2005 (3) TMI 447 - SC - VAT / Sales Tax

Separate tax concessions allowed only for qualifying industrial units; no duplicate relief for variants if one unit already benefited

Tata Iron & Steel Co. Ltd. Versus State of Jharkhand and others (and another appeal)

SC held that an assessee may claim separate tax concessions for new and existing industrial units under the Jharkhand Industrial Policy, but benefits ... Interpretation and application of the notifications bearing Nos. 65, 66 and 67 dated January 12, 2002, issued by the State of Jharkhand pursuant to the Jharkhand Industrial Policy, 2001 - tax benefits such as set-off and adjustment on intra-State - Whether the cold rolled product is a new and distinct product vis-a-vis hot rolled product? Held that:- 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. 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 November 15, 2000 and March 31, 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 January 12, 2002, although it extends the tax benefits both to the new units as also the existing units, but thereby it does not contemplate that the grant of benefit should be extended to separate existing units although they may be producing the 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. 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 January 12, 2002. Issues Involved:1. Interpretation and application of notifications Nos. 65, 66, and 67 dated January 12, 2002, issued by the State of Jharkhand.2. Eligibility of the appellant's existing industrial unit (HRM) for tax benefits under the Jharkhand Industrial Policy, 2001.3. Whether the appellant's Cold Rolled Mill (CRM) and Hot Rolled Mill (HRM) should be treated as separate units for the purpose of tax benefits.Issue-wise Detailed Analysis:1. Interpretation and Application of Notifications Nos. 65, 66, and 67:The Supreme Court considered the interpretation and application of the notifications bearing Nos. 65, 66, and 67 dated January 12, 2002, issued by the State of Jharkhand pursuant to the Jharkhand Industrial Policy, 2001. These notifications were intended to provide tax benefits such as set-off and adjustment on intra-State and inter-State sales, and concessional rates of sales tax on the purchase of raw materials.2. Eligibility of the Appellant's Existing Industrial Unit (HRM) for Tax Benefits:The appellant, an existing company producing saleable steel, applied for eligibility certificates for its HRM under the Jharkhand Industrial Policy, 2001. The Deputy Commissioner of Commercial Tax rejected the application, stating that the appellant, being a dealer with one registration under sales tax laws, was not entitled to the benefits. This decision was affirmed by the Commissioner of Commercial Tax. The High Court, however, set aside these orders and remitted the matter back for reconsideration, allowing the appellant to make a fresh claim under the Industrial Policy, 2001.3. Separate Treatment of CRM and HRM for Tax Benefits:The appellant argued that CRM, having been treated as a new unit, should entitle HRM to benefits as an existing unit. The High Court held that the appellant's CRM and HRM should be treated as one existing unit, not separate units. The Supreme Court agreed with this interpretation, stating that the notifications and the Industrial Policy did not contemplate granting benefits to separate existing units producing technically different products. The Court emphasized that the eligibility clause for tax benefits must receive strict construction.Detailed Analysis:Background Facts:The appellant, a company producing steel, was granted an industrial license for expanding its production capacity. It undertook diversification by establishing a Cold Rolling Mill (CRM) and claimed tax benefits under the Bihar Industrial Policy, 1995. These benefits were initially granted but later withdrawn by the Commissioner of Commercial Taxes. The High Court remitted the matter back to the Commissioner for reconsideration, and the Supreme Court eventually ruled that CRM was a distinct product from HRM.Exemption Claimed for New Industrial Unit:The appellant's CRM was treated as a new unit under the Bihar Industrial Policy, 1995, and was granted tax exemption. However, this exemption was withdrawn by the Commissioner of Commercial Taxes, leading to litigation. The Supreme Court eventually ruled that CRM was a distinct product and entitled to tax benefits.Exemption Claimed for Existing Industrial Unit:The appellant applied for tax benefits for its HRM under the Jharkhand Industrial Policy, 2001. The application was rejected, but the High Court allowed the appellant to make a fresh claim. The Supreme Court held that both CRM and HRM were existing units and that the appellant was not entitled to further benefits under the notifications dated January 12, 2002.Statutory Provisions of 1981 Act:The Supreme Court examined various provisions of the Bihar Finance Act, 1981, including the definitions of 'dealer,' 'industrial unit,' and the provisions for tax exemptions and set-offs. The Court emphasized that the eligibility criteria for tax benefits must be strictly construed.High Court Judgment:The High Court held that the appellant's CRM and HRM were part of the same existing unit and not entitled to separate tax benefits. The Supreme Court agreed, stating that the Industrial Policy and notifications did not support treating CRM and HRM as separate units for tax benefits.Determination:The Supreme Court concluded that the appellant's CRM and HRM, being existing units, could not claim separate tax benefits under the Jharkhand Industrial Policy, 2001. The eligibility criteria for tax benefits must be strictly construed, and the appellant was not entitled to further relief.Conclusion:The Supreme Court dismissed the appeals, holding that the appellant's CRM and HRM were existing units and not entitled to separate tax benefits under the Jharkhand Industrial Policy, 2001. The eligibility criteria for tax benefits must be strictly construed, and the appellant was not entitled to further relief under the notifications dated January 12, 2002.