Case: Commnr. Of Sales Tax Vs. Industrial Coal Enterprises

3. The facts of the case are as followsrespondent had a manufacturing unit in Moradabad registered both under the provisions of the Act and the Central Sales Tax Act, 1956. It was also registered with the Directorate of Industries as small scale unit for the manufacture ofThe unit was established in the beginning in a rented premises for which a lease deed for seven years was registered with effect from 1.1.1985. It was granted a term loan of Rs. 30,000/from the State Bank of Patiala, Moradabad. The first date of purchase of raw material was 9.2.1985 and the unit started production on 15.2.1985 with the help of a new generator. The first date of sale of the finished product was 1.10.1985. It is not in dispute that the first date of production as defined in the Rules under the Act was 9.8.1985 i.e. after six months from the date of purchase of raw material. Thus the unit was admittedly entitled to exemption from sales tax w.e.f. 9.8.1985 as it fulfilled all the prescribed conditions. The unit applied for exemption under the Act on 20.12.1985 since its capital investment was much below Rs. 3 lakhs. Later on, the respondent changed the place of manufacturing from the rented premises to a new site purchased and owned by it. The unit remained closed from 23.7.1986 to 31.7.1986 for the purpose of shifting machines to the new premises. The production started in the new place from 1.8.1986.As a result of purchase of new site and construction of own building, the capital investment of the unit increased to Rs.The unit applied for registration under the Factories Act, 1948 which was granted w.e.f. 11.8.1989. The application for exemption from sales tax filed by the unit on 20.12.1985 was considered by the Divisional Level Committee, Moradabad on 30.1.1990 and the Joint Director of Industries, Moradabad issued sales tax exemption certificate vide his letter dated 10.4.1990. Such exemption was granted from 9.8.1985 to 22.7.1986 the date till which the capital investment of the unit was below Rs. 3 lakhs. The authorities took the view that the capital investment of the unit having increased to an amount exceeding Rs. 3 lakhs, the registration of the unit under the Factories Act was necessary for the purpose of exemption and as such registration was effective only from 11.8.1989 the unit was not entitled to exemption between the period 23.7.1986 to 10.8.1989, but the total period of four years for which the unit would be entitled to exemption under the relevant Notification having expired on 8.8.1989, the unit was not entitled to any exemption beyond 22.7.1986.Aggrieved by the said order, the respondent filed a review application dated 16.4.1990 which was rejected by order dated 7.7.1990. The said order was challenged by the respondent in a writ petition before the High Court of Judicature at Allahabad. The High Court by its judgment dated 25.11.1992 allowed the writ petition and quashed the impugned order. The concerned authority was directed to modify the eligibility certificate issued to the respondent as one for a period of four years from 9.8.1985. The reasoning of the High Court is that the relevant date for fulfilling the conditions prescribed for grant of exemption is the date from which the unit became eligible in the first instance for such exemption and in this case admittedly it was 9.8.1985. The High Court held that in this case the investment having increased to an amount more than Rs. 3 lakhs merely because of the shifting of the unit from one place to another, it would not disentitle the respondent to have the benefit of exemption continuously for a period of four years from 9.8.1985. The High Court arrived at that conclusion by construing the provisions of Sectionof the Act quoted earlier. The Commissioner of Sales Tax has preferred this appeal by Special Leave.

Court's reasoning:
We are unable to accept this contention. It is pointed out by the court of Appeal in England in Attorney General v. Clarkson, 1900(1) QB 156 that subsequent Legislation may be looked at in order to see the proper construction to be put upon an earlier Act where that earlier Act is ambiguous. Lindley M.R. said, "Our duty is to interpret the meaning of the Legislature, and if the Legislature in one Act have used language which is admittedly ambiguous, and in a subsequent Act have used language which proceeds upon the hypothesis that a particular interpretation is to be placed upon the earlier Act, I think the judges have no choice but to read the two Acts together, and say that the Legislature have acted as their own interpreters of the earlier Act." There is no such situation here. The subsequent Act relied on by learned counsel is one of amendment and it may be remedial. Moreover, in this case, there is no ambiguity in the provisions of the Act as it stood at the relevant time warranting an interpretation by the Legislature. Hence the subsequent Legislation introduced in 1991 with effect from 13.9.1985 will not help the appellant.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 (supra) 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 casier 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 was any mala fide 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 fide of the respondent have never been questioned by the appellant.