COMMISSIONER OF TRADE TAX, U.P., LUCKNOWversusMIS. MODIPAN FIBRES COMPANY

A            COMMISSIONER OF TRADE TAX, U.P., LUCKNOW
                                v.
                  MIS. MODIPAN FIBRES COMPANY

                                AUGUST 2, 2006

B               [ASHOK BHAN AND MARKANDEY KA TJU, JJ.]


          Taxation:

          Trade tax-Notification No. 1093 dated 27. 7.1991-Exemption under-
C Entitlement to-Held: Dealer entitled to exemption on the turnover of sale of
    goods in an assessment year in excess of the base production-UP. Trade
    Tax Act, 1948-Section 4-A.

          The question which has arisen for consideration in the present appeal
D is whether the respondent-assessee is entitled to avail the exemption under
    Notification No.1093 dated 27.7.1991 on the basis of the turnover of sale
    of goods in an assessment year minus the base production or on the sale
    of goods after achieving the base p~oduction.

          Dismissing the appeals, the Court
E        HELD: 1. The purpose of granting exemption under the Notification
    dated 27.7.1999 was to promote the development of certain industries in
    the State. By the said notification exemption from payment of tax or
    reduction in rate of tax was granted to new units as also to the units which
    had undertaken expansion, diversification or modernization. (241-C-DI
F
          2. The units of the dealers (respondents) are covered by Clause (l-
    B)(a) of the Notification. Exemption granted is on the turnover of sales of
    quantity of goods manufactured in excess of base production. Under clause
    6(a) of the said Notification, turnover of sale of goods in any assessment
    year to the extent of quantity covered by the base production of that year
G   and balance stock of base production of previous years, shall be deemed
    to be turnover of the base production. Under clause 6(b) of the Notification,
    the facility of exemption can be availed on the turnover of goods in "any
    assessment year" in excess of the quantity referred to in sub-clause (a) of
    clause 6. A conjoint reading of Clause (1-B) (a), clause 6(a) & (b) makes
H                                       236
    COMMR OFTRADE TAX.UP. LUCKNOW v.MODIPAN FIBRES COMPANY [BHAN, 1123 7


it clear that the dealer is entitled to claim exemption in respect of the         A
turnover of sale of goods of an assessment year in excess of the base
production. "Assessment Year" has been defined in Section 3 U) to mean
the twelve months ending on March 31. The extent of entitlement to
exemption depends on the sale of goods in the assessment year minus the
base production determined under the Act. Simply because dealer has to            B
file returns from month to month and deposit the admitted tax at the time
of filing of the return does not mean that qut:stion of exemption on the
turnover of the production in excess of the base production can be
considered only after the base production is achieved. Returns filed every
month and the tax paid would be subject to adjustment at the time of the
finalization of the assessment. Intention of the legislature is clear and         C
unambiguous. Exemption is to be given on the turnover of sale of goods
in an assessment year in excess of the base production. 1241-D-H; 242-AI

     CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1760-1761
of 2001.
                                                                                  D
     From the Order dated 8.3.2000 of the High Court of Allahabad in
Trade Tax Revision No. 1071 and 1072 of 1997.

                                    WITH

      C.A. Nos. 1762-1765/2001                                                    E
     Dr. R.G. Padia, Rajeev Dubey, Rashmi Singh, for Kamlendra Mishra,
Jmran Ahmad Abbasi and Rachna Srivastava for the Appellant.

     A.K. Ganguli, A.T. Patra, Ramesh Singh, Nipun Malhotra (for O.P.
Khaitan & Co.), Dhruv Agarwal and Praveen Kumar for the Respondents.              F
      The Judgment of the Court was delivered by

      BHAN, J. This order shall dispose of Civil Appeal Nos. 1760-1761 of
200 I and 1762-1765 of 200 I as the point involved in all these appeals is
common. The High Court had also disposed of the revision petitions by a           G
common order. These appeals are directed against a common order passed by
the High Court of judicature at Allahabad in Trade Tax Revision No. I 071-
1072 of 1997 whereby the High Court allowed the revision filed by the
respondent-assessee (hereinafter referred to as "the respondent") and set aside
the order of the Trade Tax Tribunal-Bench-2, Ghaziabad (for short "the
                                                                                  H
    238                           SUPREME COURT REPORTS [2006] SUPP. 4 S.C.R.

A Tribunal"). Before adverting to the facts, it is necessary to mention a few
    preliminary facts on the statutory provision of the U.P. Trade Tax Act, I 948
    (for short "the Act") and the Notification No. 1093 dated 27.7. 1991 issued
    under Section 4-A of the Act.

            Section 4-A inter alia empowers the State Government to exempt from
B   tax on the sale or purchase of such goods by such person or class of persons,
    as the State Government may by notification in the gazette exempt. In
    pursuance to the powers vested in it under Section 4-A, the State Government
    issued Notification No. S. T.-2-1093/Xl-7(42)-68 U.P. Act XV-48-0rder-90
    dated 27.7.1991. Under the notification the State Government for the purpose
C   of promoting the development of certain industries in the State granted
    exemptions from or reduction in rate of tax to new units and also to units
    which have undertaken expansion, diversification or modernization. To
    appreciate the submi,sions advanced by the counsel for the parties it would
    be appropriate to reproduce the relevant provisions of the Notification dated
    27 .7 .1991, which are as under:
D
               ''Whereas the State Government is of the opinion that for
           promoting the development of certain industries in the State it is
           necessary to grant exemption from or reduction in rate of tax to new
           units and also to units which have undertaken expansion, diversification
           or modernization;
E
               Now, therefore, in exercise of the powers under Section 4-A of
           the Uttar Pradesh Sales Tax Act, 1948 (U.P. Act No. XV of 1948),
           hereinafter referred to as the Act the Governor is pleased to declare
           that --

F          (I-A) ................................................................... .

               (1-B) In respect of any goods manufactured in a unit other than
           the units of the type mentioned in Annexure II, which 'has undertaken
           expansion, diversification or mcdernization' on or after April I, 1990
           but not later than March 31, 1995, in the areas mentioned in column
G          2 of Annexure I, no tax shall be payable or, as the case may be, the
           tax shall be payable at the reduced rates specified in column 4 of
           Annexure I, by the manufacturer thereof for the period specified in
           column 3 of the said Annexure I, or till the maximum amount of tax
           relief by such exemption from or reduction in rate of tax as specified
           in column 5 of Annexure I is achieved, whichever is earlier, on the
H
    COMMR. OF TRADE TAX, U.P., LUCKNOW v.MODIPAN FIBRES COMPANY [BHAN,J.J239

         turnover of sales -                                                        A
        (a)   of the quantity of goods manufactured in excess of the base
              production in the case of units undertaking expansion or
              modernization; and

        (b) of goods manufactured by the unit which are of a nature different       B
            from those manufactured earlier by such unit in the case of units
            undertaking diversification.

            (2) The period of such facility shall be reckoned from the first
        date of production -

        (i)   of goods of a nature different from those manufactured earlier        C
              by such unit in case of diversification; and

        (ii) of the goods manufactured in excess of the base production in
             the case of units undertaking expansion or modernization.

        5.    Base production of a unit undertaking expansion or modernization
              shall be deemed to be -                                               D
        (a)   maximum production achieved during any of the preceding five
              consecutive assessment year, or

        (b)   80 per cent, of the installed annual production capacity; whichever
              is higher.                                                            E
        6.    (a) Turnover of sale of goods in any assessment year to the
              extent of the quantity covered by base production of that year
              and the stock of base production of previous years shall be deemed
              to be the turnover of base production.

        (b) Only the turnover of goods in any assessment year in excess of          F
            the quantity referred to in clause (a) shall be entitled to the
            exemption from or reduction in the rate of tax."

FACTS

     Facts are taken from Civil Appeal Nos. 1760-1761 of 2001.                      G
      Respondent: Mis. Modipan Fibres Company, deals in production and
sale of Nylon and Polyester yam. It was granted an eligibility certificate
under Section 4-A of the Act in tenns ofNotification No.1093 dated 27.7.1991.
For the assessment year under consideration, the respondent disclosed total
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    240                     SUPREME COURT REPORTS [2006] SUPP. 4 S.C.R.

A   production at 12.222,827 metric tones. It disclosed sales of 313 .206 metric
    tones in the State of U.P. and 1008.55 metric tones as interstate sales.
     I0,461.189 metric tones of goods were shown as stock transfer. The assessee
    thus claimed that total sale of the goods was 11782.945 mdric tones. The
    base production according to the eligibility certificate granted to the dealer
B   was 9460 metric tones. It claimed exemption from payment of tax on turnover
    (for the entire year) of sale of goods weighing 2,322.945 metric tones i.e.
    after reducing the base production from the total sale of goods in a year. The
    Assessing Authority, however, granted exemption to the extent of turnover
    on the sale of 1,321.756 metric tones of goods. The claim of the respondent
    was restricted on the ground that the base production was achieved on 4.1.1993
C   and the exemption from payment of tax can be granted on the sale of goods
    after the base production is achieved.

           Aggrieved against the order passed by the Assessing Authority,
    respondent filed two appeals, i.e., one under the State Sales Tax Act and the
    other under the Central Sales Tax Act before the Deputy Commissioner
D   (Appeals). which were accepted by the order dated 4.2.1997. The order passed
    by the Assessing Authority was set aside and the respondent was granted
    exemption on the goods as claimed by it. Feeling aggrieved by the order
    passed by the Deputy Commissioner (Appeals), the Commissioner of Trade
    Tax. U.P. (for short "the appellant") filed two appeals being Appeal Nos. 701
E   97 and 71/97, before the Tribunal, which by its order dated 24.9.1997 accepted
    the appeals, set aside the order passed by the First Appellate Authority and
    restored the order passed by the Assessing Officer. Aggrieved by the order
    passed by the Tribunal, the respondent filed revision petition in the High
    Court which have been accepted b\y the impugned order. The High Court has
    set aside the order passed by the Tribunal as well as the Assessing Authority
F   and restored that of the First Appellate Authority.

          Although before the High Court number of points were raised but the
    only submission advanced before us is: as to whether the assessee is entitled
    to avail of the exemption on the basis of the turnover of sale of goods in an
    assessment year minus the base production or on the sale of goods after
G   achieving the base production.

           Dr. Padia, learned senior counsel appearing for the appellants contends
    that the base production has to be achi~ved first. and it is only thereafter the
    question of exemption on the turnover of sale of goods in excess of base
H   production can be considered. To support his submission Dr. Padia has referred
    COMMR. OFTRAOETAX, UP., LUCKNOWvMOOIPAN FIBRES COMPANY [BHAN,J.J24 l


to the provisions of Section 7 (1) read with Rule 41(1) and submitted that the    A
dealer is required to file monthly return on the basis of actual turnover and
not on hypothetical basis. The dealer is also required to deposit the admitted
tax at the time of filing of monthly return. That in case the contention of the
assessee is accepted then the provisions of Section 7( 1) read with Rule 41 (I)
and the notification under consideration cannot be interpreted harmoniously.      B
As against this, Shri Ganguli, learned senior counsel appearing for the
respondents contends that the facility of exemptio:i can be availed on the
turnover of sale of goods in an assessment year in excess of the quantity
referred to in sub-clause (a) of Clause 6 of the Notification. According to
him, exemption is to be granted after taking into consideration the turnover
of sale of goods of the entire assessment year.                                   C
        Purpose of granting exemption under the Notification dated 27. 7.1999
 was to promote the development of certain industries in the State. By the said
 notification exemption from payment of tax or reduction in rate of tax was
granted to new units as also to the units which had undertaken expansion,
diversification or modernization. The units of dealers in all the revisions are D
units, which had undertaken expansion/modernization. The units of the dealers
(respondents) are covered by Clause (1-B) (a) of the Notification. Exemption
granted is on the turnover of sales of quantity of goods manufactured in
excess of base production. Under clause 6(a) of the said Notification, turnover
of sale of goods in any assessment year to the extent of quantity covered by E
the base production of that year and balance stock of base production of
previous years, shall be deemed to be turnover of the base production. Under
clause 6(b) of the Notification, the facility of exemption can be availed on
the turnover of goods in "any assessment year" in excess of the quantity
referred to in sub-clause (a) of clause 6. A conjoint reading of Clause (1-B)
(a), clause 6(a) & (b) makes it clear that the dealer is entitled to claim F
exemption in respect of the turnover of sale of goods of an assessment year
in excess of the base production. "Assessment Year" has been defined in
Section 3(j) to mean the twelve months ending on March 31. If that be the
case then the extent of entitlement to exemption will depend on the sale of
goods in the assessment year minus the base production determined under the G
Act. Simply because d::aler has to file returns from month to month and
deposit the admitted tax at the time of filing of the return does not mean that
question of exemption on the turnover of the production in excess of thi:: base
prodl!ction can be considered only after the base production is achieved.
Returns filed every month and the tax paid would be subject to adjustment
at the time of the finalization of the assessment. Intention of the legislature H
   242                     SUPREME COURT REPORTS [20061 SUPP. 4 S.C.R.

A is clear and unambiguous. Exemption is to be given on the turnover of sale
    of goods in an assessment year in excess of the base production. We do not
    find any substance in the submission advanced on behalf of the appellants.

         For the reasons stated above, we do not find any merit in these appeals
    and dismiss the same, leaving the parties to bear their own costs.

    D.G                                                     Appeals dismissed.