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M/S United Stone Crushing Company v. Commissioner Of Trade Tax - SALES/TRADE TAX REVISION No. 382 of 1996  RD-AH 7619 (12 April 2006)
TRADE TAX REVISION NO. 382 OF 1996.
M/S United Stone Crushing Company, Jhansi. Applicant Versus
Commissioner of Trade Tax, U.P., Lucknow. Opp-party
Hon'ble Rajes Kumar, J.
Present revision under section 11 of the U.P. Trade Tax Act (hereinafter referred to as the "Act") is directed against the order passed by the Full Bench of the Tribunal; Lucknow dated 26th February, 1996.
The applicant is a partnership firm constituted with effect from 6.1.1988 consisting of five partners, namely, Sri Bhagwan Das pakhrani, Sri MunnuMal, Sri Manoj Pakhrani, Smt. Leelawati Devi and Smt. Sarla Devi and claimed exemption under section 4-A of the Act on the turnover of stone grits manufactured in a unit established at Main Road, Kanpur Road, Moth in District Jhansi.
A partnership firm in the name and style "United Stone Crushing Company" consisting of five partners, namely, Sri Hashmat Ram, Sri Bhoj Raj, Sri Parshu Ram, Sri Chander Lal and Sri Jagdish Kumar established a unit for the manufacturing of stone grits. The said unit was closed on 3rd November, 1987. Thereafter, the land of the unit was sold for Rs. 40,000/- by Sri Paras Ram S/0 Changa Mal the owner of the land in favour of Sri Bhagwan Das pakhrani and Sri Munnulal vide sale deed dated 23.12.1987 and the machineries of the unit were sold by all the five erstwhile partners in favour of all the five new partners for Rs. 3 lacs vide sale deed dated 3.12.1987. The copies of the two sale deeds are Annexures 2 and 3 of the counter affidavit. After the purchase of the land and the machineries, the five partners on 6.1.1988 have constituted a partnership firm. It was claimed that the production in the unit was started on 9.12.1986 and the old partnership firm filed an application under section 4-A of the Act on 15.2.1986. However, the filing of the application is in dispute inasmuch as it is said that there is no evidence in this regard. The new partnership firm constituted on 6.1.1988 filed an application for exemption on 6.1.1988. Another application under section 4-A (2-B) was filed on 6.12.1990, the date of the application appears to be 23.10.1990. The Divisional Level Committee vide order dated 2nd December, 1992 rejected the application for exemption. The applicant filed review application on 27.2.1994, which has also been rejected by the Divisional Level Committee, vide order-dated 22.8.1995. The applicant filed appeal against the said order before the Tribunal. Tribunal by the impugned order rejected the appeal. Tribunal has rejected the appeal mainly on the ground that after the closure of the business by the old firm, the new partnership established unit after acquiring the ownership of the assets with effect from 6.1.1988. Tribunal has not accepted the claim of the applicant that the old firm has filed the exemption application in absence of any evidence. Tribunal held that it is not the case of the re-constitution of the firm or succession of the unit by the new partnership firm. Tribunal further held that it is not the case where the assets and liability of the old firm has been taken over by the new partnership firm, while in the present case, land and machineries have been purchased by the registered deeds and thereafter the unit was operated. It has been held that the machineries installed in the unit were old and acquired for use in the earlier unit and, therefore, the partnership firm was not entitled for exemption.
Heard learned counsel for the parties.
Learned counsel for the applicant submitted that the old firm has been re-constituted and the unit remains the same, which was taken over by the new partnership firm. He submitted that the old firm has also moved an application on 15.12.1986 under section 4-A of the Act before General Manager, District Industries Center. The said application was not processed and remained pending and thereafter the unit was being run by the new partnership firm. According to him, the unit was the same, which was being established by the old partnership firm and has been operated by the new partnership firm. He submitted that under section 4-A of the Act, it is the unit, which is eligible for the exemption, thus, the exemption to the new unit should be allowed as new unit.
Learned Standing Counsel submitted that the present is not the case of reconstitution of the firm or the succession of the unit by the new partnership firm. He submitted that in the present case, the unit was completely closed on 3.11.1987 by the old partnership firm, thereafter the land for Rs.40,000/- was sold by one of the old partner in favour of two partners of the present firm and the machineries have been sold by the partners of old partnership firm to the partners of the new partnership firm and thereafter the unit was established by the new partners and operated. Thus, it is a case of fresh establishment of a unit by the partners of the present firm. He submitted that since the machineries installed in the unit were not new so far as the unit of the present partnership firm is concerned and have been acquired by the erstwhile partnership firm for the establishment of their unit, the unit is not entitled for exemption under section 4-A of the Act. He further submitted that the application moved under section 4-A (2-B) of the Act is also barred by limitation. He submitted that under section 4-A (2-B) of the Act, application has to be moved within 60 days from the date of succession or by 25th September, 1990 under the proviso. The date of succession, according to the applicant was 6.1.1988, therefore, the application ought to have been moved by 7th March, 1988 or by 25th September, 1990, but the application was moved on 23rd October, 1990, which was beyond time.
Having heard the learned counsel for the parties, I have perused the order of the Tribunal and the authorities below. I do not find any merit in the present revision.
Section 4-A (1), 4-A (2-B) and the Explanation (1) and (2) of Section 4-A of the Act, which defines new unit established before and after 31st March, 1990 read as follows:
"Section 4-A. Exemption from sales Tax of certain goods for specified period.
(1) Notwithstanding anything contained in this Act, where the State Governments is of the opinion that it is necessary so to do for increasing the production of any goods or for promoting the development of any industry in the State generally or in any districts or parts of districts in particular, it may on application or otherwise, in any particular case or generally, by notification, declare that the turnover of sales in respect of such goods by the manufacturer thereof shall, during such period not exceeding seven years from such date on or after the date of starting production as may be specified by the State Government in such notification which may be the date of the notification or a date prior or subsequent to the date of such notification and where no date is so specified from the date of first sale by such manufacturer, if such sale takes place within six months from the date of starting production and in any other case from the date following the expiration of six months from the date of starting production, and subject to such conditions as may be specified, be exempt from sales tax whether wholly or partly or be liable to tax at such reduced rate as it may fix.
(2-B) If there is discontinuation of business, within the meaning of sub-section (1) of section 18, of the manufacturer who was eligible for exemption under sub-section (1) whether such exemption was already granted or not, and if he is succeeded by another manufacturer, such successor manufacturer may, subject to the provisions of sub-section (3), apply to the Commissioner of Sales Tax within 60 days of such succession, for the grant, under this section, of exemption for the unexpired portion of the period for which exemption was or could be granted to the former manufacturers.
Provided that where the succession took place before April 25, 1990 such application may be made by December 31, 1991:
Provided further that the Commissioner of Sales Tax may, in his discretion and for adequate and sufficient reasons to be recorded in writing, entertain an application moved within six months of the date of the expiration of the period specified in this sub-section.
Explanation: For the purposes of this section:-
(d) using machinery, accessories or components not already used, or acquired for use, in any other factory or workshop in India.
(2) "New Unit" after March 31, 1990 means a factory or workshop set-up by a dealer after such date and satisfying the conditions laid down under this Act or Rules or Notifications made thereunder with regard to such factory or workshop and includes an industrial unit manufacturing the same goods at any other place in the State or an industrial unit manufacturing any other goods on or adjacent to the site of an existing factory or workshop, but does not include-
(a) Any factory or workshop using machinery, plant, equipment, apparatus or components already used or acquired for use in other factory or workshop in India other than boilers and generators and other than any machinery, plant, equipment, apparatus or components sold to it by any Government Company or any Corporation owned or controlled by the Central or State Government.
In my view, the present is not the case of reconstitution of the firm or succession of the unit by a new partnership firm. Admittedly, the unit was closed on 3.11.1987. The land was sold by one of the old partner in favour of two partners of the new firm for Rs. 40,000/- vide registered deed dated23.12.1987 and the machineries were sold by all the five old partners in favour of the five new partners for Rs. 3 lacs. If it would be a case of reconstitution or succession of a unit the entire unit as a whole with land, building and machineries would have been transferred by the old partnership firm to the new partnership firm, but this has not been done. Thus, it is a case where after purchasing the land and machineries by new partners separately, the new partnership firm was constituted on 6.1.1988 and a unit has been established, using those machineries, which had been acquired by the old partnership firm for their unit. Thus, in view of the Explanation to Section 4-A, the unit run by the new partnership firm cannot be treated as a new unit, Further, though the provision of Section 4-A (2-B) of the Act is not applicable to the present case, but even assuming that it was applicable, the application moved on 23.10.1990 was beyond time as per the applicant's own case, unit was acquired on 6.1.1988, thus the application was not within time as provided under Section 4-A of the Act.
For the reasons stated above, revision has no force and is, accordingly, dismissed.
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