2004 (12) TMI 365 - SC - VAT and Sales Tax

Court allows single application for tax exemption for multiple units; application not time-barred; Company not in tax arrears.

Commissioner of Trade Tax, UP Versus DSM Group of Industries

The Court held that a single application could be filed for tax exemption for multiple units of an industrial undertaking. The application filed on May ... Whether one application can be filed or each unit of an industrial undertaking needs to file an application? Whether the application filed on May 17, 2000 can be said to be time-barred? Whether the Company was in arrears of tax for Rs. 1,742.25 lakhs or in any other amount? Held 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, modernisation or diversification has to be ascertained by the concerned committee. The committee will also have to determine to what extent there has been expansion, modernisation and/or diversification after December 1, 1994 and before March 31, 2000. The assessing authority will also require to consider whether clause 3(b) of the notification is applicable and whether the expansion, modernisation 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 August 13, 1991 various units of the respondent-company had applied for exemption and had been granted exemption to certain extent. Thus set aside that portion of the impugned order which directs issuance of the eligibility certificate and directs reimbursement & 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. Issues Involved:1. Whether one application can be filed or each unit of an industrial undertaking needs to file an application.2. Whether the application filed on May 17, 2000, can be said to be time-barred.3. Whether the Company was in arrears of tax for Rs. 1,742.25 lakhs or any other amount.Issue-Wise Detailed Analysis:1. Whether one application can be filed or each unit of an industrial undertaking needs to file an application:The core issue was whether the Company could file a single application for tax exemption under the Notification dated February 21, 1997, for its multiple units. The Notification and Section 4A of the U.P. Trade Tax Act, 1948, were examined. The Court noted that the term 'unit' in the context of expansion, diversification, and modernization refers to the industrial undertaking as a whole and not to individual units. The Court observed that the principal place of business of the Company is Dhampur, District Bijnore, and the exemption claimed was for expansion, modernization, or diversification. The Court concluded that the industrial undertaking (the Company) could file a single application for its multiple units, as the term 'unit' referred to the industrial undertaking and not to individual units.2. Whether the application filed on May 17, 2000, can be said to be time-barred:The Court examined Section 4A(5) of the U.P. Trade Tax Act, 1948, which provides that a manufacturer shall be entitled to the facility of exemption from, or reduction in the rate of tax if he applies for such facility within six months from the relevant date of commencement of the period of facility or within six months from the date of notification. The Court noted that 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 and computed from the date of the application till the end of the period of facility. Therefore, the Court held that the application was not time-barred and this was not a valid ground for rejecting the application.3. Whether the Company was in arrears of tax for Rs. 1,742.25 lakhs or any other amount:The Court found that the respondents (the Company) had obtained stay orders from the High Court, which meant that during the period the stay orders were in operation, the respondents could not be said to be in arrears of tax. The Court clarified that during the period of the stay, the respondents were not bound to pay, and therefore, they could not be considered in arrears. However, the Court noted that there were matters of fact which needed to be looked into by the assessing authority to determine if there were any periods when the respondents were in arrears of tax without a stay order.Conclusion and Remand:The Court concluded that the assessing authority was wrong in rejecting the application on the ground that a joint application was not permissible. The Court also found that the High Court was wrong in directing the issuance of an eligibility certificate and reimbursement of amounts paid. The matter was remitted back to the Divisional Level Committee to decide the application on its merits within six months. The Committee was instructed to consider whether the Company was in arrears of tax and to determine the extent of expansion, modernization, and/or diversification after December 1, 1994, and before March 31, 2000. The appeal was disposed of with no order as to costs.