‘Diversification’ is ‘Goods in different Nature’: SC denies Tax Exemption u/s 4A(5) of U.P. Trade Tax Act [Read Order]

In a recent ruling, the Supreme Court bench of Justice M.R. Shah and Justice Krishna Murari interpreted the meaning of diversification.

It was observed 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.

The appeal was preferred by  AMD Industries Limited against the decision passed by the Allahabad High Court.

The appellant established the unit for manufacture of “Spun Line Crown Cork” used as one of the packing materials of the 'glass bottles'.

In order to manufacture a "double Lip Dry Blend Crown" as part of a diversification programme, the appellant made a request for an eligibility certificate under Section 4A of the Uttar Pradesh Trade Tax Act before the Divisional Level Committee.

Further 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’ scheme.

It is 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 U.P. Trade Tax Act and the exemption was denied.

The division bench observed that in the present case, the appellant was manufacturing / producing “Spun Line Crown Cork” used for sealing the glass bottles.

Additionally, the appellant is currently producing "Double Lip Dry Blend Crowns," which are also used to seal glass bottles, using modern technology. Therefore, it cannot be stated that producing things today differs from producing them before such diversification.

The apex court concluded by stating that the High Court has not committed any error in refusing to grant exemption to the appellant.

To Read the full text of the Order CLICK HERE

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