TaxTMI 
TaxTMI 
2022 (8) TMI 56
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....f law: "Whether the 'Explanation' to Notification No. TT-2-779/XI-9 (226)/94 dated 31.03.1995 (Restrictive Notification) was mandatory to be fulfilled, while applying that Notification to proviso (ii) of Clause 2 of Notification No. TT-2-780/XI-9 (226)/94, dated 31.03.1995 (Exemption Notification) ?" 4. In brief, the assessee set up a 'new unit', as defined under Section 4- A of the Act. Undisputedly, the assessee was granted Eligibility Certificate, creating exemption from tax (under the Act), for a period of 8 years, beginning from the date of the starting production - 04.04.1997 to 03.04.2005. Thus, A.Y. 1997-98 was the first year of business of the assessee. 5. For A.Y. 1997-98, the assessee disclosed sales turnover Rs. 23,01,369.50/-. It claimed full exemption on the same, under the Eligibility Certificate issued to it, read with Notification No. TT-2-780/XI-9 (226)/94 dated 31.03.1995 (hereinafter referred to as the 'Exemption Notification'). 6. In the first place, under the Exemption Notification, exemption from tax was granted to the assessee, by virtue of it having established a 'new unit' at Aligarh. That exemption from tax was available ....
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....orities in not less than the following proportions to the total employment being provided such industrial units and subject to the conditions and restrictions specified in the Government Notification No. TT-2-779/XI-9 (226)/94- U.P. Act-15-48-Order-95, dated March 31, 1995. Scheduled Castes/Scheduled Tribes percent 23 Other backward classes of citizen percent 27 Minorities percent" 10 8. Thus, first, exemption available under the Exemption Notification was limited to 5% of the sale price. Second, by way of exception to that restriction, that limit was waived to 'new units' established in specified districts - Almora, Chamoli, Dehradun, Nainital, Pauri Garhwal, Pithoragarh, Tehri Garhwal and Uttar Kashi (then part of Uttar Pradesh). Also, by way of another exception, it was stipulated, such restrictive condition would not apply to new units that provided employment to persons belonging to Scheduled Castes, Scheduled Tribes, Other Backward Caste and, minorities (hereinafter referred to as 'specified categories'), in the proportions prescribed thereunder. 9. Then, by way of a further stipulation, the said proviso also made applicable 'Conditions and....
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....ovident Fund and Miscellaneous Provisions Act, 1952." 11. The Tribunal has applied the Restrictive Notification and reached a conclusion - by virtue of Clause 2 of Exemption Notification, the assessee was disabled from claiming exemption more than 5% of the sale value. 12. Having heard learned counsel for the parties and having perused the record, there is no dispute to the fact - the assessee had set up a 'new unit', to manufacture cement. It was eligible to exemption granted under Section 4-A of the Act read with the Exemption Notification. Further, it is also not in dispute, the 'new unit' established by the assessee had engaged members of specified categories, in the percentage strengths - prescribed under proviso (ii) to Clause 2 of the Exemption Notification. It was granted the Eligibility Certificate. 13. Only this much is in dispute - whether the Restrictive Notification was applicable to the case of the assessee and whether the 'Explanation' appended to the Restrictive Notification, ousted the claim of the assessee to exemption - to the full extent, under the Exemption Notification or whether it was restricted to 5% of the sale price, under Clause 2 of the....
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....der the Restrictive Notification become a justiciable issue. 18. Then, the first condition prescribed under the Restrictive Notification is of filing of Certificate of the District Magistrate & Assistant Labour Commissioner certifying engagement of persons belonging to specified categories (noted above), in specified percentages. Those certificates were to be filed before the assessing authority, up to a specified date. It is not in dispute between the parties, such condition also been met by the assessee. 19. By way of a second condition, it was stipulated, the 'new unit' would be entitled to concession for the period during which it maintained the employment of members of the specified categories (noted above), at the prescribed percentages. Thus, if the condition of such employment was found fulfilled in one year but violated in the succeeding year, that assessee would expose itself to limited exemption in terms of Clause 2 of the Exemption Notification, in the succeeding year. Again, there is no case set up by the revenue that the condition of employment had been violated by the assessee in any year. 20. Then, the Restrictive Notification is not an addendum or corrigen....
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....'Explanation' is neither a third condition/restriction contained in the Restrictive Notification nor, it otherwise provides such effect. It is only in the nature of a definition of the phrase "total employment". 24. It is not difficult to visualise the purpose of restricting 'total employment' at a 'new unit', to such number of employees who may be making contributions to the Employees Provident Fund. It is not uncommon, in running of industries, engagement is offered for different types/nature of work, to different types of workmen, enjoying different status and terms, whether as a daily wage employees or temporary employees or contract employees etc., along with permanent employees. While provident fund liability exists against certain category of employees, specified by the Employees Act, deduction of provident fund contribution is not mandatory or uniform across the board, as may apply to every category of the workmen, irrespective of his status. 25. For the Exemption Notification, the legislature - in its wisdom, restricted the computation of 'total employment' to such employees/workmen only, who may be making contributions to the provident fund. Seen in ....
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....isputed, at the relevant time, there were about 10 employees at the 'new unit' established by the assessee. Therefore, the applicability of the 'Employees Act' to the assessee, is very doubtful. Yet there is no credible material to reach a firm finding on that issue. 29. In any case, on the facts found by the Tribunal, it must be accepted - no contribution of provident fund was being made by a single employee at the new unit established by the assessee. In view of that, the only conclusion that the revenue authorities may have reached was - the number of 'total employment' was an indeterminate figure, or '0'. If strictly applied to the Exemption Notification, it would lead to an absurd result - no percentage result of employment granted to persons of specified category would be possible to deduce. That is not the purpose of the Exemption Notification. It must be read to retain its functionality and purpose. In Commissioner of Sales Tax Vs. Industrial Coal Enterprises, (1999) 2 SCC 607, in the context of interpretation of Exemption Notification, it was observed as under: "11. In CIT v. Straw Board Mfg. Co. Ltd. [1989 Supp (2) SCC 523 : 1990 SCC (Tax) 158]....
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....e that the 'Explanation' to the Restrictive Notification was satisfied. 31. Here, it must be noted, no consequence has been provided either under the Exemption Notification or under the Restrictive Notification or any other law relied by the revenue as may directly suggest - availability of the exemption would be denied if provident fund contributions were not made by the employees of the new unit. Keeping that in mind, the 'Explanation' appended to the Restrictive Notification must be read as directory. In Topline Shoes Ltd. Vs Corporation Bank, (2002) 6 SCC 33, the Supreme Court interpreted section 13 of the Consumer Protection Act, 1986, that prescribed 30 days' time limit, to file an objection/written statement to the complaint, was directory. It reasoned - in absence of any consequence prescribed by law, in the event of its non-compliance, inference may not be made, of that provision being mandatory. 32. In the context of another exemption notification, a similar conclusion was earlier reached by a division bench of this Court, in Sahu Stone Crushing Industries Vs. Divisional Level Committee &Anr., 1994 UPTC 1, in the context of requirement of registration under ....