Full Judgment Text
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CASE NO.:
Appeal (civil) 1912 of 2004
PETITIONER:
M/s. Tata Iron & Steel Co. Ltd.
RESPONDENT:
State of Jharkhand & Ors.
DATE OF JUDGMENT: 30/03/2005
BENCH:
B.P. Singh & S.B. Sinha
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NO. 2269 OF 2005
(@ SLP (C) No. 15419 OF 2004)
S.B. SINHA, J:
Leave granted in S.L.P. (C) No. 15419 of 2004.
Interpretation and application of the notifications bearing Nos. 65, 66
& 67 dated 12th January, 2002 issued by the State of Jharkhand pursuant to
the Jharkhand Industrial Policy, 2001 falls for our consideration in these
appeals which arise out of judgments and orders dated 12.8.2003 and
16.3.2004 passed by a Division Bench of the Jharkhand High Court whereby
and whereunder the writ petition filed by the Appellants herein was disposed
of with certain directions.
BACKGROUND FACTS :
The fact of the matter is being noticed from Civil Appeal No. 1912 of
2004.
The Appellant, an existing company within the meaning of
Companies Act, 1956, is a producer of saleable steel and other alloy
products having a production capacity of 17.4 lakh tons. It at all material
times was and still is producing steel through its Hot Rolled Mill (HRM). It
is registered as a dealer both under the Central Sales Tax Act, 1956 and the
Bihar Finance Act, 1981 (1981 Act). It was granted an industrial licence for
expansion of its existing industrial unit located at Jamshedpur for production
of steel to the extent of 21 lakh tons per annum.
EXEMPTION CLAIMED FOR NEW INDUSTRIAL UNIT :
The Government of Bihar issued an Industrial Policy in the year
1995. With a view to give effect thereto it issued two notifications bearing
Nos. 478 and 479 dated 22.12.1995 granting exemption to dealers in terms
of Section 7(3)(b) of the 1981 Act in respect of tax on purchase or sale of
certain goods manufactured by new/ expanded/ diversified/ modernized
units. Pursuant to or in furtherance of the said Industrial Policy as also the
notifications issued pursuant thereto, the Appellant herein undertook
diversification of its product \026 saleable steel by establishing a cold rolling
mill. On or about 10.1.1998, the Government of Bihar acknowledged that
the Appellant was ’going to diversify its plant’. In terms of the Bihar
Reorganisation Act, 2000, the State of Jharkhand was created with effect
from 15.11.2000, as a result whereof, inter alia, the 1981 Act was extended
to the State of Jharkhand.
The Appellant claimed benefits of the aforementioned notification
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Nos. 478 and 479 dated 22.12.1995 whereupon by an order dated
16.12.2000 the benefit of exemption in respect of its Cold Rolled Product
(CRP) was granted treating the ’diversified capacity’ as a new unit. Such
grant of exemption, however, was withdrawn by the Commissioner of
Commercial tax in exercise of its suo motu power of revision holding that as
both Cold Rolled Product and Hot Rolled Product find mention in the same
entry issued in terms of Section 14 of the Central Sales Tax Act, 1957, they
are not entitled to the benefits claimed.
Aggrieved, the Appellant filed a writ petition before the Jharkhand
High Court which was marked as CWJC 1426 of 2001. The Division Bench
of the High Court disposed of the said writ petition upon setting aside the
order of the Commissioner of Commercial Tax dated 3.4.2001 and remitting
the matter back to the Commissioner of Commercial Taxes for
reconsideration of the question as to whether the cold rolled product is a new
and distinct product vis-‘-vis hot rolled product.
An application for grant of Special Leave from the said order was
filed before this Court by the Appellant herein and leave having been
granted in the appeal, the matter was marked as C.A. No. 2188 of 2002.
This Court by judgment and order dated 25th August, 2004 [since reported in
(2004) 7 SCC 242] held that the product manufactured by the Appellant in
its new unit is a cold rolled mill (CRM) product and not hot rolled mill
product. It was opined:
"21\005Based 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. 2000 crores but the
State says it may be to the tune of Rs. 1400 crores.
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 Government/ authorities concerned 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 seem from
the experts’ opinion is 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 Commissioner which is
found to be erroneous, we find the ends of justice would
not be served by remanding the matter for further
inquiry."
EXEMPTION CLAIMED FOR EXISTING INDUSTRIAL UNIT :
In the meanwhile the State of Jharkhand declared its Industrial Policy
on or about 25.8.2001 for the period 15th November, 2000 to 31st March,
2005; para 28.1 whereof inter alia provided for set off / adjustment to
dealers in respect of new industrial units as well as the existing units. Para
28.2 provided for a uniform rate of tax @ 2% in view of the provision of set
off.
Three notifications bearing Nos. 65, 66 and 67 dated 12th January,
2002 were issued thereafter in terms of Sections 22, 23 and 13(1)(b)
respectively. S.O. 65 refers to facility of set off and adjustment on intra-
State sales. S.O. 66 refers to inter-state sales whereas S.O. 67 provides for
concessional rate of sales tax on purchase of raw material and other items at
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the rate of 2%. Such facility is to be allowed to those industrial units who
come under the purview of set off of tax.
The Appellant as regards its existing unit, viz., HRM applied for
eligibility certificate before the Deputy Commissioner of Commercial Tax
stating that it had been ’engaged in manufacture and sale activities of
various iron & steel products and other materials’. The said application of
the Appellant was rejected by the Deputy Commissioner of Commercial Tax
by an order dated 13.3.2002 opining that it being a dealer with one
registration under Sales Tax Laws, was not entitled thereto. The said order
came to be affirmed by the Commissioner of Commercial Tax by an order
dated 25.3.2003.
A writ petition thereagainst was filed which was marked as WP(T)
No. 2003 of 2003. By reason of the impugned judgment, while setting aside
the aforementioned orders dated 13.3.2002 and 25.3.2003 passed by the
Deputy Commissioner of Commercial Taxes and the Commissioner of
Commercial Taxes respectively, the High Court held (although not finally)
that the Appellant as a whole, including its diversification into CRP, is one
existing unit, but as the litigation in relation to CRP was pending before this
Court, the matter was remitted granting leave to the Appellant to make a
fresh claim under the Industrial Policy, 2001 on the premise that if it is
found not entitled to the benefit of 1995 Policy in respect of CRP, it would
be able to claim the benefit under the 2001 Policy of the State of Jharkhand.
CONTENTIONS :
Mr. Dushyant A. Dave and Mr. Gaurav Banerjee, learned senior
counsel appearing on behalf of the Appellant took us through the Industrial
Policy of the State of Jharkhand as also the aforementioned notification Nos.
65, 66 and 67 dated 12th January, 2002 and would submit:
(i) The Industrial Policy covers both new unit as well as existing units
and CRM having been treated to be a new unit, the High Court committed an
error in not directing grant of benefits to its HRM as an existing unit.
(ii) Such Industrial Policy as also the notifications having not referred to
’company’, ’assessee’ or ’dealer’, each unit of the Appellant was entitled to
the benefit of the notifications irrespective of the fact as to whether they are
new or existing units.
(iii) The notifications should be given a liberal construction having regard
to the object of the policy, viz. to optimally utilize the available resources of
the State in a planned manner and to accelerate the industrial development of
the State. CRM having a separate industrial licence having been set up for
manufacturing separate goods by going into commercial production which
may not be multiple ones, the High Court should not have laid too much
emphasis on Clause (6) of the notification as it was a machinery provision
and, thus, not a part of the policy.
Mr. Punit Dutt Tyagi, learned counsel appearing on behalf of the
Appellant in S.L.P. (C) No. 15419 of 2004, would contend that the
Appellant supplied gas to TISCO wherefor sales tax at the rate of 2% was
charged on the premise that it had already filed application for grant of set
off and/ or adjustment although the rate of tax was 3%. A writ petition was
filed as the State of Jharkhand stopped issuance of the concession forms on
the premise that it did not deposit the tax at the rate of 3%. It is accepted
that the fate of this appeal would depend upon the result of the first matter.
Mr. Sunil Gupta, learned senior counsel appearing on behalf of the
Respondents, would submit that :
(a) All the aforementioned three notifications dated 12th January, 2002
having been issued under Sections 22, 23 and 13(1)(b) of the 1981 Act; are
required to be construed in terms thereof.
(b) As the provisions of the 1981 Act envisage the company as an assessee,
exemptions can be claimed only by it as a whole and not in relation to each
of its units.
(c) Industrial Policy being a multi-faceted policy, although a diversified
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activity of the Appellant in terms thereof will be treated as a new unit, but
having regard to the statutory scheme and on proper reading of the
notifications, it has rightly been held by the High Court that the benefits of
adjustment and set off were available only to a dealer/ assessee as the State
exercised its jurisdiction only in terms of Sections 22 and 23 of the Act in
respect of entirety of its activities and the units belonging to it.
(d) Effective date in terms of the notification and Industrial Policy being
same in respect of both existing as well as new unit, the Appellant having
obtained the benefit in respect of its cold rolled mill was not entitled to any
further benefit by way of adjustment or set off in respect of its hot rolled mill
which was an existing unit.
(e) Eligibility clause contained in the Industrial Policy must receive strict
construction.
STATUTORY PROVISIONS
1981 Act
Section 2(e) defines ’dealer’ to mean any person who carries on the
business of buying, selling, supplying or distributing goods, directly or
indirectly, for cash, or for deferred payment, or for commission,
remuneration or valuable consideration which inter alia includes a company
which carries on such business.
Section 3 provides for charge of tax in terms whereof sales or the
purchase tax, as the case may be, is required to be paid by every dealer.
Such tax is payable to a dealer to whom clause (a) of sub-section (1) applies
on sales and purchases made inside Bihar on and from the date of
commencement of the 1981 Act and by a dealer to whom clause (b) of the
said sub-section applies on such sales or purchases made on or from the date
immediately following the day mentioned in the said clause (b). Sub-section
(9) of Section 3 provides that the provisions of the Central Sales Tax Act,
1956 shall apply for determination when a sale shall be deemed to have
taken place inside Bihar.
Section 7 provides for exemption. Section 7(3)(b) empowers the State
Government to exempt any dealer from payment of sales tax or purchase tax
by issuing an appropriate notification and subject to such conditions or
restrictions, as the case may be, inter alia sales of any goods or class or
description of goods to or by any class of dealers.
Section 12 provides for rate of tax whereas Section 13 provides for
special rate of tax on certain sales or purchases. Section 13(1)(b) of the
1981 Act reads as under:
"13. SPECIAL RATE OF TAX ON CERTAIN
SALES OR PURCHASES.
(1) Notwithstanding anything contained in this part
but subject to such conditions and restrictions as
may be prescribed -
(b) sales to or purchases by a registered dealer of
goods required by him directly for use in the
manufacture or processing of any goods for sale;"
Section 14 provides for registration of dealers. Section 16 mandates
filing of return by a dealer. Section 22 empowers the State Government to
permit any dealer, or class or description of dealers who are running
manufacturing units in the State of Bihar to adjust the amount of tax paid on
the purchases of raw materials which has been used for manufacture of
goods for inter-State sale against the tax payable on sale of finished product
within the State in such manner as may be laid down in the order allowing
permission, if it is satisfied that it is necessary to do so in the interest of
industrial growth.
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Section 23 similarly empowers the State Government to permit
adjustment or set off of tax in respect of inter-State sales.
Bihar Industrial Policy, 1995
The Industrial Policy of 1995 was issued by the State of Bihar with a
view to create an environment conducive to growth of industries in the State.
Clause 16.2 deals with sales tax on sale of finished goods for new
units, in terms whereof new units, in addition to the benefit of exemption /
set off of Sales Tax on purchases, will also have the option to choose
deferment or exemption of Sales Tax [both Bihar Sales Tax and Central
Sales Tax] on sale of finished goods for a period of 10 years for category ’A’
and 8 years for category ’B’ Districts from the date of production of the unit
with a ceiling of 100% of the fixed investment made by it.
Clause 16.3 of the said Policy reads as under:
"16.3 Units Undertaking Expansion / Diversification \026
Such units should be given identical treatment as new
units for their expanded/ diversified capacity and
incremental both in purchase of raw materials and for
sales tax on finished goods. All such incentives will be
admissible to such units which are covered by the
definition of expansion/ diversification as given in the
Annexure. Incremental production means:
"The incremental production shall mean the excess of
actual production over 2/3 of the originally installed
capacity or the highest production in 3 years immediately
preceding the year in which such expansion /
diversification commenced whichever of the two is
higher".
The said policy was to remain in force for a period of 5 years with
effect from September 1, 1995.
The following definitions mentioned in Annexure appended to the
said Policy and which are relevant for our purpose read as under:
"1. Effective Date: Effective date means the date of
which the provision of this Policy come into force i.e.
September 1, 1995. This policy will remain in force for 5
years from September 1, 1995.
2. Industrial Units/ Industrial Concern: Industrial Units/
concern means any unit/ concern or to be engaged in
manufacturing/ processing/ servicing industry belonging
to the following categories:
(a) Industries listed under the First Schedule of the
Industries (Development and Regulation) Act, 1951 and
amended from time to time.
(b) Thrust industries listed in para 15 of the Policy
Statement.
(c) Industries falling within the purview of the following
Boards/ Agencies:
(i) Small Scale Industries Board
(ii) Coir Board
(iii) Silk Board
(iv) All India Handloom and Handicrafts Board
(v) Khadi and Village Industries Commission
(vi) Any other agency constituted by the GOI or GOB
for industrial development\005.
3. Existing Industrial Unit: Existing Industrial Unit
means an industrial unit which has gone into production
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before the effective date.
4. New Industrial Unit: New Industrial Unit means an
industrial units which has come into production between
1st September, 1995 and 31st August, 2000.
7. Expansion/ Modernization / Diversification:
Expansion/ Modernization/ Diversification of an existing
industrial unit would mean additional fixed capital
investment in plant and machinery of 50% or more of the
undepreciated value of fixed capital investment in the
existing unit leading to incremental production capacity
which would not be less than 50% of the initial installed
capacity. In order to qualify for the sales tax incentives a
unit undertaking expansion/ modernization/
diversification should send intimation to the General
Manager, District Industries Centres or the Managing
Director, Industrial Area Development Authorities &
Deputy Commissioner Commercial Taxes as the case
may be in respect of Small Scale Industry or the Director
of Industries/ Director, Technical Development and
Commissioner Commercial Taxes in case of medium and
large industries before undertaking expansion/
modernization programme. Such intimation should be
accompanied by detailed expansion / modernization /
diversification proposal giving the specific period of
proposed investment."
S.O. 479 dated 2nd December, 1995 was issued by the State of Bihar
in exercise of its power under Clause (b) of Sub-section (3) of Section 7 of
the 1981 Act whereby and whereunder exemption was granted to those new
industrial units which started production from 1st September, 1995 to 31st
August, 2000 on the sales of finished goods produced by them under the
terms and conditions specified therein, clause (c) whereof reads thus:
"(c) For exemption from sales tax, industrial unit means
such unit which manufactures goods for sale and for the
purpose of it the meaning of "manufacture" shall be the
same as defined in part 1 of the Bihar Finance act, 1981
(Bihar Act No. 5 of 1981)"
Jharkhand Industrial Policy, 2001
We may, at this juncture notice certain provisions of Jharkhand
Industrial Policy.
"28.1 New Industrial Units as well as existing units
which are not availing any facility of Tax-deferment or
Tax free purchases of Tax free sales under any
notification announced earlier, shall be allowed to opt for
set off, of Jharkhand Sales Tax paid on the purchases of
raw materials within the State of Jharkhand only against
Sales Tax payable either JST or CST on the sale,
excluding stock transfer or consignment sale out side the
state, of finished products made out from such raw
materials subject to a limitation of six months or the
same financial year from the date of purchase of such
raw materials.
28.2 Clause 13(i)(b) of the Adopted Bihar Finance Act,
1981 provides for two (2) rates of concessional sales tax
on purchases of raw materials and other inputs. These
are 2% and 3% against Form IX. Both these rates will be
reduced to 2% in view of the provision for set off as
aforesaid."
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Definitions
Effective Date: Effective date means 15th November
2000 from which date the new State of Jharkhand has
been created, the date on which the provision of this
Policy come into force, i.e. November 15, 2000. This
Policy will remain in force till 31st March, 2005.
"Unit" means any industrial project in large and medium
scale having approval in the form of letter of intent,
industrial license or registration certificate, as the case
may be, under the Industries (Development and
Regulation) Act, 1951 (65 of 1951) or an
acknowledgement in the form of Secretariat for Industrial
Assistance reference number from Central Government
excluding those mentioned in the negative list of
industries at Annexure \026 III."
Explanations:
(i) For the purpose of concessions/ benefits relating to
sales tax, only such units shall be deemed to be industrial
units which carry on the business of manufacturing goods
for sale.
(ii) If any doubt arises as to whether a unit/ concern is an
industrial unit / industrial concern or not for the purposes
of this policy, the same shall be referred to a committee
headed by the Finance Commissioner with Industrial
Development Commissioner/ Secretary Industry and
Commercial Taxes Commissioner as its members and the
decision of the Committee shall be final.
Existing Industrial Unit: Existing industrial Unit means
an industrial unit which has gone into commercial
production before the effective date.
New Industrial Unit: New Industrial Unit means an
industrial unit which has come into commercial
production between 15th November, 2000 and 31st March,
2005."
Notifications:
We have noticed hereinbefore that the notifications No. S.Os. 65 and
66 dated 12th January, 2002 were issued respectively under Sections 22 and
23 of the Bihar Finance Act. As they are identically worded, we shall refer
only to S.O. 65, the relevant clauses whereof are as under:
"In exercise of powers conferred under section 22 of
Bihar Finance Act, 1981 (Bihar Act 5, 1981) (Adopted),
State Governments provides facility of set off to new
industrial units and existing units subject to the following
conditions and restrictions:
1. For permission of this:-
Industrial unit means such unit which \026
"Unit" means any industrial project of large and medium
scale having approval in the form of letter of intent,
industrial license or registration certificate, as the case
may be, under the Industries (Development and
Regulation) Act, 1951 (65 of 1951) or an
acknowledgement in the form of Secretariat for Industrial
Assistance reference number from Central Government
excluding those mentioned in the negative list of
industries at Annexure \026 III."
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Explanations:
(i) For the purposes of concessions/ benefits relating to
sales tax, only such units shall be deemed to be industrial
units which carry on the business of manufacturing goods
for sale.
(ii) If any doubt arises as to whether a unit/ concern is an
industrial unit/ industrial concern or not for the purposes
of this policy, the same shall be referred to a committee
headed by the Finance Commissioner with Industrial
Development Commissioner/ Secretary Industry and
Commercial Taxes Commissioner as its members and the
decision of the Committee shall be final.
2 Existing Industrial Unit \026 Existing Industrial Unit
means an industrial unit which has gone into commercial
production before the effective date.
3. New Industrial Unit \026 New Industrial Unit means an
industrial unit which has come into commercial
production between 15th November, 2000 and 31st March,
2005.
4. Meaning of Date of Production shall be:- The date of
start of production of an industrial unit shall mean the
date on which the unit actually starts commercial
production of the item for which the unit has been
registered. As regards the date of production of a SSI
unit, the certificate issued by the General Manager,
District Industries Centre or Managing Director,
Industrial Area Development Authority will be accepted.
In case of any dispute in the date of production the
decision of the Director or Industries in this regard shall
be final.
5. Meaning of Effective Date shall be \026 Effective date
means 15th November 2000 from which date the new
State of Jharkhand has been created. From this date
provision of this Policy shall be made effective. This
Policy shall remain in force till 31st March, 2005.
2. The facility of set off to the existing units shall be
available only to those units which are not availing any
facility like deferment of tax or tax free purchases or tax
free sales under any notifications announced earlier
before the effective date.
3. The Benefit of this facility shall be available only on
Jharkhand Sales Tax paid on Raw Material (for direct use
in Manufacturing Activities) purchased within the State
of Jharkhand under Section 13(1) (b) of Bihar Finance
Act, 1981 (adopted) against the Jharkhand Sales Tax
payable on sale excluding stock transfer or consignment
sale out side the state.
4. This set off shall be available on the finished products
manufactured from such Raw Material subject to
purchases within six month or the same financial year
from the date of purchaser of such Raw Material.
5. The benefit of set off under this notification shall be
available to only those Industrial Units which have been
issued eligibility certificate by the circle in charge
(commercial taxes) of that area.
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6(a) The verification of Monthly/ Quarterly return filed
by each of the Industrial Units shall be done by the
concerned Commercial Tax Officer. Every unit shall
enclose the photocopy of the purchase invoices along
with the return. After verification of returns and
purchase invoices, Commercial Tax Officers shall inform
the Industrial Unit as to how much amount of set off they
will adjust against the next returns.
(b) The competent Commercial Tax Officer after
verification of file shall inform the industrial unit in
writing within 15 days as to how much less or more
amount of set off has been done by them and how much
amount of set off they will adjust in the next return.
(c) Each of the Industrial Units along with its monthly/
Quarterly returns, they will file the following statements
in duplicate along with a declaration certifying there in
that the items shown in the purchase invoices have been
purchased by them and the same have been directly used
for production of products for sale."
ADMITTED FACT:
The Appellant started its cold rolled mill in terms of a fresh industrial
licence. It was granted a new industrial licence by the Ministry of Industry
of the Central Government on or about 9.11.1998 for manufacture of cold
rolled/ galvanized/ coated/ corrugated/ painted/ varnished steel sheets/ strips/
coils in the integrated steel plant for a proposed capacity of 1200000.00 ton.
It, in view of the judgment of this Court, as referred to hereinbefore, became
entitled to the benefit of set off and/ or adjustment from the tax paid on
purchase of raw materials in terms of Bihar Industrial Policy which was in
force for 5 years from September 1, 1995.
The Government of Jharkhand has declared its Industrial Policy on or
about 25.8.2001, the effective date therefor being 15th November, 2000. The
said Policy was put in force from 15th November, 2000. The Appellant’s
cold rolled mill as also hot rolled mill, thus, are existing units within the
meaning of the Jharkhand State Policy, in terms whereof if a benefit is
granted under one policy, no other benefit would be available.
INDUSTRIAL POLICY \026 RESTRICTED NEW UNITS ALONE :
The Industrial Policy of State of Jharkhand is a multi-faceted one. As
many as 20 strategies have been laid down therein. Emphasis therein has
been laid on the infrastructure inter alia having regard to the United Nations
Development Programme Co-operation Framework for India Report. The
mining and mineral base industries are in the forefront of the identification
of thrust areas. With that in view, under the heading "Commercial Tax
Reforms", clause 28.1 seeks to grant tax benefits both to new industrial units
as also existing units. Even under its notifications dated 12th January, 2002
issued under the provisions of the Bihar Finance Act, facilities of set off
both in relation to inter-State and intra-State sale are to be given to new
industrial units as also existing units. Thus, despite the fact that the
Appellant, as a juristic person is an assessee or a dealer within the meaning
of the 1981 Act; and, thus, was required not only to get itself registered as
such but also file one single return in respect whereof there may be one
order of assessment; but the same, in our opinion, does not prevent an
assessee from claiming separate tax exemptions and/ or other tax benefits
both in respect of its new industrial units as also its existing units. The
Industrial Policy permits the same.
HIGH COURT JUDGMENT :
The High Court in its impugned judgment held that the cold rolling
mill is an independent unit established by the company. The company
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sought the benefit of Industrial Policy, 2001 in respect of its units other than
cold rolling mill although all are existing units having gone into production
before 15th November, 2000.
Referring to the dictionary meaning of "Project" and "unit", it was
opined:
"So any industrial enterprise that is carefully planned and
designed to achieve a particular aim will be an industrial
project. Clause 6 of the Notification, SO 65 relates to the
verification of the returns filed by an industrial unit.
Sub-clause (c) thereof seems to suggest that an industrial
unit contemplated therein is a unit which files monthly/
quarterly returns, for, it provides that each of the
industrial units along with its monthly/ quarterly returns,
will file certain documents in duplicate regarding
purchases made and that they have been directly used for
production of the products for sale. It can be said that
clause 6 of the policy tends to support the submission of
the learned counsel for the Department that the industrial
unit referred to in the notification is the assessee or in this
case the company as a whole and not each of its
individual lines or components."
"No doubt, under the Industrial Policy, 1995, even a
diversification was treated as a new industry for the
purpose of benefit under that Policy. But here, there is
no such fiction. Here, what is contemplated is a new
industry that has come into existence or an existing
industry which has not claimed benefit under any of the
earlier notifications granting benefit pursuant to the
Industrial Policy. Merely because a unit is defined as
meaning any industrial project, it is not possible without
anything more, to accept the argument that the Cold
Rolling Mill of the Company should be treated as a
separate industrial project and the rest of the production
units of the company should be treated as different
individual industrial projects within the meaning of the
Notification, SO No. 65."
It was further held:
"Different lines of production or manufacture can in a
given circumstance be an industrial project, but if the
different lines are for achieving creation of the ultimate
marketable product of the Company, (the different
products may themselves be used as raw materials for the
ultimate product), then, can it be said that each branch or
line of production is an independent industrial unit?"
DETERMINATION :
The provisions of the statute must be assigned a meaning having
regard to the text and context thereof. In a given situation, it is possible to
hold that the cold rolling mill of the Appellant as well as its hot rolling mill
should be treated as separate industrial projects. It may also be possible for
an assessee to claim different exemptions under different heads if such a
situation exists or different fiscal benefits are granted to different units under
the same or different notifications. Only because the Appellant is a dealer,
that by itself cannot be a ground for denying to it fiscal benefits if it is
otherwise entitled thereto.
We do not agree with the High Court that the expression "industrial
unit" or "existing unit" should be used in a generic sense to indicate the
industry in its entirety and not each of its component.
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Despite the fact that Sections 22, 23 as also 13(1)(b) of the 1981 Act
refer to a dealer and Section 14 thereof refers to registration of dealers
mandating filing of return in respect of its activities, the same would not
mean that the State cannot grant the same or different benefits to different
units producing different products of the same assessee. The State has the
power not only to grant exemptions, but also direct such grant relating to a
class or description of goods. If the State has the power to issue a
notification, it has the power to amend, vary or rescind the same and
exercise such power from time to time as and when occasion arises therefor.
The notifications in question, however, are not exemption
notifications. They provide for set off or adjustment of tax. A dealer in
terms of the 1981 Act must be taxed but it may be granted exemption
therefrom in respect of certain items or adjustment or set off thereof in
relation to its particular products manufactured in a new or existing industry.
A notification may be issued under Sections 22 or 23 in respect of one or
more products or in respect of one or more units. However, whether a dealer
would be entitled to the benefit of set off unit-wise or not will depend upon
the language employed keeping in view the object the notifications seek to
achieve. It will not be proper for a court of law to prescribe limitations or
restrictions when there is none or vice versa.
The notification contemplates units which manufacture products for
sale. The Explanation appended to Clause 1 expressly provides "For the
purposes of concessions/ benefits relating to sales tax, only such units shall
be deemed to be industrial units which carry on the business of
manufacturing goods for sale". Clause 2 of the Notification defines
’existing industrial unit’ to mean "an industrial unit which has gone into
commercial production before the effective date" whereas ’new industrial
unit’ in terms of Clause 3 means "an industrial unit which has come into
commercial production between 15th November, 2000 and 31st March, 2005.
Meaning of "date of production" as contained in Clause 4 refers to actual
commencement of commercial production of the item and for which the
same has been registered. Clause 5 imposes a restriction while defining the
existing date to say that the facility of set off to the existing units shall be
available only to those units which are not availing any facility like
deferment of tax or tax free purchases or tax free sales under any
notifications announced earlier before the effective date.
The notification dated 12th January, 2002, although extends the tax
benefits both to the new units as also the existing units, but thereby it does
not contemplate that grant of benefit should be extended to separate existing
units although they may be producing same but technically different
products. The manufactured item is saleable steel. Quality of manufactured
steel from CRM and HRM may have difference but as on the date of coming
into force of the Jharkhand Industrial Policy as also the notifications issued
under the 1981 Act both CRM and HRM were existing units, each one of
them cannot get the benefit thereof.
Mr. Gupta in support of its contention that all units of assessee must
be treated in their entirety referred to a recent decision of this Court in
Commissioner, Trade Tax, U.P. Vs. DSM Group of Industries [(2005) 1
SCC 657]. In that case the assessee had different units. It expanded only
some units by making a fixed capital investment of 50 crores or more in
terms of the Industrial Policy as also the exemptions notifications issued
under the U.P. Trade Tax Act. The State, however, raised a contention that
such sum of Rs. 50 crores must be spent on each unit of the company and
not on its industrial undertaking as a whole. The provisions of the
notification dated 21.2.1997 as also Section 4-A(6) of the Uttar Pradesh
Trade Tax Act, 1948, it was held, did not justify the contention that for the
purpose of grant of exemption, each unit is to be considered to be a separate
unit stating:
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"14. It is an undisputed fact that the principal place of
business of the Company is Dhampur, District Bijnore.
The exemption claimed by the respondent, under the
notification dated 21-2-1997, was for expansion,
modernisation or diversification. What is a "unit" for
purposes of expansion, diversification or modernization
has been defined in Section 4-A(6) Explanation (5),
which has been set out hereinabove. Under this, "Unit"
means an "industrial undertaking" of a dealer who is not
a defaulter and who meets the requirements as set out in
clause (b) thereof. The dealer, indisputably, is the
respondent Company. The industrial undertaking of the
respondent is the Company. It is the Company which
will be paying the tax and which will get the benefit of
exemption, if entitled to it."
This court therein was dealing with a reverse situation. It accepted the
principle of law that the notifications have to be interpreted keeping in view
the object, and the object being to encourage investments and production, it
was held that a liberal interpretation which advances the object of the
notification should be ascribed. The Court took recourse to the doctrine of
’purposive interpretation’ saying:
"25\005As we have already seen, Section 4-A defined the
term "unit" to mean an industrial undertaking, which has
undertaken expansion, modernization and diversification.
Even under the General Clauses Act, where the context
so requires the singular can include the plural. A plain
reading of the notification shows that for "expansion,
modernization and diversification" it is the industrial
undertaking which is considered to be the "unit". This is
also clear from the fact that in the notification wherever
the words "expansion, modernization or diversification"
are used, there are no qualifying words to the effect "in
any one unit". In none of the clauses is there any
requirement of the investment being in one unit of the
industrial undertaking. Words to the effect "in a
particular unit" or "in one unit" are missing. To accept
Mr. Sunil Gupta’s submission would require adding
words to a notification which the Government purposely
omitted to add."
It was further observed:
"26 Even otherwise, the purpose of notification being to
encourage increased production and to give benefit to
industries which have invested rupees fifty crores or
more in the State and whose production has thus
increased, an interpretation must be given which would
extend benefit to such industries. There would be no
purpose in denying an industry which has invested rupees
fifty crores or more and whose production in the State
has as a result increased, the benefit of the exemption
granted by this notification merely because the whole of
the investment is not in any particular unit. Thus even
where the investment is made by the Company in more
than one unit, so long as the total investment is rupees
fifty crores or more, the benefit of the notification would
be available. Such benefit would then be distributed in
the manner set out in the schedule depending on where a
unit in which expansion, diversification or modernization
has taken place, is situated\005"
The said decision, therefore, was rendered in a different fact situation.
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Eligibility clause, it is well settled, in relation to exemption
notification must be given a strict meaning.
In Collector of Customs, Bangalore & Anr. Vs. M/s. Maestro Motors
Ltd. & Anr. [2004 (10) SCALE 253], this Court held:
"It is settled law that to avail the benefit of a notification
a party must comply with all the conditions of the
Notification. Further, a Notification has to be interpreted
in terms of its language."
The principle that in the event a provision of fiscal statute is obscure
such construction which favours the assessee may be adopted, but it would
have no application to construction of an exemption notification, as in such
a case it is for the assessee to show that he comes within the purview of
exemption. [See Novopan India Ltd., Hyderabad Vs. Collector of Central
Excise and Customs, Hyderabad, 1994 Supp (3) SCC 606]
In State Level Committee and Another Vs. Morgardshammar India
Ltd. [(1996) 1 SCC 108], referring to a large number of decisions, this
Court held:
"10\005It must be remembered that no unit has a right to
claim exemption from tax as a matter of right. His right
is only insofar as it is provided by Section 4-A. While
providing for exemption, the Legislature has hedged it
with certain conditions. It is not open to the Court to
ignore those conditions and extend the exemption."
Mr. Banerjee has relied upon a large number of decisions for the
proposition that such notifications must receive a liberal construction.
We may now notice them.
In Textile Machinery Corporation Limited, Calcutta Vs. The
Commissioner of Income Tax, West Bengal, Calcutta [(1977) 2 SCC 368],
this Court while construing Section 15C of the Income Tax Act held:
"20. Section 15C partially exempts from tax a new
industrial unit which is separate physically from the old
one, the capital of which and the profits thereon are
ascertainable. There is no difficulty to hold that Section
15C is applicable to an absolutely new undertaking for
the first time started by an assessee. The cases which
gave rise to controversy are those where the old business
is being carried on by the assessee and a new activity is
launched by him by establishing new plants and
machinery by investing substantial funds. The new
activity may produce the same commodities of the old
business or it may produce some other distinct
marketable products, even commodities which may feed
the old business. These products may be consumed by
the assessee in his old business or may be sold in the
open market. One thing is certain that the new
undertaking must be an integrated unit by itself wherein
articles are produced and at least a minimum of ten
persons with the aid of power and a minimum of twenty
persons without the aid of power have been employed.
Such a new industrially recognisable unit of an assessee
cannot be said to be reconstruction of his old business
since there is no transfer on any assets of the old business
to the new undertaking which takes place when there is
reconstruction of the old business. For the purpose of
Section 15C the industrial units set up must be new in the
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sense that new plants and machinery are erected for
producing either the same commodities or some distinct
commodities. In order to deny the benefit of Section 15C
the new undertaking must be formed by reconstruction of
the old business. Now in the instant case there is no
formation of any industrial undertaking out of the
existing business since that can take place only when the
assets of the old business are transferred substantially to
the new undertaking. There is no such transfer of assets
in the two cases with which we are concerned."
The said decision was, therefore, rendered on interpretation of Section
15C of the Income Tax Act, 1961 and on the factual matrix obtaining
therein.
Section 15C of the Income Tax Act is not in pari materia with the
provision of Section 13(2)(b) of the 1981 Act.
In Municipal Commissioner, Chinchwad New Township Municipal
Council Vs. Century Enka Ltd. [(1995) 6 SCC 152], a finding of fact was
arrived at by this Court that Unit No. 2 had been set up to effect substantial
expansion of the existing business.
In Commissioner of Income Tax, Amritsar Vs. Straw Board
Manufacturing Co. Ltd. [(1989 Supp (2) SCC 523], it was held that the
expression ’paper and pulp’ includes paperboard and strawboard having
regard to the provisions of the Industrial (Development and Regulation) Act,
1951. The said decision has been followed in Bajaj Tempo Ltd., Bombay
Vs. Commissioner of Income Tax, Bombay City \026 III, Bombay [(1992) 3
SCC 78] and Commissioner of Sales Tax Vs. Industrial Coal Enterprises
[(1999) 2 SCC 607].
These decisions again were rendered in the fact situation obtaining
therein and have no application herein.
In Pappu Sweets and Biscuits and Another Vs. Commissioner of
Trade Tax, U.P., Lucknow [(1998) 7 SCC 228], the Court noticed that
although the State declared exemptions from payment of sales tax with a
view to increase industrial activity within the State by encouraging setting
up of new industrial units or expansion/ diversification or modernization by
the existing industrial units, it did not desire to extend that benefit to all such
industries. This decision, therefore, runs counter to the submission of Mr.
Banerjee.
In Commissioner of Central Excise Vs. M.P.V. & Engg. Industries
[(2003) 5 SCC 333], a Division Bench of this Court of which one of us (B.P.
Singh, J.) is a member, has clearly held:
"11\005In dealing with the submission the Tribunal noticed
the decision of this Court in CCE v. Parle Exports (P)
Ltd. wherein this Court held that exemption should be
strictly construed although the exemption clause in the
notification may be construed liberally. In other words,
eligibility criteria should be construed strictly but a
liberal approach may be adopted in construing other
conditions\005"
We are concerned in this case with the eligibility criteria.
This is also not a case where the Appellant altered its position
pursuant to or in furtherance of a promise made to it by the State. The
doctrine of promissory estoppel, therefore, is not applicable. It is not even a
case where the doctrine of legitimate expectation could be invoked. [See
Hira Tikkoo Vs. Union Territory, Chandigarh and Others, (2004) 6 SCC
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765]
We, however, are not oblivious that the doctrine of promissory
estoppel would be applicable where a representation has been made by the
State in exercise of its power to exempt or abolish a commodity as taxable
commodity. Such promise, however, must be made by the persons who
have the power to implement the representation.
The Appellant furthermore had also understood the legal position in
the same manner as would appear from its letter dated 11th February, 2002
wherein it was contended that it is an existing industry prior to 15th
November, 2000 and further stated:
"Tisco is, thus, eligible to avail benefits of set off of sales
tax paid on purchases of raw materials within the state of
Jharkhand from the admitted sales tax payable on sales of
products within the state of Jharkhand as well as on sales
in course of inter state sales Ex State of Jharkhand in
terms of Notification Nos. S.O. 65 & 66 both dated
12.01.2002\005.
We would, therefore, request you to kindly issue to us the
Eligibility Certificates w.e.f. 15.11.2000 as required
under these Notifications to enable us to avail the benefit
of ’set off’ of sales tax which we are entitled to."
We, therefore, conclude that as both Hot Rolled Mill and the Cold
Rolled Mill are existing units, and one of them having received the benefits
under a different policy, the Appellants are not entitled to any further relief
in terms of the notifications dated 12th January, 2002.
For the reasons aforementioned, these Appeals are dismissed. No
costs.