TaxTMI 
TaxTMI 
2019 (11) TMI 5
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.... of India (Ministry of Industry), to set up the assessee company - a 100% owned subsidiary company in India to manufacture and market various electrical and electronic appliances including washing machines, refrigerators, air conditioners, colour televisions, audio and video equipments. Then, on 04.11.1997, the Government of India amended its approval letter dated 29.01.1997 and granted further approval to the parent company to manufacture and market (by the assessee company) various electrical and electronic appliances mentioned in the letter dated 29.01.1997 and also Microwaves ovens and PC monitors. In light of such approval letters, it has been contended, the assessee company was incorporated and it has engaged in the activity of manufacture and marketing of various electrical appliances and electronic goods. 3. In the context of the dispute that had arisen, it is seen that the State Government had, vide notification nos. 780 and 781, both dated 31.03.1995, provided for schemes to grant exemption to 'new units' established inside the State and to units engaged in expansion, diversification and modernisation, during the period 01.04.1995 and 31.03.2000. It is a common....
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....f filing two separate applications - one to seek exemption on manufacture of refrigerators (electrical goods), and other to seek exemption to manufacture PC monitors (electronic goods), upon a legal opinion obtained by it. In any case, the assessee first filed an application on 10.01.2002 with respect to manufacture of refrigerators, and another on 28.12.2002 for manufacture of monitors. 7. It is also a fact that the aforesaid two applications came to be considered separately by the DLC. The application to claim exemption for manufacture of refrigerators was allowed by the DLC, vide its order dated 12.05.2003, and in that regard, the assessee was granted exemption on the entire investment of Rs. 42 crores made by it. However, the second application filed with respect to PC monitors was rejected by the DLC by its order dated 07.07.2005 treating the same to be diversification separate and distinct from diversification to manufacture refrigerators. Accordingly, the investment of Rs. 8.13 crores, made by the assessee, was found to be below the qualifying limit of 25% of the original fixed capital investment (Rs. 51,37,35,446/-). This order was sought to be reviewed. However, the ....
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....d remitted the matter to the DLC and required the Tribunal itself to decide that issue. Relevant to our purpose, the revision was disposed of with the following direction: "Thus this Court directs the tribunal to decide the issues relating to diversification by way of adding new item of manufacture such as T.V. and monitor on merits and in accordance with law within a period of three months from the date of production of a certified copy of this order being placed by the petitioner within 15 days from today. Needless to say that a proper opportunity shall be given to the assessee. The impugned order of the tribunal dated 16.5.2012 is set aside. The revision is disposed of as above. No costs." 12. In compliance of the aforesaid order, the Tribunal has again adjudicated the issue which has given rise to the present revision. 13. Heard Sri Tarun Gulati, learned Senior Counsel assisted by Sri Nishant Mishra, learned counsel for the assessee and Sri B.K. Pandey, learned Standing Counsel for the revenue. 14. Present revision was itself admitted on the following questions of law: "A. Whether under clause (d) of Explanation (5) of the Section 4A of UPTT ....
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.... the PC monitor unit, by way of diversification, did not qualify for exemption as investment of Rs. 8.13 crores was not below the statutory limit of 25% initial fixed capital. 17. Heavy reliance has been placed first on the decision of the Supreme Court in Commissioner, Trade Tax, U.P. Vs. DSM Group of Industries, (2005) 1 SCC 657, to submit that the foundation for a valid claim for exemption does not depend on whether there were two applications or whether there were two or more units in which an establishment may have made investment. Referring to the facts in the case of DSM Group (supra), it has been submitted, in that case, there were three separate units established in three separate districts of the State. It had been claimed that investments made by the company which owned all the three units exceeded the prescribed limit of 50 crores. Therefore, that fact alone was held to be determinative to hold the assessee eligible to exemption. The exact investment made in individual units was found to affect the determination of the limit of exemption available on goods manufactured by each unit. That law is stated to have been followed by the Supreme Court till as late as in G....
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.... to have been filed by the assessee before the Tribunal, it has been submitted, besides the original approval letters issued by the Government of India wherein refrigerators and PC monitors were clearly mentioned as goods to be manufactured by the assessee, the annual report of the assessee for the period ending 31.03.2000, contained a clear recital and announcement of the management of the assessee company to start manufacture of refrigerators and PC monitors, which manufacturing units were projected to commence production in July, 2001 and May, 2001 respectively. Then, as a fact, it has been claimed that the assessee simultaneously carried out the diversification work to set up a manufacturing unit for manufacture of refrigerators and monitors, by way of a single diversification exercise. 22. Relying on a list of details of plants, machinery, equipment, apparatus and component to manufacture refrigerators and monitors, it has been submitted that the diversification into manufacture of refrigerators and PC monitors was carried out simultaneously during the year 2000-01. Emphasis has been laid on the fact that the assembly lines that were the main component of the plant and m....
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....stimate, plan, drawing, etc to establish that the exercise of diversification was one and not two, the Tribunal has not erred in dismissing the appeal filed by the assessee and in distinguishing the ratio in the case of DSM Group (supra). As to rule to be applied, learned Standing Counsel would submit that the Tribunal has not erred in placing the burden on the assessee to establish that it was the a single diversification. In absence of the burden to prove being discharged, the Tribunal has rightly rejected the appeal. 26. Having heard learned counsel for the parties and having perused the record, in the first place, as a rule, it cannot be disputed that at the threshold i.e. to determine whether the assessee was eligible to exemption a strict rule of interpretation had to be enforced. However, undisputedly, the assessee did engage in diversification upon establishing manufacturing facility to manufacture refrigerators and PC monitors. No goods similar to those were being manufactured by it, earlier. Thereafter, a purposive construction has to be made. In paragraph nos. 11 and 12 of the Supreme Court decision in Industrial Coal (supra) held as: 11. In CIT v. Straw B....
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....orities to rebut such evidence as the assesse may produce. To that extent, the Tribunal has not erred in its approach. In fact, the Tribunal has also itself found (in its order dated 16.5.2012) that mere filing of two separate applications for diversification to manufacture refrigerators and monitors would be inconsequential. That finding was never assailed by the revenue. In fact, the Tribunal had gone to the extent of holding that the assessee's application could not be rejected merely because two separate applications had been filed. Thus, it is to be seen whether thereafter, the Tribunal has correctly dealt with the matter. 28. It is here that the Tribunal's approach is lacking. The Tribunal appears to have completely over-looked the most material part of the evidence relied upon by the assessee. In that, it had relied on the original approval letters issued by the Government of India dated 29.1.1997 and 4.11.1997 wherein it clearly disclosed its intent to set up a unit to manufacture, amongst others, refrigerators and PC monitors. Then the assessee is a public limited company. In its annual report for the period ending 31 March, it appears, it had been specifically stated a....
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....s and that it had undertaken three successive expansions during the period 1990 to 1994. Subsequently, that is on 21.11.1994 i.e. after the last expansion claimed by Kajaria Ceramics (supra), it withdrew all earlier applications and filed a revised application thereby claiming, for the first time, that it had carried out a single expansion during the period 12.08.1988 to 28.03.1994. Such claim came to be rejected by the DLC, which order was rejected by the Tribunal, however, this Court had allowed the claim made by Kajaria Ceramics (supra). Upon appeal filed by the State before the Supreme Court framed issue no.2 as below: "II. Whether the respondent's claim of one integrated expansion from 12,000 TPA to 60,000 TPA during the period 12-8-1988 to 28-3-1994 is sustainable in fact or in law?" 32. Dealing with that issue, the Supreme Court had held that it was never the onus of the revenue to prove that there were three separate expansions. Admittedly Kajaria Ceramics had later changed its stand and claimed existence of a single scheme of expansion carried out in three phases as against its earlier stand of having engaged in three separate expansions. Considering ....
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....d its own evidence to defeat the claim of the assessee. At present, it is not clear if that evidence had been led. In any case the findings of the Tribunal are found to be lacking. 36. Again, reference made by the order of the Tribunal to the minutes of the Board of Directors, though relevant, but as noted above, the same was not the only evidence to be considered by it. On the face of it, the minutes of the meeting, as extracted in the order of the Tribunal, referred to the date of start of production of two items, namely refrigerators and PC monitors. However, the same are not such as may lead to the conclusion that, two mutually exclusive or separate diversification had been taken by the assessee to manufacture those items. 37. There is also no apparent self-contradiction in the claim made by the assessee. It had consistently stated that it had filed two applications under legal advice owing to different treatment of the two items, namely refrigerators and monitors under the relevant exemption notifications. It had also referred to the own interpretation/treatment offered by the State authorities in granting exemption, specific to the investment made to manufacture each....