Product Manufactured on Use of Modern Advanced Technology Not “Manufacture”: Supreme Court denies Trade Tax Exemption to “Spun Line Crown Cork” [Read Judgment]

The Division Bench of the Supreme Court of Justice M.R. Shah and Justice Krishna Murari in a recent ruling has denied the trade tax exemption to “spun line crown cork” holding that the product manufactured on the use of modern advanced technology would not come under the purview of Manufacture.

The appellant, AMD Industries Limited had established the unit for manufacture of “Spun Line Crown Cork” in the year 1986 which was used as one of the packing materials of the ‘glass bottles’. The appellant submitted an application for granting eligibility certificate under Section 4-A of the U.P. Trade Tax Act   before the Divisional Level Committee for manufacture of “double Lip Dry Blend Crown” under the program of diversification. The appellant was granted the eligibility certificate under ‘modernisation’ instead of eligibility certificate under ‘diversification’ scheme.

Yeshwant Chitale, on behalf of the appellant contended that appellant was entitled to claim exemption from trade tax as it had undertaken diversification and the goods i.e., “Double Lip Dry Blend Crowns” being manufactured were of a nature different from those manufactured earlier by the appellant being a different commercial commodity. He also contended that the criteria of use of goods was neither provided in the section nor in the notification and section 4-A (5) and the notification had only required the nature of goods to be different. 

Bhakti Vardhan Singh on behalf of the respondent submitted that the goods manufactured by the appellant prior to the investment exercise was subjected to levy under the class of goods namely “Corks”. He further 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. It was submitted that even mere fact that both the goods were commonly known as “Corks” were also not a relevant factor for determining if the goods were different goods.

The division Bench dismissed the appeal observing that, “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 in use of advanced 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.” 

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