Supreme Court refuses to grant an exemption under Section 4-A (5) of the UP Trade Tax Act
While hearing AMD Industries Limited vs Commissioner of Trade Tax, the Supreme Court agreed with the view taken by the High court, refusing to grant exemption to the appellant under Section 4-A (5) of the UP Trade Tax Act. The appellant, in this case, is a manufacturer of “Spun Line Crown Cork” which is used for the packaging of glass bottles. However, subsequently, it diversified its manufacturing activity to manufacture “Double Lip Dry Blend Crowns”. In order to follow up the manufacturing of “Double Lip Dry Blend Crowns”, a new plant and machinery were imported, and a fixed capital cost of Rs. 4.5 crores was invested.
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The appellant submitted an application for granting an eligibility certificate before the Divisional Level Committee for the manufacture of a “double Lip Dry Blend Crown” under the program of diversification. It was identified that the appellant was granted the eligibility certificate under ‘modernization’ instead of eligibility certificate under ‘diversification’ scheme whereas the exemption was denied under Section 4-A(5) of the Act. Further, an appeal was preferred by the appellant against the order dated before the Trade Tax Tribunal which was dismissed.
The second appeal before the Tribunal was also dismissed and held that “The nature of goods being produced under the modern technology is not different than the goods produced by the unit earlier, as both the produced material are used in packing the bottles of cold drinks and therefore, as the goods manufactured are not different but the same and used for the same purpose, the appeals came to be dismissed.” Against the order passed by the Tribunal, the revision application before the High Court has been dismissed by the impugned judgment and order. The appeal was then presented before the Supreme Court.
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The bench of the Supreme Court comprising Justice M R Shah and Krishna Murari stated that “The goods manufactured after diversification must be different goods from the goods manufactured before such diversification.” Further illustrating that “As per the settled position of law, in case of an exemption notification/exemption provision, the same is required to be construed literally and the person claiming the exemption must satisfy all the conditions of the exemption provision.”
During the investigation, it was analyzed that the earlier product being manufactured by the appellant was used for sealing glass bottles, and the product produced with the use of modern technology was also used for the same purpose, “sealing glass bottles.” The same cannot be said to be the manufacturing of goods different from being manufactured before such diversification. The Apex Court highlighted that “The goods manufactured on ‘diversification’ must be a ‘different’, ‘distinct’ and a ‘separate’ good in nature.” Giving the literal meaning to the exemption provision namely, Section 4-A, it cannot be said that the appellant was entitled to the exemption as claimed. The top Court further stated that “The High Court has not committed any error in refusing to grant exemption to the appellant” and dismissed the appeal.
