Full Judgment Text
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CASE NO.:
Appeal (civil) 2188 of 2002
PETITIONER:
M/s. Tata Iron & Steel Co. Ltd.
RESPONDENT:
State of Jharkhand & Ors.
DATE OF JUDGMENT: 25/08/2004
BENCH:
N Santosh Hegde & A K Mathur
JUDGMENT:
J U D G M E N T
(With SLP ) No.9942/2003, 15419 of 2004, CA
No.1912/2004)
SANTOSH HEGDE, J.
CA No. 2188/02 :
The appellant in this apeal has challenged a judgment of
the High Court of Jharkhand, Ranchi, made in Civil Writ
Jurisdiction Case No.1426 of 2001 dated 30.8.2001 whereby
the High Court remanded the matter to the Commissioner of
Commercial Taxes, Jharkhand, to re-examine the question
whether in fact the appellant in its newly established industry
manufactures a product which is commercially different from
the product manufactured in its pre-existing unit of
manufacturing Hot Rolled Product (HRP).
The facts giving rise to this appeal, briefly stated for the
limited purpose of disposal of this appeal, are as follows :
The appellant company had established a manufacturing
unit for production of HRP, Rounds, Structurals and other iron
and steel products in Dhanbad which was then in the erstwhile
State of Bihar. The State of Bihar in the year 1995 evolved a
new industrial policy with a view to create an environment
conducive to growth of industries in the State and to utilise to
its optimum advantage all the resources available in the form of
surface and ground water, fertile land, mineral wealth,
disciplined and skilled manpower etc. By the said policy the
Government tried to attract investors from various parts of the
country to invest in identified thrust areas, as also for creation
of essential infrastructure including private generation. One of
the areas which the said industrial policy sought to develop was
in the field of metallurgical industries. As an incentive to attract
investment in the State among others, the said policy provided
for sales-tax incentives which included (exemption for new
units in category ’B’ districts) 8 years’ sales-tax exemption on
sale and purchase of materials from the date of commencement
of production by such units located in category ’B’ districts. In
pursuance of the said policy, necessary exemption notifications
under section 7 of the Bihar Finance Act, were also issued.
The appellant having noticed the incentives offered by
the State Government, by letter dated 30.4.1997 intimated the
then Chief Minister of the State that it has a plan for installing a
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Cold Rolling Mill in Jamshedpur in which a sum of Rs.2,000
crores was to be invested if the financial climate in the State
was favourable. Therefore, before taking a final decision in this
regard, it sought a confirmation from the State of Bihar as to its
commitment to grant sales tax exemption as stated above. By
that letter the appellant also requested the Chief Minister to
authorise the Secretary of the Department of Industries and
other officials of the State to have a discussion with the
appellant about the plan in detail and to guide the appellant in
the manner in which it could enjoy the benefits of sales-tax
incentives.
Pursuant to the above request letter of the appellant, a
meeting of the High Power Committee under the Chairmanship
of the Chief Minister was summoned on 21.7.1997. Among the
persons present at the meeting were the Minister for
Commercial Taxes, Chief Secretary, Commissioner of Finance,
Secretary of Industrial Department, Commissioner of
Commercial Taxes and Director of Industries, Bihar, who were
also the members of the said High Power Committee. In the
said meeting the letter written by the appellant came to be
discussed and a decision was taken that even existing industries
which go in for diversification with an additional capital of
Rs.500 crores shall be deemed to be treated as new units and all
the benefits under the Industrial Policy of 1995 will be made
available to them. It is pursuant to the said decision of the High
Power Committee that a resolution was passed by the
Government of Bihar amending the Industrial Policy
Resolution, 1995 bringing it in conformity with the decision
taken at the meeting of the High Power Committee on
21.7.1997.
Subsequent to the above referred amendment, the
Commissioner and Secretary, Government of Bihar,
Department of Industries, wrote a letter on 11.11.1997 stating
that the Government has taken a decision that any investment
over Rs.500 crore would be taken as an
expansion/diversification or a new unit, as such the appellant
company will be entitled to all the reliefs under the Bihar
Industrial Policy. In the said letter the Secretary also expressed
the hope that the appellant will take necessary steps to set up a
unit in Bihar as soon as possible. As a follow-up action on
10.1.1998, the Director of Technical Development, Department
of Industries, State of Bihar wrote to the appellant expressing
the happiness on the decision of the appellant to put up a Cold
Rolling Mill of 1.2 million tons per annum capacity and
requested the appellant to go ahead with the project
implementation and to keep the Government informed of the
progress in this regard. By a letter dated 16.4.1999 the
Commissioner and Secretary, Government of Bihar, re-assured
the appellant that the Central sales-tax and Bihar sales-tax both
will be exempted as provided in the policy in regard to the
purchase and sale of Cold Rolling Mill. The said letter also
assured that if production in the new unit of the appellant
started in the year 1997 such benefit of exemption would be
available up to the year 2005. It also assured that even if the
industrial policy expired the facilities granted to the appellant
will continue till a period of 8 years from the date of
production.
On 2.3.2000 exercising the power conferred under sub-
section 3(b) of section 7 of the Bihar Finance Act, 1981, an
amendment was brought about in the notification which came
into existence pursuant to the industrial policy of 1995. This
amendment also provided the benefit to the new industries
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which came into existence by way of expansion/modernisation/
diversification provided the investment in such expansion/
modernisation/diversification was done on an additional
investment of Rs.500 crore. On 20.5.2000 pursuant to a
decision taken on 26.4.2000 by the Commissioner, Finance,
Director of Industries, Bihar, conveyed to the appellant that the
Government has granted approval for setting up of Cold Rolling
Mill with production capacity of 1.20 million tons on an
investment of Rs.1874.04 crores put by the appellant on this
project. On 9.8.2002, the Director Technical Development,
Department of Industries (Director of Technical Development)
wrote to the appellant that the team of Technical Officers
constituted by his Department to determine the date of
commercial production of appellant’s Cold Rolling Mill made
the site verification and examined the related papers, thereafter,
they had submitted a report of inspection observing that the
date of commercial production has been recommended as
1.8.2000, hence, the commercial production at CRMs is
declared as from 1.8.2000.
From the above, it is noticed that relying on the industrial
policy of the Government of Bihar of 1995 and the assurance
given by the Government pursuant to the said policy and the
notification made thereunder, the appellant invested nearly
Rs.2000 crores on its new unit for the manufacture of CRMs,
the commercial production of which commenced from 1.8.2000
which was verified by the Technical Officers of the Department
of Industries, Bihar and certified as such by them.
On 15.11.2000 under the Bihar Re-organisation Act,
2000, a part of Bihar which included Jamshedpur, became a
new State named as Jharkhand State. On 15.12.2000 by a
notification, the Governor of Jharkhand ordered that the Bihar
Finance Act, 1981, Central Sales Tax (Bihar) Rules, 1956 and
the notification made thereunder, among other Acts, Rules and
Regulations, shall be deemed to be in force in the entire State of
Jharkhand w.e.f. 15.11.2000.
On 21.12.2000, the successor State, namely, the State of
Jharkhand issued the exemption certificate as contemplated
under Notification Nos.478 and 479 dated 22.12.1995 by the
Bihar State Finance (and Commercial Tax) Department
exempting the new unit of the appellant from purchase tax as
well as sales-tax on purchases and sales made in regard to the
Cold Rolling Mill. This was pursuant to an order made by the
Joint Commissioner of Commercial Taxes dated 16.12.2000
wherein after an elaborate inquiry and after hearing the
departmental representatives, the Joint Commissioner came to
the conclusion among other findings that the product
manufactured by the appellant in its new unit is entirely a new
product called Cold Rolled Products while the product
manufactured in its old unit was a separate product called
HRPs; both of which required distinctly different
manufacturing processes and equipments. He also held that
though the raw-material for the manufacture of CR product is
HR product, the CR product is totally different both in its
metallurgical components, the end-use, and the two products
were commercially recognised as different products, hence, the
Cold Rolled Products manufactured by the new unit being
different from the Hot Rolled Product manufactured by the old
unit, the appellants were entitled to exemption of sales-tax as
provided under the industrial policy and the notifications,
therefore, he approved the issuance of certficate.
However, the Commissioner of Commercial Taxes,
Jharkhand, initiated suo motu revision purporting to act under
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section 46(4) of the Bihar Finance Act against the said approval
granted by the Joint Commissioner and after an inquiry and
hearing the parties concerned, came to the conclusion that the
hot rolled steel i.e. the HR product and cold rolled steel i.e. the
CR product have to be treated as one and the same commodity
for the purpose of levy of tax, therefore, the appellants are not
entitled to the sales-tax exemption. In this process, he did not
disagree with the finding of fact arrived at by the Joint
Commissioner as to the nature of product and how they are
different but relied on an entry found in the Schedule to section
14 of the Central Sales Tax Act, which enumerated both hot
and cold rolled products in the same entry. Then relying on a
judgment in Telengana Steel Industries [93 STC 187(SC)] held
merely because the two products are found in the same Entry in
the Schedule to the Central Sales Tax Act, both the products
will have to be treated as the same. Though it was pointed out
to the Commissioner that the judgment of this Court in
Telengana’s case (supra) was subsequently held to be contrary
to an earlier Constitution Bench judgment of this Court and
declared to be not good law in K.A.K. Anwar & Co. v. State of
Tamil Nadu [108 STC 258 (SC)], the Commissioner seems to
have lost sight of the same and chose to rely upon Telengana
Steel (supra) to come to the conclusion that the two products
must be treated as the same commodity merely because they are
found in the same Entry in the Act for the purpose of levy of
sales-tax and if that be so under the policy and the notification
unless the products are two different commodities the benefit of
exemption was not available.
Being aggrieved by the said order of the Commissioner,
the appellant preferred a civil writ petition before the High
Court of Jharkhand. The High Court by the impugned
judgment, accepted the appellants’ case in all other respects
including the effect of the judgment of this Court in K.A.K.
Anwar & Co.’s case (supra) and came to the conclusion that
merely because two commodities are shown in the same Entry
in the Central Sales Tax Act, it would not ipso facto make the
two commodities the same commodities. It also recorded the
concession made by the learned Additional Advocate General
appearing for the respondent-State who had submitted that all
other issues raised in the writ petition have to be answered in
favour of the appellant. The Court also held that the only issue
to be decided was whether on facts the HR product and CR
product manufactured by the two units of the appellant are one
and the same product or are two different products, and not on
the basis of law as held by the Commissioner.
On the above basis, the High Court without there being a
challenge to the finding of the Joint Commissioner as to the
comparability of the two products on facts, and which finding
being based on material produced before the said authority, still
remanded the matter to the Commissioner holding that the
appellant had not produced enough material whereby it could
be satisfactorily held that the CRM is a product commercially
different from HRM. It is because of this limited finding that
the appellant is now before us.
Mr. Dushyant A. Dave, learned senior counsel appearing
for the appellants, raised various grounds, attacking the
judgment of the High Court including the ground that after the
amendment which permitted diversification with an investment
of Rs.500 crore, nature of product manufactured by the new
product has no relevance for the purpose of promised
exemption. He also contended that the correspondence between
the State of Bihar and the appellant which culminated in the
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certificate of exemption granted by the successor State, clearly
shows that there was an unambiguous offer, if not a fervent
request by the State of Bihar to the appellant to invest large
sums of money in an industrial project for which all assistance
and exemptions as available under the 1995 policy were
promised by the State of Bihar and it was because of this
representation, request and promise that the appellant which
otherwise was thinking of putting up its project in other States
like Orissa, Gujarat etc. which also had promised certain
benefits, chose to come to Bihar and invest nearly Rs.2,000
crores. In such circumstances, the respondent-State is precluded
by the principle of promissory estoppel from retracting its
promise.
We, however, do not think it is necessary for us to go
into these questions since in our opinion as recorded by the
High Court in the impugned judgment, the only question that
arises for our consideration is whether the product
manufactured by the appellant in its new unit is a Cold Rolled
Mill product or as it is termed in some parts of the judgment
and orders as CRM or it is the same product as is being
manufactured by the appellant in its old unit which is known as
Hot Rolled Mill product or HRM.
In this regard, learned counsel for the appellant submits
the correspondence between the State of Bihar and the appellant
clearly shows that the new unit was being established for the
manufacture of CRM and the appellant had no intention to
increase the production of its HRM in the existing factory. It
accepted the proposal of the State Government to invest such a
huge amount of money because CRM is a new product used in
the manufacture of certain sophisticated equipments for which
HRM cannot be the raw-material. He submitted that from the
various reports furnished by the appellant making known the
process of manufacture, the inputs and the equipments required
for such manufacture, it is clear that the product they
manufacture in the new unit is only CRM. He further submitted
that even the report submitted after inspection by the
representatives of the Industries Department also establishes the
same fact. Learned counsel pointed out that the Joint
Commissioner while holding the two products to be different
commodities had considered various materials to come to the
said conclusion, and has given reasons for the same. He also
pointed out that the Commissioner in his suo motu revisional
order did not disagree with the Joint Commissioner on this
question of fact but on an erroneous interpretation of the
placement of the product in the same entry in the Central Sales,
and following an overruled judgment of this Court, the said
Commissioner came to an erroneous conclusion on a
technicality, therefore, the High Court having found that
technical reasoning of the Commissioner is unsustainable and
having noticed the concession of the Additional Advocate
General, it could not have allowed the writ petition on a ground
which was neither raised nor argued before it and remanded the
matter to the tribunal for a de novo inquiry by the
Commissioner which would only amount to the harassment to
the appellant.
Mr. Altaf Ahmad, learned senior counsel appearing for
the State of Jharkhand, however, contended that while it is true
that the only question which arose for consideration before the
High Court was in regard to the nature of product manufactured
by the new unit of the appellant. He contended that none of the
parties had led sufficient evidence for establishing this fact,
therefore, the High Court was justified in remanding the matter
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to the Commissioner with liberty to lead fresh evidence. He
submitted that the appellant would not be put to any prejudice if
really the product manufactured by it in the new unit is a new
product because it can establish its case before the
Commissioner. He also pointed out that this Court normally
does not interfere in an order of remand.
Having heard learned counsel for the parties, we think in
the facts and circumstances of this case, the High Court was in
error in remanding the matter to the Commissioner to decide
the question of fact which in our opinion was already
conclusively decided by the Joint Commissioner and not
disagreed on facts by the Commissioner. In this process, if we
see from the narration of facts recorded hereinabove that right
from the beginning, it is the case of the appellant that they
wanted to establish a new unit for the manufacture of CRM.
The correspondence also shows at every stage even the State
and the concerned Department accepted the proposal for the
said purpose. No case has been made out, leave alone an
attempt on behalf of the State has been made that the appellant
misled the Department or by any sort of camouflage tried to put
up a plant which only manufactures HRM. As a matter of fact,
it was not the case of the respondent-State that in fact the
product manufactured by the appellant in the new unit is not
CRM. It could not have been the case either because in our
opinion a careful reading of the letter of the Director of
Technical Developent, Bihar, dated 9.8.2000 wherein he has
referred to a team of Technical Officers who visited the unit of
the appellant, had reported that the commercial production was
CRM and on verification, production of the same was found to
have started hence they recommended that a declaration be
given in regard to the same w.e.f. 1.8.2000. These Technical
Officers who we must presume have seen the product, have
nowhere stated that the products manufactured were not CRM
nor has the respondent-State repudiated this letter or challenged
the correctness of the same.
As noticed above, even the Commissioner who initiated
suo motu revision, did not disagree with the finding of the Joint
Commissioner given on facts that the product is CRM. He only
proceeded on a technicality relying on an erroneous judgment.
In the writ petition filed by the appellant the State has filed a
counter affidavit. Even in the counter affidavit the factual
aspect of the product being CRM is not questioned nor do we
find any argument addressed on behalf of the respondent-State
before the High Court that the product manufactured by the
appellant in its new unit is not CRM. It is for the first time the
High Court having come to the conclusion that the finding of
the Commissioner based on the judgment of this Court in
Telengana Steel (supra) is erroneous, on its own proceeded to
examine the material available on facts to establish whether the
product manufactured by the appellant in its new unit is CRM
or HRM. Even the High Court on such material that was
available before it did not come to a definite conclusion that the
finding of the Joint Commissioner was erroneous but it
proceeded to weigh the quantity of evidence and thought it
more prudent to remand the matter to take more evidence in this
regard. We think in a writ petition filed under Article 226 or
227, the High Court ought not to have done such an exercise.
Mr. Altaf Ahmad, learned senior counsel cotnended that
the finding of the Joint Commissioner in regard to the nature of
product only refers to certain literature produced by the
appellant and certain feasibility report, project data and the
correspondence between the Government of Bihar and the
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appellant. This by itself according to learned counsel, would not
in fact indicate that the actual product that is manufactured by
the appellant is CRM. He submitted that the appellant ought to
have either by summoning the officers to the site or by other
materials established that the new unit produced only CRM and
not HRM.
We are unable to accept this argument either. First of all,
as noticed above, it is not the case of the State that the product
manufactured by the appellant in its new unit is not CRM. It is
not the case of the State that the existing unit either by its
machinery or by its process is capable of making HRM and not
CRM or is capable of manufacturing both. Of course, if such an
issue were to be raised the burden would have been on the
appellant to establish the same. When such an issue is not
raised it is not necessary for the appellant to establish that fact
by any such intrinsic evidence. The material produced before
the Joint Commissioner was in our opinion sufficient to decide
whether the product manufactured by the appellant is CRM or
not and the said Joint Commissioner having given a positive
finding and that finding having not been interfered with by the
Commissioner, we think the High Court erred in remanding the
matter for fresh inquiry.
It is true that normally as against an order of remand this
Court hesitates to interfere since there is always another
opportunity for an aggrieved party to establish its case. But in
this case we should notice the decision to establish an
industrial unit was initiated by the appellant as far back as in
the year 1997. Based on a promise made in the industrial policy
of the State of Bihar, at every stage the appellants tried to verify
and confirm whether they are entitled to the benefit of
exemption or not and they were assured of that exemption. It is
based on these assurances that the appellant invested a huge
sum of money which according to the appellant is to the tune of
Rs.2,000 crore but the State says it may be to the tune of
Rs.1,400 crore. Whatever may be the figure, the fact still
remains that the appellants have invested huge sums of money
in installing its new industrial unit. At every stage of the
construction, progress and installation of the machineries, the
concerned Government/authorities were informed and at no
point of time it was suspected that the new unit was going to
manufacture HRM. The process of manufacturing HRM and
CRM as could be seen from the experts’ opinion are totally
different and the material on record also shows that the plant
design for a new unit is for the purpose of manufacturing CRM.
These factors coupled with the fact that at no stage of the
proceedings which culminated in the judgment of the High
Court, the respondent-State had questioned this fact except for
the technical ground taken by the Joint Commissioner which is
found to be erroneous, we find ends of justice would not be
served by remanding the matter for further inquiry.
We are convinced that the issue before the High Court
was not whether in fact the new unit of the appellant
manufactures HRM or CRM. That being the case, the High
Court ought not to have raised the issue suo motu and remanded
the matter to the Commissioner.
For the reasons stated above, this appeal succeeds; the
impugned order of the High Court is set aside. We restore the
proposal made by the Joint Commissioner for grant of
exemption certificate to the appellant as also the exemption
certificates granted consequently.
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