioned in the notification aforestated or it is the investment up to the date of first production which is relevant, for determining the period of exemption. Having devoted our anxious consideration to the question, we are of the view that since the "first sale" has taken place within a period of six months from the date of starting production, the period of exemption specified in column 3 of the table appended to the notification, would begin to run from the date of "first sale", as would be evident from the expression, "which shall he reckoned from the date of 'first sale', if such sale takes place not later than six months from the date of starting production". It is only if the "first sale" takes place on a date later than six months from the date of starting production, i. e. , in other cases that the period is reckoned from a date "following expiration of six months from the date of starting production" as provided for in the notification. Explanation (1) (e) also provides that for the purposes of exemption, all the conditions specified in the Act or the Rules or the notification, in regard to grant of exemption must he fulfilled on the date from which such facility may he granted and since the facility is to be reckoned from the date of first sale, in the instant case, the investment preceding the date of first sale has to he taken into account for the purposes of determining the period of exemption. It is evident from explanation (1) (e) that eligibility for exemption may be acquired on fulfilment of the condition as to the capital investment amongst other conditions specified in the section "on the date from which such facility may be granted to him" and since in the present case, facility is to be granted to the petitioner from the date of "first sale", the capital investment made up to that date is to be taken into account for the purposes of determining the period specified in column 3 of the table appended to the notification. The question delineated supra, is directly covered by the decision of the Supreme Court in Vijay Enterprises v. Sales Tax Officer [1992] 85 STC 239; 1992 UPTC 421. It is not disputed that the date of first sale as taken place in the present case, is not later than six months from the date of starting production. The Divisional Level Committee has erred in excluding the cost of machinery incurred by the petitioner on March 24, 1987. The cost of machinery incurred by the petitioner on March 24, 1987 has to be included for the purposes of determining the period of exemption specified in column 3 of the notification aforestated. Accordingly, the writ petition succeeds and is allowed. The impugned order dated September 30, 1989, annexure 7 to the writ petition, is quashed. The Divisional Level Committee constituted under section 4 of the U. P. Sales Tax Act through its Convenor, Joint Director of Industries, Meerut, is directed to reconsider the review application in accordance with law in the light of the observations made in the body of the judgment, within a period of three months from the date of production of a certified copy of this order. Writ petition allowed. .