Court has not committedany error in refusing to grant exemption to & Ors. v. Amara Raja Batteries Limited (2009) 8 SCC209 : [2009] 11 SC

ABCDEFGH1037of different nature” are produced, and only then the exemptionshall 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 advanceand/or modern technology, cannot be said to be a differentcommercial activity at all. The High Court has not committedany error in refusing to grant exemption to the appellant. [Paras8.3-8.5][1043-G-H; 1044-A-F]Hansraj Gordhandas Vs. H.H. Dave, Assistant Collectorof Central Excise Customs, Surat and Ors. AIR 1970SC 755 : [1969] SCR 253; Parle Biscuits (P) Ltd. Vs.State of Bihar and Ors. (2005) 9 SCC 669 : [2004] 6Suppl. SCR 954; Assistant Commissioner (CT) LTU andAnr. Vs. Amara Raja Batteries Limited (2009) 8 SCC209 : [2009] 11 SCR 953; Commissioner of Sales Tax,Orissa and Anr. Vs. Jagannath Cotton Company andAnr. (1995) 5 SCC 527 : [1995] 2 Suppl. SCR 390 –referred to.Case Law Reference[1969] SCR 253referred toPara 4.7[2004] 6 Suppl. SCR 954referred toPara 4.7[2009] 11 SCR 953referred toPara 4.7[1995] 2 Suppl. SCR 390referred toPara 5.5CIVIL APPELLATE JURISDICTION : Civil Appeal No.108 of2013.From the Judgment and Order dated 16/09/2008 of the HighCourtof U. P. at Lucknow in TTR No. 275/2004.Atul Yeshwant Chitale, Sr. Adv., Ms. Tanvi Kakar, Ms. JayatiAtul Chitale, Mrs. Suchitra Atul Chitale, Advs. for the Appellant.Bhakti Vardhan Singh, Adv. for the Respondents.The Judgment of the Court was delivered byM. R. SHAH, J.1. I.A. No. 118667 of 2021 is allowed. The appellant is permittedto change its name in the cause title from M/s. Ashoka Metal DécorPvt. Ltd. to AMD Industries Limited and the I.A. is accordingly disposedof.AMD INDUSTRIES LTD. v. COMMISSIONER OF TRADE TAX,LUCKNOW & ANR ABCDEFGH1038SUPREME COURT REPORTS[2023] 1 S.C.R.2. Feeling aggrieved and dissatisfied with the impugned judgmentand order passed by the High Court of Judicature at Allahabad in TradeTax Revision No. 275 of 2004 by which the High Court has dismissedthe said revision application preferred by the appellant herein and hasconfirmed the order passed by the learned Trade Tax Tribunal, LucknowBench, Lucknow (hereinafter referred to as “Tribunal”) and theAssessing Officer holding that for the goods manufactured, the appellantis not entitled to the exemption under Section 4-A (5) of the U.P. TradeTax Act (hereinafter referred to as “Act”), the manufacturer – originalrevisionist 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 packingmaterials of the ‘glass bottles’. The appellant submitted an applicationon 24.05.2000 for granting eligibility certificate under Section 4-A of theAct before the Divisional Level Committee for manufacture of “doubleLip Dry Blend Crown” under the program of diversification.3.2 On the basis of the joint spot inquiry consisting of two memberscommittee, the appellant was granted the eligibility certificate under‘modernisation’ instead of eligibility certificate under ‘diversification’scheme.3.3 At this stage, it is required to be noted that if the goodsmanufactured would have been considered as a new product under thediversification scheme, the appellant was entitled to the exemption underSection 4-A(5) of the Act. The appellant was denied the exemptionunder Section 4-A(5) of the Act. The appellant preferred an appealunder Section 10 of the Act against the order dated 10.12.2003 passedunder Section 4-A of the Act before the Trade Tax Tribunal contendinginter alia that the process of manufacture and the machineries used forboth 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 andvice-a-versa, the new product cannot be manufactured on the oldmachines. It was also the case on behalf of the appellant that one of themajor raw materials for both the products are not the same and thatultimate use of both the products are different.3.5 It was submitted that under the term “modernization” onlythose units fall, which by the modern technical produce the same goodsand the scheme of “modernization” do not apply on the units whichproduce different goods. ABCDEFGH10393.6 The appeal preferred by the appellant came to be dismissed.The second appeal before the Tribunal also came to be dismissed. Itwas specifically held that the nature of goods being produced under themodern technology is not different than the goods produced by the unitearlier, as both the produced material are used in packing the bottles ofcold drinks and therefore, as the goods manufactured are not differentbut the same and used for the same purpose, the appeals came to bedismissed. Against the order passed by the Tribunal, the revisionapplication before the High Court has been dismissed by the impugnedjudgment and order, and, hence the present appeal.4. Shri Atul Yeshwant Chitale, learned Senior Advocate appearingon behalf of the appellant has submitted that the issue involved in thepresent appeal is with respect to the interpretation of Explanation 5 toSection 4-A(5) of the Act, which grants exemption from payment oftrade tax to units, which had undertaken ‘diversification’ in their units onor after 31.03.1995.4.1 It is submitted that the appellant is a manufacturer of crowncorks used for sealing glass bottles. Initially, it was producing “SpunLine Crown Corks”. However, subsequently, it diversified themanufacturing activity to manufacture “Double Lip Dry Blend Crowns”for which it imported new plant and machinery and invested a fixedcapital cost of Rs. 4.5 crores.4.2 It is submitted that the new product being manufactured bythe appellant is an eco-friendly product using PVC granules as rawmaterials. The new product is different from the “Spun Line CrownCorks” manufactured earlier.4.3 It is submitted that the new product is an entirely differentproduct from what was manufactured earlier and the use of the productwas also different. It is submitted that the new product was an entirelydifferent product in commercial parlance. It is submitted that the merefact that both the products are commonly known as “Corks” would haveno relevance. It is submitted that similarly the fact that both the productsare used for sealing glass bottles would also not be a relevant criterion.The test which was to be applied is whether the goods were differentfrom those manufactured earlier. It is submitted that the appellant wasentitled to claim exemption from trade tax since it has undertakendiversification and the goods i.e., “Double Lip Dry Blend Crowns” nowbeing manufactured are of a nature different from those manufacturedearlier by the appellant being a different commercial commodity.AMD INDUSTRIES LTD. v. COMMISSIONER OF TRADE TAX,LUCKNOW & ANR [M. R. SHAH, J.] ABCDEFGH1040SUPREME COURT REPORTS[2023] 1 S.C.R.4.4 It is submitted that the Trade Tax Tribunal as well as the HighCourt have misconstrued the Explanation 5 to Section 4-A(5) of the Actand the notification dated 31.03.1995 on the basis of which the appellanthad sought eligibility certificate on the ground of diversification.4.5 It is submitted that in order to be entitled to claim exemptionfrom trade tax on the ground of diversification, the goods had to be of anature different from those manufactured earlier. Ultimate use of thegoods is irrelevant for the consideration for exemption from trade tax.Different goods can be used for same thing. However, this does notmean that the nature of the goods is the same. It is submitted that evenmere fact that both the goods are commonly known as “Corks” is alsonot a relevant factor for determining if the goods are different goods.4.6 The learned senior counsel appearing on behalf of the appellanthas drawn our attention to the difference in earlier product and thesubsequent product. In support of his submission that the new product isaltogether a different product than that of the earlier product, he hasalso drawn our attention to the difference in process of manufacturingof both the products.4.7 It is submitted that both, the Trade Tax Tribunal and the HighCourt have erroneously introduced a new criterion that the use of bothproducts is the same. It is submitted that the criteria of use of goods isneither provided in the section nor in the notification. Section 4-A(5) andthe notification only requires the nature of goods to be different. It issubmitted that as per the settled position of law, an exemption notificationis required to be given a literal meaning. Reliance is placed on thedecisions of this Court in the case of Hansraj Gordhandas Vs. H.H.Dave, Assistant Collector of Central Excise Customs, Surat andOrs., AIR 1970 SC 755; Parle Biscuits (P) Ltd. Vs. State of Biharand Ors., (2005) 9 SCC 669 and Assistant Commissioner (CT)LTU and Anr. Vs. Amara Raja Batteries Limited, (2009) 8 SCC209.4.8 Making above submissions and relying upon the abovedecisions, it is prayed to allow the present appeal.5. Present appeal is vehemently opposed by Shri Bhakti VardhanSingh, learned counsel appearing on behalf of the respondents.5.1 It is submitted that in the present case, the appellant establisheda unit for manufacture of the “Spun Line Crown Corks” used as one ofthe packing materials of the glass bottles, to be sold to the glass bottlers.It is submitted that after ‘modernisation’, the appellant manufactured ABCDEFGH1041“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 thenotification, exemption from trade tax shall be available to a unit, whichhas undertaken “expansion, diversification or modernization” andmanufactures the different goods from those manufactured earlier bysuch undertaking. It is submitted that therefore, the issue involved in thepresent appeal is as to whether the investment of the appellant can besaid to be in the unit, having undergone “diversification” or is in a unithaving undergone “modernization” and whether the goods manufacturedby the appellant’s unit has undergone “diversification” or “modernization”?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 requiredto be produced”. It is submitted that the exemption notification issuedunder Section 4-A also uses the terminology and resultantly the test fordiversification is the “production of a goods which is different in naturethan that was produced earlier”.5.4 It is submitted that clause (5) of Section 4-A also makes thelegal position clear. It is submitted that the opening sentence of clause(5) seeks to refer “expansion, diversification and modernization” andthen clarifying in one separate sub-clause the exercise of “expansion ormodernization” means the “increase in production” and thereafter inanother separate sub-clause clarifies “diversification” to mean that theproduction of goods of a different kind, distinct and different in nature, anew article as understood in commercial circle.5.5 It is submitted that the test is how a good is understood in thecommercial parlance or commercial circle. It is submitted that the goodsmanufactured by the appellant prior to the investment exercise wassubject to levy under the class of goods namely “Corks”. After theinvestment exercise, the manufacturing of the “Double Lip Dry BlendCrowns” is merely the enhanced quality and quantity of goods namely“Corks” earlier produced before the investment exercise. It is submittedthat therefore, the investment was an exercise of “modernization andexpansion” only and the different goods were not manufactured, notentitled to the exemption under Section 4-A(5) of the Act and thenotification issued under Section 4-A. In support of his above submissions,learned counsel appearing on behalf of the respondents has placed relianceupon the decision of this Court in the case of Commissioner of SalesTax, Orissa and Anr. Vs. Jagannath Cotton Company and Anr.,(1995) 5 SCC 527 (para 5).AMD INDUSTRIES LTD. v. COMMISSIONER OF TRADE TAX,LUCKNOW & ANR [M. R. SHAH, J.] ABCDEFGH1042SUPREME COURT REPORTS[2023] 1 S.C.R.5.6 It is further submitted that mere change in technology nowthe goods being manufactured by the unit of the appellant cannot beconsidered “different in nature” than the goods being manufacturedearlier by the unit because of the fact that the goods are being utilizedfor packing the bottles. It is submitted that as per the settled position oflaw, the exemption notifications are to be strictly construed.5.7 Making above submissions and relying upon the findingsrecorded by the High Court that the goods manufactured now by theappellant cannot be said to be different than that of the goodsmanufactured earlier and the goods manufactured earlier and the neware 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 thiscourt is:-“Whether for the goods, manufactured by use of moderntechnologies can be said to be “diversification”, and manufacturingof the goods of a nature different from the goods manufacturedearlier entitle the appellant to claim the exemption from trade taxas provided under Section 4-A (5) of the U.P. Trade Tax Act?8. While considering the aforesaid issue, relevant provisions ofSection 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 readsas under:-“Section 4-A - Exemption from trade tax in certain cases(1) …………..(2) It shall be lawful for the State Government to specify in thenotification under sub-section (1) that the exemption from, orreduction in the rate of tax, shall be admissible—(a) …….(b) …….(bb) …….(c) in respect of those goods only which are manufactured in aunit which has undertaken expansion, diversification ormodernisation on or after April 1, 1990, and which in the case ofdiversification, are different from the goods manufacturedbefore such diversification, and in the case of expansion ormodernisation are additional production as a result of suchexpansion or modernisation; and ABCDEFGH1043(3) …….(4) …….(5) “Unit which has undertaken expansion, diversification ormodernisation” means an industrial undertaking—(a) …….(b) whose first date of production of goods,—(i) of a nature different from those manufactured earlierby such undertaking, in case of units undertakingdiversification, and(ii) manufactured in excess of base production in suchundertaking, in case of units undertaking expansion ormodernisation, falls at any time after March 31, 1990;(c) the production capacity whereof except as provided in theproviso to sub-section (1) has increased by atleast twenty-fivepercent as a result of expansion or modernisation, or whereingoods of a nature different from those manufactured earlierare manufactured after diversification;”8.1 Thus, on a fair reading of the aforesaid provisions, it is clearthat in case of “diversification” the goods manufactured by diversificationshall be different from the goods manufactured before such diversification[Section 4-A(2)(c)].8.2 In the case of “expansion or modernization”, the exemptionshall be available, if there is an additional production as a result of suchmodernization or expansion. In the present case, we are concerned withthe case of “diversification”. Therefore, the goods manufactured afterdiversification must be different goods from the goods manufacturedbefore such diversification. As per the settled position of law, in case ofan exemption notification/exemption provision, the same is required tobe construed literally and the person claiming the exemption must satisfyall 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 useof modern technologies, now the appellant is manufacturing “DoubleLip Dry Blend Crowns”, which is also used for sealing the glass bottles.The earlier product being manufactured by the appellant was used forsealing glass bottles and subsequently the additional product producedwith the use of modern technology is also being used for the same purposenamely, “sealing glass bottles”. Therefore, the same cannot be said toAMD INDUSTRIES LTD. v. COMMISSIONER OF TRADE TAX,LUCKNOW & ANR [M. R. SHAH, J.] ABCDEFGH1044SUPREME COURT REPORTS[2023] 1 S.C.R.be manufacturing of goods different from being manufactured beforesuch diversification. With the passage of time, due to advancement intechnology, if there is a replacement of the old machinery with the newmachinery for improvement in quality and quantity of a product, at themost, it can be said to be expansion and/or modernization, but it cannotbe said to be “diversification”, which is “manufacturing of goods differentfrom the goods manufactured before such diversification”. In a case of“diversification”, the effect has to be that the quality and quantity of theproduct should have been improved and/or increased but if the ultimateuse is the same, the product manufactured on use of modern and/oradvanced technology cannot be said to be manufacturing the differentgoods for claiming the exemption from payment of trade tax. The wordsused in Section 4-A are very clear and unambiguous. As per the settledproposition of law and as observed hereinabove, the Statute and moreparticularly, the exemption provisions are to be read as they are and tobe construed literally and should be given a literal meaning. Giving theliteral meaning to the exemption provision namely, Section 4-A, it cannotbe said that the appellant is entitled to the exemption as claimed.8.4 Considering the aforesaid facts and circumstances of the caseand as observed hereinabove, when the provisions of the Act unequivocallyprovides that the “diversification” can be considered only in a case where“goods of different nature” are produced, and only then the exemptionshall be available. The goods manufactured on “diversification” must bea “different”, “distinct” and a “separate” good in nature. In the presentcase, the goods manufactured on use of advance and/or moderntechnology, cannot be said to be a different commercial activity at all.The High Court has not committed any error in refusing to grant exemptionto the appellant. We are in complete agreement with the view taken bythe High Court.9. In view of the above and for the reasons stated above, presentappeal fails and the same deserves to be dismissed and is accordinglydismissed. No costs.Divya PandeyAppeal dismissed.(Assisted by : Abhishek Pratap Singh and Rakhi, LCRAs)