# L.G Electronics India Pvt. Limited, Gautam Budh Nagar Revisionist v. Commissioner of Commercial Taxes, U.P., Lucknow

- **Citation:** (2019) 4 ILRA 806
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-10-24
- **Case number:** Excise Appeal No.88 of 2019
- **Bench:** Saumitra Dayal Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/l-g-electronics-india-pvt-limited-gautam-budh-nagar-revisionist-v-commissioner-44951
- **Pages:** 12

## Headnote

A. Tax Law - Uttar Pradesh Trade Tax
Act, 1948: Sections 4-A - Interpretation
of
Statutes
-
The
rule
of
strict
construction may be applied only for the
purposes of determining the eligibility to
exemption and no further.

Provision granting incentive for promoting
economic growth and development in taxing
statues should be liberally construed and
restriction placed on it by way of exception
should be construed in a reasonable and
purposive manner so as to advance the
objective
of
the
provision.
(Para
26).
Assessee‟s application could not be rejected
merely because two separate applications had
been filed. (Para 19, 20 & 27)

The burden to establish single diversification,
is on the assessee and it was for the revenue
authorities to rebut such evidence as the
assessee may produce. (Para 27).

B. Distinguished from Kajaria Ceramics -
The Supreme Court did not lay any rule
of evidence required to be brought on
record for a single diversification or
expansion. No specific rule or evidence has
been prescribed either under the Act or the
Rule framed thereunder. It would remain a
matter to be considered and decided on the
facts of each case. The assessee was not
obliged to lead any particular evidence to
establish its claim or else to face rejection.
(Para 32 to 35)

In the present case, assessee has led evidence
in support of its case, and substantiated the
same by adducing corroborative evidence,
unlike Kajaria Ceramics, where not a single
piece of evidence was given. (Para 29, 30)

Matter
remitted.
(E-4)
4 All. L.G. Electronics India Pvt. Limited, Gautam Budh Nagar Vs. Commissioner of Commercial Tax, U.P. , Lucknow
807
Precedent followed:

## Text

806 INDIAN LAW REPORTS ALLAHABAD SERIES
lawfully availed CENVAT credit in the
offending transaction.

II. The learned Customs, Excise &
Service
Tax
Appellate
Tribunal
(CESTAT) was completely unjustified in
law by setting aside the penalty imposed
upon R.K. Gupta, in connected Central
Excise
Appeal
No.88
of
2019
(Commissioner,
Central
Goods
and
Service Tax Commissionerate, Ghaziabad
Versus R.K. Gupta), even in the face of
the fact that the ingredients of Rule 26 of
the Central Excise Rules, 2002, were fully
satisfied. R.K.Gupta, in law, was liable to
pay the penalty imposed in the Order-inOriginal passed by the Commissioner of
Customs, Central Excise & Service Tax,
Ghaziabad.

46. As a consequence, the judgment
of the learned Customs, Excise & Service
Tax
Appellate
Tribunal
(CESTAT),
Allahabad, dated 3rd April, 2018, is liable
to be set aside and is set aside. The
judgment
of
the
Commissioner
of
Customs, Central Excise & Service Tax,
Ghaziabad, dated 21st October, 2010, is
upheld to the extent and manner indicated
in the body of this judgment.

47. Both the appeals are accordingly
allowed.
----------
(2019)12 ILR A806

REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 24.10.2019

BEFORE
THE HON'BLE SAUMITRA DAYAL SINGH, J.

Commercial Tax Revision No. 125 of 2013

L.G
Electronics
India
Pvt.
Limited,
Gautam Budh Nagar ...Revisionist
Versus
Commissioner of Commercial Taxes, U.P.,
Lucknow ...Opposite Party

Counsel for the Revisionist:
Sri Tarun Gulati, Sri Nishant Mishra, Sri Dev Nath

Counsel for the Opposite Party:
C.S.C.

A. Tax Law - Uttar Pradesh Trade Tax
Act, 1948: Sections 4-A - Interpretation
of
Statutes
-
The
rule
of
strict
construction may be applied only for the
purposes of determining the eligibility to
exemption and no further.

Provision granting incentive for promoting
economic growth and development in taxing
statues should be liberally construed and
restriction placed on it by way of exception
should be construed in a reasonable and
purposive manner so as to advance the
objective
of
the
provision.
(Para
26).
Assessee‟s application could not be rejected
merely because two separate applications had
been filed. (Para 19, 20 & 27)

The burden to establish single diversification,
is on the assessee and it was for the revenue
authorities to rebut such evidence as the
assessee may produce. (Para 27).

B. Distinguished from Kajaria Ceramics -
The Supreme Court did not lay any rule
of evidence required to be brought on
record for a single diversification or
expansion. No specific rule or evidence has
been prescribed either under the Act or the
Rule framed thereunder. It would remain a
matter to be considered and decided on the
facts of each case. The assessee was not
obliged to lead any particular evidence to
establish its claim or else to face rejection.
(Para 32 to 35)

In the present case, assessee has led evidence
in support of its case, and substantiated the
same by adducing corroborative evidence,
unlike Kajaria Ceramics, where not a single
piece of evidence was given. (Para 29, 30)

Matter
remitted.
(E-4)
4 All. L.G. Electronics India Pvt. Limited, Gautam Budh Nagar Vs. Commissioner of Commercial Tax, U.P. , Lucknow
807
Precedent followed:

1. Commissioner, Trade Tax, U.P. Vs. DSM
Group of Industries, (2005) 1 SCC 657) (Para
17, 24, 25)

2.
G.P.
Ceramics
Private
Limited
Vs.
Commissioner, Trade Tax, Uttar Pradesh,
(2009) 2 SSC 90 (Para 17)

3. Commissioner of Sales tax Vs. Industrial
Coal Enterprises, (1999) 2 SCC 607 (Para 18,
26)

4.
Bajaj
Tempo
Ltd.,
Bombay
Vs.
Commissioner of Income Tax, Bombay City-
III, Bombay, (1992) 3 SCC 78 (Para 18)

Precedent distinguished:

1. Commissioner of Trade Tax, U.P. and Anr.
Vs. Kajaria Ceramics Ltd., (2005) 11 SCC 1
(Para 24, 31, 35)

Notifications/Circulars:

1.Notification nos. 780 and 781, both dated
31.03.1995

2. Notification no. 2760, dated 16.11.1995

3. Notification nos. 640 and 641, both dated
21.02.1997

Present revision is against order dated
22.10.2012, passed by Commercial Tax
Tribunal, Lucknow Bench.

(Delivered by Hon'ble Saumitra Dayal
Singh, J.)

1. Present revision has been filed by
the assessee against the order of the Full
Bench of the Commercial Tax Tribunal,
Lucknow dated 22.10.2012 passed in
Appeal No. 16 of 2008 [under Section 4A of the U.P. Trade Tax Act, 1948
(hereinafter referred to as the Act)]. By
that order, the Tribunal has dismissed the
appeal
filed
by
the
assessee
and
confirmed the order passed by the
Divisional Level Committee (In short
''DLC') depriving the assessee of an
eligibility certificate viz-a-viz investment
of
Rs.
8,13,30,080/-
made
in
diversification
of it's
new unit to
manufacture monitors.

2. The assessee, an Indian company
is a subsidiary of L.G. Electronics, Korea
(hereinafter referred to as the 'parent
company'). As early as on 29.01.1997, the
parent company was granted approval by
the Government 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
808 INDIAN LAW REPORTS ALLAHABAD SERIES
is a common case between the parties that the
aforesaid notifications came to be amended on
16.11.1995, by notification nos. 2760 and
2761, whereby instead of providing for
exemption by way of monetary limit, with
respect to other than electronic goods,
exemption was provided only with reference
to time from the date of start of production.
Again, by notification nos. 640 and 641, both
dated 21.02.1997, the scheme for exemption
was supplemented. Thereby, the State
Government notified further exemptions to
'new
units'
undertaking
expansion,
diversification, backward integration and
modernisation
between
01.12.1994
and
31.03.2000, subject to they are having
invested Rs. 50 crores or more.

4. It is not in dispute that initially, the
assessee did establish a 'new unit' to
manufacture colour televisions, washing
machines
and
air
conditioners.
Upon
application made in that regard, DLC granted
exemption to the assessee on a total fixed
capital investment of Rs. 51,37,35,446/- with
effect from the date of first sale - 27.03.1998,
for a period of 15 years, upto 200% of that
fixed capital investment.

5. Thereafter, the assessee first
diversified to manufacture PCB (Printed
Circuit Board) and Microwave Ovens.
Though the two commodities PCB and
Microwave Oven would have been
separately manufactured and investment
made in that regard may have been
segregated in two parts, however, upon a
single application made by the assessee, it
was
granted
exemption
on
that
investment, vide eligibility certificate
issued by the DLC dated 27.09.2000. To
that extent, there is absolutely no dispute.

6. Thereafter, the assessee claims to
have carried out a second diversification,
which for unexplained reasons came to be
described (by the assessee) as a jointventure to manufacture refrigerators and
PC monitors. This, the revenue authorities
have
treated
as
two
separate
diversifications whereas according to the
assessee,
it
was
also
a
single
diversification
to
manufacture
refrigerators and monitors. That decision
had
also
been
implemented
simultaneously. However, it is the further
case of the assessee, that PC monitors are
electronic goods whereas the refrigerators
were electrical goods. Therefore, there
existed certain doubts, as to which of the
above noted three notifications would
apply to each of those items. To that
extent, the assessee has tried to explain its
conduct
of
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,
4 All. L.G. Electronics India Pvt. Limited, Gautam Budh Nagar Vs. Commissioner of Commercial Tax, U.P. , Lucknow
809
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
review
application was rejected by the DLC on
24.05.2006. Upon appeal, the Tribunal
allowed the assessee's appeal and remitted
the matter to the DLC with a finding to
the effect that it was clear that the
purchases
regarding
machineries
to
manufacture
both
products
(that
is
refrigerators and monitors) was carried
out during the same period. Also, the
Tribunal found that the DLC had not
taken into consideration this material fact
while rejecting the application for grant of
exemption with respect to investment
made to manufacture PC monitors.
Accordingly, the Tribunal directed the
DLC to record a clear finding considering
the relevant material that was also
referred to in that order, by describing it
as Annexure No.1 to the paper book at
paper nos. 73-86 and other documents as
well.

8. Upon remand, the DLC again
rejected the application filed by the
assessee by its order dated 25.04.2008.
This order became the subject matter of
second challenge before the Tribunal that
came to be decided on 16.05.2012. The
Tribunal again allowed the assessee's
appeal and set aside the order passed by
the DLC and specifically held that there
was no bar in two applications being filed
by the assessee claiming exemption for
single
diversification,
expansion
etc.
Thus, the Tribunal observed as under:

"Therefore,
a
second
or
supplementary application may be moved
and to our mind, there appears no bar in
moving separate applications within the
time prescribed for grant of Eligibility
Certificate."

9. It was further observed by the
Tribunal:

"The
issue
as
to
whether
diversification undertook by appellant
dealer
regarding
manufacture
of
refrigerator and monitor is a joint
venture,
is
very
material
for
determination of application moved by
appellant dealer regarding grant of
Eligibility
Certificate
for
monitor.
Therefore, without deciding this issue, the
rejection of appellant's application on the
ground that two separate applications are
not maintainable, appears incorrect."

10. The matter was again remitted to
the DLC to pass a fresh order in view of
the observations made by the Tribunal.

11. The aforesaid order became
subject matter of challenge at the instance
of the assessee (only), in Sales/Trade
Tax Revision No. 815 of 2012 that came
to be decided by order dated 22.08.2012.
This Court set aside the order of the
Tribunal insofar as it had 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
810 INDIAN LAW REPORTS ALLAHABAD SERIES
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
Act
additional
fixed
capital
investment of Rs.42 crores in refrigerator
and Rs.8,13,30,080/- in monitor should be
treated as joint diversification in terms of
the judgment of Hon'ble Supreme Court in
the case of DSM Group of Industries and
according
the
Applicant
should
be
granted exemption under Section 4A?

B. Whether for the purposes of
clause (d) of Explanation (5) of Section 4A of the Act, additional fixed capital
investment of the 'industrial undertaking'
as a whole has to be taken into account or
item-wise
additional
fixed
capital
investment has to be seen?

C. Whether the Applicant can be
denied the benefit of exemption under
Section
4-A,
when
admittedly
the
Applicant's industrial undertaking has
made additional fixed capital investment
of more than 25% of the original fixed
capital investment?

D. Whether the Tribunal has
wrongly relied upon Clause (d) of the
above explanation (4) of Section 4A of
UPTT Act to hold that the Applicant has
himself separately shown the investment
in refrigerator and monitor, therefore it
cannot be considered jointly for the
purpose of Section 4A?"

15. Relying on the plain language of
Section 4-A(1) read with proviso as also
sub-section 2(c) and 5(b) of the Act as
also notification nos. 780 and 781, both
dated 31.03.1995, notification no. 2760
dated 16.11.1995 as also notification nos.
640 and 641, both dated 21.02.1997, it
has been submitted - plainly, the object
for grant of exemption under Section 4-A
of the Act was to encourage new
investment by the industry to bolster
industrial growth in the state. The intent
of legislature had been to encourage
investment in 'new unit' or any existing
unit for expansion, diversification and
modernisation
and
or
backward
integration or in one of them. With
respect to claim of diversification, the
only further requirement appears to be
that the goods manufactured as a result of
diversification must be different from
those manufactured before diversification.

16.

Insofar
as
the
exemption
notifications are concerned, it has been
submitted that there is no dispute that the
assessee had made investments to carry out
diversification to manufacture such goods as
were different from the goods earlier
manufactured by it. The only doubt that the
revenue authorities have raised and persisted
with is that the investment made to establish
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.
4 All. L.G. Electronics India Pvt. Limited, Gautam Budh Nagar Vs. Commissioner of Commercial Tax, U.P. , Lucknow
811

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.P.
Ceramics
Private
Limited
Vs.
Commissioner, Trade Tax, Uttar Pradesh,
(2009) 2 SCC 90.

18. Also, the principle of purposive
construction has been invoked by relying on
the decision of the Supreme Court in
Commissioner of Sales Tax Vs. Industrial
Coal Enterprises, (1999) 2 SCC 607 and
Bajaj
Tempo
Ltd.,
Bombay
Vs.
Commissioner of Income Tax, Bombay
City-III, Bombay, (1992) 3 SCC 78 to submit
that the rule of strict construction may be
applied only for the purposes of determining
the eligibility to exemption and no further.

19. In so far as there exists credible
and sufficient evidence to establish that
the assessee had engaged in a common
diversification exercise to manufacture
both refrigerators and PC monitors, at a
single point in time, at the same unit, the
investment made in that exercise had to
be taken as composite whole and not
truncated by looking at the investment
made to manufacture refrigerators as
distinct and independent of that made to
manufacture PC monitors. The fact that
the assessee was forced to or; chose to file
two separate applications would remain a
factor extraneous to the dispute, inasmuch
as, such application became necessary on
account
of
separate
notifications
providing
for
separate
methods
of
computation
of
exemption
on
manufacture of electronic goods and
electrical goods. Since the State treated
refrigerators and PC monitors differently,
the assessee had no choice in the matter
but to file separate applications to disclose
the facts relevant to each of those two
items, more specifically by filing separate
applications. In any case that fact has not
been found to be adverse to the assessee.

20. In that regard, it has also been
submitted, even at the stage of first
diversification,
while
granting
the
eligibility certificate, the DLC itself
clearly specified the items PCB and
microwaves separately in the eligibility
certificate dated 27.09.2000 for the
purpose of computation of exemption on
each of those commodities. Therefore, it
has been submitted that, the State
authorities themselves construed scheme
of exemption and implemented scheme of
exemption so as to treat the total
investment as a composite investment to
fix eligibility to exemption and to
bifurcate the same only for the purpose of
computing the limit or extent of that
exemption.

21. As to the facts of the case,
relying on various documents that are
812 INDIAN LAW REPORTS ALLAHABAD SERIES
stated 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 machinery used to manufacture
those goods were purchased by two
separate invoices raised on the assessee
on same date, being February 26, 2001.
All these documents are claimed to be
existing on the record of the Tribunal.
Then referring to the written arguments
that were placed before the Tribunal, it
has been further emphasised that this
issue was specifically raised by disclosing
(based on evidence on record), the date of
Commercial Invoice to purchase separate
assembly lines for the two products as
common i.e. 26.02.2001 and the date of
first investment in plant and machinery
for refrigerators as 01.02.2001 whereas
that for PC monitors as 15.11.2000.
Further, the date of starting production of
PC monitors was 11.5.2001 whereas that
of refrigerators was 11.07.2001. It also,
established
existence
of
a
single
diversification.

23. Also, it has been submitted, no
evidence was led by the revenue to rebut
the claim made by the assessee on the
strength of the evidence noticed above.
The
revenue
authorities
relied
on
presumptions solely occasioned by the
fact that the assessee had filed two
separate
applications
for
grant
of
exemption on manufacture of refrigerators
and PC monitors, which ground was
found to be irrelevant by the Tribunal
itself.

24. Coming to the impugned order
of the Tribunal, learned Senior Counsel
would submit that the Tribunal has
completely failed to appreciate the
applicability of the ratio of the decision in
the case of DSM Group (supra).
Referring to that decision, it has been
emphasised that the decision of the
Supreme Court in Commissioner of
Trade Tax, U.P. and Anr. Vs. Kajaria
Ceramics Ltd., (2005) 11 SCC 1 was a
case which would fall in the exception to
the rule laid down by the Supreme Court
in DSM Group (supra).

25. Opposing the present revision,
learned Standing Counsel would submit
that sufficient opportunity had been
granted to the assessee by the Tribunal to
bring on record the evidence to establish
that the diversification exercise was a
single business venture. In fact, the
4 All. L.G. Electronics India Pvt. Limited, Gautam Budh Nagar Vs. Commissioner of Commercial Tax, U.P. , Lucknow
813
assessee failed to bring such evidence on
record the minutes of the meeting of it's
own Board of Directors indicating that the
diversification exercise was carried out as
a single exercise. Referring to the same,
the Tribunal has rightly rejected the claim
made by the assessee. Insofar as the
present assessee has also not brought on
record any estimate, 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 Board Mfg.
Co. Ltd.[1989 Supp (2) SCC 523 : 1990
SCC (Tax) 158] this Court held that in
taxing statutes, provision for concessional
rate of tax should be liberally construed.
So also inBajaj Tempo Ltd.v.CIT[(1992) 3
SCC 78] it was held that provision
granting
incentive
for
promoting
economic growth and development in
taxing
statutes
should
be
liberally
construed and restriction placed on it by
way of exception should be construed in a
reasonable and purposive manner so as to
advance the objective of the provision.

12. We find that the object of
granting exemption from payment of sales
tax has always been for encouraging
capital investment and establishment of
industrial units for the purpose of
increasing production of goods and
promoting the development of industry in
the State. If the test laid down inBajaj
Tempo Ltd. case[(1992) 3 SCC 78] is
applied, there is no doubt whatever that
the exemption granted to the respondent
from 9-8-1985 when it fulfilled all the
prescribed conditions will not cease to
operate
just
because
the
capital
investment exceeded the limit of Rs 3
lakhs on account of the respondent
becoming the owner of land and building
to which the unit was shifted. If the
construction sought to be placed by the
appellant is accepted, the very purpose
and object of the grant of exemption will
be defeated. After all, the respondent had
only shifted the unit to its own premises
which made it much more convenient and
easier for the respondent to carry on the
production of the goods undisturbed by
the vagaries of the lessor and without any
necessity to spend a part of its income on
rent. It is not the case of the appellant that
there were any mala fides on the part of
the respondent in obtaining exemption in
the first instance as a unit with a capital
investment below Rs 3 lakhs and
increasing
the
capital
investment
subsequently to an amount exceeding Rs 3
814 INDIAN LAW REPORTS ALLAHABAD SERIES
lakhs with a view to defeat the provisions
of any of the relevant statutes. The bona
fides of the respondent have never been
questioned by the appellant."

27. It also cannot be disputed that
the burden to establish that the assesse
had made a single diversification to
manufacture
refrigerators
and
PC
monitors rested on the assessee. It was a
special fact in the knowledge of the
assessee. Therefore, the burden would
remain on the assessee to prove the same
and for the revenue authorities 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 as under:

"Despite increased competition,
your Company is confident of garnering a
higher growth in its products during the
year 2001. The Company is planning to
introduce many new models, thus making
the company with the widest range of
models in all its product category. During
the year 2000, the Company has started
work to add a Refrigerator Plant to its
existing production facilities which would
be operational by July 2001. The
Company is planning to start assembling
of Monitors in India in May 2001."

29. Not only such position appears
to have been made clear in such public
document,
but
also
the
assessee
substantiated the same by adducing
corroborative evidence in the shape of
same date invoices dated 26.2.2001 to
purchase vital machineries, being separate
assembly
lines
to
manufacture
PC
monitors
and
refrigerators.
Further
corroborative evidence appears to have
been filed in the shape of details of plant
and machinery, equipments, parts and
components, etc. purchased to set up the
manufacturing facilities for refrigerators
and monitors. Those dates overlapped or
ran parallel. Moreover, the date of first
investment; starting production and; first
sale for the two goods PC monitors and
refrigerators were very close to each other
as appear to be prima facie supportive of
the claim made by the assessee -
15.11.2000 and 01.02.2001 being the
dates of first purchase of plant and
machinery
for
PC
monitors
and
refrigerators
respectively.
Similarly,
11.05.2001 and 11.7.2001 were the
closely arising dates of start of production
of
PC
monitors
and
refrigerators,
respectively. Even the date of first sale of
PC monitors was 30.05.2001 whereas that
of refrigerators was 18.07.2001.
4 All. L.G. Electronics India Pvt. Limited, Gautam Budh Nagar Vs. Commissioner of Commercial Tax, U.P. , Lucknow
815

30. Therefore, the contention of the
assessee that there was evidence existing
on record to establish that the entire
diversification exercise to manufacture
refrigerators and PC monitors was a
single step diversification, is prima facie
found to be based on evidence on record
before the Tribunal. It is not a case where
the assessee may not have led any
evidence in support of its case. The
observations and conclusions of the
Tribunal, to the contrary, are found to be
perverse.

31. In the case of Kajaria Ceramics
(supra), that assessee had consistently
claimed to have filed three separate
applications to the DLC stating therein
that it had started production on specified
dates 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 that crucial fact,
the Supreme Court reasoned that the onus
to establish a single expansion in three
phases remained undischarged at the
hands of that assessee/Kajaria Ceramics.

33. It was in that factual context, the
Supreme Court further observed that the
scheme of expansion would necessarily
warrant estimates, plants, drawings etc. It
then observed, there was not a single
piece of evidence, to establish that the
expansion was a single step exercise
carried out by that assessee. On the
contrary, it was found that with respect to
each three expansions, separate industrial
licences had been applied for and
obtained by that assessee. Moreover,
separate negotiations had also been
entered into at each stage. Therefore, in
the face of such evidence, it was
concluded that there were three separate
expansions carried out by that assessee.

34. Such evidence has not been
shown to exist in the present case. In fact,
at present, the entire evidence appears to
indicate at least on prima facie basis that
the
decision
to
diversify
and
its
implementation was a single effort made
by the assesse, which for unexplained
reasons, came to be described as jointventure. However, that word description
is of no legal consequence. Therefore, the
Tribunal has failed to consider material
evidence filed by the assesse and record
any finding on that. It also appears, at
least at this stage, that the revenue
816 INDIAN LAW REPORTS ALLAHABAD SERIES
authorities had not rebutted such evidence
by filing any other evidence.

35. In the facts of this case, the
finding recorded by the Tribunal that the
case of the assessee is similar to that of
the Kajaria Ceramics (supra) and
invoking that rule is wholly misplaced. In
any case, in the case of Kajaria
Ceramics (supra), the Supreme Court did
not lay down a rule of evidence that for a
single diversification or expansion, it was
always necessary for the assessee to bring
on record estimates, plants, drawing, etc.
It was in the facts of that case that such
observations appear to have been made.
No specific rule or evidence has been
prescribed either under the Act or the
Rule framed thereunder. It would remain
a matter to be considered and decided on
the facts of each prescribed case. Thus,
the assessee was not obliged to lead any
particular evidence to establish its claim
or else to face rejection. However, it was
always open to the revenue to rebut that
evidence or lead 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 selfcontradiction 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 commodity.
Thus, the assessee had relied on the
certificate issued with respect to the
diversification to manufacture PCB and
Microwave
Ovens
vide
eligibility
certificate dated 27.9.2000. That issue has
also remained from being thrashed out by
the Tribunal.

38. Accordingly, I find that the
Tribunal
has
misdirected
itself
in
approach and, therefore, its order cannot
be sustained. As to what would be the
conclusion to be drawn on facts, is not
being commented upon in this order. That
would remain for the Tribunal to consider
and decide on the strength of evidence
placed before it. Insofar as the correct
approach to be followed, that has been
settled above.

39. In view of the above, the
questions of law (as framed above)
remain unanswered.

40. Accordingly, the order of the
Tribunal is set aside and the matter is
remitted to it to pass a fresh, strictly in
accordance with law, keeping in mind the
observations made above.

41. The aforesaid exercise may be
completed as expeditiously as possible,
preferably within a period of six months
4 All. M/s Parishudh Machines Pvt. Ltd., Ghaziabad Vs. Commissioner of Commercial Taxes, U.P., Lucknow 817
from the date of production of certified
copy of this order.

42. With the aforesaid observations,
the present revision stands disposed of.
----------

(2019)12 ILR A817

REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 23.10.2019

BEFORE
THE HON'BLE SAUMITRA DAYAL SINGH, J.

Commercial Tax Revision No. 169 of 2018

M/S
Parishudh
Machines
Pvt.
Ltd.,
Ghaziabad ...Revisionist
Versus
Commissioner of Commercial Taxes, U.P.,
Lucknow ...Opposite Party

Counsel for the Revisionist:
Sri Nishant Mishra, Sri Rahul Agarwal

Counsel for the Opposite Party:
C.S.C.

A. Tax Law - Uttar Pradesh Value Added
Tax, 2008: Entry 26 of Schedule -II Part
A; Sections 2(f), 4(1)(a) - Resort has to
be had to the residuary heading only
when by a liberal construction the
specific heading cannot cover the goods
in question. (Para 12)

If „crankshaft‟ and „camshaft‟ manufactured by the
assessee were not machinery, then in absence of
any other or alternative claim, the Tribunal could
treat the goods to be unclassified under Schedule V
to the Act. But if they were machinery, they could
not have been treated as unclassified by relying on
Section 2(f) of the Act, which has no bearing to
classification of any goods for taxation purpose.
(Para 13)

The words „machinery‟ and phrase „capital
goods‟ are different and may overlap or
remain mutually exclusive depending upon the
facts of each case, in the context of the
particular fiscal statute wherein they may have
been used. (Para 15)

Any machinery that may be put to use in
manufacture of goods may be treated as
capital goods in the context of any particular
legislation, especially fiscal statutes. Certain
other goods may continue to be machinery,
though not capital goods. Treatment of any
goods as capital or non-capital goods, would
remain extraneous so far as the taxability of
those goods is concerned. (Para 16)

Matter remitted. (E-4)

Precedent followed:
1. State of Maharashtra Vs. Bradma of India
Ltd., (2005) 2 SCC 669 (Para 12)

Present revision is against order dated
07.03.2018, passed by Commercial Tax
Tribunal, Ghaziabad, U.P. for the A.Y.
2008-09.

(Delivered by Hon'ble Saumitra Dayal
Singh,J.)

1. Present revision has been filed by
the assessee against the order of the
Commercial Tax Tribunal Ghaziabad
dated 7.3.2018, passed in second appeal
no. 518 of 2013, for the A.Y. 2008-09
(U.P.). By that order, the Tribunal has
dismissed the appeal filed by the assessee
against the order of the first appeal
authority dated 12.7.2013. The first
appeal authority had held 'crankshaft' and
'camshaft' used in the compressors in
refrigerators are not machinery. However,
with respect to rejection of books of
accounts and best judgement assessment,
the matter had been remitted to the
assessing authority. The proceedings, thus
remanded, have given rise to two separate
revisions being Sales/Trade Tax Revision
Nos. 298 of 2018 for A.Y. 2008-09 (U.P.)