AMD Industries Limited (Earlier known as M/s. Ashoka Metal Décor Pvt. Ltd.) Versus Commissioner of Trade Tax, Lucknow and Anr.
AMD Industries Limited (Earlier known as M/s. Ashoka Metal Décor Pvt. Ltd.) Versus Commissioner of Trade Tax, Lucknow and Anr.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 108 OF 2013
AMD Industries Limited
(Earlier known as M/s. Ashoka Metal
Décor Pvt. Ltd.) …Appellant(s)
Commissioner of Trade Tax,
Lucknow and Anr. …Respondent(s)
J U D G M E N T
M.R. SHAH, J.
1. I.A. No. 118667 of 2021 is allowed. The appellant is permitted to
change its name in the cause title from M/s. Ashoka Metal Décor Pvt.
Ltd. to AMD Industries Limited and the I.A. is accordingly disposed of.
2. Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the High Court of Judicature at Allahabad in Trade
Tax Revision No. 275 of 2004 by which the High Court has dismissed
the said revision application preferred by the appellant herein and has
confirmed the order passed by the learned Trade Tax Tribunal, Lucknow
Bench, Lucknow (hereinafter referred to as “Tribunal”) and the
Assessing Officer holding that for the goods manufactured, the appellant
is not entitled to the exemption under Section 4-A (5) of the U.P. Trade
Tax Act (hereinafter referred to as “Act”), the manufacturer – original
revisionist has preferred the present appeal.
3. The facts leading to the present appeal in nutshell are as under:-
3.1 The appellant herein established the unit for manufacture of “Spun
Line Crown Cork” in the year 1986, used as one of the packing materials
of the 'glass bottles'. The appellant submitted an application on
24.05.2000 for granting eligibility certificate under Section 4-A of the Act
before the Divisional Level Committee for manufacture of “double Lip
Dry Blend Crown” under the program of diversification.
3.2 On the basis of the joint spot inquiry consisting of two members
committee, the appellant was granted the eligibility certificate under
‘modernisation’ instead of eligibility certificate under ‘diversification’
3.3 At this stage, it is required to be noted that if the goods
manufactured would have been considered as a new product under the
diversification scheme, the appellant was entitled to the exemption under
Section 4-A(5) of the Act. The appellant was denied the exemption
under Section 4-A(5) of the Act. The appellant preferred an appeal
under Section 10 of the Act against the order dated 10.12.2003 passed
under Section 4-A of the Act before the Trade Tax Tribunal contending
inter alia that the process of manufacture and the machineries used for
both the products (existing and the new) are different.
3.4 It was also the case on behalf of the appellant that the existing
(old) product cannot be manufactured on the new installed machine and
vice-a-versa, the new product cannot be manufactured on the old
machines. It was also the case on behalf of the appellant that one of the
major raw materials for both the products are not the same and that
ultimate use of both the products are different.
3.5 It was submitted that under the term “modernization” only those
units fall, which by the modern technical produce the same goods and
the scheme of “modernization” do not apply on the units which produce
3.6 The appeal preferred by the appellant came to be dismissed. The
second appeal before the Tribunal also came to be dismissed. It was
specifically held that the nature of goods being produced under the
modern technology is not different than the goods produced by the unit
earlier, as both the produced material are used in packing the bottles of
cold drinks and therefore, as the goods manufactured are not different
but the same and used for the same purpose, the appeals came to be
dismissed. Against the order passed by the Tribunal, the revision
application before the High Court has been dismissed by the impugned
judgment and order, and, hence the present appeal.
4. Shri Atul Yeshwant Chitale, learned Senior Advocate appearing on
behalf of the appellant has submitted that the issue involved in the
present appeal is with respect to the interpretation of Explanation 5 to
Section 4-A(5) of the Act, which grants exemption from payment of trade
tax to units, which had undertaken ‘diversification’ in their units on or
4.1 It is submitted that the appellant is a manufacturer of crown corks
used for sealing glass bottles. Initially, it was producing “Spun Line
Crown Corks”. However, subsequently, it diversified the manufacturing
activity to manufacture “Double Lip Dry Blend Crowns” for which it
imported new plant and machinery and invested a fixed capital cost of
Rs. 4.5 crores.
4.2 It is submitted that the new product being manufactured by the
appellant is an eco-friendly product using PVC granules as raw
materials. The new product is different from the “Spun Line Crown
Corks” manufactured earlier.
4.3 It is submitted that the new product is an entirely different product
from what was manufactured earlier and the use of the product was also
different. It is submitted that the new product was an entirely different
product in commercial parlance. It is submitted that the mere fact that
both the products are commonly known as “Corks” would have no
relevance. It is submitted that similarly the fact that both the products
are used for sealing glass bottles would also not be a relevant criterion.
The test which was to be applied is whether the goods were different
from those manufactured earlier. It is submitted that the appellant was
entitled to claim exemption from trade tax since it has undertaken
diversification and the goods i.e., “Double Lip Dry Blend Crowns” now
being manufactured are of a nature different from those manufactured
earlier by the appellant being a different commercial commodity.
4.4 It is submitted that the Trade Tax Tribunal as well as the High
Court have misconstrued the Explanation 5 to Section 4-A(5) of the Act
and the notification dated 31.03.1995 on the basis of which the appellant
had sought eligibility certificate on the ground of diversification.
4.5 It is submitted that in order to be entitled to claim exemption from
trade tax on the ground of diversification, the goods had to be of a
nature different from those manufactured earlier. Ultimate use of the
goods is irrelevant for the consideration for exemption from trade tax.
Different goods can be used for same thing. However, this does not
mean that the nature of the goods is the same. It is submitted that even
mere fact that both the goods are commonly known as “Corks” is also
not a relevant factor for determining if the goods are different goods.
4.6 The learned senior counsel appearing on behalf of the appellant
has drawn our attention to the difference in earlier product and the
subsequent product. In support of his submission that the new product
is altogether a different product than that of the earlier product, he has
also drawn our attention to the difference in process of manufacturing of
both the products.
4.7 It is submitted that both, the Trade Tax Tribunal and the High
Court have erroneously introduced a new criterion that the use of both
products is the same. It is submitted that the criteria of use of goods is
neither provided in the section nor in the notification. Section 4-A(5) and
the notification only requires the nature of goods to be different. It is
submitted that as per the settled position of law, an exemption
notification is required to be given a literal meaning. Reliance is placed
on the decisions of this Court in the case of Hansraj Gordhandas Vs.
H.H. Dave, Assistant Collector of Central Excise Customs, Surat
and Ors., AIR 1970 SC 755; Parle Biscuits (P) Ltd. Vs. State of Bihar
and Ors., (2005) 9 SCC 669 and Assistant Commissioner (CT) LTU
and Anr. Vs. Amara Raja Batteries Limited, (2009) 8 SCC 209.
4.8 Making above submissions and relying upon the above decisions,
it is prayed to allow the present appeal.
5. Present appeal is vehemently opposed by Shri Bhakti Vardhan
Singh, learned counsel appearing on behalf of the respondents.
5.1 It is submitted that in the present case, the appellant established a
unit for manufacture of the “Spun Line Crown Corks” used as one of the
packing materials of the glass bottles, to be sold to the glass bottlers. It
is submitted that after ‘modernisation’, the appellant manufactured
“Corks” also used as one of the packing materials of the glass bottles.
5.2 It is submitted that under Section 4-A(5) of the Act and the
notification, exemption from trade tax shall be available to a unit, which
has undertaken “expansion, diversification or modernization” and
manufactures the different goods from those manufactured earlier by
such undertaking. It is submitted that therefore, the issue involved in the
present appeal is as to whether the investment of the appellant can be
said to be in the unit, having undergone “diversification” or is in a unit
having undergone “modernization” and whether the goods manufactured
by the appellant’s unit has undergone “diversification” or
5.3 It is submitted that therefore under Section 4-A(5) of the Act, the
requirement for availing the benefits under the head of “diversification”
therefore is that the “goods of different nature is required to be
produced”. It is submitted that the exemption notification issued under
Section 4-A also uses the terminology and resultantly the test for
diversification is the “production of a goods which is different in nature
than that was produced earlier”.
5.4 It is submitted that clause (5) of Section 4-A also makes the legal
position clear. It is submitted that the opening sentence of clause (5)
seeks to refer “expansion, diversification and modernization” and then
clarifying in one separate sub-clause the exercise of “expansion or
modernization” means the “increase in production” and thereafter in
another separate sub-clause clarifies “diversification” to mean that the
production of goods of a different kind, distinct and different in nature, a
new article as understood in commercial circle.
5.5 It is submitted that the test is how a good is understood in the
commercial parlance or commercial circle. It is submitted that the goods
manufactured by the appellant prior to the investment exercise was
subject to levy under the class of goods namely “Corks”. After the
investment exercise, the manufacturing of the “Double Lip Dry Blend
Crowns” is merely the enhanced quality and quantity of goods namely
“Corks” earlier produced before the investment exercise. It is submitted
that therefore, the investment was an exercise of “modernization and
expansion” only and the different goods were not manufactured, not
entitled to the exemption under Section 4-A(5) of the Act and the
notification issued under Section 4-A. In support of his above
submissions, learned counsel appearing on behalf of the respondents
has placed reliance upon the decision of this Court in the case of
Commissioner of Sales Tax, Orissa and Anr. Vs. Jagannath Cotton
Company and Anr., (1995) 5 SCC 527 (para 5).
5.6 It is further submitted that mere change in technology now the
goods being manufactured by the unit of the appellant cannot be
considered “different in nature” than the goods being manufactured
earlier by the unit because of the fact that the goods are being utilized
for packing the bottles. It is submitted that as per the settled position of
law, the exemption notifications are to be strictly construed.
5.7 Making above submissions and relying upon the findings recorded
by the High Court that the goods manufactured now by the appellant
cannot be said to be different than that of the goods manufactured
earlier and the goods manufactured earlier and the new are used as
“Corks”, it is prayed to dismiss the present appeal.
6. Heard the learned counsel for the respective parties at length.
7. The short question which is posed for consideration of this court
“Whether for the goods, manufactured by use of modern
technologies can be said to be “diversification”, and
manufacturing of the goods of a nature different from the
goods manufactured earlier entitle the appellant to claim
the exemption from trade tax as provided under Section
4-A (5) of the U.P. Trade Tax Act?
8. While considering the aforesaid issue, relevant provisions of
Section 4-A are required to be referred to, more particularly, Section 4-
A(2)(c), Section 4-A(5)(b)(i) & (ii) and Section 4-A(5)(c), which reads as
“Section 4-A - Exemption from trade tax in certain
(2) It shall be lawful for the State Government to specify in
the notification under sub-section (1) that the exemption
from, or reduction in the rate of tax, shall be admissible—
(c) in respect of those goods only which are manufactured
in a unit which has undertaken expansion, diversification
or modernisation on or after April 1, 1990, and which in
the case of diversification, are different from the
goods manufactured before such diversification, and
in the case of expansion or modernisation are additional
production as a result of such expansion or
(5) "Unit which has undertaken expansion,
diversification or modernisation" means an industrial
(b) whose first date of production of goods,--
(i) of a nature different from those manufactured
earlier by such undertaking, in case of units
undertaking diversification, and
(ii) manufactured in excess of base production in
such undertaking, in case of units undertaking
expansion or modernisation, falls at any time after
March 31, 1990;
(c) the production capacity whereof except as provided in
the proviso to sub-section (1) has increased by atleast
twenty-five percent as a result of expansion or
modernisation, or wherein goods of a nature different
from those manufactured earlier are manufactured
8.1 Thus, on a fair reading of the aforesaid provisions, it is clear that in
case of “diversification” the goods manufactured by diversification shall
be different from the goods manufactured before such diversification
8.2 In the case of “expansion or modernization”, the exemption shall
be available, if there is an additional production as a result of such
modernization or expansion. In the present case, we are concerned with
the case of “diversification”. Therefore, the goods manufactured after
diversification must be different goods from the goods manufactured
before such diversification. As per the settled position of law, in case of
an exemption notification/exemption provision, the same is required to
be construed literally and the person claiming the exemption must satisfy
all the conditions of exemption provision.
8.3 In the present case, the appellant was manufacturing / producing
“Spun Line Crown Cork” used for sealing the glass bottles. With the use
of modern technologies, now the appellant is manufacturing “Double Lip
Dry Blend Crowns”, which is also used for sealing the glass bottles. The
earlier product being manufactured by the appellant was used for sealing
glass bottles and subsequently the additional product produced with the
use of modern technology is also being used for the same purpose
namely, “sealing glass bottles”. Therefore, the same cannot be said to
be manufacturing of goods different from being manufactured before
such diversification. With the passage of time, due to advancement in
technology, if there is a replacement of the old machinery with the new
machinery for improvement in quality and quantity of a product, at the
most, it can be said to be expansion and/or modernization, but it cannot
be said to be “diversification”, which is “manufacturing of goods different
from the goods manufactured before such diversification”. In a case of
“diversification”, the effect has to be that the quality and quantity of the
product should have been improved and/or increased but if the ultimate
use is the same, the product manufactured on use of modern and/or
advanced technology cannot be said to be manufacturing the different
goods for claiming the exemption from payment of trade tax. The words
used in Section 4-A are very clear and unambiguous. As per the settled
proposition of law and as observed hereinabove, the Statute and more
particularly, the exemption provisions are to be read as they are and to
be construed literally and should be given a literal meaning. Giving the
literal meaning to the exemption provision namely, Section 4-A, it cannot
be said that the appellant is entitled to the exemption as claimed.
8.4 Considering the aforesaid facts and circumstances of the case and
as observed hereinabove, when the provisions of the Act unequivocally
provides that the “diversification” can be considered only in a case where
“goods of different nature” are produced, and only then the exemption
shall be available. The goods manufactured on “diversification” must be
a “different”, “distinct” and a “separate” good in nature. In the present
case, the goods manufactured on use of advance and/or modern
technology, cannot be said to be a different commercial activity at all.
The High Court has not committed any error in refusing to grant
exemption to the appellant. We are in complete agreement with the view
taken by the High Court.
9. In view of the above and for the reasons stated above, present
appeal fails and the same deserves to be dismissed and is accordingly
dismissed. No costs.
NEW DELHI; ………………………………….J.
JANUARY 09, 2023. [KRISHNA MURARI]