Case: Commissioner Of Trade Tax, U.P Vs. Varun Beverages Ltd

he respondent is engaged in manufacturing and sale of soft drink and beverages. The assessee - respondent applied for the grant of eligibility certificate under Section 4A of the U.P. Trade Tax Act read with notification No. 640 dated 21.02.1997. Pursuant to the aforesaid request, the respondent/assessee was granted an eligibility certificate on 26.5.2000 by the Divisional Level Committee constituted under section 4A of the Act. The exemptions were granted to the assessee for a period of ten years running from 15.4.1999 to 14.4.2009 or to the extent of 200% of the fixed capital investment of Rs.53,79,49,612/-, whichever was earlier. The exemption certificate granted on 26.5.2000 stipulates that it was granted for the goods, which were manufactured by the assessee as mentioned in the eligibility certificate. Towards the end of the eligibility certificate the goods manufactures by the respondent are described, which are as under: -1. Carbonate Soft Drinks/Aerated Drinks, including syrups and beverages packed in a sealed container.2. Sealed and no unsealed soft drinks packed in sealed glass containers carbonated drinks and aerated water including sweated and non sweated drinks, mineral water packed in pet bottles and pet pre forms to be used in fillings of beverages and liquids articles.5. Subsequently the assessee applied for a review of the eligibility certificate and sought extension of the period from ten years to fifteen years. In the said review application, the assessee also sought exemptions for fixed capital investment made by it in glass bottles and crates claiming that these items were essential for the manufacture of soft drinks and for running a beverage unit. In that application it was also stated that while computing the fixed capital investment, an amount equal to Rs. 5,73,62,277/- invested by the assessee towards purchases of bottles and crates should also be included in the fixed capital investment.6. The Divisional Level Committee vide its order dated 10.04.2001 allowed the review application and ordered that the aforesaid amount of Rs. 5,73,62,277/- be included while computing the fixed capital investment of the assessee. By the aforesaid order dated 10.04.2001 the eligibility certificate was also granted to the assessee for a period of 15 years.7. Being aggrieved by the aforesaid order dated 10.04.2001 the appellant filed an appeal before the UP Tribunal, Trade, Tax, Lucknow. The Tribunal by its order dated 14.05.2002 allowed the said appeal filed by the appellant holding that the bottles and crates are neither directly nor indirectly used in the manufacture of beverages and therefore the same cannot be treated as "Apparatus" as used in the said entry in explanation (4) to Section 4-A of the Act.8. Being aggrieved by the said order passed by the UP Tribunal, Trade, Tax, Lucknow, the respondent assessee filed a revision petition before the Allahabad High Court which was registered as Trade Tax Revision No. 337 of 2002. The High Court by its order dated 19.01.2010 allowed the said revision petition holding that for the manufacture of soft drink, the bottles and crates are essential apparatus especially in a captive industry where the liquid which is prepared and collected by way of a continuous process in the bottles and thereafter kept it in crates and therefore both bottles and crates are to be accepted as "apparatus" within the meaning of Explanation (4) (b) (i) to section 4-A of the U.P. Trade Tax Act.9. The question of law that was framed by the High Court was answered in favour of the assessee holding that such bottles and crates are to be treated as fixed capital investment. It was also held that the period of exemption was for 15 years.10. The aforesaid order passed by the High Court was challenged by the appellant by filing the present appeal in which we heard learned counsel appearing for the parties. By way of clarification it has to be stated at this stage that in the present appeal what is specifically challenged is first part of the order with regard to bottles and crates forming part of fixed capital investment and not that part of the order granting exemption for a period of 15 years. The appeal, therefore, is restricted to the aforesaid limited issue.

Court's reasoning:
is quite necessary to give full and complete effect to the provision in a purposive manner so as to advance the objective of the provision. So in the instant case all those apparatus, equipments and components which are necessary for running of the factory would also be considered as investment and would therefore be part of the definition of fixed capitalrespondents are engaged in the manufacture of soft drink and beverages which are required to be bottled and thereafter sealed, which are essential part of running of the factory and therefore the same will have to be included within the aforesaid extended meaning of the word `investment as appearing from the words `fixed capitalare concerned, they are essential part of components and equipments necessary for the running of the factory and therefore such value of the investment would form part of the fixed capital investment and would be entitled to exemption as provided for. But so far crates are concerned they are used by the respondent only for the purpose of marketing. Use of crates is necessary for taking out the bottled beverages out of the factory and while doing the marketing of the sealed bottled beverages. The aforesaid view taken by us also receives support from the contents of the eligibility certificate given by the appellant and therefore crates have no user so far as running of the factory of the respondent. Therefore, the value of crates in our considered opinion cannot be deemed to be investment for the purpose of including it within the meaning of expression "Fixed Capital Investment" as per sub-section (4) of Section 4-A of the Act.