COMMISSIONER OF TRADE TAX, U.P. AND ANR. versus M/S. KAJARIA CERAMICS LTD.

Citation: [2005] SUPP. 1 S.C.R. 437 · Decided: 12-07-2005 · Supreme Court of India · Bench: RUMA PAL · Disposal: Appeal(s) allowed

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Judgment (excerpt)

COMMISSIONER OF TRADE TAX, U.P. AND ANR. 
A 
v. 
MIS. KAJARIA CERAMICS LTD. 
JULY 12, 2005 
[RUMA PAL AND ARUN KUMAR, JJ.] 
B 
UP. Trade Tax Act, 1948: 
Section 4A-Exemption Notification of 1991-Benefit of. from payment 
of trade tax, to industrial units undergoing expansion under-Extent of C 
benefits available-Held: Benefit of 1991 Notification is limited to a 
percentage of the additional fixed. capital investment and not to a percentage 
of the aggregate of the original and additional fixed capital. 
Section 4A-Exemption Notification of{p91-Benefit of. from payment D 
of trade tax, to industri(Jl units undergoing. expansion-Expansion of units 
thrice within period of five years-Assessee claiming exemption under 1991 
notification that during the peri<fd of five years ther;e ~as. one single expansion 
in three phases-Sustainabilit)(of_:.Held: Admitted facts that there were 
three separate expansion-EacH:tiime assessee n;Jifi additional investment, 
increased its capacity to produ~e and in fact· produced goods there was E 
expansion-Whe_n expansion done unit was in PfD_duction for less than three 
years-Three separate applications were maintainable and not one composite 
application for three years-H~nce, finding of tid Authority that there .were 
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three expansions uphtdd and ·clai11i
1 of assessee not sustainable. 
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10'"' 
j. 
Section 4A explanation 4-Fixed capital J~vt:stments-Meaning of- F 
Preoperative expenses, if includible-Held: Preope;ativf'! expenses like interest 
to financial institutions, rights sh~res issue expenses, foreign technician 
expenses and foreign travel expenses does not reflect value -0f items forming 
part of fixed capital investment for 1991 Notification and the Act-Hence, 
not includible under head of fixed capiial investment for purpose · of'fection G 
4A-Also cannot be brought within the definition by any principle of statutory 
interpretation. 
Sections 4A, BA, 15A(l)(qq)-Exemption Notification of 1991-Grant 
of eligibility certificate pursuant to Order of High Court-Assessee units not 
~7 
H 
438 
SUPREME COURT REPORTS (2005) SUPP. I S.C.R. 
A collecting or realising any tax-Also order not stayed by this Court-Unit 
finally not entitled to exemption-Relief against recovery of tax-Entitlement 
of-Held: Assessee unit is not entitled to any relief-State Government is 
entitled to recover tax from the unit-Dealer has to pay tax which it did not 
collect ji-om customers even if it was under fear of punishment under section 
B l 5A(l)(qq)(viii). 
Respondent-Company having obtained industrial licence in 1988 was 
engaged in manufacturing anfl selling of ceramic tiles since then. The annual 
production capacity ofthe respondent was 12000 tonnes per annum (TPA). 
The .respondents obtained six years tax exemption from 1988-1994 in terms 
C of the Notification of 1985 issued under section 4A of the U.P. Trade Tax Act, 
1948. The annual production capacity of the respondent was increased from 
12000 TP A to 26000 TPA, from 26000 TPA to 40000 TPA and from 40000 
TPA to 60000 TPA respectively during the period in year 1990, 1991 and 
1994. The respondents were granted eligibility certificate. There was total 
additional investment in three expansions .. Meanwhile, the Notification of 1991 
D was issued and exemption was granted to a new unit and to units which had 
undertaken expansion, diversification or modernization. A Circular of 1993 
was also issued whereby units which had started production upto 31.3.1990 
and which could enjoy unlimited exemption for a fixed period, and which had 
undertaken expan.sion, diversification or modernization would get the benefit 
E of exemption. 
After exemption period from 1988-1994 came to an end, respondent filed 
application under 1991 Notification claiming that there was one expansion 
during the period from 1988-1994 by which annual production capacity of 
the respondent's unit was increased from 12000 TPA to 60000 TPA. 
p 
Meanwhile the 1995 Notification was filed which granted benefits to units 
which were either new o.r had undertaken expansion, diversification or 
modernization on or after 1.4.1995 but not later on 31.3.2000. Division Level 
O;immittee (DLC) ignored the first two expans_ions for achieving the expansion 
of 40000 MT and granted an exemption only in respect of the last expansion 
G' 
of the unit from 40000 TP A to 60000 TPA taking 40038 MT as base· 
production with the production commenci

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