Judgement

HANSARIA, J :- These appeals by special leave raise the question of exemption from octroi, inter alia, on initially imported plant and machinery, pursuant to Resolution No. 63 of Chinchwad New Township Municipal Council adopted in its meeting held on 4-7-1970. That Resolution reading as below permits exemption :-

"(i) in the first two years of new Industrial undertaking, initially imported plant and machinery (including spare and substitute parts) required in the beginning and building materials (i. e.) Iron, Steel, Cement or bricks are necessary for erection of the premises.

Clarification : New Industry means an Industry which is :

(i) Not formed by the splitting up or the reconstruction of a business already in existence;

(ii) Not formed by transfer to a new business of a building, machinery or plant previously used for any purpose and

(iii) Which begins or has begun to manufacture or produce goods within the Municipal area for the first time on or after the date on which the Council levies the tax under these rules or at any time within a period of 5 years immediately proceeding such levy."

The respondents (though two in number, we would refer to the facts of M/s. Century Enka Ltd.) claim exemption under the aforeasid resolution, which having been denied, the Bombay High Court was approached, by filing writ petitions seeking direction on the Municipal Council to grant exemption, as visualised by the resolution in question. The High Court granted the prayer. Hence these appeals.

2. The only ground on which exemption was sought to be denied to the respondents in the proceeding before the High Court was that the importation of plant and machinery for setting up of the units being by existing undertakings, the same was not meant for "new industrial undertaking". This stand was taken because of Clarification (i) appended to the resolution, according to which, an industry would not be a "new industry" which is formed by splitting up or re-construction of a business already in existence. A perusal of the impugned judgment of the High Court makes this stand on behalf of the appellants abundantly clear inasmuch as the counsel appearing for the appellants in the High Court, Shri C. J. Sawant, had clearly stated that apart from the aforesaid ground,"other contingencies set out in the explanation (sic clarification) are not applicable in case of unit No.2 (meaning the second unit set up by the respondent-company in whose name new industrial licence had been obtained and plant and machinery had been imported (and in case it is found that unit No. 2 is not formed by reconstruction of business already in existence, then the petitioner company would be entitled to exemption in respect of payment of octrio duty."

3. We have highlighted the aforesaid aspect because the learned counsel for the appellant sought to contend before us that Clause (iii) of the Clarification is also not satisfied, because of which exemption cannot be claimed. We did not premit this point to be raised for the first time before us - the same being not a pure question of law but one basically founded on fact of manufacturing for the first time.

4. We would, therefore, confine our consideration to the question as to whether respondents were entitled to exemption or not because of what has been stated in Clause (i) of the Clarification. In so far as this aspect is concerned, it is brought to our notice by learned counsel for the respondents that as to when an industrial undertaking can be said to have been formed by reconstruction splitting up, has been a subject matter of consideration by this Court itself in a number of decisions. The first in point of time is by a three Judge Bench in Textile Machinery Corporation Ltd. v. Comm. of Income-tax, (1977) 2 SCR 762 : (AIR 1977 SC 1134). There, the Court was seized with the question whether exemption from income-tax granted by Section 15-C of the Indian Income-tax Act, 1922, was available to the appellant. The se