U.P Trade Tax Act – s.4-A(5) – Whether for the goods, manufactured by use of modern technologies can be said to be “diversification”, and manufacturing of the goods of a nature different from the goods manufactured earlier if entitles the appellant to claim the exemption from trade tax provided u/s.4-A(5) – Held: In case of “diversification” the goods manufactured by diversification shall be different from the goods manufactured before such diversification – In the present case, the earlier product being manufactured by the appellant was used for sealing glass bottles and subsequently the additional product produced with the use of modern technology is also being used for the same purpose namely, “sealing glass bottles” – Therefore, the same cannot be said to be manufacturing of goods different from being manufactured before such diversification – With the passage of time, due to advancement in technology, if there is a replacement of the old machinery with the new machinery for improvement in quality and quantity of a product, at the most, it can be said to be expansion and/or modernization, but it cannot be said to be “diversification” Words used in s.4-A are clear and unambiguous – Exemption provisions are to be read as they are and construed literally – Giving the literal meaning to s.4-A, it cannot be said that the appellant is entitled to the exemption as claimed – High Court committed no error in refusing to grant exemption to the appellant.
Dismissing the appeal, the Court
HELD: 1.1 On a fair reading of Section 4 - A(2)(c), Section 4-A(5)(b)(i) & (ii) and Section 4-A(5)(c), it is clear that in case of “diversification” the goods manufactured by diversification shall be different from the goods manufactured before such diversification [Section 4-A(2)(c)]. In the case of “expansion or modernization”, the exemption shall be available, if there is an additional production as a result of such modernization or expansion. The present case is concerned with the case of “diversification”. Therefore, the goods manufactured after diversification must be different goods from the goods manufactured before such diversification. 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 exemption provision. [Paras 8.1, 8.2][1043-D-F]
1.2 In the present case, the appellant was manufacturing /producing “Spun Line Crown Cork” used for sealing the glass bottles. With the use of modern technologies, now the appellant is manufacturing “Double Lip Dry Blend Crowns”, which is also used for sealing the glass bottles. The earlier product being manufactured by the appellant was used for sealing glass bottles and subsequently the additional product produced with the use of modern technology is also being used for the same purpose namely, “sealing glass bottles”. Therefore, the same cannot be said to be manufacturing of goods different from being manufactured before such diversification. With the passage of time, due to advancement in technology, if there is a replacement of the old machinery with the new machinery for improvement in quality and quantity of a product, at the most, it can be said to be expansion and/or modernization, but it cannot be said to be “diversification”, which is “manufacturing of goods different from the goods manufactured before such diversification”. In a case of “diversification”, the effect has to be that the quality and quantity of the product should have been improved and/or increased but if the ultimate use is the same, the product manufactured on use of modern and/or advanced technology cannot be said to be manufacturing the different goods for claiming the exemption from payment of trade tax. The words used in Section 4-A are very clear and unambiguous. The Statute and more particularly, the exemption provisions are to be read as they are and to be construed literally and should be given a literal meaning. Giving the literal meaning to the exemption provision namely, Section 4-A, it cannot be said that the appellant is entitled to the exemption as claimed. Considering the aforesaid facts and circumstances of the case and as observed hereinabove, when the provisions of the Act unequivocally provides that the “diversification” can be considered only in a case where “goods of different nature” are produced, and only then the exemption shall be available. The goods manufactured on “diversification” must be a “different”, “distinct” and a “separate” good in nature. In the present case, the goods manufactured on use of advance and/or modern technology, cannot be said to be a different commercial activity at all. The High Court has not committed any error in refusing to grant exemption to the appellant. [Paras 8.3-8.5][1043-G-H; 1044-A-F]
Hansraj Gordhandas Vs. H.H. Dave, Assistant Collector of Central Excise Customs, Surat and Ors. AIR 1970 SC 755 : [1969] SCR 253; Parle Biscuits (P) Ltd. Vs. State of Bihar and Ors. (2005) 9 SCC 669 : [2004] 6 Suppl. SCR 954; Assistant Commissioner (CT) LTU and Anr. Vs. Amara Raja Batteries Limited (2009) 8 SCC
209 : [2009] 11 SCR 953; Commissioner of Sales Tax, Orissa and Anr. Vs. Jagannath Cotton Company and Anr. (1995) 5 SCC 527 : [1995] 2 Suppl. SCR 390 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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