2014 (3) TMI 905 - SC - VAT / Sales Tax

Company with FCI above Rs. 5 crores eligible for sales tax exemption under Item 1E only, not general provisions

Commercial Tax Officer, Rajasthan Versus M/s. Binani Cements Ltd. And Another

The SC allowed the appeal regarding sales tax exemption eligibility under the Sales Tax New Incentive Scheme for Industries, 1989. The court applied the ... Quantum of sales tax exemption - Eligibility for tax exemption under the 'Sales Tax New Incentive Scheme for Industries, 1989' - Scheme for exemption from payment of sales tax notified u/s 4(2) of the Rajasthan Sales Tax Act, 1954 - Interpretation of Statute - Principle of harmonious construction - Intention and object of the legislation - Specific versus general provision - expression ‘New Industrial Unit’ - maxim generalia specialibus non derogant - conflict between a specific provision and a general provision. Held that:- In Gobind Sugar Mills Ltd. v. State of Bihar [1999 (8) TMI 761 - SUPREME COURT], this Court has observed that while determining the question whether a statute is a general or a special one, focus must be on the principal subject- matter coupled with a particular perspective with reference to the intendment of the Act. With this basic principle in mind, the provisions must be examined to find out whether it is possible to construe harmoniously the two provisions. If it is not possible then an effort will have to be made to ascertain whether the legislature had intended to accord a special treatment vis-à-vis the general entries and a further endeavour will have to be made to find out whether the specific provision excludes the applicability of the general ones. Once we come to the conclusion that intention of the legislation is to exclude the general provision then the rule “general provision should yield to special provision” is squarely attracted. Having noticed the aforesaid, it could be concluded that the rule of statutory construction that the specific governs the general is not an absolute rule but is merely a strong indication of statutory meaning that can be overcome by textual indications that point in the other direction. This rule is particularly applicable where the legislature has enacted comprehensive scheme and has deliberately targeted specific problems with specific solutions. A subject specific provision relating to a specific, defined and descriptable subject is regarded as an exception to and would prevail over a general provision relating to a broad subject. In the instant case, the item 1E is subject specific provision introduced by an amendment in 1996 to the Scheme. The said amendment removed “new cement industries” from the non-eligible Annexure-B and placed it into Annexure-C amongst the eligible industries. It classified the cement units for eligibility of tax exemption into three categories: small, medium and large. The said categories are comprehensive whereby small and medium cement units have been prescribed to have maximum FCIs of ₹ 60/- lakhs and ₹ 5/- crores, respectively and large to be over the FCI of ₹ 5/- crores. The maximum ceiling for large cement units has been purposefully left open and thereby reflects that the intention clearly is to provide for an all-inclusive provision for new cement units so as to avoid any ambiguity in determination of appropriate provision for applicability to new cement units to seek exemption. It leaves no doubt that what is specific has to be seen in contradistinction with the other items/entries. The provision more specific than the other on the same subject would prevail. Here it is subject specific item and therefore as against items 1, 4, 6 and 7, which deal with units of all industries and not only cement, item 1E restricted to only cement units would be a specific and special entry and thus would override the general provision. The specific entries being mutually exclusive have been placed so systematically arranged and classified in the Scheme. The construction of provisions must not be divorced from the object of introduction of subject specific provision while retaining other generalized provision that now specifically exclude the new cement industries, which could otherwise fall into its ambit, lest such interpretation would be not ab absurdo (i.e., interpretation avoiding absurd results). Therefore, in our considered view the respondent-Company would only be eligible for grant of exemption under Item 1E as a large new cement unit in accordance with its FCI being above ₹ 5/- crores. In the result, the appeal is allowed and the judgment and order passed by the High Court is set aside. Issues Involved:1. Eligibility for tax exemption under the 'Sales Tax New Incentive Scheme for Industries, 1989'.2. Classification of the respondent-assessee as a 'Prestigious Unit' or 'Very Prestigious Unit'.3. Interpretation of specific versus general provisions in statutory schemes.Detailed Analysis:1. Eligibility for Tax Exemption:The core issue revolves around the respondent-assessee's application for an eligibility certificate for exemption from Central Sales Tax and Rajasthan Sales Tax under the 'Sales Tax New Incentive Scheme for Industries, 1989' (the Scheme). The Scheme, notified under Section 4(2) of the Rajasthan Sales Tax Act, 1954, exempts certain industrial units from tax on goods manufactured within the state. The respondent-assessee, a new industrial unit manufacturing cement, started commercial production on 27.05.1997 and has a fixed capital investment (FCI) exceeding Rs. 500 crores, employing more than 250 employees. The State Level Screening Committee initially granted only 25% exemption, treating the unit as a large-scale industry under Item 1E of Annexure 'C' of the Scheme. However, the Rajasthan Tax Board and the High Court later classified the unit as a 'Prestigious Unit,' entitling it to a 75% exemption.2. Classification as 'Prestigious Unit' or 'Very Prestigious Unit':The Scheme defines various categories of units, including 'New Industrial Unit,' 'Prestigious Unit,' and 'Very Prestigious Unit.' A 'Prestigious Unit' is defined as a new industrial unit with an FCI exceeding Rs. 10 crores and employing at least 250 persons, or with an FCI exceeding Rs. 25 crores and employing at least 250 persons. A 'Very Prestigious Unit' requires an FCI of Rs. 100 crores or more. The respondent-assessee claimed to be a 'Prestigious Unit' based on its FCI and employment figures. The High Court upheld this classification, granting a 75% tax exemption. However, the Supreme Court noted that Item 1E specifically addresses new cement units, categorizing them into small, medium, and large units based on FCI, with varying exemption percentages.3. Interpretation of Specific vs. General Provisions:The Supreme Court emphasized the principle of statutory interpretation that specific provisions prevail over general ones. Item 1E, introduced by an amendment in 1996, specifically governs new cement units, providing a detailed classification and exemption structure. This specific provision overrides general provisions applicable to other industrial units. The Court cited several precedents, including Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd., J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P., and others, to support this principle. The Court concluded that the respondent-assessee, being a new large-scale cement unit, is only eligible for the 25% exemption under Item 1E, not the 75% exemption under the general 'Prestigious Unit' category.Conclusion:The Supreme Court set aside the High Court's judgment, ruling that the specific provision (Item 1E) for new cement units prevails over the general provisions for 'Prestigious Units.' The respondent-assessee is entitled to a 25% tax exemption as a large new cement unit, in accordance with its FCI exceeding Rs. 5 crores. The appeal by the Revenue was allowed, and no order as to costs was made.