TaxTMI 
TaxTMI 
2007 (9) TMI 541
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.....2.2003 whereby the Commissioner of Trade Tax has clarified the import and scope of notification dated 21.2.1997 has been questioned in all these writ petitions, as also the initiation of reassessment proceedings in pursuance thereof barring the writ petition No.288 of 2003: M/s.Kajaria Ceramics Ltd. Vs. State of U.P. and others. In this writ petition the challenge is with regard to said circular alone. For the sake of convenience, we are noticing the facts of the writ petition no.278 of 2004 only which was treated as leading petition by Shri Bharat Ji Agrawal, learned senior counsel for the petitioner. Learned counsel for the parties advanced their arguments with reference to the facts of this writ petition and submitted that the decision shall govern the remaining petitions also. The petitioner, Ambika Steels Pvt. Ltd., a company registered under the Companies Act is carrying on the business of manufacture and sale of stainless steel, ingots etc.. It is registered as a 'dealer' under the U.P. Trade Tax Act and the Central Sales Tax Act as well. Section 4-A of the Act provides exemption from trade tax in certain cases. This section broadly grants exemption from tr....
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....mits that section 4-A of the Act has been enacted with twin objects to increase production of the goods in the State of Uttar Pradesh as well to grant exemption or concessional rate of tax in respect of goods manufactured in unit which has undertaken expansion, modernization or diversification on or after April 1st, 1990. The State Government under section 4-A of the Act has been empowered to grant exemption from, or reduction in rate of tax to new units and also to units which have undertaken expansion, diversification or modernization. The phrase 'base production' with which the present writ petitions concern has been statutorily defined under section 4-A of the Act. The facility of exemption from, or reduction in rate of tax to units which have undertaken expansion, diversification or modernization, has been granted to such units which besides the other things have produced in excess of the 'base production'. The turnover upto the 'base production' shall be assessed to tax without taking into consideration that the unit has been granted eligibility certificate or exemption under section 4-A of the Act. Only such turnover which is in excess of 'base pr....
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....but not later than March 31st, 1995. This was followed by notification No.780 dated 31st of March, 1995. By this notification the benefit under section 4-A of the Act was conferred on such units which have undertaken expansion, diversification or modernization on or after 1st of April, 1995 but not later than 31st of March, 2000 in the areas mentioned in column - 2 of Annexure -1 of the notification. The latest one is dated 21st of February, 1997 being notification no.640. It provides besides other things that an unit making additional fixed capital investment of Rs.50 crores or more in expansion, diversification or modernization, backward integration be entitled to exemption or reduction in rate of tax on the fulfilment of the conditions specified therein. The 'base production' and 'turnover' of unit undertaking expansion, diversification or modernization have been defined in clauses - 5 and 6 of the first notification dated 27.7.1991, the relevant portion of the notification read as follows:- "Whereas the State Government is of the opinion that for promoting the development of certain industries in the State, it is necessary to grant exemption from or reduct....
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....tax." The relevant portion of the second notification dated 31st of March, 1995 which defines turnover of sale, reads as follows :- "Now, therefore, in exercise of the powers under Section 4-A of the Uttar Pradesh Trade Tax Act, 1948 (U.P. Act No. XV of 1948), hereinafter referred to as the Act, the Governor is pleased to declare that : 1 (A)..................................................................................... 1 (B) in respect of any goods manufactured in a unit, other than the units of the type mentioned in Annexure II, which has undertaken 'expansion, diversification or modernisation' on or after April 1, 1995 but not later than March 31, 2000 in the areas mentioned in column 2 of Annexure I, no tax shall be payable or, as the case may be, the tax shall be payable at the reduced rates specified in Column 4 of Annexure I, by the manufacturer thereof for the period specified in Column 3 of the Annexure I, or till the maximum amount of tax relief by such exemption from or reduction in rate of tax as specified in column 5 of Annexure I is achieved whichever is earlier, on the turnover of sales : (a) of the quantity of goods manufactured in exces....
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....nd consignment sale also. Referring to the facts of the present case the submission is that up to 5600 M.T. which is the 'base production' as specified in the eligibility certificate, the assessment of the turnover of the petitioner shall be made and was actually made notwithstanding the fact that the petitioner unit has undertaken expansion, diversification or modernisation etc.. In other words, the consignment sale and stock transfer being not covered within the definition of word 'sale' would remain exempted from trade tax. The said turnover of stock transfer and consignment sale if is not liable to trade tax shall not be liable to trade tax otherwise, the petitioner may be an eligibility certificate holder. Elaborating the argument, he submits that purpose of notifications being to promote the development of certain industries in the State of U.P. and to increase production in the State, the phrase 'turnover of sale' should be liberally construed so as to advance the object of the Act. Reliance has been placed on the following decisions to buttress the arguments:- In CIT Vs. Straw Board Manufacturing Co. Ltd. 1989 UPTC 1300 the Apex Court has observed....
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....mption he cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the statute or rule or by necessary implication therefrom, the matter is different, but that is not the position here." The Court held that the State was "possibly right in the submission that the object behind the framers of the notification was to avoid double taxation but the operation of an enactment or of a notification has to be judged not by the object which the legislature or the notifying authority, as the case may be, may have had in mind but by the words which it has employed to effectuate the legislative intent." This was reaffirmed in Hansraj Gordhandas v. H.H. Dave & Ords (1969) 2 SCR 260 where it was said that:- "................the operation of the notification has to be judged not by the object which the rule-making authority had in mind but by the words which it has employed to effectuate the legislative intent." The aforesaid cases have been quoted and followed by the Apex Court in M/s. ITC Ltd. Vs. Commissioner of Central Excise New Delhi JT 2004 (7) S.C. 409. In Stat....
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.... operate fully and there could not be any limits to its operation. This Court in Biswanath Jhunjhunwalla case said that if the language expressly so states or clearly implies, retrospectivity must be given to the provision." Keeping the aforesaid principles of interpretation of notification in the background of the mind the question now arises as to whether the principle of strict interpretation should or should not be invoked in the present case. In other words, whether there is any ambiguity in the notifications under consideration or they are free from ambiguity. As already noted, the controversy revolves on the expression "on the turnover of sales". The words "turnover" and "sales" have been defined in section 2(i) and 2 (h) of the U.P. Trade Tax Act. These words should be interpreted accordingly. Section 2(i) of the Act defines turnover which means the aggregate amount for which goods are supplied or distributed by way of sale or are sold, by a dealer, either directly or through another, on his account or on account of others, whether for cash or defer payment or for other valuable consideration. The notifications under consideration were issued under the Act by the Stat....
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....ion/reduced rate of tax notification. So, to measure the starting point from which such exemption or reduced rate of tax will be available, as a measure, base production, is the point, fixed under the notification. The three notifications referred to above, show a pattern. 'Base Production' is the qualifying limit, to be attained by a unit, beyond which it would be entitled to claim exemption for or reduction in tax. These notifications cannot, therefore, be read in isolation but in the context and within the parameters of section 4-A of the Act under which they were issued. The object of the State Government by issuing these notifications is to tax the 'base production' and realise Trade Tax and the Central Sales Tax thereon as the case may be and by way of incentive grant exemption from or rate of reduction in tax on the excess production beyond the 'base production'. At this place the observation of the Apex Court made in CTT Vs. M/s. Kajaria Ceramics 2005 (6) JT 28 (para -33) is apt. Case of Kajariya Ceramics was also a case under Section 4-A of the Act and the unit had undergone expansion. For the purposes of determination of entitlement of relief to....
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.... something in addition to "turnover". The use of word 'total turnover' in the said form instead of advancing the case of the petitioner supports the case of the respondents that wherever "turnover" has been used it is used as defined in the Act. The very use of words 'total turnover' in the said form itself shows that the other turnover (exempted turnover) is also included therein. Reverting back to the notifications under consideration we find that the words 'turnover of sales' have been used and not the total turnover. "Turnover" is also defined under the Central Sales Tax Act which means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-state trade or commerce made during any prescribed period and determined in accordance with the provisions of the Central Sales Tax Act and Rules made thereunder. A bare perusal of the definition of turnover both under the U.P. Trade Tax Act as well under the Central Sales Tax Act has made it clear that the dispatches of the goods outside the State of U.P. to its own depots or a consignee agent have not been included in the turnover of sales in any....
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....s. Ambika Steels Pvt. Ltd.) It is argued that the Commissioner had issued a circular dated 15.9.1998 (annexure - 3 to the writ petition) clarifying the position in para -3 thereof in an express term disapproving the view taken by certain officials holding that the tax is payable on the entire 'base production' irrespective of the fact that the dealer has made consignment sale/stock transfer or export sale. The circular expresses the view of the department on the notifications. In other words how these circulars were understood by the Commissioner of Trade Tax, has been stated for guidance to the officials of the department. In the counter affidavit filed in writ petition No.622 of 2004 in para 7 it has been stated that the circulars were not in conformity with the legal provisions, as such earlier circulars were revised by Government Order no.437 dated 25.1.2003. The Commissioner of Trade Tax, U.P. has explained the statutory provision of the Act and various notifications issued by the government from time to time by the subsequent circular dated 25.1.03. It is not in dispute that the assessments were completed by the Assessing Authority relying upon the earlier circu....