M/S. CONTINENTAL CHEMICALS LTD. versus SALES TAX OFFICER AND ANR.

Citation: [1999] 1 S.C.R. 340 · Decided: 02-02-1999 · Supreme Court of India · Bench: M. SRINIVASAN, U.C. BANERJEE · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
M/S. CONTINENTAL CHEMICALS LTD. 
..... --
v. 
SALES TAX OFFICER AND ANR. 
t 
FEBRUARY 2, 1999 
B 
[M. SRINIVASAN AND U.C. BANERJEE, JJ.) 
• .. 
U.P. Sales Tax Act, 1948 : 
Section 4-A-2nd Explanatiort-Applicability of 
c 
Sales Tax-Exemption from-Notification dated 26.12.1985--Ap-
plicability of-Expression 'Industrial Unit' and 'Date of Starting 
Production'--Meaning of 
D 
Sales Tax-Appellallt-assesseee-Commencement of ManufacturingC 
unit by-First sale effected on 1.11.1985 and sales tax registration Certificate 
y 
obtained 011 23.11.1985--Thereafter assessee started manufacturing unit 011 its 
own property and obtained permanent registration certificate on 
11.9.1986-That unit started production 011 3.3.1986 and first sale effected on 
E 
5.3.1986-Application by assessee for exemption from sales tax under section 
4A-Competent authority held as the first sale was effected on 1.11.1985 and 
at that time, the appellant had not invested amounts in excess of Rs. 3 lakhs, 
the appellant was entitled to exemption only for a period off our years from 
the date of first sale, namely, 1.11.1985--0n that basis, the claim of the 
appellant for exemption for six years from 5.3.1986 was rejected-Assessee 
F preferred a writ petition before the High Court-The High Court relied upon 
the 2nd Explanation to Section 4-A of the Act by which the "date of produc-
tion" was defined-It took the view that the appellant had started production 
as required by the Notification on 1.11.1985 with a capital investment below 
Rs. 3 lakhs and, therefore, the appellant was entitled to exemption for a period 
G of four years only from 1.11.1985--Appeal preferred before this Court-Held 
the appellant got permanent registration with the Directorate of Industries only 
,_..,, -
on 11.9.1986 and became an industrial unit as defined by the Notifica-
...,. 
tion-That industrial unit had commenced production only on 3.3.1986 and 
the first sale was effected by that unit on 5.3.1986-Hence, the relevant date 
H for the purpose of granting exemption is 5.3.1986 and not 1.11.1985 as decided 
340 
-.. + 
CONTINENTAL CHEMICALS LTD. v. SALES TAX OFFICER 
341 
by the competent authority and the High Court-That industrial unit had a A 
capital investment of much more than Rs. 3 lakhs-Consequently, the appel-
Zant is entitled to get exemption for a period of six years from 5.3.1986. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3850 of 
)' 
1996. 
B 
:...· 
From th~ Judgment and Order dated 5.1.96 of the Allahabad High 
Court in C.W.P. No. 657 of 1990. 
Avadh Behari Rohtagi, R.B. Mishra (Sunil Kumar) (NP), Jitendera 
Mohan Sharma, Dr. Meera Aggarwal and Ramesh Chandra Mishra for the c 
appearing parties. 
The following Order of the Court was delivered : 
The appellant commenced a manufacturing unit with manual labour 
~ 
without getting it registered under the Factories Act or before the Direc-
D 
torate of Industries .. It got a sales tax registration certificate on 23.11.1985. 
Earlier it had purchased raw material and started trial run pursuant to 
which the first sale was effected on 1.11.1985. 
2. The appellant, however, purchased land and building and started E 
manufac•uring unit on a property of its own and at that time it applied for 
and obtained permanent registration from the Deputy Director of In-
dustries as small scale unit. The actual registration certificate was issued 
on 11.9.1986 by the Deputy Director of Industries. That unit started 
production on 3.3. 1986 and the first sale was effected on 5.3.1986. The 
appellant had also applied for a loan from the U.P. Financial Corporation F 
for a sum of Rs. 49 lakhs in October 1986 of which a sum of Rs. 35 lakhs 
was sanctioned. On December 6, 1986, the appellant applied for exemption 
under Section 4-A of the U.P. Sales Tax Act, 1948 (for short "the Act") for 
a period of six years from payment of sales tax under the Notification dated 
26.12.1985 stating that the date of first sale was 5.3.1986. 
G 
. ._·-) ,., 
3. The 2nd respondent issued a sales tax exemption certificate on 
25.7.1989 for a period of four years from 1.11.1985. The reasoning of the 
2nd respondent was that the appellant had on its own showing commenced 
trial run, purchased raw material and started production in November 1985 
and the first sale was effected on 1.11.1985. At that time, as the. appellant H 
342 
SUPREME COURT REPORTS 
[1999] 1 S.C.R. 
A had not invested amounts in excess of Rs. 3 lakhs, the a!Jpellant was 
e

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