ivil Appeal No 830 of 1988
275 From the Judgment and Order Dated 7121987 of the Allahabad High Court in Civil Misc
No Nil 1987
AK Ganguli and Sunil Kumar Jain for the Appellant
Gopal Subramanium and Ashok K Srivastava for the Re spondents
The Judgment of the Court was delivered by RANGANATHAN J
The petitioner is a concern engaged in the business of manufacture of electric motors pump sets and their parts
It applied for exemption from sales tax in respect of the goods manufactured by it in terms of a noti fication issued by the State Government on 3091982 under section 4A of the Uttar Pradesh Sales Tax Act 1948 herein after called the Act 
This application was rejected by a Division Level Committee by an order dated 92
1987 and a further review application was also dismissed on 27101987
Thereupon the appellant filed a writ petition which was also rejected by the High Court by a short order dated 7121987
Aggrieved by this denial of the exemption which it claims it is entitled to the appellant has preferred this appeal
Section 4A of the Act reads as under 4 A Exemption from sales tax of certain goods for specified period 1 Notwithstanding anything co tained in section 3 or section 3 A where the State Government is of the opinion that it is necessary so to do for increasing the produc tion of any goods or for promoting the devel opment of in any districts or parts of dis tricts in particular it may on application or otherwise by notification declare that the turnover of sales in respect of such goods by the manufacturer thereof shall during such period not exceeding seven years from the date of starting production by such manufacturer and subject to such conditions as may be specified be exempt from sales tax or be liable to tax at such reduced rate as it may fix
2It shall be lawful for the State Government to specify in the notification under sub section 1 that the 276 exemption from or reduction in the rate of tax shall be admissible a generally in respect of all such goods manufactured subsequent to the date of such notification or b in respect of such of those goods only as are manufactured in a new unit the date of starting production whereof fails on or after the first day of October 1982 or c only if the manufacturer had not discon tinued production of such goods for a period exceeding six months at a stretch in any assessment year
Explanation For the purposes of this section i new unit  means a factory or workshop using machinery accessories or components not already used or acquired for use in any other factory or workshop in India but does not include any factory or workshop established on the site of an existing factory or workshop manufacturing the same goods or any addition to or extension of an existing factory or workshop and ii date of starting production  means the date on which any raw material required for use in the manufacture or packing of the specified goods is purchased for the first time or the date of installation of power connection where needed whichever is later
In pursuance of the above section the State Government published a scheme for the grant of exemption from sales tax to certain industrial units in the State
The scheme ac cording to its introduction had been introduced in order to encourage capital investment and establishment of new industrial units in the State
It granted exemption to the industrial units established in certain areas of the State during the period from 1101982 to 3131985 and producing certain categories of goods
It is not necessary to refer in detail to the provisions of the scheme or other conditions of exemption
It is sufficient to say that this exemption was conferred only on units established on or after 1101982 but before 3131985
The scheme also makes it clear that though it referred to units established this really is a reference to the date of commencement of produc tion by the industrial 277 unit
This is also in accord with the terms of the statute and in particular sub section 2 of 4A
The appellant s claim to exemption has been rejected on a very short ground namely that it had not commenced production after 1101982
In the application filed by the appellant for exemption the appellant had mentioned that the date of actual com mencement of use of electricity for production was the 4th of December 1982 which was also the actual date of com mencement of production
The appellant also claimed that upto 3091984 it had produced and sold electric motor parts for Rs270590
The General Managers of the District Indus trial Centers at Deoband and Saharanpur and the Assistant Engineer of the Industrial State of Roorkee endorsed the following recommendation on the application   
I have checked with the use of power and other sources that the unit started actual production from 4121982 and the production made is self manufactured and is within the prescribed production capacity
1 am fully satisfied with the facts produced by the Unit and I recommend that this unit is eligible to get exemption from sales taxinter state sales tax  with effect from date of production commencement for 5 6 7 years under section 4 A of the Sales Tax Act vide GO No 8244 Bha18 11 231ABha39 dated 30982
 The difficulty in the appellant s way appears to have been created by a certificate which had been produced by it before the Division Level Committee along with its applica tion
This purported to be a certificate by a firm known as Krishna Trading Co in which the proprietor of the appel lant was a partner
This certificate dated 412
1981 reads as follows It is certified that the Trial Production of Kupla Bhatti was made today is 4121981 expenses for which were incurred by our compa ny by purchasing raw material for its own ex penses under the agreement dated 1551981 entered into
Ms Janta Machine Tools was assured by the company to supply very soon all the remaining machines and installing them and making its trial production at its own ex penses
 The Division Level Committee while rejecting the applica tion 278 dated 921987 essentially gave only one reason for the rejection
It was stated that the date of the alleged trial production was really the date of commencement of production and this fell prior to 1101982
As stated earlier the assessee preferred a review appli cation pointing out that the trial production could not be treated as commencement of actual production
This review application was disposed of on 27101987
In its order the Committee observed On joint inquiry into the reality of your unit being conducted by the General Manager and sales tax officer of Deoband Industries Department they have reported that Shri Suresh Datt Sharma the proprietor of Ms Janta Ma chine Tools is partner of one third share in Ms Krishna Trading Company also
No purchase of raw material was declared by Ms Krishna Trading Company in the year 198 1 82 and therefore the certificate of trial production issued by Ms Krishna Trading Company on 412
1981 is baseless and untrue
In joint inquiry report it is also clear that your unit has purchased from Ms Krishna Trading Company Kupla etc
of Rs69000 on 21581 whereas Ms Krishna Trading Company have declared sale of Rs 13035 only in 198 1 82 as per file of the Sales Tax Department
In the joint inquiry Report it is also mentioned that your unit got electricity on 21111982 and on inquiry the unit informed that the trial production was done with the help of a generator
Your unit could not give any certificate for purchasing or hiring a generator and now it has declared to have hired the generator for 4 5 hours from Ms Mitra Industries Deoband
In the inquiry report it is also made clear that a unit cannot use a generator of other unit without prior permission of the electricity depart ment
xx xx xx On the above discussion it is concluded that the unit in question wants to get illegal benefit of exemption from sales tax by produc ing wrong facts
The trial production done by Ms Krishna Trading Company on 412
1981 is proved to have been done by the unit in ques tion itself and not by them
Thus the unit was established before l 1082
The unit established before 11082 is therefore not entitled to exemption from sales tax
 279 In our opinion the rejection of the assessee s applica tion proceeds on a total misconception of the facts
The conclusion of the Division Level Committee is that produc tion was commenced by the appellant on 41281 but this conclusion is based on no evidence
It is true that the appellant produced a certificate showing that some produc tion was done on 412
1981 but the appellant s case was that this was merely a trial production
It is not quite clear whether the District Level Committee completely doubts any trial production having taken place at all or whether its conclusion is that there was a trial production on 4121981
If its conclusion is the former one it does not affect the appellant s claim
Assuming that the Committee has come to the conclusion that the production on 41281 was conducted not by Ms Krishna Trading Company but by the appellant itself the fact still remains that what had happened on that date was only trial production
The mere fact that a certificate by Ms Krishna Trading is disbe lieved cannot lead to the conclusion that the assessee had produced goods on 41281
If one is to go by the definition contained in the explanation to section 4A for determining when the production started one has to concentrate on the date of purchase of raw materials or on the date on which the electricity was brought into use for commercial produc tion
The appellant s claim that it had manufactured goods by 3091984 is not denied
Production had therefore commenced before 313
There is no suggestion by the Department or the Committee and there is no material to show that the appellant had purchased raw materials suffi cient to carry out normal commercial production at any time prior to 11082
It is an admitted fact that the assessee was able to obtain electricity for use for commercial pro duction only in November 1982
This lends support to the appellant s contention that the production could not have been effected by the assessee prior to that date
In fact this is a point on which emphasis is laid in the order dated 27101987
That being so there is no iota of evidence or material on the basis of which the appellant s claim that it had started production in December 1982 could have been rejected
On the other hand the recommendation and endorse ment of the General Manager District Industries Centre which has been extracted earlier also supports the appel lant s contention that it had started production on 4121982 and this report was given after verifying the actual position on the spot
For the reasons above mentioned we are of the opinion that the denial of the exemption to the appellant under the notification dated 30982 was not justified
The rejection of the appellant s application in this regard is quashed and the appellant is declared entitled to the 280 exemption in terms of the notification
We should not be understood however to have expressed any opinion as to the amount of exemption available to the appellant under the notification
That will be a matter for consideration of the authorities in respect of each of the years concerned in respect of which the claim is made for exemption
The appeal stands allowed but in the circumstances we make no order as to costs
GN Appeal allowed


Summary:
Customs Notification No 20079 dated 2891979 exempts components required for the manufacture of heavy commercial motor vehicles or of tractors from customs duty in excess of 25 per cent ad valorem and whole of the additional duty leviable thereon
Notification No 179 80 dated 491980 exempts components required for the purpose of initial setting up or for the assembly or manufacture of tractors an article falling under Heading No 87011 of the First Schedule of the Act from so much of the customs duty as is in excess of the rate applicable to the said article when imported complete
The appellant company imported three consignments of components of agricultural tractors
The Directorate General of Technical Development issued certificate in terms of notification No 17980 stating that the appellant company was holding a valid industrial licence for the manufacture of agricultural tractors and have an approved manufacturing programme
The appellant cleared the goods availing itself of the said concession
Having realised later that it was entitled to the larger concession available under Notifica tion No 200 of 1979 it filed three applications in respect of the said consignments claiming refund to the extent of the difference between the entitlements to concession under the two notifications
The DGTD issued certificates in terms of notification No 200 of 1979 in its favour
The Assistant Collector of Customs rejected assessee s prayer on the ground that it had failed to produce end use certificate
Its appeals before the Collector of Customs Appeals failed
The Customs Excise and Gold Control Appellate Tribunal dismissed the appeal on the ground that the appellant did not produce the approved manufacturing programme at the time of clearance of the goods as required under Notification No 200 of 1979
282 In these appeals it was contended for the respondents that since the amended certificates were not produced at the time of clearance but only much later the assessee was not entitled to the concession under Notification No 200 of 1979
Allowing the appeals HELD 1
The assessee is entitled to the concession available under Notification No 200 of 1979
287B C 21 The grant of concession depends on production of evidence by the importer to the Assistant Collector of Customs at the time of clearance of the components or the goods that they have a programme duly approved by the Minis try of Industry and the Industrial Adviser or Additional Industrial Adviser of the Directorate General of Technical Development of the Ministry of Industry for the manufacture of such motor vehicles or of tractors and not on the refer ence in the certificates to the notifications that can be availed of by the assessee
286C D 287B 22 In the instant case the assessee had produced unequivocal evidence in the form of original set of certifi cates from DGTD at the time of clearance of the goods of the fact that the appellant held a valid industrial licence for the manufacture of agricultural tractors and that it also had an approved manufacturing programme
That was sufficient compliance with the terms of the notification in question
The omission of the assessee to request the DGTD to refer to the assessee s entitlement under the 1979 notification or the omission of the DGTD to refer to the assessee s entitle ment under the 1979 notification cannot take away the asses see s rights
The order of the Tribunal is therefore set aside
286F H 287A