Holding

The exemption under Section 4‑A continues for the full period despite the post‑grant increase in capital investment, and the subsequent amendment is not applicable for interpreting the earlier provision.

Summary

The Industrial Coal Enterprises (respondent) established a small‑scale manufacturing unit in Uttar Pradesh with a capital investment below Rs. 3 lakh and obtained sales‑tax exemption under Section 4‑A of the U.P. Sales Tax Act, 1948, effective from 9 August 1985. The unit later shifted to its own premises, raising its capital investment to Rs. 3.86 lakh and obtaining registration under the Factories Act only in August 1989, after the statutory maximum exemption period had elapsed. The Commissioner of Sales Tax (appellant) contended that the exemption should cease once the capital investment exceeded Rs. 3 lakh and that the later amendment of Section 4‑A could be used to interpret the earlier provision. The Supreme Court held that the exemption scheme was intended to promote industrial investment and, in the absence of any express condition linking exemption to the capital limit, the exemption continued for the full four‑year period despite the increase in investment. The Court also rejected reliance on the subsequent amendment, stating that it was not relevant for interpreting the unamended provision. Consequently, the appeal was dismissed, upholding the High Court’s order granting a four‑year exemption.

Issues considered

Whether the sales‑tax exemption under Section 4‑A ceases when the unit's capital investment exceeds Rs. 3 lakh after the exemption has been granted.
Whether a subsequent amendment of Section 4‑A (effective 13 September 1985) can be used to interpret the earlier provision.
Whether the exemption clause in a taxing statute must be strictly construed or can be liberally interpreted in view of its purpose.

Legislation cited

Factories Act, 1948

Subjects

sales tax exemptionSection 4-Acapital investment limitstatutory interpretationsubsequent amendmentliberal constructionsmall scale unitUttar Pradesh

Judgment

COMMISSIONER OF SALES TAX A
v.
INDUSTRIAL COAL ENTERPRISES

FEBRUARY 24, 1999

(M. SRINIVASAN AND U.C. BANERJEE, JJ.] B

SALES TAX:

U.P. Sales Tax Act, 1948: Section 4-A (as it stood prior to 13. 9.1985).

Sales Tax-Exemptiorr-Small Scale Unit (SSU)-New C
unit-Registered with Directorate of Industries as SSlf-Granted exemption
for a particular period under S.4-A-Capital investment exceeded the
prescribed limit during the period of exemption-However, unit obtained
registration under the Factories Act after expiry of maximum period of exemp-
tion (4 years)-17ierefore, unit denied exemption beyond date already sane- D

- tioned since capital investment exceeded the prescribed limit-Validity
oHfeld: In the circumstances of the case, discontinuance of exemption even
if unit did not fulfil prescribed conditions for. large industries, not war-
rante~Subsequent amendment of S.4-A not relevant-U.P. Government
Notification No. ST-II-604/X-9(208)161-U.P. Act 15/48--0rder 85 dated
29.1.1985. E

Interpretation of Statutes :

External aids-Other statutes-Subsequent legislatiorr-Amending
Act~ffect of-Held: May be remedial and not relevant-More so when there
is 110 ambiguity in the unamended legislation. F

Taxing statutes-Provisions for incentive-Strict constructiorr-Ap-
plicability of-Held : Should be liberally construed.

The respondent established a manufacturing unit in a rented ,...
premises under a sale deed for seven years w.e.f.1.1.1985. The unit was also J
registered with the Directorate of Industries as a small-scale unit for the
manufacture of coal-briquettes. It was granted a term loan of Rs. 30,000
+ from the State Bank of Patiala. The first date of purchase of raw material
was on 9.2.1985 and the unit started production on 15.2.1985 with the help
of a new generator. The first date of sale of the finished product was H
871
-,.;

-i ~

872 SUPREME COURT REPORTS [1999] 1 S.C.R.
_.._.
A 1.10.1985. The first date of production as defined in the Rules under the U.P. ""
Sales Tax Act, 1948 was 9.8.1985 i.e. after six months from the date of
purchase of raw material. Thus the unit was entitled to exemption from
sales tax w.e.f. 9.8.1985 as it fulfilled all the prescribed conditions. The unit
applied for exemption under Section 4-A of the Act on 20.12.1985 since its
capital investment was much below Rs. 3. lakhs. ·Later on, the respondent
B changed the place of manufacturing from the ~ented premises to a new site ,.
purchased and owned by it. The unit remained closed from 23.7.1986 to .;
31.7.1986 for the purpose for shifting machines to the new premises. The
production started in the new place from 1.8.1986.

c the capital
As. a result of purchase of new site and construction of own building,
investment of the unit increased to beyond Rs. 3 lakhs. The unit
. applied for registration under the Factories Act, 1948, which was granted
w.e.f. 11.8.1989. The unit was granted sales tax exemption from 9.8.1985 to
22.7.1986, the date till which the capital investment of the unit was below Rs.
3 lakhs. However, since the registration under the Factories Act was ob-
D tained after the expiry of the maximum period of exemption (4 years) under .. ,.
Government Notification dated 29.1.1985 no exemption beyond 22.7.1986
was granted. The review applicaticn filed by the respondent was rejected.
But the High Court held that the unit was entitled to exemption for a period
of 4 years from 9.8.1985. Hence this appeal.
E
On behalf of the appellant-Revenue it was contended that the
provisions of an exemption clause should be strictly construed and if,the
conditions under which exemption was granted stood changed on account
of subsequent event, the exemption would not operate, and that the amend-
ment of Section 4-A w.e.f. 13.9.1983 made by U.P. Act 28 of 1991, being a
F subsequent legislation, could be taken for purpose of guidance for inter- ~
._
preting the provisions of the Act as it stood earlier.

Dis_missing the appeal, this Court

HELD : 1. Admittedly, the provisions for exemption from sales tax
G have been introduced in the U.P. Tax Act, 1948 for the purpose ofincreasing
the production of goods and for promoting the development of industries in
the State. When the scheme called "Grant of Sales Tax Exemption Scheme,
~
1982 to industrial units under Section 4-A of the U.P. Sales Tax Act, 1948"
was originally framed, it was expressly stated that the Government granted
H the facility of exemption in order to encourage the capital investment and
C.I.T. v. INDUSTRIAL COAL ENTERPRISES 873
.,. ...- establishment of industrial units in the State Under the Government A
Notification dated 29.1.1985 the period of exemption in case of unit with
capital investment not exceediPg, Rs. 3 lakhs was four years. Neither Sec-
tion 4-A nor the Notification contains any condition that if the capital
investment of the unit exceeds Rs. 3 lakhs after the grant of exemption, such
exemption would cease to operate unless and until the conditions
B
.. prescribed for units having capital investment exceeding Rs. 3 lakhs are
fulfilled. Therefore, there is no warrant for the stand taken by the appellant
,.,
that after 23.7.1986 the unit was not entitled to the benefit of exemption as
its capital investment exceeded Rs. 3 lakhs from such date.
[881-D-H; 882-A-C]

2.1. The appellant's contention that the amendment of Section 4-A
c
w.e.f. 13.9.1983 by U.P. Act 28 of 1991, being a subsequent legislation could
be taken for the purpose of guidance for interpreting the provisions in the
Act as it stood earlier, cannot be accepted. The subsequent Act in the instant
case is one of amendment and it may be remedial. Moreover, in this case
~ there is no ambiguity in the provisions of the Act as it stood at the relevant D
·' time warranting interpretation by the Legislature. [883-D-F]

Attorney General v. Clm*son, (1900) 1QB156, referred to.

2.2. Provision granting incentive for promoting economic growth and
development in taxing statutes should be liberally construed and restriction E
placed on it by way of exception should be construed in a reasonable and
purposive manner so as to advance the objective of the provision. The
objective of granting exemption from payment of sales tax has always been
for encouraging capital investment and establishment of industrial units
~ for the purpose of increasing production of goods and promoting the F
.... development of industry in the State. Therefore, the exemption granted to
the respondent from 9.8.1985 when it fulfilled all the prescribed conditions,
will not cease to operate just because the capital investment exceeded the
limit of Rs. 3 lakhs on account of the respondent becoming the owner ofland
and building to which the unit was shifted. Otherwise the very purpose and
object of the grant exemption will be defeated. [883-H; 884-C]
G

.. CIT v. Straw Board Manufacturing Co. Ltd., [1989] Supp. 2 SCC 523
and Bajaj Tempo v. CIT, [1992] 3 SCC 78, relied on.

State Level Committee v. Morgardshammar India Ltd., [1996] 1 SCC H
-f

874 SUPREME COURT REPORTS [1999] 1 S.C.R.

A 108; Pappu Sweets and Biscuits v. Commissioner of Trade Tax, U.P., [1998j "'
7 SCC 228 and Divisional Level Committee v. Sahu Stone Crnshing In-
dustries, [1998] 8 sec 435, held inapplicable•

. Novopan India Ltd. v. Collector of Central Excise and Customs, [1994]
Supp. 3 SCC 606 and Sahu Stone Gushing Industries v. Divisional Level
B Committee, Jhansi, (1994) UPTC 1 (All), referred to.
' ,.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7451 of
1993.

From the Judgment and Order dated 25.11.92 of the Allahabad High
c Court in C.M.W.P. No. 819 of 1990.
Kavin Gulati, R.B. Misra and K. Misra for the Appellant.

Dhruv Aggarwal and Irshad Ahmad for the Respondent.

D The Judgment of the Court was delivered by
-..
,,
SRINIVASAN, J. The decision in this case depends upon the con-
struction of the relevant provisions of the U.P. Sales Tax Act, 1948
(hereinafter referred to as the 'Act') and the Government Notification
issued thereunder granting exemption from sales tax of certain goods for
E specified period. Section 4-A is the Section with which we are concerned
and for the purpose of this case the Section as it stood at the relevant time
reads as follows :

4A. Exemption from sales tax of certain goods for specified period.
- (1) Notwithstanding anything contained in Section 3 or 3-A, where
F the State Government is of the opinion that it is necessary so to do ~

for increasing the production of any goods or for promoting the ...
development of industry in the State generally or in any districts or
parts of districts in particular, it may on application or otherwise,
by notification declare that the turnover of sales in respect of such
goods by the manufacturer thereof shall, during such period not
G
exceeding seven years from the (date of first sale by such manufac-
turer if such sale takes place within six months from the date of
starting production and in any other case from the date following ~

the expiration of six months from the date of starting production), ..
and subject to such conditions as may be specified, be exempt from
H sales tax or be liable to tax at such reduced rate as it may fix".
C.l.T. v. INDUSTRIAL COAL ENTERPRISES [SRINIVASAN, J.) 875
-.., ... CL (2) ................. ~ .... A
Expla11ado11 : For the purposes of this Section

(1) 'new unit during the period ending with March 31, 1990'
means an industrial undertaking set-up by a dealer on or after
October 1, 1982 but not later than March 31, 1990 - B
~·

(a) which is licenced or in respect whereof a letter of intent has
-- been issued or which is registered, permanently or otherwise
by the appropriate authority in accordance with any law for
the time being in force relating to licensing or registration of
industrial undertakings; c
(b) (i) which is registered under the Factories Act, 1948;
or

(ii) an application for registration in respect whereof has
41 D
been made under that Act; or
.. (iii) after making an application for a Term Loan from the
Uttar Pradesh Financial Corporation or a Scheduled
Commercial Bank whether .such Term Loan is sane-
tioned and disbursed before or after the undertaking is E
set-up (where the capital investment in the undertaking
does not exceed three lakh rupees);

(c) on land or building or both owned or taken on lease

~
. for a period of not less than seven years by such dealer
or allotted to such dealer by any Government company F
~ or any corporation owned or controlled by the Central
or the State Government;

(d) using machinery, accessories or components not al-
ready used, or acquired for use, in any other factory
workshop in India;
G

(e) fulfilling all the conditions specified in this Act or the
-,I
rules; or notifications made thereunder in regard tci
grant of facility under this section on the date from
which such facility may be granted to him; H
__,

876 SUPREME COURT REPORTS [1999] 1 S.C.R.

A and includes an industrial undertaking fulfilling the conditions laid j..
~-

down in clauses (a) to (e) set-up by a dealer -

(i) already having an industrial undertaking manufacturing
the same goods at any other place in the State, or

B (ii) on or adjacent to the site of an existing factory or
workshop manufacturing any other goods, ~

'-
but does not include, -

(i) any factory or workshop manufacturing the same goods
c established by a person on or adjacent to the site of an
existing factory or workshop wherein such person has in-
terest as proprietor or partner or agent or promotor or
holding company or subsidiary company, so however that
where the date of starting production of such factory or
D workshop falls before January 19, 1985 this clause shall be '>-
construed as if the words "or adjacemt to" were omitted, ,_
or '!'

(ii) any addition to or extension of an existing factory or
workshop;
E
provided that-

(i) in relation to a new unit whose date of starting produc-
tion falls before March 24, 1984, in clause (d) for the
F words "in India" the words "in Uttar Pradesh" shall be r
deemed to have been substituted; .
~

(ii) in relation in a new unit whose date of starting produc-
tion falls before August 27, 1984 and the capital invest-
ment wherein is not less than three lakh rupees, the
G condition of registration or application for registration
under the Factories Act, 1948, shall not apply;

(iii) In relation to a new unit whose date of starting production Jo-

falls before March 6, 1986, the condition regarding lease
H for a period of not less than seven years shall not apply.
C.I.T. v. INDUSTRIAL COAL ENTERPRISES [SRINIVASAN, J.] 877

,., (c) the unit in relation to which the application for under A
che Factories Act, 1948 is made on and the registration
is granted with effect from, a date later than the date
of commencement of the period of facility notified
under sub-section (1), shall be deemed to be new unit
for entitlement to the facility of exemption from or
reduction in the rate of tax notified under sub-section
B
..\ (1) only for part of period, notified under sub-section
-: (1), be computed from the date from which such
registration becomes effective, till the end of the period
of such facility".
c
The remaining part of the Section is omitted as unnecessary.

2. The relevant Notification prevalent at that time was in the follow-
ing terms:

-4'
(64) D

Not. No. ST-11-604/X-9(208)/81-U.P. Act 15/48-0rder/85, dated
29th January, 1985.

(Published in U.P. Gazette Extraordinary, dated 29th January,
1985), E

Whereas the State Government is of the opinion that it is necessary
so to do for promoting the development of industry in. the State
generally and in certain districts and parts of districts in particular;

-t Now, therefore, in exercise of the powers under section 4-A of the F
-.... U.P. Sales Tax Act, 1948 (U.P. Act No. XV of 1948), read with
section 21.of the U.P. General Clauses Act, 1904 (Act No. 1 of
1904), and in supersession of Notification No. ST-11- 6468/X-
9(208)/81-U.P. Act XV/48-0rder-84, dated August 27, 1984 (S.No.
55), the Governor is pleased to declare that, in respect of any goods
manufactured in an industrial unit, which is a new unit as defined
G
in the aforesaid Act of 1948 established in the areas mentioned in
column 2 of the Table below, the date of starting production
j whereof falls on or after the first day of October, 1982, but not
later than thirty-first day of March, 1990, no tax under the aforesaid
Act of 1948, shall be payable by the manufacturer thereof on the H
1
878 SUPREME COURT REPORTS [1999) 1 S.C.R.

A turnover of sales of shall of such goods for the period specified in
column-3 against each, which shall be reckoned from the date of
sale, if such sale takes place not later than six months from the
,...
- '

date of starting production, or, in other cases, from the date
following the expiration of six months from the date of starting
production subject to the condition that the said industrial unit has
B not discontinued production of such goods for a period exceeding
six months at a stretch in any assessment year. ).

<:
TABLE

c S.No. Location of Unit Period of Exemption
1. In case of unit with In case of units with
capital investment capital investment
not exceeding 3 lakh not exceeding 3 la\<h
rupees rupees

D 1 2 3(a) 3(b) .....

1. The Districts of Banda Five years Seven years
Jalaun, Hamirpur, Jaunpur,
Fatehpur, Pauri Garhwal,
E Tehri Garhwal, Chamoli,
Uttar Kashi, Sultanpur and
Kanpur (Rural), Almora,
Pithoragarh, Nainital &
Dehradun.
F
2. The Districts of Azamgarh, Four years Six years. +
~
Bahraich, Ballia, Barabanki,
Basti, Budaun, Bulandshahr,
Deoria, Etah, Etawah,
Faizabad, Farrukhabad,
G Ghaziabad, Gonda, Hardoi,
Jhansi, Mainpuri, Mathura,
Moradabad, Pilibhit,
Pratapgarh, Rai Bareli,
-""
Rampur, Shahjahanpur,
H Sitapur and Unnao.
-r
C.I.T. v. INDUS1RIAL COAL ENTERPRISES (SRINIVASAN, J.] 879

3. The Districts of Agra, Three years Five years A
Aligarh, Bijnor, Ghaziabad,
Gorakhpur, Kanpur, (Urban),
Lakhimpur-Kheri, Lalitpur,
Lucknow, Meerut, Mirzapur,
Muzaffarnagar, Saharanpur
and Varanasi.

Explanation - For the purposes of this notification. -

(1) "Industrial Unit" means an industrial unit holding permanent
registration with the Directorate of Industries, U .P. as a small,
handloom or handicraft industry of an industrial licence granted
by the Iron and Steel Controller or the Textile Commissioner or
the Director General of Technical Development or the Govern-
ment of India; and

(a) registered under the India Factories Act, 1948, or es-
tablished after obtaining a Term Loan from the U.P.
Financial Corporation or a Scheduled Commercial
Bank, in the case of units with a capital investment not
exceeding three lakh rupees; or

(b) registered under the India Factories Act, 1948 or having
applied for registration under the said Act and
deposited the required fee for the purpose, in the case
of units other than those refer.red to above;

(2) "Date of starting production" and "new unit" shall have
the same meaning as assigned to them in the Explana-
..... tion to section 4-A of the U.P. Sales Tax Act, 1948; and

(3) "Capital Investment" means investment in land, build-
ing, plant machinery, equipments and apparatuses.

3. The facts of the case are as follows :

The respondent had a manufacturing unit in Moradabad registered
--.i both under the provisions of the Act and the Central Sales Tax Act, 1956.
It was also registered with the Directorate of Industries as small scale unit
for the manufacture of coal- briquettes. The unit was established in the
880 SUPREME COURT REPORTS [1999) 1 S.C.R.

A beginning in a rented premises for which a lease deed for seven years was '.""
..-
registered with effect from 1.1.1985. It was granted a term loan of Rs.
30,000 from the State Bank of Patiala, Moradabad. The first date of
purchase of raw material was 9.2.1985 and the unit started production on
15.2.1985 with the help of a new generator. The first date of sale of the
finished product was 1.10.1985. It is not in dispute that the first date of
B production as defined in the Rules under the Act was 9 .8.85 i.e. after six
months from the date of purchase of raw material. Thus the unit was J(

admittedly entitled to exemption from sales tax w.e.f. 9.8.1985 as it fulfilled ...:::
all the prescribed conditions. The unit applied for exemption under the
Act on 20.12.1985 since its capital investment was much below Rs. 3 lakhs.
c Later on, the respondent changed the place of manufacturing from the
rented premises to a new site purchased and owned by it. The unit
remained closed from 23.7.1986 to 31.7.1986 for the purpose of shifting
machines to the new premises. The production started in the new place
from 1.8.1986.
D 4. As a result of purchase of new site and construction of own )>

building, the capital investment of the unit increased to Rs. 3,86,299. The
unit applied for registration under the Factories Act, 1948 which was
granted w.e.f. 11.8.1989. The application for exemption from sales tax filed
by the unit on 20.12.85 was considered by the Divisional Level Committee,
E Moradabad on 30.1.1990 and the Joint Director of Industries, Moradabad
issued sales tax exemption certificate vide his letter date 10.4.1990. Such
exemption was granted from 9.8.1985 to 22.7.1986 the date till which the
capital investment of the unit was below Rs. 3 lakhs. The authorities took
the view that the capital investment of the unit having increased to an
F amount exceeding Rs. 3 lakhs, the registration of the unit under the
Factories Act was necessary for the purpose of exemption and as such +-
registration was effective only from 11.8.1989 the unit was not entitled to ,.....
exemption between the period 23.7.1986 to 10.8.1989, but the total period
of four years for which the unit would be entitled to exemption under the
relevant Notification having expired on 8.8.1989, the unit was not entitled
G to any exemption beyond 22.7.1986.

5. Aggrieved by the said order, the respondent filed a review applica-
tion date 16.4.1990 which was rejected by order dated 7.7.1990. The said
>
order was challenged by the respondent in a writ petition before the High
H Court of Judicature at Allahabad. The High Court by its judgment dated
C.LT. v. INDUSTRIAL COAL ENTERPRISES [SRINIVASAN, J.] 881

... 25.11.1992 allowed the writ petition and quashed the impugned order. The A
concerned authority was directed to modify the eligibility certificate issued
to the respondent as one for a period of four years from 9.8.1985. The
reasoning of the High Court is that the relevant date for fulfilling the
conditions prescribed for grant of P,Xemption is the date from which the
unit became eligible in the first instance for such exemption and in this
case admittedly it was 9.8.1985. The High Court held that in this case the
B
investment having increased to an amount more than Rs. 3 lakhs merely
"' because of the shifting of the unit from one place to another, it would not
disentitle the respondent to have the benefit of exemption continuously for
a period of four years from 9.8.1985. The High Court arrived at that
conclusion by construing the provisions of Section 4-A of the Act quoted c
earlier. The Commissioner of Sales Tax has preferred this appeal by
Special Leave.

6. Admittedly the provisions for exemption from sales tax have been
introduced in the Act for the purpose of increasing the production of goods
...,,
D
and for promoting the development of industries in the State. In fact, when
,.. the scheme called "Grant of Sales-tax Exemption Scheme 1982 to industrial
units under Section 4-A of the Sales-tax Act" was originally framed, it was
expressly stated that the Government granted the facility of exemption in
order to encourage the capital investment and establishment of industrial
units in the State. The Scheme contained various rules for grant of such cE
exemption. The Section itself has referred to the purpose for which the
Government could grant such exemption. Sub-s. (1) of Section 4-A
prescribes the maximum period for which the exemption could be granted
as 7 years. As per the section, such exemption should commence from the
date of first sale by such manufacture if such sale takes place within six
months from the date of starting production and in any other case from F
-;
the date following the expiration of six months from the date of starting
'
production. The expression "date of starting production" has been defmed
in the Explanation as the date on which any raw material required for use
in the manufacture or packing of the goods is purchased for the first time.
The term "new unit" used in the Section has also been defined in the
G
Explanation. It is admitted that the respondent fulfilled the relevant con-
ditions at the time when it applied for exemption as its capital investment
did not exceed Rs 3 lakhs. Under the Notification extracted earlier, the
j period of exemption in case of unit with capital investment not exceeding
Rs. 3 lakhs was four years. Such period was to be reckoned from the date
of frrst sale if such sale took place not later than six months from the date H
882 SUPREME COURT REPORTS [1999] 1 S.C.R.

A starting production and in other cases from the date following the expira-
tion of six months from the date of starting production subject to the
condition that the unit had not discontinued production of such goods for
a period exceeding six months at a stretch in any assessment year. Neither
the Section nor the Notification contains any condition that if the capital
investment of the unit exceeds Rs. 3 lakhs after the grant of exemptioI!,
B such exemption would cease to operate unless and until the conditions
prescribed. for units having capital investment exceeding Rs. 3 lakhs are :J
fulfilled. In the absence of such express provision there is no warrant for
the stand taken by the appellant that after 23.7.1986 the unit was not
entitled to the benefit of exemption as its capital investment exceeded Rs.
C 3 lakhs from such date.

7. According to learned counsel for the appellant, the provisions of
an exemption clause should be strictly construed and if the conditions
under which exemption was granted stood changed on account of sub-
sequent even, the exemption would not operate. In support of his conten-
D tion that provision for exemption from payment of tax should be strictly
construed, reliance is placed upon the judgment of this Court in State Level
Committee and Another v. Morgardshummar India Ltd., [1996] 1S.C.C.108.
A Bench of two Judges of this Court relied upon an earlier decision of
Three Judge Bench in Novopan India Ltd. v. Collector of Central Excise
E and Customs, [1994] Supp. 3 S.C.C. 606 and held that an exception or an
0 exempting provision in a taxing statute should be construed strictly and it

is not open to the Court to ignore the conditions prescribed in Section 4-A
of the Act and extend the exemption. Though the decision pertains to
exemption under Section 4-A of the Act, the facts of the case are entirely
different and the ruling has to be understood in the context thereof.
F
8. Our attention has also been drawn to another case under Section
4-A which came up before this Court in Pappu Sweets and Biscuits and
Another v. Commissioner of Trade Tax, U.P. Lucknow, [1998) 7 S.C.C. 228.
Far from helping the appellant, the ruling can be used against the appellant
G as it is held that the object of the relevant Exemption Notification and the
intention of the State Government in granting exemption are to be taken
into account for interpreting the word 'sweetmeat" and the words "condi-
tions of like nature".

9. Learned counsel for the appellant relied upon the decision of this
H Court in Divisional Level Committee and Another v. Sahu Stone Crushing
C.I.T. v. INDUSTRIAL COAL ENTERPRISES [SRINIVASAN, J.] 883

A
Indust1ies, [1998] 8 S.C.C. 435. In that case, it is held that the provision in A
Section 4-A(5) © requiring registration of the unit under the Factories Act
if the capital investment exceeds Rs. 3 lakhs is mandatory. The Bench
reversed the judgment of the High Court reported in M/s. Sahu Stone
011shing Industlies v. Divisional Level Committee, Jha11si, (1994) U.P.T.C.1.
which took the view that the expression "shall" in the Section could be read
as "may". The ruling has no relevance in the present case as the industrial
B
A unit in that case was established in November, 1986 and the date of first
,- sale was 3.12.1986. The Court had to consider Section 4-A after it was
amended w.e.f. 13.9.1985 under U.P. Act No. 28 of 1991. The said amend-
ment Act inserted sub-s. (5)©. We are in this case concerned with the
Section as it stood on 9.8.1985 before the said amendment. c
10. Learned counsel for the appellant argues that the subsequent
legislation could be taken for the purpose of guidance for interpreting the
provisions in the Act as it stood earlier. We are unable to accept this
contention. It is pointed out by the Court of Appeal in England in Attomey
.,,, Ge11eral v. Clarkson, (1900) 1 QB 156 that subsequent Legislation may be
D
looked at in order to see the proper construction to be put upon an earlier
Act where that earlier Act is ambiguous. Lindley M.R. said, "Our duty is
to interpret the mea11ing of the Legislature, and if the Legislature in one Act
have used language which is admittedly ambiguous, and in a subsequent Act
have used la11guage which proceeds upon the hypothesis that a palticular E
interpretation is to be placed upon the earlier Act. I think the judges have no
choice but to read the two Acts together, and say that the Legislature have
acted as their own interpreters of the earlier Act." There is no such situation
here. The subsequent Act relied on by learned councel is one of amend-
ment and it may be remedial. Moreover, in this case, there is no ambiguity
F
in the provisions of the Act as it stood at the relevant time warranting an
interpretation by the Legislature. Hence the subsequent Legislation intro-
duced in 1991 with effect from 13.9.85 will not help the appellant.

11. In Commissioner of Income-tax, Am1itsar v. Straw Board Manufac-
tuling Co. Ltd., [1989] Supp. 2 S.C.C. 523, this Court held that in taxing G
statutes, provision for concessional rate of tax should be liberally con-
strued. So also in Bajaj Tempo Ltd. Bombay v. Commissioner of Income-tax,
.. Bombay City-III, Bombay, [1992] 3 S.C.C. 78, it was held that provision
granting incentive for promoting economic growth and development in
taxing statutes should be liberally construed and restriction placed on it by H
884 SUPREME COURT REPORTS [1999] 1 S.C.R.
A way of exception should be construed in a reasonable and purposive
manner so as to advance the objective of the provision.

12. We find that the object of granting exemption from payment of
sales tax has always been for encouraging capital investment and estab-
lishment of industrial units for the purpose of increasing production of
B goods and promoting the development of industry in the State. If the test
laid down in Bajaj Tempo Ltd. case (supra) is applied, there is no doubt
whatever that the exemption granted to the respondent from 9.8.85 when
it fulfilled all the prescribed conditions will not cease to operate just
-,
because the capital investment exceeded the limit of Rs. 3 lakhs on account
C of the respondent becoming the owner of land and building to which the
unit was shifted. If the construction sought to be placed by the appellant
is accepted, the very purpose and object of the grant of exemption will be
defeated. After all, the respondent had only shifted the unit to its own
premises which made it much more convenient and easie.r for the respon-
dent to carry on the production of the goods undisturbed by the vagaries
D of the lessor and without any necessity to spend a part of its income on
rent. It is not the case of the appellant that there was any mala fides on
the part of the respondent in obtaining exemption in the first instance as
a unit with a capital investment below Rs. 3 lakhs and increasing the capital
investment subsequently to an amount exceeding Rs. 3 lakhs with a view
E to defeat the provisions of any of the relevant statutes. The bona fides of
the respondent have never been questioned by the appellant.

13. In the circumstances, we have no hesitation in agreeing with the
view expressed by the High Court. The appeal fails and is dismissed. There
will be no order as to costs.
F
v.s.s. Appeal dismissed.
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