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CASE NO.: Appeal (civil)  6635 of 2003

PETITIONER: Commissioner, Trade Tax, U. P.

RESPONDENT: M/s D. S. M. Group of Industries

DATE OF JUDGMENT: 09/12/2004

BENCH: S. N. Variava & Dr. AR. Lakshmanan

JUDGMENT: J U D G M E N T

S. N. VARIAVA, J.  

       This Appeal is against the Judgment of the Allahabad High Court  dated 24th May, 2002.         Briefly stated the facts are as follows.         M/s Dhampur Sugar Mills Limited [hereinafter called the  ‘Company’] is having its Registered Office at Dhampur, Bijnore  District, U. P.  It carried 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 granted to an undertaking which made a fixed capital investment  of Rs.50 crores or more in expansion, modernization or diversification  or backward integration.          On 17th May, 2000 the Company styling itself as Dhampur Sugar  Mills Group of Industries 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 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, 2001.  The  Trade Tax Tribunal held that every unit was a separate unit and 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 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 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.         To answer these questions, one needs to notice various

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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, 1948 provides  that the Assessing Authority will be the one 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 are situated, that the Trade Tax Officer where the principal  place of business is situate shall be the Assessing Authority in respect  of such dealer.  Thus, 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.         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 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 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 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 :

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 investment of  five crore rupees or more in expansion,  diversification, modernization and backward  integration or in any one of them, within such  period 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 exemption from, or reduction in the  rate of tax, shall be admissible\027

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

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notification; or  

(b) in respect of such of those goods only as are  manufactured in a new unit, the date of starting  production whereof falls on or after the first day  of October, 1982; or  

(bb) in respect of those finished goods which are  manufactured in a unit which has undertaken  backward integration; or  

(c) in respect of those goods only which are  manufactured in a unit which has undertaken  expansion, diversification or modernization on or  after April 1, 1990, 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 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, as may be specified."

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(5) A manufacturer shall be entitled to the  facility of exemption from, or reduction in the  rate of tax, notified under sub-section (1) --  

(a) if he 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 issued under that sub- section or by September 30, 1992, 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 (1), which  shall be computed from the date of the  application till the end of the period of facility; .................................................................... ....................................................................

(6) Where the State Government is of the  opinion that the purpose 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 :

Provided that no such facility shall be withdrawn  with retrospective effect.

Explanation.\027For the purposes of this Section--

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(3) ‘Date of starting production’ means, the  later of the following dates, namely :

(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  

(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 :

Provided that in respect of such raw material or  packing material purchased on or after April 1,  1990 from outside 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) :

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 of  land and building and such plants including  captive power plant, machinery, equipment,  apparatus and components, moulds, dyes, jigs,  and fixtures as have not been used in any other  factory or workshop in India :

Provided that\027

(a)     for the purposes of  determining value of land and building  only the following shall be taken into  account\027

(i)     value of only such portion of land  and building as is necessary for the  establishment or running of the  factory 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 charges payable to any  statutory body;

(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 or building;

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(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 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  obligation.

(b)     for the purposes of  determining value of plant including  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  and machinery as is necessary for the  establishment or running of the  factory or workshop;

(ii)     investment as is necessary under  some statutory obligation;

(iii)   expenses incurred in erection  and installation of such plant and  machinery and bringing it to the site.

(c)            the State Government may be  notified order specify the procedure  for determining fixed capital  investment.   (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 as certainable, then the  break up of fixed capital investment  furnished by the unit will be accepted.

(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  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

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pro-rata basis alongwith the interest  in accordance with the provisions of  sub-section (1) of Section 8.

(5) "Unit which has undertaken expansion,  diversification or modernization" means an  industrial undertaking\027

(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, 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\027

(i) of a nature different from those  manufactured earlier by such  undertaking in case of units  undertaking diversification, and

(ii) manufactured in excess of base  production in such 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 cent as a  result of expansion or modernization, or wherein  goods of a 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  providing for depreciation) is made.

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

(6) For the purposes of this section the  expression "base production" means,--

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

(b) maximum production achieved during any  one of the preceding five consecutive  assessment years or if the 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 not undertaken expansion  or modernization in respect of all such goods, its

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base production will be determined on the basis  of 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  investment, the production immediately prior to  the date on which such investment was first  started to be made in respect of expansion or  modernization shall be taken into account for  determining the base production."

Section 25 of the U. P. Trade Tax Act provides that an application  for grant 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 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:         "Whereas the State Government is of the  opinion that 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 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), hereinafter  referred to as the Act, the Governor is pleased to  declare that :--

1.      (a) in respect of goods manufactured in a new  unit    established in the areas mentioned in  Column 2 of the Annexure the date of 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 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;

(b) in respect of goods manufactured in a unit  which has undertaken expansion, modernization or  diversification on or after December 1, 1994 but  not later than March 31, 2000, in the areas

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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  manufacturer thereof 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 turnover of sales\027

(i)     of the quantity of goods,  manufactured in excess of the 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  case of unit undertaking diversification;

(c) in respect of goods manufactured in a unit,  which has undertaken ‘backward integration’ on or  after December 1, 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 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  turnover of sales.  The benefit of exemption from,  or reduction in, the rate of tax to the unit which  has undertaken backward integration, 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 exemption from, or reduction in,  the rate of tax 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 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 crore or  more as a new unit or making an  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 integration  and from the date of starting

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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;

(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 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 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 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, 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;

(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 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 under this  notification 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

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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  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 Government, sufficient to  cover its aforesaid liability;

(h)     that the total amount of tax  exemption under the Act as 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 assessment year, but the  amount of exemption under both the  aforesaid Acts up to the end of any  assessment year shall not exceed the  amount equal to multiple of  percentage mentioned in Column 3 of  the Annexure and the fixed capital  investment in the case of a new unit  or additional fixed capital investment,  as the case may be, 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 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 :--

(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  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 1, 1994 up to the close  of such assessment year;

(d)     the facility of exemption from,

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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.

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 earlier by such  unit in case of diversification;  

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

(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, as the case may be, may,  unless otherwise established, be determined in  the case of an industrial undertaking financed  by a term-loan advanced 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,  according to \026

(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  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;  

(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 units or additional fixed capital  investment referred to in clause (d) of  explanation (5) or clause (ii) of explanation (7)  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 on or before  expiration of the period specified in sub-clause  (a) of Para 3 of this notification.

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7.      (1) 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.

(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.           

ANNEXURE _______________________________________________ Sr.No.  Location of units                      Monetary limit  up to   which the                                                    Limit benefit of   exemption from                                                    or reduction in the rate                                                                                   of tax 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. __________________________________________________________ 1.                     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.                Nainital, Pauri Garhwal,  Sultanpur, Uttar Kashi,  Pithoragarh, Tehri Garhwal,  Udham Singh Nagar and  Growth Centres.

2. (i) The districts of Azamgarh,          200 per cent of the fixed capital       Ambedkar Nagar,Bahraich,            investment or as the case may       Balia, Barabanki, Basti,                 be, the additional fixed capital       Badaun, Bulandshahr,Deoria,         investment.       Etah,Etawah,Faizabad,Farrukhabad,       Ghazipur, Gonda, Hardoi, Jhansi,       Lalitpur, Mainpuri,Mathura, Mau,       Moradabad, Padrauna, Pilibhit,    Pratapgarh, Rae Bareli, Rampur,    Shahjahanpur, Siddarth Nagar,    Sitapur and Unnao.

(ii)The area of Allahabad District in     South of the river Jamuna and     Confluent Ganga (excluding the     Area included under Municipal     Corporation, Allahabad).

         (iii) The Taj Trapezium area.

         (iv) Greater NOIDA Industrial                Development Area.                              3. The Districts of Agra (excluding          150 per cent of the fixed                     Taj Trapezium area), Aligarh             capital investment or as

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                   (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                     Area included under Municipal                     Corporation, Allahabad), Bareilly,                     Bhadohi, Bijnore,Firozabad (excluding                     Taj Trapezium area), Ghaziabad                     excluding (Greater NOIDA Industrial                     Development Area), Gorakhpur,                     Haridwar, Kanpur (Nagar),Lakhimpur                     Kheri, Lucknow, Maharajganj, Meerut,                     Mirzapur, Muzaffarnagar, Saharanpur,                     Sonbhadra and Varanasi.                                             

       Mr. Sunil Gupta, Additional Solicitor General for the State of      U.P., 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 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 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 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 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 Oblum  Electrical Industries Pvt. Ltd., Hyderabad vs. Collector of  Customs, Bombay, reported in (1997) 7 SCC 581; Commissioner  of Sales Tax vs. Industrial Coal Enterprises, reported in (1999) 2  SCC 607 and K. R. Steel Union Ltd. vs. Commissioner of Customs,  Kandla (Gujarat), reported in (2001) 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.          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 if a dealer is carrying on business in more than  one place then the Assessing Authority 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, 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

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not a defaulter and who meets the requirements as set out in sub- clause (b) thereof.  The dealer, indisputably, is the Respondent  Company.  The industrial undertaking of the Respondent is the  Company.  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 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 manufacturing  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. 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".  Thus 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 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 or modernization clause (c)  required that the production capacity of the undertaking should  increase by at least 25%.  He submitted that this increase is relative  and has to be achieved in comparison to the pre-existing figure of  ’base production’. He submitted 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 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 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 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 if the meaning given is that the goods manufactured  should not have been manufactured by the dealer anywhere in any  concern of his, 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 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

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expression ’industrial undertaking’. In our view clause (d) makes it  clear that it is the 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.   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."

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 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. He  submitted 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 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 (all the existing industrial units)  belonging to the dealer for they may possibly be located even in  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 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 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 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.         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 manufacturing concern.  He  submitted that one of the two figures, whichever is higher, is taken as  the base production \026 either eighty percent of the installed annual  production capacity or the maximum 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 meaning of  ’industrial undertaking’ viz. multiple concerns belonging to a dealer is

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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 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  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.  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.  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 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 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 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 (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 unit which has  undertaken expansion, modernization or diversification between 1st  December 1994 and 31st 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 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 diversification" 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 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 add.           Even otherwise, the purpose of Notification being to encourage  increased production and to give benefit to industries which have  invested Rs. fifty crore or more in the State and whose production has

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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 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 long  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 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.  Similarly, the base production and the  starting date of production could be in respect of those units. However,  it is the Company 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.         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: "(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 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;

(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 (1),  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 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.  This, therefore, was no ground for  rejecting the application.         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 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

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Centre, Bijnore.  If this Officer or the concerned Committee requires  any further information from any other 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 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 consider whether Clause  3(b) of the  Notification is applicable and whether the expansion,  modernization and diversification now claimed is not in 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.          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 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.