Summary
A manufacturer of 'Spun Line Crown Corks' for sealing glass bottles invested in imported machinery to make 'Double Lip Dry Blend Crowns'. It claimed exemption from U.P. trade tax under Section 4-A for diversification. The authorities treated the change as modernisation, and the Tribunal and High Court denied the exemption. The Supreme Court dismissed the appeal. Exemption provisions are read literally, and diversification requires goods of a nature different from those made earlier, a distinct commercial commodity. Both products serve the same purpose of sealing glass bottles. Replacing old machinery with new to improve quality or output is at most modernisation or expansion.
Issues
- Whether production of 'Double Lip Dry Blend Crowns' with new technology by a unit earlier manufacturing 'Spun Line Crown Corks', both used to seal glass bottles, amounts to diversification entitling exemption under Section 4-A of the U.P. Trade Tax Act.
Provisions considered
- Section 4-A(2)(c) and 4-A(5)(b) and (c), Uttar Pradesh Trade Tax ActExemption for diversification requires goods of a nature different from those manufactured earlier, while expansion or modernisation qualifies only for additional production; the provision is construed literally and every condition must be satisfied. (¶¶ 8, 8.1, 8.2, 8.4)
Held
- As the earlier and new products are both used for sealing glass bottles, the new product manufactured with modern technology is not a different good, and replacing old machinery for better quality or quantity is at most expansion or modernisation, not diversification. (¶ 8.3)
- Since diversification requires a different, distinct and separate commodity and the exemption provision must be read literally, the High Court rightly refused the exemption. (¶¶ 8.2, 8.3, 8.4)
Result
Civil Appeal No. 108 of 2013 against the Allahabad High Court (Lucknow Bench) judgment dated 16.09.2008 in Trade Tax Revision No. 275 of 2004 dismissed; the appellant's change of name to AMD Industries Limited allowed; no costs.