Diversification under trade tax law fails where only machinery and technique change, not the essential nature of the product.

Under Section 4-A of the U.P. Trade Tax Act, diversification requires manufacture of goods different in nature from those earlier produced, while modernisation covers improved machinery or process without change in the essential nature of the goods. The High Court found that the unit had already manufactured crown corks for cold drinks and that the proposed double lip dry blend crown served the same end use, so the change was only in machinery and technique. The claim for diversification was therefore rejected, and eligibility under modernisation was upheld.

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Issues: Whether the petitioner was entitled to an eligibility certificate under the diversification scheme under Section 4-A of the U.P. Trade Tax Act, or whether the case was rightly treated as one of modernisation.

Analysis: The unit had already been manufacturing spum line crown corks for use in packing cold drinks, and the proposed double lip dry blend crown was found to serve the same end use. Under Section 4-A(5) of the U.P. Trade Tax Act, diversification requires manufacture of goods of a nature different from those earlier manufactured by the undertaking, while modernisation covers production through improved machinery or process without change in the essential nature of the goods. On the facts, the change was only in machinery and technique, not in the nature of the product.

Conclusion: The claim for diversification was rejected and the grant of eligibility under modernisation was upheld.

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