TaxTMI 
TaxTMI 
2005 (3) TMI 447
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....ion 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: 3.. The fact of the matter is being noticed from Civil Appeal No. 1912 of 2004. The appellant, an existing company within the meaning of the 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 ("the 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: 4.. 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 December 22, 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 manu....
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........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 crores but the State says it may be to the tune of Rs. 1,400 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 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 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 fac....
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....olicy, 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: 12.. 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 Notifications Nos. 65, 66 and 67 dated January 12, 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 utilise the available resources of the State in a planned manner and to accelerate the indust....
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..... Statutory provisions of 1981 Act: 15.. 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. 16.. Section 3 provides for charge of tax in terms whereof sales tax 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. 17.. Section 7 provides for exemption. Section 7(3)(b) empowers the State Government to exempt any dealer from payment of sales tax or purc....
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....rsified 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. 24.. 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) Indust....
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....tion 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 26.. 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 or 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 outside 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(1)(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 per cent and 3 per cent against form IX. ....
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....arge and medium scale having approval in the form of letter of intent, industrial licence 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 III. 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.-Existing industrial unit means an industrial unit which has gone into commercial production before the effective date. 3.. New industrial unit.-New industrial unit means an indus....
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....t 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 therein 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: 28.. 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 November 9, 1998, for manufacture of cold rolled/galvanised/coated/ corrugated/painted/varnished steel sheets/strips/coils in the integrated steel plant for a proposed capacity of 12,00,000 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 the Bihar Industrial Policy whi....
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....m will be an industrial project. Clause 6 of the Notification S.O. No. 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 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 Polic....
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....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 setoff thereof in relation to its particular products manufactured in a new or existing industry. A notification may be issued under section 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. 35.. 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 commerc....
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....ss of the company is Dhampur, District Bijnore. The exemption claimed by the respondent, under the notification dated February 21, 1997, was for expansion, modernisation or diversification. What is a 'unit' for purposes of expansion, diversification or modernisation has been defined in section 4A(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 sub-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." 38.. 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 Para 26 in 139 STC at page 291.: "25. A....
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.... notification. Further, a notification has to be interpreted in terms of its language." 41.. The principle that in the event of a provision of a 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. v. Collector of Central Excise and Customs (1994) Supp 3 SCC 606. 42.. In State Level Committee v. Morgardshammar India Ltd. Reported in [1996] 101 STC 1 (SC). (1996) 1 SCC 108, referring to a large number of decisions, this Court held: "10. ..........It must be remembered that no unit has a right to claim exemption from tax as a matter of right. His right is only in so far as it is provided by section 4A. 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." 43.. 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. ....
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....sion of section 13(1)(b) of the 1981 Act. 47.. In Municipal Commissioner, Chinchwad New Township Municipal Council v. Century Enka Ltd. See [1996] 100 STC 138 (SC). (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. 48.. In Commissioner of Income-tax v. Straw Board Manufacturing Co. Ltd. See [1989] 177 ITR 431 (SC). (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 Industries (Development and Regulation) Act, 1951. The said decision has been followed in Bajaj Tempo Ltd., Bombay v. Commissioner of Income-tax, Bombay City-III, Bombay See [1992] 196 ITR 188 (SC). (1992) 3 SCC 78 and Commissioner of Sales Tax v. Industrial Coal Enterprises See [1999] 114 STC 365 (SC). (1999) 2 SCC 607. 49.. These decisions again were rendered in the fact-situation obtaining therein and have no application herein. 50.. In Pappu Sweets and Biscuits v. Commissioner of Trade Tax, U.P., Lucknow See [1998] 111 STC 425 (SC). (1998) 7 SCC 228, the court noticed that although the State declared ex....