Insecta Pesticides vs Commissioner of Trade Tax

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Sudhir Agarwal, J.—Heard Sri Rakesh Ranjan Agarwal, learned counsel for the revisionist and learned standing counsel for the respondent. The two questions of law involved in the matter are:

"(i) Whether for the purpose of eligibility for exemption of tax under section 4A in the case of diversification the assessee was required to satisfy requirement pertaining to land with regard to its ownership and tenancy for seven years contemplated in section 4A, Explanation (1) or it is governed by section 4A, Explanation (5)?

(ii) Whether liquid pesticides and powder pesticides manufactured by the assessee-revisionist are one and the same thing as held by Revenue or different?

So far as question No. (i) is concerned, this court finds that requirement relating to land, building, etc., are contemplated in Explanation (1) in the context of a new unit but in respect of units which are already existing but have undergone expansion, diversification or modernization, the matter is governed by Explanation (5), which reads as under:

"(5) ''Unit which has undertaken expansion, diversification or modernization'' means an industrial undertaking--

(a) of a dealer who is not defaulter in payment of any dues under this Act or the Central Sales Tax Act, 1956 or under the Sales Tax Loan Scheme administered by the Pradeshiya Industrial and Investment Corporation of Uttar Pradesh;

(b) which has undertaken a programme of expansion, diversification or modernization at any time after March 31, 1990;

(c) the production capacity whereof has increased by at least twenty-five per cent, as a result of expansion or modernization, or wherein goods of a nature different from these manufactured earlier are manufactured after diversification;

(d) wherein an additional fixed capital investment of at least twenty-five per cent, of such original fixed capital investment (without providing for depreciation) is made."

There I do not find any requirement with respect to land or building and to my mind the Tribunal has erred in law in going into the question of lease deed and its registration, etc., as that would have been a requirement, had it been a case of a new unit governed by Explanation (1) but in the present case the revisionist-assessee was claiming certain benefits as a result of expansion and diversification of an existing industrial undertaking, hence the requirement of Explanation (1) could not have been read under Explanation (5), particularly in absence of anything available in the statute book permitting to do so.

The question No. (i), therefore, is answered in favour of the assessee and it is held that it was required to satisfy the requirements contemplated in Explanation (5) and the requirement under Explanation (1) have wrongly been taken into account by the Tribunal in the impugned order, as the same is not applicable.

Now I come to second question, whether liquid pesticides and powder pesticides are one and the same thing.

In this regard my attention is drawn to the raw material used for preparation of two forms of pesticides, i.e., liquid and powder, by referring to annexure 10 to the revision, which has been issued by Plant Protection Officer, Muzaffarnagar and it says that for production of dust (powder) pesticides, nature of B.H.C., malathyne, methyl parathyne/D.P. are used. The ingredients used are different than what are used in liquid pesticides. It reads as under:

Similarly, the machines which are used for manufacturing powder pesticides and liquid pesticides are stated differently and the same are as under:

The Tribunal has held that the two types of pesticides are same on the ground that it is only the change of form and nothing else but to my mind this inference, as such, in its totality, is not correct. It is no doubt true that apparently the term powder pesticides and liquid pesticides suggest that there is only a difference of form of manufactured items but in fact the two types of items have different utilities, sometimes different ingredients and the machines used for their preparation obviously are different. When the machines are different and investments is made in different kind of plants and machines for extending manufacturing to different form of pesticides, it cannot be said that there is no diversification or expansion of industrial establishment.

It is also said that the user of dust pesticides has different constituents than that of liquid pesticides. A better and more akin illustration one can have is from the fact that when a medicine is prepared in the form of a tablet or capsule or liquid form or in injection form, though the basic medical ingredients may be the same but the kind of precaution in manufacturing of different kinds of medicines, machines and other legal requirements are concerned, they are all different. It cannot be said that a person, manufacturing a particular compound in tablet form, if starts manufacturing the same compound in injection form, there is no change and it is one and the same thing. Moreover a different form of a particular item per se cannot be said that it amounts to manufacturing the same item. On the face of also, it amounts to manufacturing an item with expansion of industrial establishment for the reason that machines, plants; and other items will have to be added so as to go for manufacturing different form of item.

Even applying the doctrine of common parlance, when a person demands a particular pesticides in a particular form, the supplier does not make him available the item in whatever form he had. In common parlance also, therefore, the dust pesticides and liquid pesticides are treated differently. At least in this regard no otherwise finding has been recorded by the Tribunal and in fact it has gone only on the aspect that since the two things are different in forms only, therefore, they are same. This approach on the part of the Tribunal is totally erroneous and in any case the inference drawn by the Tribunal also cannot be upheld.

Question No. (ii), therefore, is answered in favour of the assessee and against the Revenue holding that liquid pesticides, sought to be manufactured by the assessee, cannot be treated to be the same item, i.e., powder pesticide, which he was earlier manufacturing and it cannot be said that there was no expansion or diversification of unit by going to manufacture liquid pesticides in addition to powder pesticides. In view of the above, the writ petition is allowed. The impugned order of the Tribunal is hereby quashed. The matter is remanded to the Tribunal to pass consequential order in the light of above observation and in accordance with law.