Sudhir Agarwal, J.
1. This writ petition under Article 226 of Constitution of India has been filed by M/s Universal Dairy Product Pvt. Ltd. praying for a writ of certiorari for quashing order dated 22.02.2007 passed by Commissioner Trade Tax, U.P. (hereinafter referred to as "CTT, U.P.") rejecting petitioner's application to grant moratorium for the unexpired portion of the period of exemption granted to original manufacturer from 23.12.2002 to 30.10.2006. It has also challenged consequential notice dated 14.03.2007 issued by Deputy Commissioner (Assessment), Trade Tax, Agra (hereinafter referred to as "DC(A), TT") demanding payment of interest on the amount of tax for which moratorium was claimed alongwith interest.
2. One M/s Devyani Foods Ltd., Agra (hereinafter referred to as "DFL, Agra") was granted eligibility certificate for exemption under Section 5(4-A) of U.P. Trade Tax Act, 1948 (hereinafter referred to as "Act, 1948") vide Notification dated 31.03.1995 for a period from 31.10.1996 to 30.10.2006 on a fixed capital investment of Rs. 46,61,085/- subject to monetary limit of Rs. 93,22,170/-.
3. A decision of Divisional Level Committee (hereinafter referred to as "DLC") was communicated to DFL, Agra by Additional Director, Industries, Agra vide letter dated 16.04.2002. DFL, Agra applied for deferment under Section 8(2-A) of Act, 1948 read with Rule 43 of Trade Tax Rules, 1948 (hereinafter referred to as "Rules, 1948") in view of exemption granted under Section 4-A vide letters dated 14.01.1997 and 26.04.2002.
4. No decision was communicated by Commissioner and said application was pending. In the meantime, M/s DFL, Agra sold entire unit to petitioner vide sale agreement dated 23.12.2002. Petitioner as a successor manufacturer and transferree of ice-cream unit, moved application on 24.01.2003 to Additional Director, Industries, Agra with a request to issue fresh eligibility certificate incorporating petitioner's name therein so as to enable it to avail benefit of exemption/deferment for unexpired period of exemption and amount. Petitioner also requested to be permitted to honour payment obligation of deferred tax already availed by M/s DFL, Agra. It gave an undertaking for payment of deferred tax on due date and also to execute document as may be endorsed.
5. Petitioner supported its claim by referring to an earlier decision taken by Government vide letter dated 11.01.2001 whereby Managing Director, PICUP was required to transfer deferred facility already availed by M/s U.P. Asbestos Ltd. to M/s U.P. Cements Ltd., Lucknow to the successor manufacturer for the unexpired period and it was also directed that the Successor Manufacturer will pay deferred amount from due dates as per Rules. Applications of original manufacturer dated 14.01.1997 and 26.04.2002 as also that of petitioner dated 24.01.2003 were rejected by CTT, U.P. vide order dated 17.06.2004.
6. Petitioner also applied for eligibility certificate for remaining portion of period of exemption granted to original manufacturer under Section 4-A(2-B) to Divisional Level Committee, Agra vide application dated 20.02.2003.
7. DLC granted eligibility certificate under Section 4-A(2-B) for unexpired period of exemption from 23.12.2004 to 30.10.2006, subject to monetary limit of Rs. 35,21,902/-. It was communicated by Additional Director, Industries vide letter dated 22.01.2005.
8. Thereafter, petitioner applied for grant of deferment under Section 8-A(2-B) of Act, 1948 read with Rule 43 of Rules, 1948 vide application dated 15.02.2005.
9. After almost two years, CTT, U.P. issued a show cause notice dated 09.02.2007 to show why application for deferment may not be rejected as facility of deferment of original manufacturer came to an end on 17.06.2004; that it is not possible to quantify the amount to be deferred in case of Successor Manufacturer and facility of deferment automatically expired on transfer of unit; and it is legally not permissible to transfer to petitioner.
10. Petitioner submitted reply vide letter dated 15.02.2007. Original manufacture was granted exemption upto 30.10.2006. Despite the fact that petitioner was entitled for transfer of exemption for the balance period, however, CTT, U.P. vide impugned order dated 22.02.2007 has rejected the same.
11. Respondents have contested writ petition by filing counter affidavit admitting that M/s DFL, Agra was having a manufacture unit for manufacture of ice-cream at Sikandara, Agra. It undertook an expansion programme in 1996, of the existing ice-cream manufacturer unit, by making additional fixed capital investment of Rs. 46,61,085/-. In view of aforesaid expansion programme, M/s DFL, Agra applied for and obtained eligibility certificate dated 16.04.2002 under Section 4-A of Act, 1948 to avail exemption or reduction in rate of trade tax. Eligibility certificate dated 16.04.2002 shows period of exemption from 31.10.1996 to 30.10.2006 or equivalent to tax liability of Rs. 93,22,170/- M/s DFL opted for deferment scheme under Section 8(2-A) of Act, 1948 read with Rule 43 of Rules, 1948 vide application dated 14.01.1997 followed by letter dated 26.04.2002. Without awaiting any decision of Competent Authority, M/s DFL, Agra stopped production in September, 2002 and ultimately declared closure of business w.e.f. 22.12.2002. Vide sale deed dated 23.12.2002, manufacturing unit of M/s DFL, Agra was sold to petitioner. M/s DFL, Agra's application dated 14.01.1997 for deferment of payment of tax under Section 8(2-A) of Act, 1948 was disposed of by Competent Authority vide order dated 17.06.2004. Thereafter, notice was issued to petitioner to deposit amount of tax which it had deposited but withheld interest payable on the said amount. Challenging the demand of interest made by respondents, petitioner filed Writ Petition No. 1723 (M/B) of 2005 which is pending. Petitioner, successor of unit, moved application dated 24.01.2003 under Section 4-A(2-B) for grant of eligibility certificate for the remaining period/amount of eligibility certificate dated 16.04.2002. It was granted said certificate dated 22.01.2005 for the remaining period/amount of eligibility certificate dated 16.04.2002. In other words, said benefit was allowed from 23.12.2002 to 30.10.2006 or equivalent to tax liability of Rs. 35,21,902/- Thereafter, petitioner submitted another application dated 15.02.2005 and reminder dated 12.09.2006 making an option for availing benefit of deferment of payment of tax under Section 8(2-A) of Act, 1948. Competent Authority called upon petitioner for personal hearing on 15.02.2007. Petitioner availed said remedy and also filed written reply dated 15.02.2007. Application, ultimately, was rejected by Competent Authority vide order dated 22.02.2007.
12. Real issue is "Whether petitioner is entitled for deferment in payment of tax under Section 8(2-A) of Act, 1948 and Rule 43 of Rules, 1948."
13. It would be appropriate to reproduce relevant provisions applicable for adjudication of the matter:-
"Section 8. Payment and recovery of tax.
8(2-A) Notwithstanding anything contained in sub-sections (1), (1-A), (1-B), (1-BB), (1-C) or (2) the Commissioner may, on the application of a manufacturer within such time and in such manner as may be prescribed grant in lieu of exemption, under section 4-A, moratorium for payment of the admitted tax subject to such conditions as may be prescribed. The commissioner may withdraw any such moratorium in the circumstances in which it could have withdrawn the exemption under section 4-A but no such withdrawal shall be made with retrospective effect.
Provided that on and after the commencement of the Uttar Pradesh Trade Tax (Amendment) Act, 1997, the Commissioner may on the application of a manufacturer having a small scale industry the date of starting production of which falls on or after April 1, 1990, grant in lieu of exemption under Section 4-A, moratorium for payment of the admitted tax and the provision of Rule 43 of the Uttar Pradesh Trade Tax Rules, 1948 as amended by the Uttar Pradesh Trade Tax (Second Amendment) Rules, 1993 shall apply for granting such moratorium.
Rule 43. Conditions for grant of moratorium under section 8(2-A).
The Commissioner, on application of a manufacturer may, in lieu of exemption under section 4-A grant moratorium for payment of tax admittedly payable by such manufacturer on sale of goods manufactured by him beyond the period prescribed in rule-41 subject to the following conditions, namely,-
(1) the facility shall be available only to the manufacturer who is registered under the Act and has been granted an eligibility certificate under Section 4-A and has filed the returns of his turnover as per rules;
(2) the facility shall be available:-
(a) only for the period for which exemption from or reduction in rate of tax is admissible according to eligibility certificate issued under Section 4-A of the Act;
(b) for the amount up to which exemption from or reduction in rate of tax is admissible according to the eligibility certificate plus fifty per cent of the fixed capital investment mentioned in the eligibility certificate;
(3) the moratorium for payment of tax admittedly payable for each of the assessment years may be granted for a period of five years the computation of which shall be done from the last date for furnishing the last return according to sub-rule (1), (2) or (3) of rule 41 for the assessment year concerned. The amount of tax admittedly payable for each assessment year shall be paid by the manufacturer in a lump sum, within one month of the expiry of the period of moratorium;
(4) the moratorium shall cease and the total amount of the tax admittedly payable shall become payable,-
(a) on the date of discontinuance of business where the manufacturer discontinues business, within the meaning of sub-section (1) of section 18 of the Act,
(b) on the date on which the unit becomes ineligible for exemption under section 4-A, and the amount shall be paid in lump sum within three months of its so becoming payable;
(5) the facility shall not be admissible in respect of the amount of tax assessed in excess of the tax admittedly payable by the manufacturer on the turnover admitted by him in the returns filed or in any proceeding under the Act, whichever is greater, whether the excess tax so assessed is due to detection of any evasion of tax made, or disallowance of any exemption claimed, by such manufacturer or for any other reason, and the amount of tax so assessed in excess shall be paid in accordance with the provisions of the Act and the rules;
(6) the facility shall be available to the manufacture on creating first or second charge on its property in favour of the State Government, sufficient to cover the amount of tax in respect of which moratorium has been granted;
(7) if the amount in respect of which moratorium has been granted is not paid within the period specified in clause (3) or (4) as the case may be the manufacturer shall, in addition to any penalty which the assessing authority may deem fit to impose under section 15-A be liable to pay interest in accordance with sub-section (1) of section 8 for the entire period during which the amount remained deferred and subsequently till the time of its payment.
(8) a manufacturer who has availed the facility of exemption from or reduction in the rate of tax whether wholly or in part, under section 4-A shall not be entitled to the grant of moratorium.: (emphasis added)
14. Learned counsel for petitioner contended that unit was transferred by M/s DFL, Agra to petitioner and it became "Manufacturer Successor" under Section 4-A(2-B) of Act, 1948 w.e.f. 23.12.2002. In view of order dated 17.06.2004, if petitioner obtained eligibility certificate under Section 4-A it can opt for deferment under Section 8(2-A) read with Rule 43 in lieu of exemption. Section 4-A(2-B) grants benefit of exemption to "Manufacturer Successor" for the unexpired portion of period for which exemption from tax was or could be granted to former manufacturer. He further submits that under Rule 43, a unit shall be entitled to benefit of moratorium/deferment, if unit; (a) is registered under Act, 1948; (b) has been granted eligibility certificate under Section 4-A; and, (c) has filed return of its turnover as per Rules. It is submitted that petitioner fulfills all the above conditions. In view thereof, petitioner could not have been denied benefit of moratorium on the ground that M/s DFL, Agra, original unit has seized its business.
15. It is submitted that Rule 43 nowhere mentions type of unit to whom deferment could be granted. It could be a new unit, unit making expansion, diversification or backward integration or successor manufacturer under Section 4-A(2-B). He further submitted that observation that amount of benefit of deferment cannot be calculated, is factually incorrect. It is urged that observation that facility of deferment of original unit having been discontinued, new unit cannot be granted deferment, if accepted, it will render Section 4-A(2-B), redundant and inoperative, and in such case no successor unit opting benefit of deferment will be entitled to get benefit of deferment under Section 4-A(2-B) of Act, 1948 read with Rule 43 of Rules, 1948. Explaining the observation about any improbability of calculation of benefit of deferment, it is submitted that original manufacturer is entitled to benefit of exemption to the extent of amount mentioned in eligibility certificate plus 50% of amount of fixed capital investment of original manufacturer. Amount of deferment can be calculated by total amount of deferment available to original manufacturer minus amount availed by original manufacturer. Amount of fixed capital investment of Successor Manufacture can also be computed by adding amount of balance of fixed capital investment mentioned in eligibility certificate of Successor Manufacturer plus 50% of fixed capital investment of original manufacturer. In both situations, amount will be same.
16. Lastly, it is submitted that sub-section (2-B) was inserted in Section 4-A by U.P. Sales Tax (Amendment and Validation) Act, 1991 (hereinafter referred to as "Act, 1991") retrospectively w.e.f. 12.10.1983, specifically, to grant benefit of deferment of amount to successor manufacturer and interpretation given by CTT, U.P. in the impugned order, would render aforesaid legislative intent and promulgation redundant which is not permissible.
17. Learned Standing Counsel, however, opposed the claim of petitioner on the grounds stated by CTT, U.P. in the impugned order.
18. We have heard Sri N.C. Mishra and Sri Chandra Has Mishra, learned counsels for petitioner, learned Standing Counsel for respondents and perused the record.
19. Section 4-A(1) and (2), as initially enacted, did not include within its ambit a situation of discontinuance of business and succession by another manufacturer by means of sale, licence, contract, lease etc. Such a situation for the purpose of granting exemption under sub-section (1) has been introduced by inserting sub-section (2-B) with retrospective effect. Therefore, wherever benefit under sub-section (2-B) of Section 4-A is claimed that has to be read with sub-section (1) and (2) of Section 4-A.
20. Section 8(2-B) was inserted by U.P. Act No. 14 of 2004 w.e.f. 11.06.2004. Sub-section (2-A) was already there and it is not in dispute that original manufacturer could have claimed moratorium in lieu of exemption under Sections 4-A and 8(2-A) read with Rule 43 but since it has discontinued its business before a decision could be taken by CTT, U.P., said benefit was denied to original manufacturer, i.e., M/s DFL, Agra and simultaneously by applying Rule 43(4)(a), same has also been denied to petitioner. In our view, Section 8(2-A) read with Rule 43 has to be read with Section 4-A(2-B) as well for the reason that Successor Manufacturer when gets eligibility certificate, it is referable to Section 4-A(1) and (2) and said benefit could not have been denied by confining meaning of "discontinuance of business" under Rule 43(4)(a) to principal manufacturer and not to the successor one.
21. Learned Standing Counsel, however, placed reliance on certain decisions in support of decision taken by CTT, U.P. in the impugned order. The first such judgment is M/s Bindal Bateries Pvt. Ltd., Ghaziabad Vs. State of U.P. and another 2003 UPTC 462. M/s Bindal Bateries Pvt. Ltd., a new unit established in 1995, was issued eligibility certificate on 21.05.1996. From 12.12.1995 to 31.03.1996, M/s Bindal Bateries Pvt. Ltd., admittedly, availed benefit of exemption under Section 4-A. After receiving eligibility certificate, it applied for moratorium under Section 8(2-A) of Act, 1948 which was rejected vide order dated 24.06.2002 relying on Rule 43(8) of Rules, 1948, which provides that a manufacturer who has availed facility of exemption from or reduction in the rate of tax, whether wholly or in part under Section 4-A, shall not be entitled to grant of moratorium. Since for a small part of period, facility of exemption was already availed by M/s Bindal Bateries Pvt. Ltd., therefore, it was not found eligible for moratorium in view of condition under Rule 43(8). Court said that a taxing statute has to be read as it is and if specifically exemption is not permissible, it cannot be allowed. Aforesaid situation is not available in this case and therefore, that judgment would not help respondents in the case in hand.
22. Next authority relied by learned Standing Counsel is Excel Hi-Tech Pvt. Ltd. through its Director Rajat Maheshwari Vs. State of U.P., The Commissioner of Trade Tax and The Assistant Commissioner (Assessment), Trade Tax (Civil Misc. Writ Petition No. 257 of 2001); decided on 09.09.2005. Here also, petitioner, Excel Hi-Tech Pvt. Ltd., actually availed exemption under Section 4-A for the period from 15.09.1998 to 19.02.1999 and hence in view of Rule 43(8) it was held that petitioner, a new manufacturer unit and original holder of eligibility certificate, was not entitled for moratorium under Section 8(2-A). Aforesaid judgment is also inapplicable in the case in hand and same has also been decided following earlier judgment in M/s Bindal Bateries Pvt. Ltd., Ghaziabad Vs. State of U.P. and another (supra).
23. The third decision cited by learned Standing Counsel is M/s J.C.L. International Ltd., New Delhi Vs. Commissioner of Trade Tax and others 2008 UPTC 921. This decision, we find has also no application to the case in hand. Therein M/s J.C.L. International Ltd. was granted eligibility certificate by Notification dated 31.03.1995, issued under Section 4-A for the period from 20.06.1998 to 20.12.2006 vide order dated 10.10.2001. In lieu of exemption/concession in tax under Section 4-A, M/s J.C.L. International Ltd. applied for moratorium under Section 8(2-A) of Act, 1948 but before such certificate could have been granted, M/s J.C.L. International Ltd. sold out its unit to M/s Quality Synthetic Industries Ltd. vide sale deed dated 01.03.2001 and this information was communicated to Trade Tax Commissioner vide letter dated 24.03.2001. Eligibility was also surrendered alongwith request of cancellation thereof. Application of M/s J.C.L. International Ltd. for grant of moratorium under Section 8(2-A) was rejected vide order dated 19.06.2002 and Tax authorities required original manufacturer to pay entire tax. This demand was challenged before this Court but since M/s J.C.L. International Ltd. has closed its business, its application for moratorium was held rightly rejected in view of Rule 43(4)(a) of Rules, 1948. The observations made by Court in paragraphs 10, 14 and 15 are reproduced as under:-
"10. A perusal of Section 4-A of the Act shows that the Government by notification may provide for exemption/concession in respect of tax under the Act to certain class of dealers, who fulfil the requirement prescribed thereunder. In respect to such category of dealers, who are given or found eligible for tax concession under Section 4-A, another mode of tax concession is provided under Section 8 (2-A) when such dealer opts that in lieu of exemption/concession in the tax under Section 4-A, he may be allowed deferment of tax for certain period as prescribed and, thereafter, such dealer would be liable to pay the entire tax for the entire period in such manner as prescribed. The application of section 8 (2-A) is, thus, obviously distinct and operates in a different field. It cannot be controlled in its entirety or in any manner as suggested and argued by the learned counsel for the petitioner, by Section 4-A of the Act for the reason that the deferment of tax provided under Section 8(2-A) is governed by the provisions made thereunder and is not subject to the provision of Section 4-A of the Act. For attracting Section 8 (2-A), obviously only dealer entitled for exemption/concession under Section 4-A, is necessary, but thereafter, the conditions whereupon such deferment under Section 8 (2-A) can be granted must also exist. They cannot be controlled and governed by Section 4-A. Section 8 (2-A) clearly provides that the deferment of tax would be subject to such conditions, as may be prescribed. The applicability of Section 4-A with respect to Section 8 (2-A) is only at the entry point, namely, whether the person, who is exercising option, is eligible to opt or not and not beyond that. Once he is eligible to opt for deferment of tax under Section 8 (2-A), thereafter what conditions he will have to follow and would be abide by are not governed by Section 4-A. The same, on the contrary, is within the authority of delegated legislation to provide in exercise of powers under Section 8 (2-A) independently. It is not the case of the petitioner that the conditions provided under Rule 43 (4)(a) are inconsistent or ultra vires of any provision of the Act as such. On the contrary, what he submits is that the spirit of the provision, with which a dealer is given exemption/concession under Section 4-A, that is violated by the conditions prescribed under Rule 43 (4)(a) of the Rules. We are afraid that this cannot be a reason to struck down an otherwise valid piece of delegated legislation, which has been made in exercise of statutory powers by competent authority. Such a vague concept of spirit of a provision will not be available to test the validity of statute. No doubt, it is true that a rule (delegated legislation) must be consistence with the provision of the Act (parent legislation) and if it is not so, it would be ultra vires of the Act. However, it does not mean that in order to judge the validity of a delegated legislation, the Court can embark upon such aspects of the principle legislation, which are not expressly legislative but in the words of the petitioners it is spirit of the parent legislation i.e. the inference and conjecture of the individual. Such vague allegations cannot be a basis to challenge a subordinate legislation. It is well settled that rules made on matters permitted by the Act in order to supplement the Act and not to supplant the Act cannot be made in violation of the Act. Like substantive law, a delegated legislation also raises a presumption of constitutionality as well as statutory validity unless shown otherwise. Attempt is made for upholding the same unless it cannot be read harmoniously with the provisions of the Act.
14. Even otherwise, we find that the entire edifice of the argument that it is contrary to the spirit of the policy of exemption allowed under Section 4-A has no legs to stand and on closure scrutiny, we find that even this argument is without any substance. When an unit is allowed exemption/concession, under Section 4-A subject to the conditions prescribed thereunder, the exemption/concession goes with the time without any future liability of payment of tax to the State and, therefore, nothing is to be said with respect to the future conditions or circumstances, in which the tax is to be collected for the period the incumbent was availing the exemption/concession. However, when he opts for deferment of tax in lieu of exemption/concession in the rates of the tax, the person concerned enters into a contract with the State agreeing to pay tax at some later point of time and that is an agreement between the parties, namely, the State and person concerned. Such agreement, obviously, would be binding upon the parties, who have executed the agreement and if, there is any change in the parties, the agreement would not bound the successor and is liable to come to an end at that stage itself. It is always open to either of the parties to the agreement to provide that in case there is any substantive change in the ownership of the unit concerned, which has entered into the agreement, the option of deferment of tax would seize then on and and the optee has to pay the entire tax. Such condition, by no manner of imagination, goes inconsistent or contrary to the policy of exemption/concession of tax under Section 4-A. Therefore, we are not impressed by the submission of the learned counsel for the petitioner that Rule 43 (4)(a) is against the spirit of the exemption/concession granted under Section 4-A and, therefore, is liable to be struck down.
15. Coming to the last lag of the argument that some concession has been allowed with respect to continuance of deferment of tax on change of parties to one dealer and, therefore, the same benefit must be allowed
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to the petitioner also, we are afraid that contrary to what is provided in the statute and Rule 43, this Court cannot issue a mandamus to the respondents to act in breach of the statutory provisions. It is well established that two wrongs will not make one right and in any case, in the presence of Rule 43 (4)(a) of the Act, which is admittedly applicable to the case in hand, we are not inclined to hold that the petitioner is entitled for issuance of mandamus directing the respondents to dispense with the requirement of Rule 43(4)(a) of the Rules upon the petitioner as that would amount to make a statutory provision by judicial order inapplicable upon the petitioner, though otherwise by operation of law, it is applicable, binding and cannot be dispensed with. In view thereof, we do not find any error in the order dated 16.9.2002, impugned in this writ petition, passed by respondent no. 1. The petitioner, in our view, thus, is not entitled for any relief as sought in this writ petition." (emphasis added) 24. There was no occasion to consider Section 4-A(2-B) of Act, 1948 alongwith Section 8(2-A) and Rule 43 of Rules, 1948. 25. The other two decisions i.e. Commissioner of Sales Tax Vs. Qureshi Crucible Centre 1993 Supp (3) SCC 495 and; Pepsico India Holdings Limited Vs. Commissioner of Trade Tax, Lucknow, Uttar Pradesh (2011) 13 SCC 68 are in the context of liability of tax under Section 8 and we find that no issue of Section 8(2-A) and Rule 43, vis a vis, Section 4-A(2-B) of Act, 1948 was involved therein. Therefore, these authorities also have no application in the case in hand and would not help respondents at all. 26. The last decision relied by learned Standing Counsel is Commissioner of Trade Tax, U.P., Lucknow Vs. Nervy Lock Company (2007) 8 VST 683 (All). It deals with issue of interest on delayed payment of tax and, in our view, issue with which we are concerned, was not involved therein also. 27. In order to support the ground that benefit of deferment under Section 8(2-A) read with Rule 43 would be available to only original manufacturer and not to Successor, who is also held entitled for similar exemption under Section 4-A(1) and (2) of Act, 1948 by virtue of Section 4-A(2-B) inserted with retrospective effect of 1983, learned Standing Counsel could give no satisfactory reply at all except citing aforesaid authorities which we have discussed in detail above and find inapplicable to the issue raised in this writ petition. 28. In the result, we allow this writ petition, set aside impugned orders dated 22.02.2007 and 14.03.2007 and direct Competent Authority to reconsider petitioner's application and pass a reasoned order in the light of discussion made above, expeditiously, and in any case, within three months from the date of production of a certified copy of this order.