J K STEELS Vs. STATE OF UTTAR PRADESH

JUDGEMENT

(1.) HEARD the learned counsel for the parties. Subject-matter of impugnment in the instant petition on the two orders dated January 19, 1989 and January 18, 1990. By means of the order dated January 19, 1989, the Divisional Level Committee-respondent No. 2, rejected the exemption application filed on behalf of the petitioner under section 4-A of the U. P. Sales Tax Act, 1948. The review applied for, was rejected by order dated January 18, 1990 by the Divisional Level Committee. It is these two orders which are sought to be quashed in this writ petition. A perusal of the order dated January 18, 1990 indicates that the exemption application under section 4-A of the Act was rejected on the premise that old machinery was brought to bear in the unit. The order, however, indicates that the old machinery which is alleged to have been made use of in the unit, was worth Rs. 1,453 only as against the total investment of Rs. 1,04,104 in the machinery installed and used in the unit. There is recorded no finding that the machinery other than the ones mentioned in the order dated January 18, 1990 worth Rs. 1,453, was also old. The question that crops up for consideration is whether the benefit of exemption can be denied merely because insignificant part of the machinery is old. Notification dated August 27, 1984, is intended to grant exemption to new units with capital investment not exceeding Rs. 3 lacs. For the purpose of section 4-A, new unit during the period ending on March 31, means industrial undertaking set up by a dealer on or after October 1, 1982 but not later than March 31, 1990. In order to become a new unit, it must also satisfy the conditions stipulated in clause (d) of explanation (1) to section 4-A, which requires that the new unit must be "using machinery, accessories or components not already used or acquired for use in any other factory or workshop in India". It is not disputed that the object of the notification was to promote industrial growth in the State and for that purpose the exemption is allowed on fulfilment of conditions specified in the notification, as also those mentioned in section 4-A. In Bajaj Tempo Ltd. v. Commissioner of Income-tax, Bombay [1992] 196 ITR 188; 1992 UPTC 857, it has been held by the Supreme Court that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. Similar is the view taken by the Supreme Court in another case namely, Commissioner of Income-tax, Amritsar v. Strawboard Manufacturing Co. Ltd. [1989] 177 ITR 431; 1989 UPTC 1300. The relevant observations made by the Supreme Court may be extracted below : ". . . . . . . . . . . . . . It is necessary to remember that when a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging an industrial activity, a liberal construction should be put upon the language of the statute. . . . . . . . . " Clause (1) (d) of the Explanation to section 4-A of the Act, came up for consideration before a Division Bench of this Court in Amit Plastic Industry v. Divisional Level Committee [1995] 96 STC 538; 1994 UPTC 121, wherein the Division Bench has observed that "a liberal and positive approach should be taken and eligibility certificate should not be denied or cancelled on hypertechnical or narrow considerations". It has further been held by the Division Bench in the abovenoted case as under : " No doubt Explanation (1) (d) states that the unit which seeks the benefit of section 4-A of the U. P. Sales Tax Act should be 'using machinery, accessories, or components not already used or acquired for use in any other factory or workshop in India'. However, in our opinion, this condition in clause (1) (d) should not be interpreted in a narrow or pedantic manner, nor should it be given a literal interpretation. If we construe clause (1) (d) to the Explanation literally it would mean that even where there is a factory having new machinery worth say Rs. 10 crore, it will be denied the benefit of section 4-A of the U. P. Sales Tax Act if it has a small component worth Rs. 200 which was old and had been used earlier. Such a narrow interpretation would militate against the very object of section 4-A which is to increase production of goods and promote the development of industries in the State vide clause (1) of section 4-A. . . . . . " It was further held by the Division Bench in the aforesaid case : " In our opinion clause (1) (d) of the Explanation to section 4-A of the U. P. Sales Tax Act should not be interpreted literally for that would subvert the very intention of section 4-A, viz. , to encourage the industrialisation of the State. In our opinion clause (d) should be interpreted to mean that to get the benefit of exemption a substantial part of the factory machinery should not have already been used in any other factory or workshop. As to what is substantial would depend on the facts of each case. " In our opinion, the application for grant of eligibility certificate for the purposes of exemption under section 4-A of the Act, requires to be reconsidered by the Divisional Level Committee in accordance with law as expounded in the abovenoted decision. Accordingly the writ petition succeeds and is allowed in part. The impugned order dated January 18, 1990 is quashed. The Divisional Level Committee is directed to reconsider the matter as to grant of eligibility certificate for the purpose of exemption under section 4-A in accordance with law and in the light of the observations made above. Since the matter is being remitted to the Divisional Level Committee, it would be but proper to observe that the question regarding closure of the unit, since April 1988 may also be examined in the light of the clarificatory circular dated February 1, 1988 as interpreted by this Court in Writ Petition No. 277 of 1989, Ramraj Rice Mills, Meerut v. State of Uttar Pradesh decided on July 18, 1994 (printed at page 570 supra), a copy of which shall be made available by the petitioner to the Divisional Level Committee along with certified copy of this order. As observed above, the Divisional Level Committee shall reconsider the application and dispose of the same within two months from the date of production of a certified copy of this order. Petition disposed of accordingly. .