Rajasthan High Court - Jaipur
Commercial Taxes Officer vs Ganpati Marbles And Rajsamand Granites ... on 12 February, 2007
Equivalent citations: RLW2007(2)RAJ1567
Author: Prakash Tatia
Bench: Prakash Tatia
JUDGMENT Prakash Tatia, J.
1. Heard learned Counsel for the parties.
2. The non-petitioner-Dealer sought exemption from payment of tax under the Rajasthan Sales Tax Incentive Scheme, 1987 (for short 'the Scheme of 1987) on the ground that the non- petitioner-Dealer established new industrial unit as defined in Clause 2 of the said scheme and, therefore, is entitled to benefit of tax exemption. The District Level committee vide its order dated 26.3.1997 denied the said benefit on the ground that the non-petitioner-Dealer has established industry by purchasing existing industry and it is located on the same land over which there was already an industrial unit in existence and was manufacturing the similar goods which the non-petitioner is manufacturing. The non-petitioner preferred appeal against the order of the District Level Committee before the Rajasthan Tax Board, Ajmer. The Rajasthan Tax Board, Ajmer held that the non- petitioner unit is entitled to get the benefit under the Scheme of 1987. Hence this revision petition by the revenue against the order of the Rajasthan Tax Board, Ajmer dated 31.3.1998.
3. According to the learned Counsel for the petitioner, from the definition given in the Clause 2 of the Scheme of 1987 it is clear that an industrial unit established by transferring or shifting or dismantling an existing industry and an industrial unitestablished on the site of an existing unit manufacturing similar goods, is not the new industry. The learned Counsel for the petitioner submitted that statements of erstwhile industry's owner Madan Monan Verma and one neighbour Chandan Singh were recorded before the rejection of the claim of the non-petitioner. The learned Counsel for the petitioner relied upon the judgment of the Hon'ble Apex Court delivered in the case of State Level Committee and Anr. v. Morgardshammar India Ltd. (1996) 101 STC page 1 wherein Section 4A of the Scheme framed under the U.P. Salex Tax Act, 1948 was under consideration before the Hon'ble Apex Court. According to the learned Counsel for the petitioner, identical provision of law was in force in the State of U.P. and the present case is squarely covered by the judgment of the Hon'ble Apex Court. It is also submitted that the exemption laws are required to be construed strictly, which has also been laid down by the Hon'ble Apex Court in the above referred judgment. In view of the legal position, according to the learned Counsel for the petitioner, it is not in dispute that on the land in question there was industrial unit known as Shrinath Marbles and Minerals and that unit was engaged in cutting marbles blocks. The said unit was purchased by the non- petitioner. According to the learned Counsel for the petitioner, since the land was belonging to the Industries Department, therefore, mere sanction was granted by the District Collector to the non-petitioner-unit for running the industry and it is not a case of transfer of land by the Collector to the non-petitioner. It is also submitted that as per the admitted fact, the machines were also purchased by the non-petitioner unit of Shrinath Marbles and Minerals and, therefore, the non-petitioner's unit is on the land on which the similar goods were produced by the erstwhile industrial unit and further the non-petitioner purchased the machinery from the erstwhile seller unit, therefore, non-petitioner's unit is not a new unit as per Sub-clauses (i) and (ii) of Clause 2 of the Scheme of 1987.
4. The learned Counsel for the non-petitioners vehemently submitted that the industrial unit of Shrinath Marbles and Minerals closed down and its registration was surrendered to the Industries Department of the State. The non-petitioner purchased the land of M/s Shrinath Marbles and Minerals and established entirely a new industrial unit. The non-petitioner is manufacturing the marbles tiles and is not engaged in the trade of marbles cutting which was the job of the Shrinath Marbles and Minerals. Not only this, in the statement which was recorded at the back of the non-petitioner by the department itself, it has come on record that the total investment of the erstwhile unit was Rs. 1,98,657/- and that investment was for purchasing the local machinery for cutting marbles blocks of 8 x 4 x 4. By this machine, the industry was cutting one marble block in 15 days. It has its own limitation in cutting the marble of about 8 ft. only. The industrial unit of Shrinath Marbles and Minerals was closed and thereafter, the non-petitioner purchased the said land as well as the machinery as it could not have been sold separately. According to the learned Counsel for the non-petitioner, in the statements of two witnesses which were recorded by the C.T.O., the proprietor of Shrinath Marbles and Minerals clearly stated that the his unit even had no electric connection after 5.12.1982 and, therefore, it cannot be said that there was any industrial unit on the site when the non-petitioner purchased the land and machinery of the said unit in the year 1994. It is also submitted that industrial unit means the industrial unit in fact and not a piece of land with junk machines or out-dated machines and having no production. Contrary to it, the Tax Board took note of the fact that the land was allotted to the non-petitioner unit by the District Collector and the total investment of Shrinath Marbles and Minerals was of about Rs. two lacs or some thing more, the non-petitioner's unit invested Rs. 47,10,000/-at that time and at the time of consideration of his application for grant of benefit under the Scheme of 1987, the non-petitioner's investment was of Rs. 65.66 lacks. It is also submitted that the order of the District Level Committee (Annx.l) is in fact not a reasoned order and the reasons which are sought to be supplied by the revenue by filing the copy of the minutes of the State Level Committee, also clearly reveal that before the State Level committee took any decision of rejecting the non-petitioner's claim, they decided to take opinion of Directorate of Industries in the meeting dated 3.8.1986 but it appears from the minutes that said opinion was not considered by the State Level Committee and the District Level Committee and without application of mind, the District Level Committee rejected the non-petitioner's claim which was rightly set aside by the Tax Board.
5. The learned Counsel for the non-petitioner also pointed out that the guidelines were also issued in this respect by the Commissioner Commercial Taxes on 18.6.1992 and those guidelines were not considered by the State Level Committed or by the District Level Committee at all, whereas the Tax Board considered the guidelines issued by the Commissioner, Commercial Taxes. It is submitted by the learned Counsel for the non-petitioner that those guidelines issued by the Commissioner, Commercial Taxes are binding upon the revenue. It is submitted that after considering the factual aspect as well as the relevant record, when the Tax Board has held non-petitioner unit as the new industrial unit, there is no reason for interference in such an order passed by the Tax Board dated 31.3.1998. It is also submitted that if this order is interfered after more than 8 years then that will cause irreparable loss to the non-petitioner unit.
6. The learned Counsel for the non-petitioner vehemently submitted that the interpretation which has been given by the revenue to the definition of new industrial unit, is absolutely wrong because of the reason that the language of Clauses (i) and (ii) do not suggest such an interpretation. According to the learned Counsel for the non-petitioner, the tax exemption is not available to the "existing industry" which has been established by (i) transferring or (ii) shifting or (iii) dismantling an existing industry( and re-erecting). Therefore, the very foundation of the industry seeking benefit under the Scheme of 1987 must be the original industry which has been either transferred or has been shifted or has been dismantled and that too for the purpose of establishing a new industry. The industry cannot be without there being in fact production of goods or the unit which is not capable of producing the goods. So far as Sub-clause (ii) of Clause 2(a) is concerned, according to the learned Counsel for the non-petitioner, in a case where industrial unit is established on an existing unit manufacturing the similar goods, alone is disqualified from claiming the benefit of the Scheme of 1987. It does not mean that if once upon a time there was an industrial unit on a land and that unit closed down, the land or that property will incur the total disqualification so as to deny the benefit of Scheme of 1987 to a person who wants to or who has purchased the said closed down industrial unit's property and establishes entirely a new unit and is manufacturing the similar goods.
7. I considered the submissions of the learned Counsel for the parties.
8. The definition of "New Industrial Unit" as given in Clause 2 is as under:
2. Definitions.- (a) "New Industrial Unit" means an industrial unit which commences commercial production during the operative period of the Incentive Scheme but will not include,-
(i) an industrial unit established by transferring or shifting or dismantling an existing industry ; and
(ii) an industrial unit established on the site of an existing unit manufacturing similar goods;
Explanation.- Date of commencement of commercial production means the 61st day after the day on which the raw material is, for the first time, put in the process of production including trial production.
9. The guidelines issued by the Commissioner, Commercial Taxes dated 18.6.1992 are as under:
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10. Since heavy reliance has been placed by the learned Counsel for the petitioner on the judgment of the Hon'ble Apex Court delivered in the case of State Level Committee and Anr. v. Morgardshammar India Ltd. (supra), it will be relevant to quote the Section 4-A of the Scheme under the U.P. Sales Tax Act:
Section 4-A provides for exemption from sales tax of goods manufactured a by a new unit during the first five year period, subject to the terms and conditions specified therein. Explanation (i), with which alone we are concerned herein, reads as follows:
Explanation.- For the purposes of this section,
(i) 'new unit' means a factory or workshop whether set up by a dealer already having an industrial unit manufacturing the same goods at any other place in the State or an industrial unit, manufacturing any other goods on, or adjacent to, the site of an existing factory or workshop; but does not include
(a) any factory or workshop using machinery, accessories or components already used or acquired for use in any other factory or workshop in India,
(b) any factory or workshop established on, or adjacent to the site of an existing factory or workshop manufacturing the same goods, or
(c) any addition to or extension of an existing factory or workshop.
11. The Hon'ble the Apex Court in the above case held as under:
(a) If a dealer is already having an industrial unit manufacturing particular goods and if he sets up another industrial unit manufacturing the same goods at any other place in the State, it would be a new unit. In other words, if a dealer establishes a new factory or workshop. on or adjacent to his existing factory or workshop, and if the new factory or workshop is meant for manufacturing the very same goods as are manufactured in the existing factory or workshop, the newly established factory or workshop would not be a "new unit" within the meaning of the Explanation.
(b) If, however, the new industrial unit is meant for manufacturing goods different from the goods manufactured in the existing factory or workshop, the new industrial unit (factory or workshop) can be located on the same premises or adjacent to the premises of the existing factory or workshop; if would be "new unit" for the purposes of Explanation.
(c) If, however, any such new factory or workshop uses machinery, accessories or components already used or acquired for use in any other factory or workshop in India, it does not and cannot qualify as a "new unit".
(d) Any factory or workshop established on or adjacent to the site of an existing factory or workshop manufacturing same goods as are being manufactured in the existing factory or workshop cannot be called a "new unit" for the purposes of the Explanation.
(e) Any addition to or extension of an existing factory or workshop cannot and does not qualify as a new unit.
The definition of "new unit" in Explanation (i) thus comprises of two clauses mentioned as (a) and (b) above) to which three exceptions (mentioned as (c), (d) and (e) above) are appended.
12. The Hon'ble the Apex Court while considering the provisions of the U.P. Sales Tax Act held that the legislature wanted to avoid an enquiry into the factual issue of actual user where the machinery is acquired for use in any other factory or workshop in India. Once it is shown that such machinery was acquired for use in any other factory or workshop in India, the Legislature presumes user a case of conclusive presumption. The Hon'ble Apex Court held that the idea was to shut out enquiries of the type as ordered by the High Court in that case. For this Hon'ble the Apex Court also observed that one person may say that though the machinery was acquired by him, he never installed it or used it; another may say that he only installed the machinery but did not use or operate it; a third person may say that the machinery was used only for trial run but not on a regular basis, and so on and so forth. After observing so, the Hon'ble Apex Court held that the idea was to lessen the room for factual controversies. In the same judgment, Hon'ble the Apex Court held that it must be remembered that no unit has a right to claim exemption from tax as a matter of right. His right is only in so far as it is provided by the Acts or Rules (in the above case Section 4-A).
13. Before proceeding further, we may notice the different language used in two provisions, one which is applicable in the State of Rajasthan and Anr. enacted for U.P. State. In the U.P. Act in new industrial units are not, as per Sub-section (a) of Section 4A, who "uses" "machinery", "accessories" or "components" which were "already in use" or "enquired for use in any other factory or workshop in India". Therefore, mere use of only machinery or accessory or any component of which were used by any other factory or workshop and even if the said machinery or accessory or component has not been used by another unit but has been acquired for use of other factory or workshop are used in different industrial unit that that unit is not new industry. No such provision in the definition of "New Industrial Unit" in Scheme of 1987. In definition of Scheme of 1987 mere use of machinery or any accessory or mere some components of existing unit by new unit is not the disqualification. The some machinery short of industry, mere some components or accessory of one industry cannot make the new unit disqualified from availing benefit of the Scheme.
14. From the judgment of the Hon'ble Apex Court delivered in the case of State Level Committee v. Morgardshammar India Ltd. (supra), it is clear as held by Hon'ble the Apex Court in Clause (a) that if a dealer is already having an industrial unit manufacturing particular goods and if he sets up another industrial unit manufacturing the same goods, it should be at other place. Therefore, from above as well as as per the language used in definition clause of Scheme of 1987 applicable in the present case, of "New Industrial Unit" the disqualification is on the person who establishes the industrial unit (1) by acquiring the existing industrial unit by transfer or otherwise and further those persons are disqualified who establishes industrial unit by (2) shifting the existing industrial unit, may it be shifting of the industrial unit as a whole or may be (3) by dismantling the existing unit and obviously by re-erecting the same industry. Sub-clause (ii) of Clause 2(a) of the Scheme of 1987 makes the industrial unit disqualified from claiming benefit under the Scheme of 1987 provided the said industrial unit is established on the site of "an existing industrial unit manufacturing similar goods."
15. Clause (ii) is required to be considered again because of the reason that it is not in dispute that non-petitioner's industrial unit has been established on a plot or property over which erstwhile owner's industry Shrinath Marbles and Minerals was running and was doing the marble block cutting. The learned Counsel for the petitioner tried to submit that any land or industrial property incurs disqualification once that land had been put to use for manufacturing the goods and other person establishes industrial unit for manufacturing the similar goods as of vendor. The interpretation given by the revenue cannot be accepted because of the simple reason that Sub-clause (ii) of Clause 2(a) of the Scheme of 1987 has not provided for disqualification to be applied over the immovable property in perpetuity so as to deny the tax exemption benefit to any person who establishes entirely a new unit manufacturing the similar goods which was manufactured by the erstwhile industrial unit long ago or before new unit was established. Such interpretation is not coming directly or indirectly from the language of Sub-clause (ii) of Clause 2(a), nor it could have been the intention of the legislature to declare the immovable property as disqualified for ever for giving any benefit to any subsequent dealer or the owner of the industrial unit. The plain and simple meaning of Sub-clause (ii) of Clause 2(a) is that if on an existing unit manufacturing similar goods, another industrial unit is established, then that industrial unit cannot claim benefit of the Scheme of 1987 and obvious reason is that the expansion of existing running industrial unit is not included in the definition of "New Industrial Unit". The word "manufacturing" similar goods in Sub-clause (ii) is relevant and significant. The word "manufacturing" denotes the continuity of running of industrial unit and it cannot mean that "once goods were manufactured on the premises". There cannot be any reason for holding that once goods are manufactured on one land or on one immovable property and that unit closed down and the Industry extinguished then disqualification will continue on the land and building irrespective of its owner. Therefore, mere establishing industrial unit on the land which was land of other owner and which was manufacturing goods similar to the goods manufactured by purchaser, the subsequent dealer will not be eligible to benefit of the exemption merely because of its location on the land of old unit which was manufacturing the same goods.
16. At this juncture it will be worthwhile to mention here that in the case of the State Level Committee v. Morgardshammar India Ltd. (supra) that one M/s Modi Steels purchased the machinery and established a factory. According to the dealer of that case, M/s Modi Steels had not put the said machinery to any use and that was purchased by the dealer of that case who was seeking exemption of the tax under Section 4-A of the U.P. Sales Tax Act. The Hon'ble Apex Court held that the enquiry about actual use of that machinery by the vendor M/s Modi Steels is not permissible and it cannot be enquired whether that machinery was in fact used by M/s Modi Steels or not. The different language used in U.P. Act is clear and it has been specifically provided that if machinery has been acquired for other industry, the benefit will not be given to purchaser of that machinery even if the machinery has not been used by original purchaser. Contrary to it, the facts of this case reveal that the proprietor of the vendor industrial unit clearly stated that he had a marble cutting machine for which he described that machine as 'Deshi'. He stated that said marble machine was purchased by him in the year 1980, 14 years ago from establishing the unit by the non-petitioner. The cost of the said machine was less than Rs. two lacs or about Rs. two lacs. The alleged industrial unit has no electric connection since the year 1982. From the statement which was relied upon by the revenue and which was of the proprietor of Shrinath Marbles and Minerals, it is also reveled that according to him the factory was closed four months before the sale of the unit. Though completes facts are not on record but from the reasons given in the order of the Tax Board, it is clear that the District Collector allotted the land to the non-petitioner unit and the non-petitioner unit invested more than Rs. 65 lacs. Admittedly, the non-petitioner unit's partners/proprietor have no family relation of the proprietor of the earlier industrial unit. When the Collector intervened and transfer was affected with the sanction of the District Collector, then as per the guidelines issued by the Commissioner, Commercial Taxes dated 18.6,1992, the sale of the land and building and machinery of Shrinath Marble and Minerals by the RIICO and as per Condition No. 3, the fact came on record was that earlier unit was not running unit and as per Clause (4) of the said guidelines issued by the Commissioner Commercial Taxes dated 18.6.1992, the non-petitioner installed its own machinery.
17. Apart from above, it will be worthwhile to mention here that neither the District Level Committee nor the State Level Committee held that at the time of sale, the industrial unit of Shrinath Marbles and Minerals was running and the running industrial unit was sold to the non-petitioner. It appears that the claim of non-petitioner was rejected ignoring basic and fundamental facts about establishing the new industrial unit and that too, without considering the guidelines issued by the Commissioner, Commercial Taxes dated 18.6.1992 and without obtaining guidelines which were sought by the State Level Committee from the Director of Industries, therefore, on this ground also of non- consideration of documents, the order of the District Level Committee as well as the decision of the State Level Committee could not have been sustained by the Tax Board.
18. In view of the above reason, I do not find any merit in this revision petition and the same is hereby dismissed.