Holding

The Court held that ‘unit’ means the industrial undertaking as a whole, permitting a joint application across multiple units; the application was not time‑barred; the respondent could not be said to be in arrears during the stay; and the High Court’s order directing issuance of an Eligibility Certificate and reimbursement was set aside.

Summary

The appellant, the U.P. Commissioner of Trade Tax, challenged the High Court’s order allowing Mis D.S.M. Group of Industries to claim a trade‑tax exemption under a 1997 Notification. The dispute centered on whether a "unit" for purposes of expansion, modernization or diversification meant each individual plant or the industrial undertaking as a whole, whether a joint application by the company’s multiple units was permissible, whether the application filed on 17 May 2000 was time‑barred, and whether the company was in arrears of tax. The Supreme Court held that the term "unit" refers to the industrial undertaking as a whole, so a joint application is allowed and the investment can be clubbed across units; the application was not barred and the company could not be deemed in arrears during the stay order; however, the High Court’s directive to issue an Eligibility Certificate and order reimbursement was erroneous. The matter was remitted to the Divisional Level Committee for fresh determination, and the appeal was disposed of.

Issues considered

Whether the term "unit" in Section 4‑A(6)(5) of the U.P. Trade Tax Act and the 1997 Notification refers to each individual plant or to the industrial undertaking as a whole.
Whether a joint application for exemption can be filed by an industrial undertaking having multiple units.
Whether the application filed on 17 May 2000 is time‑barred under Section 4‑A(5).
Whether the respondent was in arrears of tax, affecting eligibility for exemption.
Whether the High Court’s order directing issuance of an Eligibility Certificate and reimbursement of amounts paid was valid.

Legislation cited

General Clauses Act, 1897
U.P. Trade Tax Act, 1948s. 4-A(1), s. 4-A(5), s. 4-A(6)(5)

Subjects

trade taxexemptionunit definitionjoint applicationtime-bararrears of taxnotification interpretationUttar Pradeshindustrial undertakingeligibility certificate

Judgment

A COMMISSIONER, TRADE TAX, U.P.
v.
MIS. D.S.M. GROUP OF INDUSTRIES

DECEMBER 9, 2004
B
[S.N. VARIAVA AND DR. AR. LAKSHMANAN, JJ.]

Trade Tax :

U.P. Trade Tax Act, 1948-Section 4-A-Trade Tax-Exemption-
C Notification granting exemption to undertaking manufacturing goods which
made a fzxed capital investment of Rs. 50 crores or more in expansion,
modernization or diversification-Joint application for claim of exemption
by company having multiple units-Rejection of, on the ground that the
application was joint, time barred and the company in arrears of tax-
D On appeal held : Plain reading of the Notification shows that for expansion,
modernization and diversification, industrial undertaking is considered to
be a unit-Unit refers to more than one unit-Clause (b) of Section 4-
A (6)(5) clearly indicates that reference is to industrial undertaking as a
while and not a unit of industrial undertaking-For expression expansion,
modernization there is no qualifYing words 'in any one unit '-Furthermore,
E manufacturer is entitled to the benefit of exemption if application is made
at later date though benefit would be limited-Also manufacturer cannot
be said to be in arrears of tax-Hence, the Assessing Authority and the
Tribunal erred in rejecting the application and the order of High Court
upheld-However, order of High Court directing issuance of Eligibility Tax
F and directing reimbursement not correct-Hence that part of the order set
aside-Matter is remitted back.

Words and Phrases :

Unit and Industrial Undertaking-Meaning of in the context of Section
G 4-A(6/(5) of the U.P. Trade Tax Act, 1948.

By a Notification certain exemption from payment of trade tax was
granted to an undertaking which made a fixed capital investment of Rs.
50 crores or more in expansion, modernization or diversification or
H backward integration. •
798
COMMR., TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. 799

Respondent-company has more than one unit in different localities. A
Company's principal place of business is at District B. It filed joint
application before the General Manager of District B for claiming
exemptions under the Notification on the grounds of expansion,
diversification and modernization. Assessing Authority rejected. the
application on the ground that a joint application for multiple units was B
not permissible and was time barred; and that the company was in
arrears of tax. Trade Tax Tribunal rejected the appeal. High Court set
aside the order of the Tribunal an allowed the Revision. It directed the
Authority concerned to issue an Eligibility Certificate under Section 4-
A of the U.P. Trade Tax Act, 1948 for benefit of tax rebate and reimburse
the amount paid earlier. Hence the present appeal. c
Appellant contended that term 'Unit' refers not to the industrial
undertaking as a whole but to a unit of the Company and each unit is
considered to be a separate entity; that the Company making a capital
investment of Rs. fifty crores or more in its various units cannot club D
the units to claim exemption under the Notification but the investment
has to be in respect of one unit only; that the increase in production in
respect of any one particular manufacturing concern under expansion
or modernization should be compared with the pre-existing figure of
'base production' of that concern only; that claus.e (d) of Section 4-
A(6)(5) brings out the necessity of giving the narrow meaning to the E
expression 'industrial undertaking'; that under clause (e) the enhanced
portion of the undertaking should be established within the same district
in which the existing industrial unit is established having reference only
to one manufacturing concern at a time which is undergoing expansion
etc. and the district in which it is located and not to all the existing F
industrial units belonging to the dealer, that expression 'base production'
in explanation can have reference only to the production capacity or
production figures in respect of the one 'existing industrial unit' which
is undergoing expansion etc; that the application was time barred; and
that the Company was in arrears of tax and as such not entitled to the
benefit to the Notification. G

- Disposing of the appeal, the Court

HELD : l.l. The Preamble to the Notification· shows that the
capital investment of Rs. fifty crore or more has to be in a new unit or H
800 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A in expansion, modernization and diversification. A plain reading of the
Notification shows that for "expansion, modernization and
diversification" it is the industrial undertaking which is considered to
be the 'Unit'. Section 4-A (6)(5) of the Trade Tax Act, 1948 defines the .
ter"! 'Unit' to mean an industrial undertaking, which has undertaken
B expansion, modernization and diversification. To the words 'expansion,
modernization and diversification' in the Notification, there are no
qualifying words to the effect 'in any one Unit' or 'in one unit'. In none
of the cJauses these is any requirement of the investment being in one
unit of the Industrial Undertaking. It is not stated that these must be
in one unit of the Industrial Undertaking. Therefore, the Preamble,
C clearly supports the case of the respondents that the expansion,
diversification and modernization need not be only in one of the units
of the Industrial Undertaking. This becomes further clear that if one
looks at Clause (1) of the Notification. Under sub-clause (a) the benefit
is in respect of a new unit but under sub-clause (b) it is in respect in a
D unit which has undertaken expansion, modernization or diversification
between 1st December 1994 and 31st March 2000. Even under the
General Clauses Act, where the context so requires the singular can
include the plural. [824-C, F, G, HJ

1.2. The purpose of Notification being to encourage increased
E production and to give benefit to industries which have invested Rs. fifty
crores or more in the State and whose production has thus increased,
an interpretation must be given which would extend benefit to such
industries. There would be no purpose in denying, an industry which has
invested Rs. fifty crores or more and whose production in the State has
F as a result increased, the benefit of the exemption granted by this
Notification merely because the whole of the investment is not in any
particular unit. Thus even where the investment is made by the Company
in more than one unit, so long as the total investment is Rs. fifty crores
or more, the benefit of the Notification would be available. Such benefit
would be distributed in the manner set out in the Schedule depending
G on where a unit in which expansion, diversification or modernization
has taken place, is situated. [825-A, B, CJ

1.3. Clause (b) of Section 4-A(6)(5) of the Act clearly indicates that
the reference is to the industrial undertaking as a whole and not a unit
H of the industrial undertaking. There could be diversification in one unit
COMMR., TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. 801

in respect of which the first date of production would be as per clause A
(b)(i). Clause (b)(ii) puts the matter beyond any doubt. It uses the words
"in such undertaking in case of units undertaking expansion or
modernization". Thus now there is clear reference not just to the
undertaking i.e. the Company but also to Units of that Company. The
term "units" clearly refers to more than one units. This shows that the B
expansion and modernization can be in more than one unit. (820-F, G]

1.4. It is not necessary to decide whether the production capacity
of the undertaking or a unit is to be considered. Even if production
capacity of only the unit/s, in which expansion, modernization or
diversification has taken place, is to be taken into account then also it C
would not show that the entire investment is to be only in one unit. The
very fact that clause (c) of Section 4-A(6)(5) is dealing with all three
aspects i.e. expansion, modernization and diversification shows that in
most cases they would be in separate units. (821-C, D]

1.5. It is the industrial undertaking which is diversifying in some D
or one of its unit. Undoubtedly the industrial undertaking may diversify
in any one of its units. But that does not mean that it is the unit and ·
not the industrial undertaking which is diversifying. (821-F]

1.6. Clause (d) of Section 4-A(6)(5) of the Act makes it clear that
it is the industrial :undertaking and not a unit which is making the E
additional fixed capital investment. It could not be denied that the
provision for depreciation would necessarily be made by the Company.
Thus, it is the Company which has to make an additional investment of
at least 25% without providing for depreciation. [821-G, HJ
F
1.7. Sub-clause (e) of Section 4-A(6)(5) of the Act merely sets out
that the expansion, diversification or modernization must be in respect
of a unit, which has been established within the same district in which
the industrial unit is established. In this case, the expansion, diversification
or modernization is not claimed in respect of any new unit. It is claimed
in respect of existing units. That the term "Unit" in the context of G
expansion, diversification and modernization refers to the Industrial
Undertaking and not to a unit of a Industrial Undertaking. Thus an
expansion of one unit at the same location or a modernization of any
.... unit or a diversification in an existing unit would suffice. All that this
clause is ensuring is that there is distinction between a new unit and an H
802 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A expansion, modernization and diversification. A new unit may be at a
different place but expansion, modernization or divers~fication must be
at the pla_ce/places where the existing units of the industrial undertaking
are situated. [822-G, H; 823-A] .

1.8. Even if the figures are to be in respect of only· one unit it still
B would not meant that the entire investment of Rs. 50 crores or more
must be in one unit only. Separate figures of each unit in which expansion,
modernization or diversification has taken place may and can be worked
out; That the expansion, modernization or diversification need not be
in one unit is also clear from the wording of the Notification.
C [823-G, H; 824-A]

1.9. The Assessing Authority was wrong in rejecting the application
on the ground that a joint application was not permissible. A joint
application is permissible. As the principal place of business is at place
B, the Assessing Authority would be the General manager, at District
D B. The Officer or the concerned Committee can always call for
information from the concerned Officer of the other District/s or even
the Company if required. [826-E, G)

2. In view of Section 4-A(S) even if an application is made at a later
E date it does not preclude the dealer from getting the benefit of the
exemption. If an application is made at a later date the benefit of
exemption will be limited. It will be computed from the date of the
application till the end of the period of facility and as such there was
no ground for rejecting the application. [826-B]

F 3. Respondents had obtained stay orders from the High Court.
There is nothing to show whether for any period when there were no
orders the respondents were still in arrears of tax. During the period
the stay orders were in operation the respondents cannot be said to be
in arrears of tax. Therefore, they cannot be said to be in arrears of tax.
[826-C]
G
4. High Court was wrong in directing issuance of an Eligibility
Certificate as well as directing reimbursement of the amounts paid and
thus, the order directing the same is set aside. Matter is remitted back to
the Divisional Level Committee which would decide the application.
[826-G; 827-C]
H
COMMR., TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. [VARIAVA, J.) 803

Oblum Electrical Industries Pvt. Ltd., Hyderabad v. Collector of A
Customs, Bombay, (1997) 7 SCC 581; Commissioner of Sales Tax v.
Industrial Coal Enterprises, (1999) 2 SCC 607 and K.R Steel Union Ltd.
v. Commissioner ofCustoms, Kand/a (Gujarat), [2001) 4 SCC 736, referred
to.
B
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6635 of
2003.

Form the Judgment and Order dated 24.5.2002 of the Allahabad High
Court in T.T.R. No. 30 of 2001.
c
Sunil Gupta, (Additional Advocate General for State of U.P.), Punit
Dutt ffyagi, Vivek Vishnoi, Mukesh Verma and Ram Kishore Singh Yadav
for the Appellant.

Sudhir Chandra, Ashok Sagar, Achintya Dvivedi and Rajesh Kumar D
for the Respondent.

The Judgment of the Court was delivered by

S.N. V ARIAVA, J. : . This Appeal is against the Judgment of the
Allahabad High Court dated 24th May, 2002. E

Briefly stated the facts are as follows.

Mis Dhampur Sugar Mills Limited [hereinafter called the 'Company']
is having its Registered Office at Dhampur, Bijnore District, U.P. It carried. F
on business of manufacturing sugar. In 1991 it opened, at Dhampur, a unit
manufacturing Chemicals. In 1993, it opened a unit manufacturing Particle
Board at Agwanpur, Moradabad District, U.P. In 1993, it established
another unit manufacturing Sugar at Rozagaon, Barabanki District and
in 1995 it established a unit manufacturing Sugar at Asmoli, Moradabad

-· District, U .P.

By a Notification dated 21st February, 1997 certain exemptions were
G

granted to an undertaking which made a fixed capital investment of Rs.SO
crores or more in expansion, modernization or diversification or backward
integration. H
804 SUPREME COURT REPORTS (2004] SUPP. 6 S.C.R.

A On 17th May, 2000 the Company styling itself as Dhampur Sugar Mills
Group oflndustries filed an application before the General Manager, District,
Industries Centre, District Bijnore. It claimed exemptions under the
Notification dated 21st February, 1997 on grounds of expansion,
diversification and modernization. This application was rejected by an
B Order dated 31st October, 2000 on three grounds, namely, (a) A joint
application for multiple units is not permissible under the Rules; (b) The
application was time-barred; and (c) the Company was in arrears of tax for
Rs.1742.25 lakhs. The Company filed an Appeal to the Trade Tax Tribunal,
against this Order. This Appeal was rejected by an Order dated 20th March,
200 I. The Trade Tax Tribunal held that every unit was a separate unit and
C that a joint application could not be made.

The Company then filed a Trade Tax Revision before the High Court.
The High Court has allowed the Revision and set aside the Orders dated 30th
October, 2000 and 20th March, 2001. The High Court has directed the
D concerned authority to issue an Eligibility Certificate under Section 4-A for
the benefit of tax rebate on all goods manufactured as well as on the waste
products. The High Court has further directed reimbursement of amounts
paid earlier with interest thereon at 9% from the date of deposit.

The questions for consideration by us are (a) whether one application
E can be filed or each unit of an industrial undertaking needs to file an
application; (b) whether the application filed on 17th May, 2000 can be said
to be time-barred; and (c) whether the Company was in arrears of tax for
Rs.1742.25 lakhs or in any other amount.

F To answer these questions, one needs to notice various provisions as
well as the concerned Notification. Under Section 8-A of the U.P. Trade Tax
Act, 1948 every dealer who commences business, during the course of an
assessment year and whose average monthly estimated turnover is as set out
in sub-clause (d).thereof, must get himself registered. Rule 6 of the U.P.
trade Tax Rules, I 948 provides that the Assessing Authority will be the one
G within whose jurisdiction the dealer carries on business. It further provides
that if a dealer carries on business within the limits of jurisdiction of more
than one Trade Tax Officer then he may declare one of the places of his
business as his principal place of business with an intimation to all other
Trade Tax Officers, within whose jurisdiction his other places of business
H are situated, that the 'trade Tax Officer where the principal place of business
COMMR., TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. (VARIAVA, J.] 805

is situate shall be the Assessing Authority in respect of such dealer. Thus, A
in cases like the present where a Company has more than one unit in
different localities, the Company can if it so desires have the Trade Tax
Officer of the principal place of business as the Assessing Authority of that
Company.
B
Relevant portion of Section 4-A of the U.P. Trade Tax Act, 1948 reads
as follows:-"

4-A. Exemption from trade tax in certain cases.- (1) Notwithstanding
anything contained in this Act, where the State Government is of
the opinion that it is necessary so to do for increasing the production C
of any goods or for promoting the development of any industry in
the State generally or any district or part of district in particular,
it may on application or otherwise, in any particular case or generally
by notification, declare that the turnover of sales in respect of such
goods by the manufacturer thereof shall, during such period not D
exceeding fifteen years from such date on or after the date of
starting production as may be specified by the State Government
in such notification, which may be the date of the notification or
a date prior or subsequent to the date of such notification, and
where no date is so specified from the date of first sale by such
manufacturer if such sale takes place within six months from the E
date of starting production and in any other case from the date
following the expiration of six months from the date of starting
production, and subject to such conditions as may be specified be
exempt from trade tax on sale of goods [whether wholly or partly]
or be liable to tax at such reduced rate as it may fix : F
Provided that in respect of goods manufactured in a new unit
having a fixed capital investment of five crore rupees or more or
in an existing unit which may make fixed capital investiaent of five
crore rupees or more in expansion, diversification, modernization
and backward integration or in any one of them, within such period G
not exceeding five years as may be specified in the notification, the
exemption from or reduction in the rate of tax may be granted.

(2) It shall be lawful for the State Government to specify in the
notification under sub-section ( 1) that the e:vemption from, or H
806 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A reduction in the rate of tax, shall be admissible -

(a) generally in respect of all such goods manufactured subsequent
to the date of such notification; or

(b) in respect of such of those goods only as are manufactured in
B a new unit, the date of starting production whereof falls on or after
the first day of October, I 982; or

(bb) in respect of those finished goods which are manufactured in
a unit which has undertaken backward integration; or
c
(c) in respect of those goods· only which are manufactured in a unit
which has undertaken expansion, diversification or modernization
on or after April I, I 990, and which, in case of diversification are
different from the goods manufactured before such diversification,
·and in the case of exemption or modernization. are additional
D
production as a result of such expansion or modernization; and

(d) only if the manufacturer furnishes to the assessing authority an
Eligibility Certificate granted by such officer, in accordance with
such procedure, :is may be specified." ·
E

(5) A manufacturer shall be entitled to the facility of exemption
from, or reduction in the rate of tax, notified under sub-section
F
(I) -

(a) ifhe applies for such facility within six months from the relevant
date of commencement of the period ·of facility referred to in that
sub-section or within six months from the date of notification
G issued under that sub-section or by September 30, I 992, which
ever, expires later, for the entire period notified under the sub-
section;

(b) if he applies for such facility later than the date specified in
Clause (a) only for part of the period notified under sub-section (I),
H
COMMR., TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. [V ARIA YA, J.] 807

which shall be computed from the date of the application till the A
end of the period of facility;

(6) Where the State Government is of the opinion that the purpose
B
for which the facility of exemption from or reduction in the rate
of tax was granted under this section has been fulfilled or that the
continuation of such facility is no longer in public interest or is
against the public interest, it may, by notification, withdraw such
facility granted to any industry, dealer or class of dealers : C
Provided that no such facility shall be withdrawn with retrospective
effect.

Explanation. - For the purposes of this Section-
D

(3) 'Date of starting production' means, the later of the following
dates, namely :
E
(a) the date of which any raw material (which term includes
accessories, components, parts and packing material) required for
use in the manufacturing (whether on trial or commercial basis) or
as the case may be, packing of the goods is purchased for the first
time; or F
(b) where the manufacture of goods is not possible without power,
the first date on which power supply for manufacturing (whether
on trial or commercial basis) from whatever source is obtained by
the Unit:
G
Provided that in respect of such raw material or packing material
purchased on or after April 1, 1990 from out.side India, the date of
clearance by the Customs Authorities under the Customs Act, 1962,
shall be reckoned as the date of its purchase for the purposes of
Clause (a) : H
808 SUPREME COURT REPORTS (2004] SUPP. 6 S.C.R.

A Provided further that where any stage of manufacture is commenced
before any of the dates referred to above, the date of such
commencement shall be the date of starting production.

(4) "Fixed capital investment" means value ,9fJand and building
and such plants including captive power plant, machinery,
B equipment, apparatus and components, moulds, dyes, jigs, and
fixtures as have not been used in any other factory or workshop in
India :

Provided that-
c
(a) for the purposes of determining value ofland and building
only the following shall be taken into account-

(i) value of only such portion of land and building as is
necessary for the establishment or running of the factory
D or workshop of the unit;

(ii) expenses incurred in registration of land and building
under the provisions of the Registration Act, 1908 and
in development of land as development chaiges payable
to any statutory body;
E
(iii) the value of land or building already owned and
given by the proprietor, partner, managing director,
promoter director or holding company as his or its share
in the capital in case the unit is established in such land
F or building;

(iv) the amount or proportionate amount paid or payable
as premium during the period for which expansion under
Section 4-A is granted on account of lease and the
expenses incurred on registration of the lease deed under
G the Registration Act, 1908, in case the unit is established
in land or building taken on lease;

(v) the value of land or building which is necessary for
establishing or running the unit under some statutory
H obligation.
COMMR., TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. [VARIAVA, J.] 809

(b) for the purposes of determining value of plant including A
captive power plant, machinery, equipment, apparatus
and components only the following shall be taken into
account :

(i) investment whether by means of purchase, hire or
lease in such plant, equipment, apparatus, components
B
and machinery as is necessary for the establishment or
running of the factory or :workshop;

(ii) investment as is necessary under some statutory
obligation; c
(iii) expenses incurred in erection· and,, installation of
such plant and machinery and bringin~ it to the site.

(c) the State Government may be notified order specify the
procedure for determining fixed capital investment. D
(d) if a unit has made fixed capital investment under two or
more heads of expansion, diversification, modernization and
backward integration but fixed capital investment made under
each such head is not ascertainable, then the break up of fixed
capital investment furnished by the unit will be accepted. E
(e) The facility of exemption from or reduction in the rate
of tax on the basis of fixed capital investment in a captive
power plant will be available when the unit does not sell the
power which is in excess of its consumption to any person
other than the Uttar Pradesh State Electricity Board and in
F
case the unit sells such excess power to person other than the
said board, the unit will be liable to pay the tax on the sale
of its manufactured goods on pro-rata basis alongwith the
interest in accordance with the provisions of sub-section (1)
of Section 8. G
(5) "Unit which has undertaken expansion, diversification or
modernization" means an industrial undertaking-

(a) of a dealer who is not a defaulter in payment of any dues under
this Act or the Central Sales Tax Act, 1956 or under any loan, H
810 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A scheme, administered by the Pradeshiya Industrial and Investment
Corporation of Uttar Pradesh regarding trade tax sale or purchase
of goods;

(b) whose first date of production of goods-
B
(i) of a nature different from those manufactured earlier by
such undertaking in case of units undertaking diversi-fication,
and

(ii) manufactured in excess of base production in such
c undertaking in case of units undertaking expansion or
modernization, falls at any time after March 31, 1990;

(c) the production capacity whereof except as provided in the
proviso to sub-section (1) has increased by at least twenty-five per
D cent as a result of expansion or modernization, or wherein goods
of.i~::nature different from those manufactured earlier are
manufactured after diversification;

( d) wherein an additional fixed capital investment of at least twenty-
five per cent of such original fixed capital investment (without
E providing for depreciation) is made.

(e) which has been established within the same district in which the
existing industrial unit is established.

F (6) For the purposes of this section the expr~ssion
., ?
"base production"
means,-
'I ,, ... J ;r.,_

(a) eighty per cent of the installed annual production capacity;

(b) maximum production achieved during any one of the preceding
G five consecutive assessment years or ifthe unit were in production
for less than five years, the maximum production achieved during
any one of the preceding assessment years whichever is higher:

Provided that where a unit manufacturing more than one goods has
H not undertaken expansion or modernization in respect of all such
COMMR., TRADE TAX, U.P. v. MIS. D.SM. GROUP OF INDS. [V ARIA VA, J.] 811

goods, its base production will be determined on the basis of A
production of goods in respect of which expansion or modernization
has been undertaken :

Provided further that where investment made during certain period
is clubbed together for the purpose of determining the fixed capital B
investment, the production immediately prior to the date oµ which
such investment was first started to be made in respect of expansion
or modernization shall be taken into account for determining the
b~se production."

Section 25 of the U. P. Trade Tax Act provides that an application for grant C
of Eligibility Certificate is to be made to the General Manager, District
Industries Centre of the district in which the unit is situated. This Section
also provides that the State Government may constitute Committees for
disposal of applications for grant of Eligibility Certificate. It further provides
that an application of a unit having a fixed capital investment exceeding Rs.5 D
lakhs shall be disposed of by the Divisional Level Committee. Once the
Committee decides then the Eligibility Certificate is to be issued by the
Additional or Joint Director of Industries of the concerned range.

The concerned Notification dated 21st February, 1997 reads as
follows: E

"Whereas the State Government is of the opinion tl:at it is
necessary for increasing the production of certain goods in the
State, manufactured by industrial units, having a fixed capital
investment of rupees fifty crore or more as new units, or making
F
an additional fixed capital investment of rupees fifty crore or more
in expansion, modernization, diversification or backward integration,
to grant exemption from, or reduction in rate of tax to such units:

Now, therefore, in exercise of the powers under Section 4-A of the
Uttar Pradesh Trade Tax Act, 1948 (U. P. Act No. XV of 1948), G
hereinafter referred to as the Act, the Governor is pleased to declare
that:-

I. (a) in respect of goods manufactured in a new unit estrblished
in the areas mentioned in Column 2 of the Annexure the date of H
812 SUPREME COURT REPORTS [2004) SUPP. 6 S.C.R.

A the starting production whereof falls on or after December 1, 1994
but not later than March 31, 2000, no tax shall be payable, or, as
the case may be, the tax shall be payable at the reduced rates by
the manufacturer thereof on the turnover of sales of such goods for
the period of twelve years or till the maximum amount of tax relief
B by such exemption from, or reduction in the rate of tax as specified
in Column 3 of the Annexure is achieved, whichever is earlier. The
period shall be reckoned from the date of the first sale or the date
following the expiration of six months from the date of starting
production, whichever is earlier;

c (b) in respect of goods manufactured in a unit which has undertaken
expansion, modernization or diversification on or after December,.• •
I, 1994 but not later than March 31, 2000, in the areas mentioned
in Column 2 of the Annexure, no tax shall be payable or, as the
case may be, the tax shall be payable at a reduced rate by the
D manufacturer thereof for the period of twelve years or till the
maximum amount of tax relief by such exemption from, orreduction
in the rate of, tax as specified in Column 3 of the Annexure is
achieved, whichever is earlier, on the turnover of sales-

(i) of the quantity of goods, manufactured in excess of the,
E base production in the case of unit undertaking expansion or
modernization; and

(ii) of goods manufactured by the unit which are of a nature
different from those manufactured earlier by such unit in the
F case of unit undertaking diversification;

(c) in respect of goods manufactured in a unit, which has undertaken
'backward integration' on or after December l, 1994 but not later
than March 31, 2000, in the areas mentioned in Column 2 of the
Annexure, no tax shall be payable, or as the case may be, the tax
G shall be payable at the reduced rates by the manufacturer thereof
on the turnover of sales of such finished goods, for the period of
twelve years or till the maximum amount of tax relief by such
exemption from, or reduction in the rate of, tax as specified in
Column 3 of the Annexure is achieved whichever is earlier on the
H turnover of sales. The benefit of exemption from, or reduction in,
COMMR., TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. [VARIAVA, J.) 813

the rate of tax to the unit which has undertaken backward integration, A
shall be admissible only if the unit starts manufacturing such raw
material, parts, intermediates or components as were not
manufactured by it to such backward integration.

2. The facility of exe·mption from, or reduction in, the rate of tax B
including additional tax to any unit on any transaction of sale shall
not exceed five per cent of the sale price. The tax including additional
tax in excess of five per cent shall be payable by such unit according
to law.

3. The facility of exemption from, or reduction in the rate of tax C
shall be subject to the following conditions in addition to the
conditions referred to in Section 4-A of the Act:-

(a) that the unit will have a fixed capital investment of
rupees fifty crcre or more as a new unit or making an D
additional fixed capital investment of rupees fifty crore
or more in expansion, modernization, diversification or
backward integration. The fixed capital investment which
is made during the period of five years commencing
from the first day of such investment in the case of
expansion, modernization, diversification or backward E
integration and from the date of starting production in
the case of new units will be included in fixed capital
investment for the purpose of this notification and also
for the purpose of exemption from, or reduction in the
rate of, tax benefit; F
(b) that the facility of exemption from, or reduction in the
rate of, tax on the basis of new units expansion,
modernization, diversification or backward integration,
as the case may be, under this notification shall not be
simultaneously be available to a unit availing such tax G
facility on the same basis under Section 4-A.

(c) that the new unit is licensed or in respect whereof a letter
of intent has been issued, or which is registered,
permanently or otherwise, by the appropriate authority H
814 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A in accordance with any law for the time being in force
relating to licensing or registration of such units;

(d) that the new unit is established on land or building or
both owned or taken on lease for a period of not less than
B fifteen years by such unit or allotted to such unit by the
Central or the State Government or any Government
Company or any Corporation owned or controlled by the
Central or the State Government;

( e) that the exemption from tax or as the case may be,
c reduction in the rate of tax shall be admissible only in
respect of such goods manufactured by the unit and such
by-products and waste-products as are mentioned in the
eligibility certificate issued to such unit under Section 4-
A;
D
(f) that the said unit furnishes to the assessing authority
concerned an eligibility certificate granted in this behalf
by the General Manager, District Industries Centre, Area
Development Officer (Industry) of the concerned
Industrial Development Authority, Additional or Joint
E Director Industries of the range or Additional Director
or Joint Director Industries of the concerned Industrial
Development Authority, as the case may be:

(g) that the exemption from, or reduction in the rate of, tax
F under this no.tification shall be available to a unit only
when fixed capital investment or as the case may be, an
additional fixed capital investment of at least rupees fifty
crore is made by it as specified in clause (a) of Para 3.
If the investment is not so made by a unit, it shall be
liable to pay penalty, if any, imposed and the entire tax
G benefit availed by the unit together with interest thereon
shall become due and be payable by the unit as admitted
tax, such unit shall however before it starts availing
facility under this notification creates first or second
charge on its property in the favour of the State
H Government, sufficient to cover its aforesaid liability;
COMMR., TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. [VARIAVA, J.] 815

(h) that the total amount of tax exemption under the Act as A
also under the Central Sales Tax Act, 1956 (Act No. 74
of 1956) in any assessment year shall not exceed the
amount which is equal to the multiple of percentage
mentioned in Column 3 of the Annexure and the fixed
capital investment, made by the unit during the said B
assessment year, but the amount of exemption under
both the aforesaid Acts up to the end of any assessment
year shall not exeeed the amount equal to multiple of
percentage mentioned in Column 3 of the Annexure :md
the fixed capital investment in the case of a new unit or
additional fixed capital investment, as the case may be, c
made up to the end of that assessment year;

(i) that the unit shall after close of every assessment year
during which exemption from, or reduction in the rate
of tax is admissible but not later than thirty days of D
the approval of its balance sheet by concerned
authority of the unit submit to the assessing authority a
certificate from a chartered accountant in respect of each
assessment year. Such certificate shall contain the
following details : -
E
h
(a) additional fixed capital investment made during
the assessment year;

(b) cumulative additional fixed capital investment
made from or after December 1, 1994 up to the F
close of such assessment year; and

(c) amount of tax exemption from, or reduction in
the rate of, tax availed by the unit during the
(
assessment year and from or after December l,
1994 up to the close of such assessment year; G

(d) the facility of exemption from, or reduction in
the rate of, tax under this notification shall not be
available to such industrial units as are notified by
the State Government. H
816 SUPREME COURT REPORTS (2004] SUPP. 6 S.C.R.

A 4. That the period of facility of exemption from, or reduction in
the rate of tax shall be reckoned from the first date of
production,-

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

(b) of goods manufactured in excess of the base production
in the case ofunit undertaking expansion modernization;
and

c ( c) of such raw material, parts, intermediate or components
as were earlier imported from outside the State and not
manufactured by the unit which has undertaken backward
integration.

5. Fixed capital investment or additional fixed capital investment,
D
as the case may be, m·ay, unless otherwise established, be
determined in the case of an industrial undertaking financed
by a term-loan aQvanced
- I\ .
by a public financial institution or
a Scheduled Bank' according to the certificate to that effect
issued by such institution or the Bank and in any other case,
E according to -

(a) the value of the land certified by the Collector in
accordance with the procedure laid down for
determination of the value of land for the purpose of
p payment of stamp duty under the Indian Stamp Act,
1899;

(b) the value of building certified by an evaluator approved
by the Income Tax Department for the purpose;

G (c) the value of plant, machinery, equipment, apparatus,
components, moulds, dyes, jigs and fixtures certified by
a Chartered Accountant.

6. In determining the fixed capital investment in case of new
H units or additional fixed capital investment referred to in
COMMR., TRADE TAX, U.P. v. MIS D.S.M. GROUP OF INDS. [VARIAVA, J.] 817

clause (d) of explanation (5) or clause (ii) of explanation (7) A
of Section 4-A in case of units which have undertaken
expansion, diversification or modernization or backward
integration, the investment in only such land, building, plant,
machinery, equipment, apparatus, components, moulds, dyes,
jigs, and fixtures shall be taken into account as were acquired B
on or before expiration of the period specified in sub-clause
(a) of Para 3 of this notification.

7. (I) 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 C
deemed to be the turnover of base production.

(2) Only the turnover of goods in any assessment year in
excess of the quantity referred to in sub-para ( 1) shall be
entitled to the facility of exemption from, or reduction in the
rate of, tax. D
ANNEX URE
Sr. Location of units Monetary limit up to which the
No. Limit benefit of exemption from
or reduction in the rate of tax E
under the Act together with the
benefit of exemption from, or
reduction in the rate, of tax
under the Central Sales Tax
Act, 1956 is admissible.
F
2 3

1. The districts of Almora, Banda, 250 per cent of the fixed capital
Chamoli, Dehradun,Fatehpur, investment or as the case may
Hamirpur, Jalaun, Jaunpur, be the additional fixed capital
Kanpur(Dehat), Mahoba, investment. G
Nainital, Pauri Garhwal,
Sultanpur, Uttar Kashi,
Pithoragarh, Tehri Garhwal,
Udham Singh Nagar and
Growth Centres.
H
818 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A 2.(i) The districts of Azamgarh, 200 per cent of the fixed
Ambedkar Nagar, Bahraich, capital investment or as the
Balia, Barabanki, Basti, case may be, the additional
Badaun, Bulandshahr, Deoria, fixed capital investment.
Etah, Etawah, Faizabad,
B Farrukhabad, Ghazipur, Gonda,
Hardoi, Jhansi, Lalitpur, Mainpuri,
Mathura, Mau, Moradabad,
Padrauna, Pilibhit, Pratapgarh,
Rae Bareli, Rampur, Shahjahanpur,
Siddarth Nagar, Sitapur and Unnao.
c
(ii) The area of Allahabad District in
South of the river Jamuna and
Confluent Ganga (excluding the
Area included. under Municipal
Corporation, Allahabad).
D
(iii) The Taj Trapezium area.

(iv) Greater NOIDA' Industrial
Development Area.

E 3. The Districts of Agra (excluding 150 per cent of the fixed
Taj Trapezium area), Aligarh capital investment or as
(excluding Taj Trapezium area), the case may be, the
Allahabad (excluding the area in additional fixed capital
South of rivers Jamuna and investment.
Confluent Ganga but including the
F
Area included under Municipal
Corporation, Allahabad), Bareilly,
Bhadohi, Bijnore, Firozabad
(excluding Taj Trapezium area),
Ghaziabad excluding (Greater
G NOIDA Industrial Development
Area), Gorakhpur, Haridwar,
Kanpur (Nagar), Lakhimpur Kheri,
Lucknow, Maharajganj, Meerut,
Mirzapur, Muzaffarnagar, Saharanpur,
Sonbhadra and Varanasi.
-·
H
COMMR.. TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. [VARIAVA, J.] 819

Mr. Sunil Gupta, Additional Solicitor General for the State of U.P., A
submitted that the reading of the above provisions and the Notification along
with Form 46 (being the form in which an application for exemption is to
be made) clearly indicate that for the purposes of exemption each unit is
considered to be a separate entity. He submits that to avail the benefits of
the Notification, an investment of Rs. fifty crores or more must be in respect B
of one unit only. He submitted that the Company making a capital investment
of Rs. fifty crores or more in its various units cannot, by clubbing the units,
claim an exemption under the said Notification. He further submitted that,
in any event, the application was made belatedly and, therefore, deserved
to be dismissed. He submitted that even otherwise the Company was in
arrears of tax approximating Rs.1742.25 lakhs and, therefore, also they were C
not entitled to the benefit of the Notification.

On the other hand, Mr. Sudhir Chandra, on behalf of the Company,
submitted that a reading of the provisions and the Notification make it clear
that it is the Company which is to make the investment and get the benefit D
of tax exemption. He submitted that, therefore, so long as the Company
makes a capital investment of Rs. fifty crores or more even though such
investment is spread over various units of the Company it becomes entitled
to the benefit of the Notification.

Mr. Sudhir Chandra cited a number of authorities for the proposition E
that Notifications have to be interpreted keeping in view the object. He
submitted that the object was to encourage investments and production, He
submitted that a liberal interpretation which advances the object of the
Notification should be given. Mr. Sudhir Chandra relied upon the authorities
in the cases of Ob/um Electrical Industries Pvt. Ltd., Hyderabad v. Collector F
a/Customs, Bombay, reported in (1997] 7 SCC 581; Commissioner ofSales
Tax v. Industrial Coal Enterprises, reported in (1999] 2 SCC 607 and K.
R. Steel Union Ltd. v. Commissioner ofCustoms, Kandla (Gujarat), reported
in (200 l] 4 SCC 736. In our view, there can be no dispute with the above
mentioned proposition of law. Therefore, there is no necessity to consider
in detail the authorities relied upon. G

In our view, the answer depends on the wording of the Notification
read along with Section 4-A of the U. P. Trade Tax Act. One must also keep
in mind Rule 6-A of the U.P. Trade Tax Rules which provides that ifa dealer
is carrying on business in more than one place then the Assessing Authority H
820 SUPREME COURT REPORTS [2004) SUPP. 6 S.C.R.

A for that dealer can be one where his principal place of business is.

It is undisputed fact that the principal place of business of the Company
is Dhampur, District Bijnore. The exemption claimed by the Respondent,
under the Notification dated 21st February, 1997, was for expansion,
modernization or diversification. What is a "Unit" for purposes of expansion,
B
diversification or modernization has been defined in Section 4-A (6) (5),
which has been set out hereinabove. Under this "unit" means an "industrial
undertaking" of a dealer who is not a defaulter and who meets the requirements
as setout in sub-clause (b) thereof. The dealer, indisputably, is the Respondent
Company. The industrial unde1taking of the Respondent is the Company.
c It is the Company which will be paying the tax and which will get the benefit
of exemption, if entitled to it.
.•
Mr. Sunil Gupta, the learned A.S.G. however submitted that a reading
of the various sub-clauses indicates that the term "Unit" refers not to the
D industrial undertaking as a whole but to a unit of the Company. He submitted
that Clause (b) requires that the 'first date of production of the goods'
consequent upon the expansion, modernization or diversification of the
undertaking in question should be a date falling at any time after March 31,
1980. He submitted that the expression the 'first date of production of the
goods' can have reference to the production of goods by only one
E manufaclliring concern or entity at a time. It cannot refer to multiple
manufacturing concerns of the dealer taken collectively because all of them
would not be expected to have a common first date of production of the
goods. In our view clause (b) clearly indicates that the referance is to the
industrial undertaking as a whole and not a unit of the industrial undertaking.
F There could be diversification in one unit in respect of which the first date
of production would be as per clause (b )(i). Clause (b )(ii) puts the matter
beyond any doubt. It uses the words "in such undertaking in case of units
undertaking expansion or modernization". Thu·s now there is clear referance
not just to the undertaking i.e. the Company but also to Units of that
Company. The term "units" clearly refers to more than one unit. This shows
G that the expansion and modernization can be in more than one unit.

Mr. Sunil Gupta, the learned A.S.G. next relied on clause (c) and
submitted that in cases of expansion Oi modernization clause (c) required
that the production capacity of the undertaking should increase by at least
H 25%. He submitted that this increase is relative and has to be achieved in
COMMR.. TRADE TAX, U.P. v. MIS. D.SM. GROUP OF INDS. [VARIAVA, J.] 821

·comparison to the pre-existing figure of 'base production'. He submitted A
that the increase contemplated is not in the enhanced production of all the
manufacturing concerns taken collectively together in comparison with their
collective pre-existing 'base production'. He submitted that there would be
no sense in comparing the over-all production capacity of all the
manufacturing concerns of the dealer regardless of the goods (products) they B
are manufacturing at different places (possibly in different States) and by
means of different kinds of plant, machinery etc. He submitted that such an
interpretation would render the provision both implausible and unworkable.
He submitted that the increase in production in respect of any one particular
manufacturing concern under expansion or modernization can and should
be compared with the pre-existing figure of'base production' of that concern C
only. In our view it is not necessary for us to decide whether the production
capacity of the undertaking or a unit is to be considered. Even if production
capacity of only the unit/s, in which expansion, modernization or
diversification has taken place, is to be taken into account then also it would
not show that the entire investment is to be only in one unit. The very fact D
that this clause is dealing with all 3 aspects i.e. expansion, modernization
and diversification shows that in most cases they would be in separate units.

We are also unimpressed by the submission that in cases of
diversification ifthe meaning given is that the goods manufactured should
not have been manufactured by the dealer anywhere in any concern of his, E
whether the present concern applied for or any other concern at any other
place, then again the provision would be deprived of all its sensibility
and reasonableness and would serve no purpose. It is the industrial
undertaking which is diversifying in some or one of its unit. Undoubtedly
the industrial undertaking may diversify in any one of its units. But that does F
not mean that it is the unit and not the industrial undertaking which is
diversifying.

Mr. Sunil Gupta, the learned A.S.G. next submitted that clause (d)
brings out the necessity of giving the narrow meaning to the expression
. 'industrial undertaking'. In our view clause (d) makes it clear that it is the G
industrial undertaking and not a unit which is making the additional fixed
capital investment. It could not be denied that the provision for depreciation
would necessarily be made by the Company. Thus it is the Company who
has to make an additional investment of at least 25% without providing for
depreciation. H
822 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A Mr. Sunil Gupta, the learned A.S.G., placed very strong reliance on
sub-clause (e), which reads as follows:-

"which has been established within the same district in which the
existing industrial unit is established."
B
He submitted that clause (e) proves beyond any doubt that the expression
'industrial undertaking' envisages only one manufacturing concern at a time
and not all such concerns belonging to the dealer. He submitted that the
expression 'the existing industrial unit' brings about the much wanted
connectivity between the old existing manufacturing concern and its
c enhancement (expansion, modernization or diversification) in terms of
establishment of both being required in one and the same district. He
submitted that this clause required that the enhanced portion (expansion,
modernization and diversification) of an undertaking should be located in
the same district as the original 'existing industrial unit' of that undertaking.
D He submitte.d that if it is located outside that district, the law would not treat
it as expansion, modernization or diversification of that undertaking. In that
event, it would be more akin to a new unit rather than an expanded or
modernized unit or a unit undergoing diversification. He submitted that the
requirement as to location, namely, that the enhanced portion of the
undertaking should be 'established within the same district in which the
E existing industrial unit is established; can have reference only to one
manufacturing concern (the existing industrial unit) at a time i.e. the one
particular concern which is undergoing expansion etc. and the district in
which it is located and not to all the concerns ( 'lll the existing industrial
units) belonging to the dealer for they may possibly be located even in
F different districts.

We are unable to accept this submission. This sub-clause merely sets
out that the expansion, diversification or modernization must be in respect
of a unit, which has been established within the same district in which the
industrial unit is established. In this case, the expansion, diversification or
G modernization is not claimed in respect of any new unit. It is claimed in
respect of existing units at Dhampur, Agwanpur, Rozagaon and Asmoli.
That the term "Unit" in the context of expansion, diversification and
modernization refers to the Industrial Undertaking and not to a unit of an
Industrial Undertaking. Thus an expansion of one unit at the same location
H or a modernization of any unit or a diversification in an existing unit would
COMMR., TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. [VARIAVA, J.] 823

suffice. All that this clause is ensuring is that there is distinction between A
a new unit and an expansion, modernization and diversification. A new unit
may be at a different place but expansion, modernization or diversification
must be at the place/places where the existing units of the industrial
undertaking are situated.
B
Mr. Sunil Gupta, learned A.S.G. next submitted that the definition of
the expression 'base production' in Explanation (6) further underscores the
individual identity of each maQ.ufacturing concern. He submitted that one
of the two figures, whichever is higher, is taken as the base production-either
eighty percent of the installed annual production capacity or the maximum C
production achieved during any one of the preceding five consecutive
assessment years. He submitted that this can have reference only to the
production capacity or production figures in respect of the one 'existing
industrial unit' which is undergoing expansion etc. He submitted that the
concept of 'base production' has relevance only to expansion and
modernization and not to diversification. He submitted that if a wide D
meaning of 'industrial undertaking' viz. multiple concerns belonging to a
dealer is applied, the production capacity and production figures of the other
manufacturing concern or concerns of the dealer, producing possibly even
some other kind of goods, shall have to be taken into consideration even
though it would be wholly irrelevant for the purposes of determining the E
base production of the particular concern undergoing expansion for there
would be no rational basis or linkage for comparison between the two. He
submitted that this is also in consonance with the first proviso to Explanation
(6). He relied on the first proviso and submitted that whilst dealing with
one unit manufacturing more than one goods but not undertaking expansion
F
etc. in respect of all such goods, requires the base production to be
determined only on the basis of production of goods in respect of which
the expansion etc. has been undertaken. He submitted that in such a case,
the comparison is made even more specific. It is determined not merely unit-
wise but even goods-wise.
G
We are unimpressed by these submissions. As stated above even if the
figures are to be in respect of only one unit it still would not mean that the
entire investment of Rs. 50 crores or more must be in one unit only. Separate
figures of each unit in which expansion, modernization or diversification
has taken place may and can be worked out. H
824 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A That the expansion, modernization or diversification need not be in one
unit is also clear from the wording of the Notification.

The Preamble to the Notification reads as follows :-

"Whereas the State Government is of the opinion that it is necessary
B
for increasing the production of certain goods in the State,
manufactured by industrial units, having a fixed capital investment
of rupees fifty crore or more as new units, or making an additional
fixed capital investment of rupees fifty crore or more in expansion,
modernization, diversification or backward integration, to grant
c exemption from, or reduction in rate of tax to such units."

Thus, the Preamble shows that the capital investment of Rs. fifty crore
or more has to be in a new unit or in expansion, modernization and
diversification. To be noted that to the words "expansion, modernization and
D diversification", there are no qualifying words. It is not stated that these must
be in one unit of the Industrial Undertaking. The Preamble, therefore, clearly
supports the case of the Respondents that the expansion, diversification and
modernization need not be only in one of the units of the Industrial
Undertaking. This becomes further clear that if one looks at Clause (l) of
the Notification. Under sub-clause (a) the benefit is in respect of a new unit
E but under sub-clause (b) it is in respect in a unit which has undertaken
expansion, modernization or diversification between 1st December 1994
and 3 1st March 2000. As seen above, the term 'Unit' has the meaning as
defined in Section 4-A. As we have already seen, Section 4-A defines the
term 'Unit' to mean an industrial undertaking, which has undertaken
F expansion, modernization and diversification. Even under the General Clauses
Act, where the context so requires the singular can include the plural. A plain
reading of the Notification shows that for "expansion, modernization and
diversifica~ion" it is the industrial undertaking which is considered to be the
"Unit". This is also clear from fact that in the Notification wherever the
words "expansion, modernization or diversification" are used, there is no
G qualifying words to the effect "in any one Unit". In none of the clauses
is there any requirement of the investment being in one unit of the
Industrial Undertaking. Words to the effect "in a particular unit" or "in one
unit" are missing. To accept Mr. Sunil Gupta's submission would require
adding words to a Notification which the Government purposely omitted to
H add.
COJ\1MR., TRADE TAX, U.P. v. MIS. D.S.M. GROUP OF INDS. [VARIAVA, J.] 825

Even otherwise, the purpose ofNotification being to encourage increased A
production and to give benefit to industries which have invested Rs. fifty
crore or more in the State and whose production has thus increased, an
interpretation must be given which would extend benefit to such industries.
There would be no purpose in denying, an industry .which has invested Rs.
fifty crore or more and whose production in the State has as a result B
increased, the benefit of the exemption granted by this Notification merely
because the whole of the investment is not in any particular unit. Thus even
where the investment is made by the Company in more than one units, so
Jong as the total investment is Rs. fifty crore or more, the benefit of the
Notification would be available. Such benefit would then be distributed in
the manner set out in the Schedule depending on where a unit in which
c
expansion, diversification or modernization has taken place, is situated.
Thus, for example, in respect of the units situated in Barabanki and
Moradabad, the benefit would be to the extent of 200% of the fixed capital
investment in those units, whereas in respect of units in Bijnore the benefit
would be to the extent of 150% of the fixed capital investment in that unit. D
Similarly, the base production and the starting date of production could be
in respect of those units. However, it is the r:ompany which has made
the investment. It is the Company which is paying the tax. It is the Company
which would be getting the benefit of the exemption. The manner in which
the Company gets the benefit would be as set out_ hereinabove. E

The second question is whether the application could have been rejected
on the ground that it is time-barred. The relevant portion of Section 4-A(5)
reads as follows:
F
"(5) A manufacturer shall be entitled to the facility of exemption
form, or reduction in the rate of tax, notified under sub-section
(1)-

(a) if he applies for such facility within six months from the G
relevant date of commencement of the period of facility referred
to in that sub-section or within six months from the date of
notification issued under that sub-section or by September 30,
1992, which ever, expires later, for the entire period notified
under the sub-section;
H
826 SUPREME COURT REPORTS (2004] SUPP. 6 S.C.R.

A (b) if he applies for such facility later than the date specified
in Clause (a) only for part of the period notified under sub-
section (I), which shall be computed from the date of the
application till the end of the period of facility;

Thus, even if an application is made at a later date it does not preclude the
B dealer from getting the benefit of the exemption. If an application is made
at a later date the benefit of exemption will be lim~ted. It will be computed
from the date of the application till the end of the period of facility. This,
therefore, was no ground for rejecting the application.

c The third ground on which the application was rejected was that the
Respondents were in arrears of tax. We, however, find that the Respondents
had obtained stay orders from the High Court. Neither side could enlighten
us, whether for any period when there were no stay orders the Respondents
were still in arrears of tax. During the period the stay orders were in
operation the Respondents cannot be said to be in arrears of tax. During the
period of the stay the Respondents were not bound to pay. Therefore, they
cannot be said to be in arrears. These are matters of fact which need to be
looked into by the Assessing Authority.

We are, therefore, of the opinion that the Assessing Authority was
E wrong in rejecting the application on the ground that a joint application was
not permissible. As stated above, a joint application is permissible. As the
principal place of business is at Bijnore, the Assessing Authority would be
the General Manager, District Industries Centre, Bijnore. If this Officer or
the concerned Committee requires any further information from any other
F District, it can always call for information from the concerned Officer of
the other District/s or even call upon the Company to furnish relevant
information.

We, however, find that the High Court was wrong in directing issuance
of an Eligibility Certificate as well as directing reimbursement of the amounts
G paid. Whether, factually, there has been any expansion, modernization or
diversification has to be ascertained by the concerned Committee. The
Committee will also have to determine to what extent there has been
expansion, modernization and/or diversification after· ist December 1994
and before 31st March 2000. The Assessing Authority will also require to
H consider whether Clause 3(b) of the Notification is applicable and whether
C0\\1MR., TRADE TAX. U.P. v. M/S. D.S.M. GROUP OF INDS. [VARIA YA. J.] 827

the expansion, modernization and diversification now claimed is not in A
respect of any exemption already claimed and made available to the
Respondent-Company or any of its units earlier. It must be mentioned that
under an earlier Notification dated 13.8.1991 various units of the Respondent-
company had applied for exemption and had been granted exemption to
certain extant.
B
Thus, we set aside that portion of the impugned Order which directs
issuance of the Eligibility Certificate and directs reimbursement. We remit
the matter back to the Divisional Level Committee which shall decide the
application on its merit within a period of six months from today. The
Committee, among the other things, will consider whether the Company was C
in arrears of tax. It is again clarified that during the period of stay orders
the Company cannot be said to be in arrears of tax.

With these observations, the Appeal stands disposed of. There will be
no order as to costs.
D
N.J. Appeal disposed of.