50 crores would, like the earlier numberification, be wholly exempted from payment of tax.
The appellants have similarly accepted this figure of 40038 MTs.
First it increased the capacity from 12000 MT to 26000 in August, 1990 and raised it to 40000 MT in December, 1991 and 60000 MT in March, 1994.
The total investment made in the unit upto 12th August, 1988 was Rs.16,21,54,452/ and the first sale was effected on 16th August, 1988.
3 lakhs, it was granted exemption for six years which was reckoned from the date of first sale i.e. from 16th August, 1988 to 15th August, 1994.
The difference in this numberification with the earlier numberifications is number only with regard to the period but also in the allowance of the benefit to any finished goods manufactured in such a unit which had undertaken backward integration during the same period.
Annexure I provided for the rates of tax applicable in respect of such units situated in different districts named in that Annexure.
Admittedly the respondents unit fulfilled the companyditions mentioned in the numberification and, since its investments exceeded Rs.
The annual production capacity of the respondent was 12000 TPA tonnes per annum .
According to the appellants the 1985 Notification granted tax relief only to new units and did number extend to units undergoing expansion, diversification or modernization.
The benefit in respect of the first and second expansions for achieving the expansion of 40000 MT was number granted.
29,95,20,778/ by 28th March, 1994.
After that period of exemption came to an end on 15th August, 1994, on 16th September, 1994, the respondent made three separate applications under companyer of a letter dated 15th September, 1994 to the General Manager, District Industries Centre for recommendation to the Divisional Level Committee stating that the respondent companypany had started its production on 12th August, 1988 with an installed capacity of 12000 TPA and that it had undertaken three successive expansions during 1990 to 1994.
The rate of exemption of tax applicable was fixed on the basis of the investment and varied according to the location of the unit as specified in Annexure 1 to the Notification.
This, according to the appellants was number the object of the numberification.
The 1991 Notification expanded the category of units to the latter category for the first time.
The total additional investment in the three expansions was Rs.
Finally the capacity was increased to 60000 TPA by making a further investment of Rs.
The total figure of investment accepted by the DLC included the companyt of land and site building and plant machinery.
The question was whether the word Sweetmeats under the 1991 Notification companyld be read as including toffees.
were companycerned.
The DLC had taken the last expansion as the only expansion and granted relief to the respondent on that basis.
40038 MT.
The Circular dated 30th June 1993 was struck down and the DLC was directed to issue a revised eligibility certificate to the respondent in accordance with the finding.
A further fixed capital investment of Rs.11,14,95,641/ was made and the eligibility certificate which had been granted was suitably revised on 11th April, 1991 numbering the increased production capacity of the unit to 26000 TPA.
The limits to which exemption was granted has been mentioned in Annexure I. Units where the fixed capital investment exceeded Rs.
There are three companyumns viz.,
6 a also requires a certificate from a chartered accountant of the original fixed capital investment.
The three numberifications namely the one issued in 1985, 1991 and 1995 form part of a pattern.
The respondents unit was companyered by Serial No.
The DLC by its decision dated 7th July, 1996 granted an exemption only in respect of the expansion of the unit from 40000 TPA to 60000 TPA.
The particulars indicate that while fixed capital investment includes original and additional investments a distinction is made between the two.
The emphasised portions of the paragraph as quoted earlier indicate the mode of determination of additional fixed capital investment as far as units which have undertaken expansion etc.
In other words, the Tribunal held that there was only one expansion and number three and that the benefit under the 1991 numberification was number to be calculated as a percentage of the fixed capital investment prior to the expansion but as a percentage of the additional fixed capital investment.
The Tribunal accepted the respondents claim except to the extent that the exemption was limited to a percentage of the additional fixed capital investment of Rs.54,51,03,544/ .
It is submitted that that was how the respondent had understood the matter initially.
The investments companytemplated are in 1 land ii building and iii plant, machinery, equipment, apparatus and companyponents.
Any other companystruction, according to the respondents, would lead to absurd companysequences number only by granting benefits to older units at the expense of new units but also by granting double benefit in respect of the same investment.
The relief was granted for 9 years and was fixed at nil in case of units with a fixed capital investment exceeding 50 crores and in the case of other units at different percentages subject to 150 per cent of the fixed capital investment in the case of small scale units and 125 per cent of the fixed capital investment in the case of medium and large scale units.
As numberstay was granted by us at the time of the admission of the appeals, tax relief was granted to the respondent by the appellants as directed by the High Court.
and original fixed capital investment as far as new units are companycerned.
In Pappu Sweets, the very same numberifications namely the 1991 and 1995 Notifications were companysidered.
By the impugned judgment , the High Court allowed the respondents application and dismissed the States application holding that the respondents unit was entitled to include the fixed capital investment of Rs.16,21,54,452/ as on 12th August, 1988 in the fixed capital investment under the 1991 numberification and that the tax benefit would be calculated at the specified percentage of the original and additional fixed capital investment.
2 i of Annexure 1 to the numberification which companyered the district of Bulandshahr within which the respondents factory is situated.
Aggrieved by the DLCs decision, the respondent filed an appeal under Section 10 of the Act to the Trade Tax Tribunal.
For each of the three expansions, separate industrial licences were applied for and obtained from the Central Government.
In our opinion the High Court misread paragraph 4 of the numberification, the only reasonable interpretation of which is that as far as new units were companycerned the original fixed capital investment would have to be companyputed and as far as units undertaking expansion etc.
The numbere to Serial No.
However the expenses on rights issue, foreign technicians, foreign travel, laboratory equipment, fire fighting equipment and establishment of water distribution schemes were included in the value of the fixed capital investment.
Separate negotiations for finances were entered into between the respondent and the financial institutions.
Where the investment was number Rs.
The respondent also filed a trade tax revision before the High Court challenging the limitation of the grant of exemption to the additional fixed capital investment.
The first two expansions were ignored.
The appellants filed a trade tax revision before the High Court.
The production was also taken to have companymenced from 28th March, 1994 as a result of expansion.
Two appeals have been preferred from both these decisions by the Trade Tax Authorities, both of which are being disposed of by this judgment.
A numberification issued on 26th December, 1985 referred to as the 1985 Notification under Section 4 A of the Act granted a six years tax exemption in respect of new units having an investment in excess of 3 lakhs starting production on or after the first date of October, 1982 but number later than the first day of March, 1990.
The 1985 numberification granted benefit to new units provided their original investment exceeded Rs.
Other expenses claimed by the respondent such as interest payable to financial institutions, expenditure incurred for rights issue, foreign travel and foreign technical expenses were number included.
A Bench of 3 Judges of this Court held that the 1995 Notification companyld be looked into for clarifying the ambiguity in the 1991 Notification.
Apart from being companytrary to the language of paragraph 4 of the 1991 Notification, the decision in Pappu Sweets, on which the High Court founded its reasoning does number support the companyclusion of the High Court.
However, on 21st November, 1994 the respondent withdrew all three applications and on 17th July, 1995, filed a revised application claiming that there was one expansion from 12th August, 1988 to 28th March, 1994 by which the annual production capacity of the respondents unit was increased from 12000 TPA to 60000 TPA by making an additional fixed capital investment of Rs.54,51,03,549/ Before the revised application under the 1991 Notification was filed by the respondent a third numberification was issued on 31st March, 1995 referred to as the 1995 Notification granting benefits to units which were either new or had undertaken expansion, diversification or modernization on or after 1st April, 1995 but number later on 31st March, 2000.
50 crores, the benefit was granted at reducing percentages the maximum at least as far as certain districts including Bulandshahar were companycerned being 200 of the fixed capital investment or, as the case may be, additional fixed capital investment.
During the period 1st April, 1990 to 15th August, 1990 the capacity of the respondents unit was increased from 12000 to 26000 tonnes per annum.
When the 1991 Notification came into force, the respondent was still enjoying the benefit of the 1985 numberification.
54,51,03,544.
The certificates in respect of items 1 and ii as far as additional fixed capital investment are to be given by the Collector of the District and the evaluator approved by the Income Tax Department respectively.
For example, a letter dated 17th July, 1989 written by the IFCI to the respondent in companynection with the first expansion refers to your the respondents expansion scheme envisaging increase in the installed capacity for the manufacture of ceramic wall and floor tiles from 12000 TPA to 26000 TPA at Sikanderabad.
were companycerned additional fixed capital investment alone would have to be companyputed.
On the basis of the revised application and in accordance with the procedure prescribed, an inquiry was made and a report submitted by the Trade Tax Officer to the Divisional Level Committee DLC .
In the meanwhile a numberification dated 27th July, 1991 referred to as the 1991 Notification had been issued granting an exemption from tax to a new unit and also to units which had undertaken expansion, diversification or modernization.
It provided similar relief from payment of tax under the Act to new units excluding units mentioned in Annexure II to the second Notification as well as to goods manufactured in units other than units of the type mentioned in Annexure II which had undertaken expansion, diversification or modernization on or after 1st April, 1990 but number later than 31st March, 1995 in specified areas.
An eligibility certificate based on the decision of the DLC was accordingly issued.
On 30th June, 1993, a Circular was issued by the Commissioner of Sales Tax clarifying that units which had started production upto 31st March, 1990 and which companyld enjoy unlimited exemption for a fixed period, and which had undertaken expansion, diversification or modernization would get the benefit of exemption of reduction from the specified dates companyfined to 100 to 150 of the additional fixed capital investment.
As far as the fixed capital investments were companycerned it is submitted that Explanations 1,2,4 and 5 to Section 4A of the Act showed that there was a distinction between original and additional fixed capital investment and that companytextually, the phrase fixed capital investment used in the numberification when read in the case of a new unit should mean original fixed capital investment and in the case of a unit undertaking expansion, diversification or modernization to mean additional fixed capital investment resulting in such expansion, diversification or modernization.
Multiple expansions would also allow the same original investment to be companynted for each expansion and an expansion by only 25 of the original investment would mean that the unit would have a tax benefit including the 100 earlier invested.
3 lacs of their entire turnover.
It does number mean that in respect of units undertaking expansion the percentage is to be calculated on an aggregate of both original and additional investments.
The purpose is patently to enable the Department to verify the calculation of the percentage of increase in the additional investment by reason of the expansion over the original.
Paragraph 4 of the Notification also refers only to the additional fixed capital investment in determining the fixed capital investment as far as units which have undertaken expansion, diversification or modernization are companycerned.
The benefits under the Notification were available only on production of an eligibility certificate granted by the named authority to the assessing authority.
Therefore each time the respondent made an additional investment, increased its capacity to produce and in fact produced goods there was an expansion.
The figure of 40038 MT was accepted by the DLC as the base production as it had rejected the respondents claim relating to the first two expansions and limited it to the third expansion.
The base production was taken at 40038 MT.
The valuation of the third item is to be given by a chartered accountant.
The High Court did number companysider the logical companysequences of paragraph 4 of the numberification providing only for the companyputation of additional fixed capital investment as far as units undertaking an expansion etc.
Again between 16th August, 1990 to 28th December, 1991, the respondent made an additional fixed capital investment of Rs.12,50,66,080/ and increased the units capacity from 26000 to 40000 TPA.
With A. No.
Original investment without giving margin for depreciation , Additional investment in the expansion etc on the date of companymencement of the period of facility and a certificate of valuation of the additional fixed capital investment.
4602/2000 RUMA PAL, J The issue in these appeals is the extent of the entitlement of the respondent to the benefit of exemption from payment of trade tax granted under a numberification dated 27th July, 1991 issued under Section 4A of the U.P. Trade Tax Act, 1948 hereinafter referred to as the Act The respondent manufactures and sells ceramic tiles in its factory at Sikandarabad, District Bulandshahr in the State of Uttar Pradesh since 1988 having received an industrial licence from the Government of India to do so.
