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1997 Supreme(SC) 985
SUPREME COURT OF INDIA
S P Bharucha, V N Khare
KISAN SAHKARI CHINI MILLS LTD, APPELLANT.
VERSUS
STATE OF U. P. AND OTHERS, RESPONDENTS.
Civil Appeal No. 3813 of 1989, decided on July 23, 1997.
Headnote:
Uttar Pradesh Sales Tax Act – Section 4-A - Liable to tax - Promoting development of industry - Section 4-A of the U.P. Sales Tax Act deals with exemption from sales tax of certain goods for a specified period - It states that where State Government is of opinion that it is necessary so to do for increasing production of any goods or of promoting development of industry in State or any part thereof, it may by notification declare that turnover of sales in respect of such goods by manufacturer thereof shall be exempted from sales tax or be liable to tax at such reduced rate as it may fix -This is subject to certain conditions, inter alia, regarding period for which exemption shall operate - Notifications were issued in pursuance of power given to State Government by Section 4-A - Notifications specified areas within which exemption was to operate in respect of any goods manufactured in an industrial unit therein and exemption was on turnover of sales of such goods - Appellants applied for exemption under first of these notifications and stated therein figures of actual production up to date of inspection of their unit of sugar, molasses, bagasse and press mud - They were given exemption in respect of manufacture of sugar, but refused it on production of molasses, bagasse and press mud – Held, appellants filed a writ petition before High Court and by order under appeal, writ petition was dismissed - Tenor of judgment is that molasses, bagasse and press mud are not items in manufacture of which appellant was principally engaged and that, therefore, provisions of Section 4-A would not apply - As Section 4-A itself makes clear, exemption thereunder is to be granted when State Government is of opinion that it is necessary so to do for production of any goods or promotion and development of industry in State - Exemption applies to the turnover of sales in respect of such goods by manufacturer thereof - It is evident therefore that exemption is given to goods that are principal object of the manufacture and not to such goods as may be incidental thereto - That molasses, bagasse and press mud are incidental to principal manufacture of sugar is fairly not disputed - For this reason, court are of view that High Court was not in error - Appeal is dismissed.
ORDER
1. Section 4-A of the U.P. Sales Tax Act deals with exemption from sales tax of certain goods for a specified period. It states that where the State Government is of the opinion that it is necessary so to do for increasing the production of any goods or of promoting the development of industry in the State or any part thereof, it may by notification declare that the turnover of sales in respect of such goods by the manufacturer thereof shall be exempted from sales tax or be liable to tax at such reduced rate as it may fix. This is subject to certain conditions, inter alia, regarding the period for which the exemption shall operate. Notifications were issued in pursuance of the power given to the State Government by Section 4-A. The notifications specified the areas within which the exemption was to operate "in respect of any goods manufactured in an industrial unit" therein and the exemption was "on the turnover of sales of such goods... ".
2. The appellants applied for exemption under the first of these notifications and stated therein the figures of actual production up to the date of inspection of their unit of sugar, molasses, bagasse and pressmud. They were given exemption in respect of the manufacture of sugar, but refused it on the production of molasses, bagasse and pressmud. The appellants filed a writ petition before the High Court of Allahabad and, by the order under appeal, the writ petition was dismissed. The tenor of the judgment is that molasses, bagasse and pressmud are not items in the manufacture of which the appellant was principally engaged and that, therefore, the provisions of Section 4-A would not apply.
3. As Section 4-A itself makes clear, the exemption thereunder is to be granted when the State Government is of the opinion that it is necessary so to do for the production of any goods or the promotion and development of industry in the State. The exemption applies to the turnover of sales "in respect of such goods by the manufacturer thereof. It is evident therefore that the exemption is given to the goods that are the principal object of the manufacture and not to such goods as may be incidental thereto. That molasses, bagasse and pressmud are incidental to the principal manufacture of sugar is, fairly, not disputed. For this reason, we are of the view that the High Court was not in error.
4. The appeal is dismissed.
5. On 13-9-1989, when special leave was granted, this Court ordered that assessment proceedings could go on but no order for recovery should be issued without the order of this Court. It appears that a sum of approximately Rs 7,70,000 has been found to be payable by the appellants for the Assessment Years 1986-1987 to 1989-1990. On the application of learned counsel for the appellants, we direct that no coercive steps for recovery of the said amount shall be taken for a period of three months from today to enable the appellants to make payment thereof. No interest shall be payable upon this amount. a 6. No order as to costs.
