2018 (1) TMI 1253 - HC - VAT and Sales Tax

Land possession key for new unit; acquisition process procedural. Non-compliance doesn't impact exemption essence. Revision allowed.

M/s Atul Gases (A Unit Of Atul Generator & Pipe Co.) Versus Commissioner of Commercial Taxes, U.P. Lucknow And Another

M/s Atul Gases (A Unit Of Atul Generator & Pipe Co.) Versus Commissioner of Commercial Taxes, U.P. Lucknow And Another - [2018] 59 G S.T.R. 446 (All) Issues Involved:1. Whether the condition of allotment of land for the unit is a substantive/mandatory condition in the exemption notification.2. Whether the mode of acquisition of land is substantive or procedural for the purpose of granting tax exemption under Section 4-A of the U.P. Trade Tax Act.Detailed Analysis:Issue 1: Substantive/Mandatory Condition of Allotment of LandThe revisionist established a unit for manufacturing Oxygen Gas and sought exemption from payment of trade tax under Section 4-A of the U.P. Trade Tax Act. The exemption was declined by the Tribunal on the grounds that the unit did not fulfill the condition of being allotted land for the factory as specified in the notification dated 15th January 2000. The Tribunal held that the revisionist's claim was not covered under the exemption notification, and consequently, its benefit would not enure to it.The court examined whether the condition of allotment of land is a substantive/mandatory condition in the exemption notification. The object of Section 4-A of the Act and the exemption notification is to promote industrial development by encouraging the establishment of new units. The court observed that possessing land is a mandatory condition for establishing a new unit, as the unit itself cannot come up in its absence. This condition has a direct nexus with the object sought to be achieved, i.e., increasing production or developing industry in the State.The court referred to previous notifications and noted that the condition of allotment of land specified in the notification dated 15th January 2000 was substituted by a subsequent notification dated 22nd December 2001, which allowed land to be obtained from any source. This change indicated that the mode of acquisition was not of relevance, rather, possessing land alone had relevance for the context.Issue 2: Procedural Nature of Mode of Acquisition of LandThe court analyzed whether the mode of acquisition of land is substantive or procedural. The revisionist argued that the mode of acquiring land is procedural and attaching importance to it is inconsistent with the object of the Act and the notification. The court referred to several judgments, including Mangalore Chemicals & Fertilisers Ltd. Vs. Deputy Commissioner of Commercial Taxes and others, and Commissioner of Sales Tax Vs. Industrial Coal Enterprises, which distinguished between substantive conditions and procedural requirements.The court concluded that while possessing land for establishing a new unit is a mandatory condition, the mode of acquisition of land is procedural. The court emphasized that non-compliance with procedural requirements should not affect the essence or substance of the exemption notification. The court noted that the notification dated 22nd December 2001, which eliminated the mode of acquisition for the purposes of granting exemption, supported this view.The court further observed that any distinction based on the mode of acquisition of land would be arbitrary and violative of Article 14 of the Constitution of India, as it would have no nexus with the object sought to be achieved by Section 4-A of the Act or the exemption notification.Conclusion:The court held that possessing land for establishing a new unit is a mandatory condition, but the mode of acquisition of land is procedural. The non-compliance with the procedural requirement of mode of acquisition does not affect the essence or substance of the exemption notification. The revision was allowed in favor of the assessee, and the question posed for consideration was answered accordingly.