# M/S Aligarh Cement Factory Private Ltd. Revisionist v. The Commissioner Trade Tax U.P. Lucknow

- **Citation:** (2022) 8 ILRA 1022
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-07-19
- **Case number:** Trade Tax Revision No. 269 of 2008
- **Bench:** Saumitra Dayal Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-aligarh-cement-factory-private-ltd-revisionist-v-the-commissioner-trade-tax-48698
- **Pages:** 12

## Headnote

A. Tax Law - U.P. Trade Tax Act, 1948 -
Sections 4-A & 4-AA - 'Employees Act' -
Sections 1(1), 1(2), 1(3) & 16(1)(d) - In
the present case, it is found - though the
'Explanation' appended to the Restrictive
Notification would apply to the reading of
Clause 2 of the Exemption Notification, at
the same time, it would remain a directory
provision of law. Where the figure of
employment to be computed under the
Restrictive
Notification
remained
indeterminate, the same would be read as
'total employment' granted otherwise.
(Para 34)

The language of proviso (ii) Clause 2 of
the Exemption Notification leaves no
doubt that the legislature adopted the
mode-legislation by incorporation which is
a well-recognized mode of legislation. It bodily
lifted and incorporated the 'Conditions &
Restrictions'
contained
in
the
Restrictive
Notification, to the Exemption Notification, as a
further condition to be fulfilled, to avail
exemption. (Para 14, 15)

By virtue of proviso (ii) of Clause 2 of the
Exemption Notification, the legislature
chose to provide three conditions to be
fulfilled to exclude the applicability of
Clause 2 of the Exemption Notification.
First, it excluded applicability of the restrictive
Clause to 'new units' established in specified
districts. Second, it excluded that restrictive
Clause to 'new units' providing employment to
members of specified categories, in prescribed
percentages. Such 'new units' would avail
full/unrestricted
exemption.
Third,
it
was
provided, the restrictive Clause 2 would not
apply if "Conditions and Restrictions" specified
in the Restrictive Notification, were fulfilled.
(Para 16)

It is not in dispute between the parties that
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, in specified percentages up to a
specified date, has been met by the assessee.
(Para 18)

There is no case set up by the revenue that
the condition of maintaining employment of
members of the specified categories, at the
prescribed percentages had been violated by
the assessee in any year. Therefore, the
second condition has also been fulfilled. (Para
19)

B. The Restrictive Notification is not an
addendum
or
corrigendum
to
the
Exemption
Notification.
It
is
an
independent notification issued under
Section 4-AA of the Act. By its very nature,
such notifications were issued by the State
Government, at the relevant time, to grant
exemption to a unit, based on employment
granted - to persons belonging to specified
categories. The assessee had not claimed
that exemption. (Para 20)

C. The '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 phr

## Text

1022 INDIAN LAW REPORTS ALLAHABAD SERIES
Whether such forgery actually took place,
whether it caused any loss to the
complainant and whether there is the
requisite mens rea are the questions which
are yet to be determined. The Magistrate
has not found clear material to proceed
against the accused. Even a case for
summoning has not yet been found. While a
transaction giving rise to cause of action
for a civil action may also involve a crime
in
which
case
resort
to
criminal
proceedings may be justified, there is
judicially acknowledged tendency in the
commercial world to give colour of a
criminal case to a purely commercial
transaction. This Court has cautioned
against such abuse."

10. It is, thus, abundantly clear that in
view of law laid down by the Division
Bench of this Court in Sukhwasi (supra)
and Ramdev Food Products (P) Ltd.
(supra), it cannot be said that a Magistrate,
while entertaining an application filed
under Section 156 (3) Cr.P.C. cannot reject
or treat the same to be a complaint.

11. So far as the question of recovery
of alleged tractor is concerned, it is
pertinent to mention that keeping in view
the provisions contained in Section 202
Cr.P.C. in its entirety it is held in M/s.
Cucusan Foils Pvt. Ltd. vs. State (Delhi
Admn.), 1991 Cr.LJ 683 in paragraph
No.16, as under :-

"16. Even this judgment says
that once the Magistrate proceeds on the
basis of the original complaint, then he
must first proceed to examine on oath the
complainant and his witnesses under
Section 200 and thereafter either hold an
enquiry himself or direct the enquiry to be
held by police officer under Section 202 of
the Code, as he thinks fit and then either
dismiss the complaint or issue the process,
as the case may be."

 (emphasis supplied)

12. Therefore, it is also open to the
learned Magistrate, at the appropriate stage,
to do the needful in this regard, keeping in
view the provisions of Section 202 Cr.P.C.
and law laid down by Delhi High Court in
M/s. Cucusan Foils (Supra).

13. In view of what has been
discussed above, the impugned order
passed by learned Magistrate, whereby he
has treated the application filed under
Section 156 (3) Cr.P.C. as a complaint,
cannot be said to be illegal. The impugned
order cannot be said to be an abuse of
process of the Court either. Therefore, the
present application lacks merit and is liable
to be dismissed.

14. In view of the aforesaid
discussion, the present application is
dismissed.
----------
(2022) 8 ILRA 1022
REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 19.07.2022

BEFORE

THE HON'BLE SAUMITRA DAYAL SINGH, J.

Trade Tax Revision No. 269 of 2008

M/S Aligarh Cement Factory Private Ltd.
 ...Revisionist
Versus
The
Commissioner
Trade
Tax
U.P.
Lucknow ...Opposite Party

Counsel for the Revisionist:
Sri N.R. Kumar, Sri Vishwajeet

Counsel for the Opposite Party:
8 All. M/S Aligarh Cement Factory Private Ltd. Vs. The Commissioner Trade Tax U.P.
 Lucknow
1023
C.S.C.

A. Tax Law - U.P. Trade Tax Act, 1948 -
Sections 4-A & 4-AA - 'Employees Act' -
Sections 1(1), 1(2), 1(3) & 16(1)(d) - In
the present case, it is found - though the
'Explanation' appended to the Restrictive
Notification would apply to the reading of
Clause 2 of the Exemption Notification, at
the same time, it would remain a directory
provision of law. Where the figure of
employment to be computed under the
Restrictive
Notification
remained
indeterminate, the same would be read as
'total employment' granted otherwise.
(Para 34)

The language of proviso (ii) Clause 2 of
the Exemption Notification leaves no
doubt that the legislature adopted the
mode-legislation by incorporation which is
a well-recognized mode of legislation. It bodily
lifted and incorporated the 'Conditions &
Restrictions'
contained
in
the
Restrictive
Notification, to the Exemption Notification, as a
further condition to be fulfilled, to avail
exemption. (Para 14, 15)

By virtue of proviso (ii) of Clause 2 of the
Exemption Notification, the legislature
chose to provide three conditions to be
fulfilled to exclude the applicability of
Clause 2 of the Exemption Notification.
First, it excluded applicability of the restrictive
Clause to 'new units' established in specified
districts. Second, it excluded that restrictive
Clause to 'new units' providing employment to
members of specified categories, in prescribed
percentages. Such 'new units' would avail
full/unrestricted
exemption.
Third,
it
was
provided, the restrictive Clause 2 would not
apply if "Conditions and Restrictions" specified
in the Restrictive Notification, were fulfilled.
(Para 16)

It is not in dispute between the parties that
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, in specified percentages up to a
specified date, has been met by the assessee.
(Para 18)

There is no case set up by the revenue that
the condition of maintaining employment of
members of the specified categories, at the
prescribed percentages had been violated by
the assessee in any year. Therefore, the
second condition has also been fulfilled. (Para
19)

B. The Restrictive Notification is not an
addendum
or
corrigendum
to
the
Exemption
Notification.
It
is
an
independent notification issued under
Section 4-AA of the Act. By its very nature,
such notifications were issued by the State
Government, at the relevant time, to grant
exemption to a unit, based on employment
granted - to persons belonging to specified
categories. The assessee had not claimed
that exemption. (Para 20)

C. The '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". The revenue has read
the 'Explanation' to imply - a new restrictive
condition on the claim of full exemption made
by the assessee-being payment of Employees
Provident Fund contribution, by employees of
the 'new unit'. Plainly, there is nothing in the
language of the Restrictive Notification read
with the Exemption Notification to infer
existence of such a condition. (Para 23)

D.
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. (Para 29)

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 that
light, the
1024 INDIAN LAW REPORTS ALLAHABAD SERIES
'Explanation' is likely to work in favour of the
'new unit' claiming exemption, u/s 4-A of the
Act. The larger body of workmen (who may
have been engaged on casual basis and w.r.t.
whom the requirement to make contributions to
provident fund would not apply) including those
who may not be making such contribution
would stand excluded in that computation.
Based on that determination, the percentage of
employment (to be reserved for members of
scheduled
castes,
scheduled
tribes,
other
backward
classes,
and
minorities),
as
a
condition for grant of full exemption, would
have to be determined. Computed on that basis,
there is no dispute that the 'Explanation' to the
Restrictive Notification was satisfied. (Para 25,
26, 30)

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. (Para 27, 28)

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. (Para 29)

There is no dispute to the fact, considering that
figure, the percentage of employment granted
by the assessee to the members of Scheduled
Castes, Scheduled Tribes and Other Backward
Classes and minorities was met, satisfactorily.
Thus,
substantial
compliance
of
the
directory provision had been made by the
assessee. (Para 35)

E.
In
absence
of
any
consequence
prescribed by law, in the event of its noncompliance, inference may not be made,
of that provision being mandatory. (Para
31)
Here, 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. (Para 31)

Therefore, the proviso (ii) to Clause 2 of the
Exemption Notification wholly applied to the
assessee's case. Consequently, the restrictive
Clause 2 of the Exemption Notification did not
apply to it. Still, consequentially, the assessee
was entitled to full exemption under the
Exemption Notification, as provided under
Annexure No. I thereto. (Para 36)

Revision allowed. (E-4)

Precedent followed:

1. Ram Sarup Vs Munshi & ors., AIR 1963 SC
553 (Para 15)

2. Commissioner of Sales Tax Vs Industrial Coal
Enterprises, (1999) 2 SCC 607 (Para 28)

3. Topline Shoes Ltd. Vs Corporation Bank,
(2002) 6 SCC 33 (Para 31)

4. Sahu Stone Crushing Industries Vs Divisional
Level Committee & anr., 1994 UPTC 1 (Para 32)

5.
M/s Atul Gases Vs Commissioner of
Commercial Tax, U.P. Lucknow & anr., 2018
UPTC 198 (Para 33)

Present
revision
assails
order
dated
02.01.2008, passed by Trade Tax Tribunal,
Aligarh Bench, Aligarh.

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

1. Heard Sri Vishwjit, learned
counsel for the assessee and Sri A.C.
Tripathi, learned Standing Counsel for the
revenue.
8 All. M/S Aligarh Cement Factory Private Ltd. Vs. The Commissioner Trade Tax U.P.
 Lucknow
1025
2. Present revision has been filed
by the assessee, against the order of the
Trade Tax Tribunal, Aligarh Bench,
Aligarh, dated 02.01.2008, in Second
Appeal No. 445 of 2002 for A.Y. 1997-98
(U.P.), whereby the Tribunal has dismissed
the appeal filed by the assessee and thereby
upheld the order passed by the first appeal
authority, restricting the available limit of
exemption under section 4-A of the U.P.
Trade Tax Act, 1948 (hereinafter referred
to as the 'Act'), to 5% of the sale price.

3. The revision has been pressed
on the following question of 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 to the extent described under
column 4, for the year described in column
3, under Clause 3 of Annexure No. - I to
the Exemption Notification. It read as
below:

1
2

3
4

5

A
B
C

"
3
.

Ei
gh
t
ye
ar
s
1s
t
Y
ea
r
100
per
cen
t
100
per
cen
t
175
perc
ent
of
the
fixed
capit
al
inves
tmen
t or,
as
the
case
may
be,
addit
ional
fixed
capit
al
inves
tmen
t
in
case
of
small
scale
units
and
150
perc
ent
of

The
district
of Agra
(excludi
ng Taj
Trapezi
um
area),
Aligarh
(excludi
ng Taj
Trapezi
um
Area),
Allahab
ad
(excludi
ng the
area in
south of
rivers
Jamuna
and
conflue
nt
Ganga
but
includi
ng the
2
n
d
Y
ea
r
100
per
cen
t
100
per
cen
t
3r
d
Y
ea
r
100
per
cen
t
75
per
cen
t
4t
h
Y
ea
r
100
per
cen
t
75
per
cen
t
5t
h
Y
ea
r
100
per
cen
t
50
per
cen
t
6t
h
Y
ea
r
100
per
cen
t
50
per
cen
t
7t
h
Y
100
per
cen
25
per
cen
1026 INDIAN LAW REPORTS ALLAHABAD SERIES
area
include
d under
Munici
pal
Corpor
ation
Allahab
ad),
Bareilly
,
Bhadoh
i,
Bijnor,
Firozab
ad,
(excludi
ng Taj
Trapezi
um
Area),
Ghazia
bad
(excludi
ng the
Greater
Noida
Industri
al
Develo
pment
Area),
Gorakh
pur,
Haridw
ar,
Kanpur
(Nagar)
,
Lakhim
pur
Kheri,
Luckno
w,
Mahara
ea
r
t
t
the
fixed
capit
al
inves
tmen
t or
addit
ional
fixed
capit
al
inves
tmen
t
in
case
of
other
units.
"
8t
h
Y
ea
r
100
per
cen
t
25
per
cen
t
jganj,
Mirzap
ur,
Meerut,
Muzaff
arnaga
r,
Sahara
npur,
Sonbha
dra and
Varana
si.

7. At the same time, by virtue of
Clause 2 of the Exemption Notification, the
extent of exemption from tax, was limited
to a maximum of 5% of the sale price. For
ready reference, Clause 2 of the Exemption
Notification read as below:

"2. The facility of exemption from
or reduction in the rate of tax, including
additional tax specified in column 4 of
Annexure I to any unit on any transaction
of sale shall not exceed 5 percent of the
sale price. The tax, including additional
tax, in excess of 5 percent shall be payable
by such unit according to law:

Provided that the provisions of
the paragraph shall not apply to any unit.
 (i) established in the districts of
Almora, Chamoli, Dehradun, Nainital,
Pauri
Garhwal,
Pithoragarh,
Tehri
Garhwal and Uttar Kashi;

(ii) which provides employment to
the persons belonging to the Scheduled
Castes, Scheduled Tribes, other backward
classes of citizens and minorities 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-
8 All. M/S Aligarh Cement Factory Private Ltd. Vs. The Commissioner Trade Tax U.P.
 Lucknow
1027
U.P. Act-15-48-Order-95, dated March 31,
1995.

Scheduled
Castes/Scheduled
Tribe 23 percent

Other backward classes of citizen
 27 percent

Minorities 10 percent"

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 Restrictions'
specified under Notification No. TT-2779/XI-9
(226)/94
dated
31.03.1995
(hereinafter referred to as the 'Restrictive
Notification').

10. For ready reference, the contents
of the Restrictive Notification read as
below:

"Vitta (Vyapar Kar) Anubhag-2,
Notification No. TT-2-779/XI-9 (226)/94-
U.P. Act-15-48-Order-95, dated March 31,
1995.

In exercise of the powers under
Section 4-AA of the Uttar Pradesh Trade Tax
Act, 1948 (U.P. Act. No. XV of 1948), the
Governor is pleased to grant, with effect from
April, 1, 1995, a concession of twenty-five
percent in the rate of tax to such industrial
units in the private sector as are registered
under the Factories Act, 1948 and provide
employment to the persons belonging to
Scheduled Castes and Scheduled Tribes,
other Backward Classes of Citizens and
Minorities at the rate respectively of not less
than 23 percent., 27 percent and ten percent
of the total employment being provided by
such industrial unit subject to the following
conditions and restrictions:

Conditions and restrictions. -- (1)
An industrial unit may be granted concession
in the rate of tax only if it files before the
concerned assessing authority upto 31st
December of the succeeding assessment year
a certificate:

(a) of the District Magistrate to the
effect that the person who has been provided
employment belongs to the category of
Scheduled Castes or Scheduled Tribes or
Other Backward Classes of Citizens or
Minorities, as the case may be.

(b) of an officer not below the rank
of an Assistant Labour Commissioner to the
effect that such industrial unit has provided
employment to the persons belonging to
Scheduled Castes, Scheduled Tribes, Other
Backward Classes of Citizens and Minorities
in the required proportion to the total
employment during whole or part or parts of
the assessment year concerned.

(2) The industrial unit shall be
entitled to the concession in the rate of tax
only during the period in which employment
in the required proportion to the total
employment has been provided to persons
belonging to the Scheduled Castes, Scheduled
Tribes, Other Backward Classes of Citizens
and Minorities.

Explanation : For the purposes of
this
notification,
the
term
"total
employment" shall include only the persons
1028 INDIAN LAW REPORTS ALLAHABAD SERIES
who contribute to the Fund established
under Employees, Provident 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 Exemption
Notification.

14. Here, in the first place, the
language of proviso (ii) Clause 2 of the
Exemption Notification leaves no doubt,
the
legislature
adopted
the
mode
-
legislation by incorporation. It bodily lifted
and
incorporated
the
'Conditions
&
Restrictions' contained in the Restrictive
Notification, to the Exemption Notification,
as a further condition to be fulfilled, to
avail exemption.

15. Legislation by incorporation is
clearly
a
well-recognized
mode
of
legislation. In that, the legislature only
avoids repetition of words, phrases, and
even whole provisions. The principle is -
the provisions of a former/first enactment
are
incorporated
in
a
later/second
enactment such that they become an
absolute part of the later/second enactment,
as if they had been bodily transposed into
it, to the point - still later/third enactment of
repeal of the former/first enactment would
not severe its incorporation into the
later/second enactment, to the extent of its
original incorporation. It would require a
repeal of/in the later/second enactment, to
cause that legal effect. That principle was
recognized and applied in Ram Sarup Vs.
Munshi & Ors., AIR 1963 SC 553.

16. Here, by virtue of proviso (ii) of
Clause 2 of the Exemption Notification, the
legislature
chose
to
provide
three
conditions to be fulfilled to exclude the
applicability of Clause 2 of the Exemption
Notification. First, it excluded applicability
of the restrictive Clause to ''new units'
established in specified districts. Second, it
excluded that restrictive Clause to ''new
units' providing employment to members of
specified
categories,
in
prescribed
percentages. Such ''new units' would avail
full/unrestricted exemption. Third, it was
provided, the restrictive Clause 2 would not
apply if "Conditions and Restrictions"
specified in the Restrictive Notification,
were fulfilled.

17. Plainly, if the assessee had
fulfilled the requirement of engagement of
certain members of the society in the
prescribed percentage but did not fulfill
8 All. M/S Aligarh Cement Factory Private Ltd. Vs. The Commissioner Trade Tax U.P.
 Lucknow
1029
'Conditions & Restrictions' contained in the
Restrictive Notification, it could not claim
full exemption under the Exemption
Notification. To that extent, that condition
is like an exception to the second condition
to proviso (ii) to Clause 2 of the Exemption
Notification. Therefore, the effect of
'Conditions and Restrictions' prescribed
under 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 corrigendum to the
Exemption
Notification.
It
is
an
independent
notification
issued
under
Section 4-AA of the Act. By its very
nature, such notifications were issued by
the State Government, at the relevant time,
to grant exemption to a unit, based on
employment granted - to persons belonging
to specified categories. The assessee had
not claimed that exemption.

21. What survives for consideration
is, whether the 'Explanation' to the
Restrictive Notification also constitutes
part of the 'Conditions and Restrictions'
contained
therein.
In
essence,
the
'Explanation'
defines
the
term,
'total
employment'. It has been used in Clause
1(b) and Clause 2 of the 'Conditions and
Restrictions'
under
the
Restrictive
Notification. It provides - for the purposes
of considering the 'total employment'
generated by a ''new unit', only such of its
employees would be counted, who may
have contributed to the fund established
under the Employees Provident Funds and
Miscellaneous
Provisions
Act,
1952
(hereinafter referred to as the ' Employees
Act').
Once
that
number
(of
total
employment) would be determined, the
percentage test - of employment granted to
members of specified categories, could be
easily applied, to that number determined.

22. It is not the case of the revenue
that the number of employees engaged by
the assessee who were making contribution
to Employees Provident Fund was such that
the 'total employment' generated by the
assessee was much higher or such as would
deplete the percentage of members of
specified categories, employed by it, below
the prescribed percentages. In fact, the
revenue alleges in the converse, i.e. the
employees of the assessee were not making
contribution to the Employees Provident
Fund. Yet, it did not allege that the
numbers
of
members
of
specified
categories, engaged by the assessee were
1030 INDIAN LAW REPORTS ALLAHABAD SERIES
below the percentages prescribed, either
under the Exemption Notification or the
Restrictive Notification.

23. Thus, the revenue has read the
'Explanation' to imply - a new restrictive
condition on the claim of full exemption
made by the assessee - being payment of
Employees Provident Fund contribution, by
employees of the ''new unit'. Plainly, there
is nothing in the language of the Restrictive
Notification read with the Exemption
Notification to infer existence of such a
condition. The ''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 that light, the 'Explanation'
is likely to work in favour of the ''new
unit' claiming exemption, under Section 4A of the Act. A ''new unit' where
provident fund contribution may be made
by some employees, only such number of
employees would be included in the list of
'total employment', who may be making
that contribution. The larger body of
workmen including those who may not be
making such contribution would stand
excluded in that computation.

26. Thus, for example, at a ''new unit'
engaging 200 workmen, if provident fund
contribution were being made by only 100
of its workmen, the 'total employment' of
that ''new unit', for the purpose of
satisfaction
of
the
'Conditions
and
Restrictions',
under
the
Restrictive
Notification, would remain confined to
100 i.e., the lesser number and not the
larger. Based on that determination, the
percentage of employment (to be reserved
for
members
of
scheduled
castes,
scheduled tribes, other backward classes,
and minorities), as a condition for grant of
full
exemption,
would
have
to
be
determined.

27. Next, it may be noted, the
Tribunal has wrongly taken note of
Section 16(1)(d) of the ''Employees Act'. It
was omitted by the Parliament by Act
no.10 of 1998, with retrospective effect
from 22.9.1997. However, it cannot be
ignored, the said provision remained
operative for part period of A.Y. 1997-98.
At the same time, Section 1(1), 1(2) and
1(3) of the Act reads as below:

 "(1) This Act may be called the
Employees'
Provident
Funds
and
Miscellaneous Provisions Act, 1952.
8 All. M/S Aligarh Cement Factory Private Ltd. Vs. The Commissioner Trade Tax U.P.
 Lucknow
1031

(2) It extends to the whole of
India 5***.

[(3) Subject to the provisions
contained in section 16, it applies-

(a) to every establishment which
is a factory engaged in any industry
specified in Schedule I and in which 7
[twenty] or more persons are employed,
and (b) to any other establishment
employing 6 [twenty] or more persons or
class of such establishments which the
Central Government may, by notification in
the Official Gazette, specify in this behalf:
Provided that the Central Government
may, after giving not less than two months'
notice of its intention so to do, by
notification in the Official Gazette, apply
the
provisions
of
this
Act
to
any
establishment employing such number of
persons less than 6 [twenty] as may be
specified in the notification.]"

28. It is also undisputed, 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] this Court held that in
taxing statutes, provision for concessional
rate of tax should be liberally construed. So
also in Bajaj 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 in Bajaj
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
1032 INDIAN LAW REPORTS ALLAHABAD SERIES
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 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."

30. Also, as discussed above, it is
seen, the computation of 'total employment'
provided under the Restrictive Notification
appears to run to the benefit of the assessee,
to exclude therefrom such workmen who
may have been engaged on casual basis and
with respect to whom the requirement to
make contributions to provident fund
would not apply. Computed on that basis,
there is no dispute 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
the Factories Act. It was found, registration
under the Factories Act, could not be
granted to that ''new unit', yet would be
entitled to claim exemption. To that extent
the requirement of registration under the
Factories Act, was directory. It was held:

"23. In Kuchchal Industries case
1990 UPTC 481, it was held by a Division
Bench of this Court that the requirement of
registration under the Factories Act cannot
always be complied with because a new
unit which has less than 10 employees does
not come within the definition of "factory"
in section 2(m) of the Factories Act and
hence to insist upon such registration
would deprive such small-units of the
benefit of exemption under section 4-A. The
special leave petition against the said
decision was dismissed by the Supreme
Court. The ratio of the said decision is
obviously
that
the
requirement
of
registration under the Factories Act is only
directory and not mandatory. The purpose
of requirement of registration is only to
ensure that there is a genuine new unit and
hence this condition need not be insisted
upon when by other materials it can be
demonstrated that a genuine new unit has
been
set
up.
The
requirement
of
registration under the Factories Act has,
hence, to be treated as directory and not
mandatory."
8 All. In Re Vs. Shri Chandan Kumar, Investigating Officer
1033

33. Again, in the context of the exemption
granted under Section 4-A, in M/S Atul Gases
Vs. Commissioner of Commercial Taxes, U.P.
Lucknow & Anr., 2018 UPTC 198, with
respect to requirement of ownership of land, it
was found, acquisition of land was not a
condition that may be inferred so long as its
ownership derived from open market was not
doubted. Accordingly, a co-ordinate bench of
this Court observed as under:

"20. The construction sought to be
culled out finds support from the exemption
notification also. The last notification dated
22.12.2000 eliminates the mode of acquisition
for the purposes of grant of exemption entirely.
This clearly reflects that mode of acquisition was
not of relevance, rather, it was possessing of land
which alone had relevance for the context.

21. Any other construction, as is
suggested by the learned Standing Counsel, may
be open to challenge as being arbitrary. If it is
allowed, a person who establishes new unit upon
land owned by him or upon land purchased from
the open market would not be disentitled to
exemption, even if all other conditions are met.
Such a classification would be impermissible in
law. Mode of acquisition of land is not shown to
have any relevance for the object sought to be
achieved by promulgating Section 4-A of the Act
or the exemption notification. Any distinction
drawn based upon mode of acquisition of land
would have no nexus with the object sought to be
achieved, and thus would be violative of Article
14 of the Constitution of India."

34. In the present case, it is found - though
the 'Explanation' appended to the Restrictive
Notification would apply to the reading of
Clause 2 of the Exemption Notification, at the
same time, it would remain a directory provision
of law. Where the figure of employment to be
computed under the Restrictive Notification
remained indeterminate, the same would be read
as 'total employment' granted otherwise.

35. As noted above, there is no dispute to
the fact, considering that figure, the percentage of
employment granted by the assessee to the
members of Scheduled Castes, Scheduled Tribes
and Other Backward Classes and minorities was
met, satisfactorily. Thus, substantial compliance
of the directory provision had been made by the
assessee.

36. Therefore, the proviso (ii) to Clause 2
of the Exemption Notification wholly applied to
the assessee's case. Consequently, the restrictive
Clause 2 of the Exemption Notification did not
apply to it. Still, consequentially, the assessee
was entitled to full exemption under the
Exemption Notification, as provided under
Annexure No. I thereto.

37. In view of the above, the question of
law is answered in the negative i.e., in favour of
the assessee and against the revenue.

38. The revision is allowed. No order as to
costs. Any amount of tax deposited by the
petitioner, may be refunded in accordance with
law, subject to exclusion of the rule of unjust
enrichment.
----------
(2022) 8 ILRA 1033
ORIGINAL JURISDICTION
CRIMINAL SIDE
DATED: ALLAHABAD 18.08.2022

BEFORE

THE HON'BLE SUNEET KUMAR, J.
THE HON'BLE SYED WAIZ MIAN, J.

Contempt Application (Criminal) No. 5 of
2022

In Re ...Applicant
Versus
Shri Chandan Kumar, Investigating Officer
 ...Opposite Party

Counsel for the Applicant: