KUMAR STATIONERS Vs. STATE OF UTTAR PRADESH

JUDGEMENT

(1.) Heard learned counsel for the petitioner and also the learned Standing Counsel. In view of the facts and circumstances of this case and also as the affidavits have been exchanged in this case, this case is being disposed of finally at the stage of admission in accordance with the Rules of the Court. Petitioners seek mandamus directing respondent No. 2 to grant eligibility certificate with effect from March 24, 1990 thus modifying the said certificate dated March 24, 1993 to be read as for a period of four years with effect from March 24, 1990 to March 23, 1994, instead of July 20, 1992 to March 23, 1994. The facts of the case are that the petitioner No. 1 is a registered partnership firm under the U. P. and Central Sales Tax Act. It applied for exemption under section 4-A of the U. P. Sales Tax Act, though initially on January 21, 1992, its application was rejected but on review ultimately the eligibility certificate was issued on March 24, 1993, which is annexure 3 to the petition. It is also not in dispute that the date of the first sale of the said unit is March 24, 1990, which is also the date of the production of the unit. When the petitioner received the said certificate limiting the period of exemption as aforesaid from the concerned respondent, it requested the respondent concerned to intimate it the reasons as to why the exemption has been granted from July 20, 1992 and not from the date of the first sale, i. e. , March 24, 1990. Therefore, the short question involved in this case is whether the concerned respondent was right in limiting the period of exemption by granting it with effect from July 20, 1992, instead of March 24, 1990. It is also not in dispute that the permanent registration of the petitioner's unit was on March 29, 1990. The contention of the petitioners is that by virtue of section 4-A read with Notification No. ST-II-604/x-9 (208)/1981-U. P : Act 15/48-Order-85 dated january 29, 1985, the certificate has been issued under section 4-A read with section 21 of the U. P. General Clauses Act, 1904. This notification recites that it is necessary so to do for promoting the development of industry in the State and the power of section 4-A has been exercised in respect of any goods manufactured in an industrial unit, the date of the starting production whereof falls on or after the first day of October, 1982, but not later than thirty first day of March, 1990. It is also disputed that the date of starting production in the case of the petitioner's unit just falls within this period. However, reliance has been placed on behalf of the respondents on Explanation to this notification which is quoted below : " Explanation.- For the purposes of this notification - (i) 'industrial unit' means an industrial unit holding permanent registration with the Directorate of Industries, Uttar Pradesh, as a small, handloom or handicraft industry or an industrial licence granted by the Iron and Steel Controller or the Textile Commissioner or the Director, Sugar or the Director-General of Technical Development or the Government of India, and (a) registered under the Indian Factories Act, 1948 or established after obtaining a term loan from the U. P. Financial Corporation or a scheduled commercial bank, in the case of units with capital investment not exceeding three lakh rupees; or (b) registered under the Indian Factories Act, 1948 or having applied for registration under the said Act and deposited the required fee for the purpose, in the case of units other than those referred to above :" The order for the permanent registration of the petitioner's unit was made on March 29, 1990, subsequent to the date of the first sale which is March 24, 1990, hence the argument Is that the said unit on this date not being permanently registered would not be covered within the Explanation of this notification to be an industrial unit. It is also significant that by U. P. Act No. 28 of 1491 in section 4-A the definition of "new unit" has been amended retrospectively with effect from October 12, 1983. The relevant portion of the definition of the "new unit" as mentioned in sub-clauses (a) and (b) is quoted as under : " (1) 'new unit' during the period ending with March 31, 1990, means an industrial undertaking set up by a dealer on or after October 1, 1982 but not later than March 31, 1990, - (a) which is licensed or in respect whereof a letter of intent has been issued or which is registered, permanently or otherwise by the appropriate authority in accordance with any law for the time being in force relating to licensing or registration of industrial undertakings; (b) (i) which is registered under the Factories Act, 1948; or (ii) an application for registration in respect whereof has been made under that Act, or (iii) after making an application for a term loan from any Financial Corporation or company owned or controlled by the Central or the State Government of any Bank whether such term loan is sanctioned and disbursed before or after the undertaking is set up (where the capital investment in the undertaking does not exceed three lakh rupees ). " Scrutinizing this notification dated January 29, 1985, we find in the Explanation, the words used are ". . . . . . . . . an industrial unit holding permanent registration" while under the aforesaid amending Act in section 4-A, Explanation (1) (a) the words used are "registered permanently or otherwise". What is also significant is sub-clause (b) of this Explanation referring to registration under the Factories Act, 1948 qualifies not only such unit which is registered under the Factories Act but even where an application for the registration in respect thereof is made. This scheme and the use of the words therein clearly indicate that requirement of permanent registration, in fact is not a condition of exemption but it is only such unit which is permanently registered would be a unit to which exemption could be given. Such requirement or condition cannot be treated to be mandatory in nature. Similar question arose in the case of Maheshwari Industries (P.) Ltd. v. State of U. P. 1993 UPTC 1226 (All. ). In this case the petitioner's unit was not registered as small-scale unit on the date the production commenced and on this ground alone the authorities rejected the claim for exemption under section 4-A. However, it was held : ". . . . . . . . A liberal view should be taken in interpreting section 4-A in consonance with its object of encouraging setting up of new industries. The Explanation does not require registration as an S. S. I. unit for getting the exemption. In fact clause (1) (a) of the Explanation states that unit seeking exemption may be licensed or registered in accordance with any law relating to licensing or registration of industries. The petitioner's unit is a rice milling industry holding a licence under the Rice Milling Industry (Regulation) Act, 1958, and we are of the opinion that this satisfies the requirement of the Explanation. Hence his application for exemption has been arbitrarily rejected. " In this case, while interpreting "new unit" under section 4-A, after the aforesaid 1991 amendment it is held that such rejection for exemption was arbitrary and not sustainable. Learned Standing Counsel has urged that this decision has not taken into consideration section 4-A (5) (c) coupled with sub-clause (e) (i) of Explanation of section 4-A which requires that the unit must fulfil all the conditions specified in this regard under the Act, Rules or notifications made therein, and once notification specifies the condition of permanent registration and that not being complied with, the rejection of the petitioner's application was justified in law. The relevant sub-section (5) (c) is quoted as under : " (c) in relation to a new unit referred to in Explanation (1), where the conditions specified in clauses (a) to (d) of the said Explanation (1) are fulfilled on a date later than the date of commencement of the period of facility notified under sub-section (1), then subject to the provisions of clause (b) only for part of the period, notified under sub-section (1), which shall be computed from the date on which all the conditions referred to in the said clauses (a) to (d) have been fulfilled or July 20, 1992 whichever is later till the end of the period of such facility so, however, that a manufacturer who was eligible for such facility under clause (c) as it stood prior to July 20, 1992 and had applied for the facility prior to the said date shall be entitled to the facility in accordance with the said clause (c ). " Sub-clause (e) (i) of Explanation (1) of section 4-A is quoted as under " (e) fulfilling all the conditions specified in this Act or Rules or notifications made thereunder in regard to grant of facility under this section on the date from which such facility may be granted to him; and includes an industrial undertaking fulfilling the conditions laid down in clauses (a) to (e) set up by a dealer - (i) already having an industrial undertaking manufacturing the same goods at any other place in the State, or" Sub-clause (c) of sub-section (5) requires in respect of "new unit" has to comply with the conditions as provided in sub-clauses (a) to (d) in relation to a new unit on the date of the commencement of the period of facility notified in sub-section (1 ). To the similar effect is also clause (e) as aforesaid, i. e. , a unit holder must fulfils all the conditions specified in the Rules and the notification. The only question is whether the requirement which is pre-requisite for compliance is mandatory or directory in nature. If the compliance has been made, the requirement which is for grant of exemption existed on record and only on account of not passing of any order by the concerned authority, delayed the date of the registration could this delay, which makes the date of registration late disentitles unit holder for his claim of exemption. Question of interpretation in a fiscal statute is well-settled. Whenever there is provision, for increasing production of any goods or for promoting development of any industry in a State and on the basis of this incentive the unit holder applies for the exemption, complying the conditions then an interpretation beneficial to the subject is to be made keeping this principle and applying as required, both under the definition of words "new unit" and under the aforesaid notification dated January 29, 1985, should this be treated as mandatory in nature. This is not in dispute, principle underlying under section 4-A is in pursuance of the policy for increase of production of goods and for promoting the development of industry in the State. Thus a liberal interpretation which is beneficial to the subject is to be given. Hence if there are two possible interpretations; one which benefits the subject and the other on strict compliance rejecting the claim of such benefit, then the earlier one should be accepted. This matter is also covered by a decision of this Court reported in the case of Sahu Stone Crushing Industries v. Divisional Level Committee [1995] 98 STC 66 1994 UPTC I. This decision has also considered the argument of the learned Standing Counsel interpreting the aforesaid sub-section (5) (c) of section 4-A. After quoting the arguments raised in that case the Division Bench of the court while interpreting the said sub-section (5) (c) has held as under : " In view of the above, we are clearly of the view that sub-section (5) (c) of section 4-A of the U. P. Sales Tax Act is directory and not mandatory and hence the petitioner is entitled to exemption from the date of first sale, i. e. , December 3, 1986. Accordingly, we direct the respondents to rectify the eligibility certificate, true copy of which is annexure 1 to the writ petition, within three weeks of production of a certified copy of this judgment before the appropriate authority and we further direct the respondents to rectify/cancel the assessment orders for the relevant years in accordance with the rectified eligibility certificate. " It is true that the said decision has taken into consideration the registration under the Factories Act and the principle of sub-section (5) (c) to be directory tn nature and it is equally applied in the case of registration of sub-clause (a) also where the permanent registration is required of a new unit under section 4-A. In the present case admittedly the date of the first sale/date of first production which is not in dispute is March 24, 1990 but order for the permanent registration under sub-clause (a) was only made on March 29, 1990. Since on the date of first sale there was no permanent registration, claim for exemption was rejected. There is nothing on record shown even before registering authority that there was any laches or short-coming for not getting the registration when the petitioner applied for registration on March 2, 1990. It is only because the authority passed order for permanent registration on March 29, 1990 five days later than the date of the first sale disentitled the claim of the petitioners. Such an interpretation cannot be given to these provisions. We having held the petitioner having complied with all the conditions required for registration on the date of the first sale itself which he has mentioned in his application dated March 2, 1990, merely the delay in the date of passing the order cannot disentitle petitioner's claim for exemption from the date of first sale. We hold requirement of permanent registration under the aforesaid provision and notification dated January 29, 1985 is directory in nature. Hence, we direct respondent No. 2 to modify the eligibility certificate dated March 24, 1993 of the petitioner and grant exemption for the period of four years with effect from March 24, 1990. With the aforesaid observations the present writ petition is allowed with costs. Certified copy of this judgment be issued to the counsel for the petitioners on payment of usual charges within ten days. Writ petition allowed. .