2008 (11) TMI 383 - SC - VAT / Sales Tax

Appeal allowed: ten-year trade-tax exemption (24 Oct 1992-23 Oct 2002) granted; attested allotment letters suffice, lease deed not required

SC allowed the appeal and directed respondents to grant a ten-year trade-tax exemption from October 24, 1992 to October 23, 2002. The Court held that ... Interpretation and/or application of an exemption notification dated July 27, 1991 - seeking benefit of exemption for a period of ten years - grant of exemption from payment of trade tax for the specified period in favour of owner of a new unit was to be granted on the basis of the eligibility certificate - Requirement to supply a copy of the deed of lease for eligibility certificate - Whether if in terms of the Act or the Rules framed thereunder, the appellant was not required to supply a copy of the deed of lease, failure on his part to supply a copy of the deed of lease would attract clause (c) of sub- rule (1) of rule 25 or not. Held that:- The statutory rule as also the notification point out a clear distinction between a deed of lease which may be obtained from a private person and the letter of allotment granted by the State or statutory Corporation. The reason for making such a distinction is not far to seek. Whereas in the case of the former, a registered deed of lease is required to be executed if it is for a period of more than one year, in the latter it is not. An exception has been made as regards allotment of land by the State or a statutory Corporation. The exemption is being granted by the State. Eligibility certificate is also to be granted by the Industries Department. Each Department is supposed to be in touch with the other department of the State or the statutory corporation. The authorities would be in a position to verify the particulars of the letter of allotment furnished by the applicant from the concerned Department or statutory Corporation. It was not necessary for the authorities of the Industries Department of the Government of Uttar Pradesh to obtain any additional information. When an additional information is required to be sought for, it must be done when the information furnished by the applicant is not complete or otherwise required. It is not in dispute that the attested copies of the letters of allotment had been furnished. If the same subserved the statutory requirements, we do not see any reason as to why the appellant should not be held to be entitled to grant of exemption for the entire period of ten years beginning from October 24, 1992 to October 23, 2002. It is not a case where the application was incomplete by itself. It was also not a case where having regard to the provisions of the Act, Rules, notifications as also the information required to be furnished in terms of paragraph 10 of form XLVI, any other or further information was necessary to be obtained or furnished. If the appellant, thus, had fulfilled the eligibility criteria for grant of exemption, it had acquired a right in respect thereof and we see no reason why it should have been deprived therefrom. It is in that sense the exemption notification was required to be construed liberally in favour of the appellant. Thus the impugned judgment cannot be sustained. It is set aside accordingly. The respondents are directed to extend the benefit of exemption to the appellant for a period of 10 years from October 24, 1992. The appeal is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether, for the purpose of grant of eligibility certificate under the exemption notification, a copy of the registered lease deed is required to be furnished where land was allotted by a State or State-owned/statutory Corporation and an allotment letter was produced. 2. Whether failure to furnish a copy of the lease deed (furnished later) attracts clause (c) of sub-rule (1) of Rule 25 of the U.P. Trade Tax Rules so as to treat the later date of furnishing the deed as the date of application and thereby curtail the period of exemption. 3. Proper approach to the construction of exemption notifications and subordinate rules: when strict construction is required and when a liberal construction in favour of the applicant must be applied. ISSUE-WISE DETAILED ANALYSIS Issue 1: Requirement of registered lease deed where land is allotted by State/State-owned/statutory Corporation Legal framework: Section 4A of the U.P. Trade Tax Act confers power on the State to grant exemption for specified periods, subject to conditions set in the notification. Clause (d) of s.4A(2) permits the State to require an eligibility certificate issued in accordance with procedure; Rule 25 of the U.P. Trade Tax Rules prescribes application procedure in Form XLVI. Paragraph 2(ii) of the July 27, 1991 notification specifies three alternative title contingencies: (a) owned, (b) taken on lease for 15 years, or (c) allotted by State/Corporation. Precedent treatment: The Court referred to prior decisions dealing with construction of s.4A and notifications, noting the settled propositions that eligibility criteria are to be strictly construed but that exemption provisions should be given effect to (citing earlier precedents discussed in the judgment). Interpretation and reasoning: The notification's three title contingencies are disjunctive, not conjunctive. Form XLVI distinguishes between (i) 'Taken on lease' (requiring attested copy of registered lease deed) and (ii) 'Allotted by Government or a Corporation...' (requiring attested copy of the allotment letter). The Court held that where allotment by a State/statutory corporation is the basis, the allotment letter alone satisfies the statutory requirement; execution of a subsequent lease deed does not enlarge documentary requirements because the legislature and rule-makers deliberately differentiated the two categories given their different legal nature and evidentiary needs (e.g., leases by private persons require registration whereas allotments by State corporations need only the allotment letter to demonstrate title or entitlement). The Industries Department, when presented with an allotment letter, can verify particulars with the allotting authority; therefore, additional production of the later lease deed was not mandated by the Act/Rules/notification. Ratio vs. Obiter: Ratio - where land is allotted by State or State-owned/statutory corporation and the applicant furnishes the attested allotment letter required by Form XLVI, no further requirement to furnish the registered lease deed arises from the Act, Rules or the notification. Obiter - observations on administrative ease and inter-departmental verification. Conclusion: Allotment letter furnished in this case satisfied the documentary requirement; the assessing/issuing authority could not validly insist on production of the lease deed as a precondition for eligibility. Issue 2: Effect of late furnishing of lease deed - applicability of Rule 25(1)(c) Legal framework: Rule 25(1)(c) provides that where an application is incomplete or missing required information, the unit may be asked to complete it within 60 days, and failure to do so makes the date on which application is completed the date of application for statutory computation of benefit. Section 4A(5)(a) entitles a manufacturer to the full notified period only if application is made within six months from the relevant commencement/notification date. Precedent treatment: The Court reviewed earlier authorities applying principles of strict construction to exemption clauses but recognized authority holding that, once eligibility criteria are satisfied, exemption should be given effect to without technical defeat where the plain statutory requirement is met. Interpretation and reasoning: Rule 25(1)(c) must be read in conjunction with the substantive conditions in section 4A and the notification. Clause 10 of Form XLVI prescribes which specific documents are required for different title scenarios. Where the applicant had furnished the attested allotment letters specified by the form, the application was not incomplete within the meaning of Rule 25(1)(c). The later production of a lease deed (which the Rules did not require in the case of allotment) could not be treated as curing an earlier 'incompletion' to the effect of shifting the application date. The authorities could ask for additional information only where the application, as governed by the Act, Rules and notification, was incomplete or the information furnished did not satisfy the statutory requirements. Here, the statutory requirements were fulfilled by the allotment letters submitted within the six-month period following first sale; therefore Rule 25(1)(c) could not be invoked to treat the later date of lease production as the date of application for computing the exemption period. Ratio vs. Obiter: Ratio - where the prescribed form and notification require only an allotment letter for State/statutory-corporation allotments and such letter is furnished within the statutory period, Rule 25(1)(c) cannot be invoked to postpone the date of application because no statutory incompleteness existed. Obiter - factual comment on when authorities may properly require additional information. Conclusion: The later filing of the lease deed did not legally delay or curtail the date from which the applicant's entitlement to exemption is computed; the applicant was entitled to the exemption from the statutory starting date (date of first sale) subject to s.4A conditions. Issue 3: Approach to construction - strictness vs. liberalism in exemption notifications Legal framework: Longstanding principle: provisions granting exemptions or exceptions are construed strictly; however, when an applicant satisfies clear eligibility criteria, exemption notifications should be given effect so as to promote the statutory object. Rules and forms must be interpreted in light of the parent statute and the notified purpose. Precedent treatment: The Court reconciled earlier decisions: strict construction is warranted to avoid extending exemptions beyond legislative intent; conversely, where plain meaning and purpose align, liberal construction ensures the object of the notification-promotion of industry-will not be frustrated by technicalities. Interpretation and reasoning: The Court applied a purposive and contextual construction: (a) read the notification and Form XLVI together with Rule 25 and section 4A; (b) recognize that the notification's eligibility contingencies are disjunctive; and (c) where the prescribed documentary proof in the form corresponds to one of the contingencies and has been furnished, the exemption must not be defeated by importing additional documentary requirements absent in the statute/rules/notification. Strict construction applies to the eligibility criteria themselves to ensure no unwarranted extension; once eligibility is established under the plain terms, construction in favor of effecting the exemption is appropriate. Ratio vs. Obiter: Ratio - interpretive principle: subordinate rules/forms are to be read with the parent statute; disjunctive eligibility conditions must be treated as alternatives; where the applicant conforms to the applicable alternative, the exemption should be granted and not defeated by superimposed requirements. Obiter - general remarks on administrative interaction between departments. Conclusion: The proper construction balances strictness in reading eligibility criteria with liberality in giving effect to an entitlement once the statutory requirements are plainly satisfied; applied here it mandates grant of the full notified exemption period. Final Determination and Relief Because the applicant had furnished the allotted-land documentation required by Form XLVI within the six-month period and met the notification's eligibility criteria, the authorities erred in treating the later production of the lease deed as shifting the application date. The applicant was therefore entitled to the full period of exemption computed from the date of first sale as specified in the notification.