COMMISSIONER OF SALES TAX versus INDUSTRIAL COAL ENTERPRISES

Citation: [1999] 1 S.C.R. 871 · Decided: 24-02-1999 · Supreme Court of India · Bench: M. SRINIVASAN · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

-
COMMISSIONER OF SALES TAX 
A 
v. 
INDUSTRIAL COAL ENTERPRISES 
FEBRUARY 24, 1999 
(M. SRINIVASAN AND U.C. BANERJEE, JJ.] 
B 
SALES TAX: 
U.P. Sales Tax Act, 1948: Section 4-A (as it stood prior to 13. 9.1985). 
Sales 
Tax-Exemptiorr-Small 
Scale 
Unit 
(SSU)-New C 
unit-Registered with Directorate of Industries as SSlf-Granted exemption 
for a particular period under S.4-A-Capital investment exceeded the 
prescribed limit during the period of exemption-However, unit obtained 
registration under the Factories Act after expiry of maximum period of exemp-
tion (4 years)-17ierefore, unit denied exemption beyond date already sane-
D 
tioned since capital investment exceeded the prescribed limit-Validity 
oHf eld: In the circumstances of the case, discontinuance of exemption even 
if unit did not fulfil prescribed conditions for. large industries, not war-
rante~Subsequent amendment of S.4-A not relevant-U.P. Government 
Notification No. ST-II-604/X-9(208)161-U.P. Act 15/48--0rder 85 dated 
E 
29.1.1985. 
Interpretation of Statutes : 
External aids-Other statutes-Subsequent legislatiorr-Amending 
Act~ffect of-Held: May be remedial and not relevant-More so when there 
is 110 ambiguity in the unamended legislation. 
Taxing statutes-Provisions for incentive-Strict constructiorr-Ap-
plicability of-Held : Should be liberally construed. 
F 
The respondent established a manufacturing unit in a rented 
,... 
premises under a sale deed for seven years w.e.f.1.1.1985. The unit was also 
J 
registered with the Directorate of Industries as a small-scale unit for the 
manufacture of coal-briquettes. It was granted a term loan of Rs. 30,000 
+ 
from the State Bank of Patiala. The first date of purchase of raw material 
was on 9.2.1985 and the unit started production on 15.2.1985 with the help 
of a new generator. The first date of sale of the finished product was H 
871 
-,.; 
-i 
~ 
872 
SUPREME COURT REPORTS 
[1999] 1 S.C.R. 
A 1.10.1985. The first date of production as defined in the Rules under the U.P. 
_.._. 
"" 
Sales Tax Act, 1948 was 9.8.1985 i.e. after six months from the date of 
purchase of raw material. Thus the unit was entitled to exemption from 
sales tax w.e.f. 9.8.1985 as it fulfilled all the prescribed conditions. The unit 
applied for exemption under Section 4-A of the Act on 20.12.1985 since its 
B 
capital investment was much below Rs. 3. lakhs. ·Later on, the respondent 
changed the place of manufacturing from the ~ented premises to a new site 
,. 
purchased and owned by it. The unit remained closed from 23.7.1986 to 
.; 
31.7.1986 for the purpose for shifting machines to the new premises. The 
production started in the new place from 1.8.1986. 
c 
As. a result of purchase of new site and construction of own building, 
the capital investment of the unit increased to beyond Rs. 3 lakhs. The unit 
. applied for registration under the Factories Act, 1948, which was granted 
w.e.f. 11.8.1989. The unit was granted sales tax exemption from 9.8.1985 to 
22.7.1986, the date till which the capital investment of the unit was below Rs. 
D 
3 lakhs. However, since the registration under the Factories Act was ob-
tained after the expiry of the maximum period of exemption ( 4 years) under 
.. 
Government Notification dated 29.1.1985 no exemption beyond 22.7.1986 
,. 
was granted. The review applicaticn filed by the respondent was rejected. 
But the High Court held that the unit was entitled to exemption for a period 
of 4 years from 9.8.1985. Hence this appeal. 
E 
On behalf of the appellant-Revenue it was contended that the 
provisions of an exemption clause should be strictly construed and if,the 
conditions under which exemption was granted stood changed on account 
of subsequent event, the exemption would not operate, and that the amend-
ment of Section 4-A w.e.f. 13.9.1983 made by U.P. Act 28 of 1991, being a 
F subsequent legislation, could be taken for purpose of guidance for inter-
~ ._ 
preting the provisions of the Act as it stood earlier. 
Dis_missing the appeal, this Court 
G 
HELD : 1. Admittedly, the provisions for exemption from sales tax 
have been introduced in the U.P. Tax Act, 1948 for the purpose ofincreasing 
the production of goods and for promoting the development of industries in 
the State. When the scheme called "Grant of Sales Tax Exemption Scheme, 
~ 
1982 to industrial units under Section 4-A of the U.P. Sales Tax Act, 1948" 
was originally framed, it was expressly stated that the Government grant

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