Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court of Judicature at Allahabad in Trade Tax Revision No 275 of 2004 by which the High Court has dismissed the said revision application preferred by the appellant herein and has confirmed the order passed by the learned Trade Tax Tribunal, Lucknow Bench, Lucknow (hereinafter referred to as “Tribunal”) and the Assessing Officer holding that for the goods manufactured, the appellant is not entitled to the exemption under Section 4-A (5) of the U.P. 3 At this stage, it is required to be noted that if the goods manufactured would have been considered as a new product under the diversification scheme, the appellant was entitled to the exemption under Section 4-A(5) of the Act. It was specifically held that the nature of goods being produced under the modern technology is not different than the goods produced by the unit earlier, as both the produced material are used in packing the bottles of cold drinks and therefore, as the goods manufactured are not different but the same and used for the same purpose, the appeals came to be dismissed.
Shri Atul Yeshwant Chitale, learned Senior Advocate appearing on behalf of the appellant has submitted that the issue involved in the present appeal is with respect to the interpretation of Explanation 5 to Section 4-A(5) of the Act, which grants exemption from payment of trade tax to units, which had undertaken ‘diversification’ in their units on or after 31.03.1995. 3 It is submitted that the new product is an entirely different product from what was manufactured earlier and the use of the product was also different.
5
It is submitted that in order to be entitled to claim exemption from trade tax on the ground of diversification, the goods had to be of a nature different from those manufactured earlier. It is submitted that the criteria of use of goods is neither provided in the section nor in the notification.
1
Also Read: https://newslaw.in/case-type/civil/acquisition-of-land-and-deemed-lapse-under-the-act-2013/
It is submitted that in the present case, the appellant established a unit for manufacture of the “Spun Line Crown Corks” used as one of the packing materials of the glass bottles, to be sold to the glass bottlers.
It is submitted that the opening sentence of clause (5) seeks to refer “expansion, diversification and modernization” and then clarifying in one separate sub-clause the exercise of “expansion or modernization” means the “increase in production” and thereafter in another separate sub-clause clarifies “diversification” to mean that the production of goods of a different kind, distinct and different in nature, a new article as understood in commercial circle. It is submitted that the goods manufactured by the appellant prior to the investment exercise was subject to levy under the class of goods namely “Corks”. The short question which is posed for consideration of this court is:- “Whether for the goods, manufactured by use of modern technologies can be said to be “diversification”, and manufacturing of the goods of a nature different from the goods manufactured earlier entitle the appellant to claim the exemption from trade tax as provided under Section 4-A (5) of the U.P. (c) in respect of those goods only which are manufactured in a unit which has undertaken expansion, diversification or modernisation on or after April 1, 1990, and which in the case of diversification, are different from the goods manufactured before such diversification, and in the case of expansion or modernisation are additional production as a result of such expansion or modernisation; and (3)…….
2 In the case of “expansion or modernization”, the exemption shall be available, if there is an additional production as a result of such modernization or expansion. The earlier product being manufactured by the appellant was used for sealing glass bottles and subsequently the additional product produced with the use of modern technology is also being used for the same purpose namely, “sealing glass bottles”. In a case of “diversification”, the effect has to be that the quality and quantity of the product should have been improved and/or increased but if the ultimate use is the same, the product manufactured on use of modern and/or advanced technology cannot be said to be manufacturing the different goods for claiming the exemption from payment of trade tax.
Also Read: https://newslaw.in/case-type/civil/taxation-of-engineering-design-drawings-goods-or-services/
In the present case, the goods manufactured on use of advance and/or modern technology, cannot be said to be a different commercial activity at all. No costs.
Case Title: AMD INDUSTRIES LIMITED (EARLIER KNOWN AS M/S.ASHOKA METAL DECOR PVT.LTD) Vs. COMMISSIONER OF TRADE TAX,LUCKNOW (2023 INSC 20)
Case Number: C.A. No.-000108-000108 / 2013
