TaxTMI 
TaxTMI 
1990 (9) TMI 70
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....ise a common issue. The assessees' claim for exemption from sales tax for certain periods in question was accepted by the High Court in the case of G. S. Dail and Flour Mills and, following it, in the case of Mohd. Ismail (a case where the exemption sought for was originally granted but subsequently revoked). However, subsequently, a Full Bench of the High Court, in the case of Jagdamba Industries [1988] 69 STC 1, disapproved the view taken by the Division Bench in G. S. Dail and Flour Mills' case and, following the Full Bench decision, the writ petitions filed by certain other assessees were dismissed by the High Court. The State is aggrieved by the judgment in the first two cases and the assessees by the High Court's decision in the other cases. Hence, these appeals and special leave petitions. Before dealing with the appeals on merits, an important circumstance needs to be referred to, which is this : The judgment of the Full Bench in the case of Jagdamba Industries [1988] 69 STC 1 was itself the subjectmatter of special leave petitions in this court but those petitions (S. L. P. No. 15688-90 of 1987) were dismissed, at the stage of admission, on February 9, 1988, with the obs....
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.... of 1959), the State Government hereby exempts the class of dealers specified in column (1) of the Schedule below who have set up industry in any of the districts of Madhya Pradesh specified in the annexure to this notification and have commenced production after lst April, 1981, from payment of tax under the said Act for the period specified in column (2), subject to the restrictions and conditions specified in column (3) of the said schedule :-- -------------------------------------------------------------------------------------------------------------------------------------------------- Restrictions and conditions Class of dealers Period subject to which exemption has been granted -------------------------------------------------------------------------------------------------------------------------------------------------- (1) (2) (3) -------------------------------------------------------------------------------------------------------------------------------------------------- 1. Dealers who - Two years from the The dealer specified in (a) hold a certificate date of commencement column (1) shall continue of registration under the of production. to furnish the pre....
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....ry 'A' of Part II fying that the dealer is elig- to do so by State or Central of the annexure ; ible to claim such exemption Government or hold a licence under the scheme of the under the Industrial (Deve- Industries Department being lopment and Regulation) the first dealer to have Act, 1951 (No. 65 of 1951), commenced production in have a fixed capital investment the industry set up by him between Rs. 1 crore in the tehsils referred to in and Rs. 10 crores and ; column (2) and that such dealer has not opted for the scheme of deferring the payment of tax under the rules framed for this purpose. (c) are the first to (c) 7 years, in the case set up the industry in any of an industry located in tehsil of the districts of any of the tehsils of a Madhya Pradesh specified district specified in category in the annexure. "B" of Part II of the annexure; (d) 9 years, in the case of an industry located in any of the tehsils of a district specified in category "C" of Part II of the annexure; from the date of commencment of production. -----------------------------------------------------------------------------------------------------------------------------------------....
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....elied considerably on the history of the sales tax levy in the State as furnishing a proper and necessary background in which the terms of the notification of October 23, 1981, have to be read and interpreted. This history has, therefore, to be set out now in order to appreciate the validity of the conclusions of the Full Bench. Before doing this, it may be mentioned that the Full Bench comprised of Ojha C. J., Faizanuddin J. and Adhikari J. In fact, the judgment was written by Faizanuddin J. who has explained in detail the reasons for the change in his view. It may also be mentioned, as a matter of record, that, subsequent to the decision of the Division Bench in G. S. Dall and Flour Mills, the State Government appears to have issued a notification on July 3, 1987, intended obviously to overcome the effect of the said decision. We shall refer to this later in this judgment. Now, to turn to the history relied on by the Full Bench, we start with "scheme for the grant of subsidy/interest-free loan to new industries set up in Madhya Pradesh". The scheme was to be effective from September 15, 1969, and, till the end of the Fourth Five-Year Plan period (1970) "or such further period as....
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....onsidered to be a new unit for the purpose of this concession." Another set of "rules" came into force with effect from April 1, 1977, and superseded the earlier rules. These were more or less on the same lines as the earlier ones and were to apply to "new industrial units", and "existing industrial units", as defined in rules 2(a) and (b), on fulfilment of certain terms and conditions but industries enumerated in rule 3 were specifically excluded from the purview of the definition. Rule 3 made it clear that the rules shall not be applicable to "the following traditional industries". The list of such industries, in addition to those mentioned in the earlier set of rules (excluding roller flour mills and solvent extraction plants in oil mills), took in also saw mills, ice factories and "such other industries as may be notified by the Government from time to time". The period and extent of the subsidy/loan here again depended upon the district-advanced or backward, and in the latter category "A" or "B" or "C"-in which the industry was set up. Rule 7 is of some relevance and may be set out : "7. An industrial unit eligible for this concession will apply to the Assistant Director of ....
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....sales made by them to such unit. The third notification exempts the goods manufactured by the new industrial units from the levy of sales tax even when these goods are sold by the dealers who have purchased these goods from the new industrial units. In other words, by issue of this notification, the goods manufactured by the new industrial units are fully exempted from the payment of sales tax right up to the stage they reach the consumer. These three notifications only deal with the grant of exemption from payment of sales tax under the M. P. General Sales Tax Act, that is to say, from the payment of the State sales tax. The fourth notification exempts the new industrial units from payment of the Central sales tax on the sale of goods manufactured by them in the course of inter-State trade or commerce. This notification has exempted the new units from payment of sales tax with effect from July 1, 1982." In view of these notifications, the Government considered it necessary to issue certain instructions "for the grant of certificate of eligibility to new industrial units claiming exemption from/deferment of payment of sales tax" on January 12, 1983. These instructions also procee....
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....o above (at page 12 of 69 STC) : "These instructions also contain a complete procedure for application and grant of eligibility certificate by the Industries Department. Thus, it is clear from these instructions that the question of grant of eligibility certificate by the Industries Department is not an empty formality but, before granting the certificate, the Industries Department has to see whether all the requirements as contained in the instructions are fulfilled and complied with or not. All the Government instructions discussed above, issued from time to time right from 1973 onwards till 1983 (annexures R-I, II and III) clearly indicate not only the consistent Government policy in the matter of grant of sales tax concessions to the new industrial units but also the consistent practice that has been followed throughout whereby these concessions were not at any time made available to the traditional industries like flour mills and dall mills, etc. Not a single instance is available to show that any of these concessions was ever made available to any traditional industries. It may be pointed out that all these facts and the Government policy as also all the aforesaid Governmen....
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....ollowed and acted upon accordingly for a period over a decade, cannot be given a go-by but has to be accepted. In view of the above discussion the impugned notification dated July 3, 1987 (annexure G), is hardly of any consequence. More or less it is a clarification of the 1981 notification and not a rescission of any grant." The contention that "instructions" could not override the effect of statutory notification was repelled by the court on the ground that the validity and effectiveness of the instructions can be supported by reference to article 162 of the Constitution as filling up a lack of guidelines in the notification. An argument based on the doctrine of promissory estoppel was also rejected as "the petitioners were well aware of the fact that the exemption was not available to their new units and they had not established their units because of the exemption". The court explained the position thus (at P. 15 of 69 STC): "In this behalf firstly it may be pointed out that all the petitioners had established their industrial units after the Government issued the executive instructions (annexure R. III) dated January 12, 1983, of which clause 5(b) specifically speaks that t....
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....1983, Sri Salve argued that the dismissal of the special leave petition against the Full Bench judgment will not affect his case as this assessee had set up its industry, admittedly, before January 12, 1983. The position is similar in the case of Mohd. Ismail. Learned counsel, therefore, submitted that, even if the 1983 instructions were rightly held by the High Court to have validly supplemented the terms of the 1981 notification, they can have no application to the two earlier cases which had to be decided solely on the terms of the 1981 notification. To answer these contentions, one has to look first at the statutory instruments in this case, viz., section 12 of the Act and the notification thereunder. Section 12(1)(i), with which we are concerned, lays down four requirements for the grant of exemption from the provisions of the Act: (i) that any exemption to be granted under the section has to be by a notification ; (ii) that the notification may exempt any class of dealers or any goods or class of goods from the payment of tax under the Act in whole or in part but only for a definite period to be specified in the notification ; (iii) that the exemption will be subject to s....
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....ition about the dealer filing returns regularly would seem to be one under the purview of the Sales Tax Officer rather than one under the Director of Industries. If these conditions are fulfilled, the exemption certificate will have to be granted. That seems the straight and simple interpretation of the notification. But, it is said for the State, that this is not the intendment or effect of the notification. It is said that the argument overlooks the reference in column No. (3) to the grant of an eligibility certificate by the Director of Industries. This is one of the important conditions for the grant of this exemption. It is pointed out, in this context, that there had been in force in the State, for several years past, a scheme of subsidy/loan. That scheme was also dependent on a certificate of the Director of Industries but that certificate could be denied to "traditional industries". It is argued that, since the notification does not set out the conditions on which, and the procedure in accordance with which, the Director of Industries is to issue the eligibility certificate, that the earlier scheme and procedure should be read into the notification. Sri Salve objected to t....
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....o read a further condition into the notification excluding "traditional industries" from the exemption is based on the words which require that the Director of Industries should grant a certificate (a) that the dealer is entitled to claim the exemption and (b) that he has not opted for the scheme of deferring the payment of tax under the rules framed for the purpose. But these words do not carry the State's case further for, what the Director of Industries has to do is to certify that the applicant is entitled to the exemption on the terms and conditions set out in the notification and not on the basis of any further requirements not so set out. The notification does not authorise him to say that, though the applicant fulfills the terms of the notification, he will not grant the eligibility certificate because, under the previously prevalent schemes, he could not issue an eligibility certificate to "traditional industries". He could not grant an eligibility certificate under the earlier schemes because the instructions which outlined the scheme specifically excluded traditional industries. Actually, even under the earlier schemes, neither the application form nor the form of cer....
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....d. We may point out that, in construing the notification thus, we are only giving effect to a well-settled rule that may be illustrated by a reference to the decision in Hansraj Gordhandas v. H. H. Dave [1969] 2 SCR 253 ; AIR 1970 SC 755. In that case, notifications had been issued under rule 8 of the Central Excise Rules, 1944, granting exemption to (a) "cotton fabrics produced by any co-operative society formed of owners of cotton powerlooms . . ." and (b) "cotton fabrics produced on powerlooms owned by any co-operative society or owned by or allotted to the members of the society . . .". The appellant had sought exemption from excise duty under these notifications in respect of cotton fabrics which had been got manufactured by him on the powerlooms belonging to a co-operative society in pursuance of an agreement entered into with it. The excise authorities rejected the claim on the ground that the exemption under the notifications could be claimed only when the cotton fabrics were manufactured by a co-operative society for itself. Upholding the assessee's claim, this court observed (at p. 758) : "It was contended on behalf of the respondent that the object of granting exemptio....
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....not be extended so as to meet a casus omissus. As appears in the judgment of the Privy Council in Crawford v. Spooner [1846] 6 Moo P. C. 1, 9: '. . . We cannot aid the Legislature's defective phrasing of the Act, we cannot add, and mend, and, by construction, make up deficiencies which are left there.' Learned counsel for the respondents is possibly right in his submission that the object behind the two notifications is to encourage the actual manufacturers of handloom cloth to switch over to powerlooms by constituting themselves into co-operative societies. But the operation of the notifications has to be judged not by the object which the rule-making authority had in mind but by the words which it has employed to effectuate the legislative intent." In our view, this principle applies here squarely. Indeed, even granting that the notification may be interpreted having regard to the past history and the possible intention of the Government while issuing the notification, the position of the assessees here is much stronger for, while, in the reported case, the State was trying only to effectuate the clear object of the notification, here it is not at all clear, for the reasons di....
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....e with the concession regarding sales tax. He contends that these representations and acts are sufficient to found a claim of "equitable estoppel" against the State. We are unable to accept this argument. The respondents have stated in their counter-affidavit that the Nigam had acted in error and misconstrued the notification and was not acting under the authority of the Government in issuing the pamphlet. The other concessions extended to the assessee pertained to the setting upon a small scale industry in the State and were unrelated to the exemption from sales tax. In our opinion, there is force in these submissions. The circumstances and material relied on by the assessee do not spell out any clear promise of exemption from sales tax even for traditional industries. The notifications or guidelines under which the other facilities were granted have not been placed before us and no material is available on record to correlate them to the sales tax exemption or to show that all these were inextricably connected so as to form part of a single "relief packet". We, therefore, reject this contention of Sri Salve. However, on the interpretation of the notification, we accept the conten....
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....hat way. But, to apply the doctrine to widen the ambit of the statutory language would, however, virtually mean that the State can determine the interpretation of a statute by its ipsi dixit. That, certainly, is not, and cannot be, the scope of the doctrine. The doctrine can be applied to limit the State to its own narrower interpretation in favour of the subject but not to claim its interpretation in its own favour as conclusive. The second ground on which the Full Bench has sought to invoke the instructions is also not correct. Executive instructions can supplement statute or cover areas to which the statute does not extend. But they cannot run contrary to statutory provisions or whittle down their effect. The Full Bench seems to think that, unless the instructions are brought in, the notifications would have been in danger of abuse for want of proper guidelines as to the grant of exemption certificates. It is suggested that the notification contemplates rules to be issued for the purpose and that, since no rules had been issued, Directors of Industries were left with no parameters for the issue of exemption certificates and might act capriciously or arbitrarily in granting or r....
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....nguage of the notification to suggest that anything further is needed to enable the Director of Industries to grant the exemption. Without the guidelines, the requirement for an exemption certificate would not become an "empty formality" as suggested by the Full Bench. The Director of Industries has to issue the same after satisfying himself that the applicant industry falls within the terms of the notification in the following respects (a) that the assessee is one of the class of dealers set out in column No. (1) ; (b) that he has set up an industry in the State; (c) that it has been set up in one of the districts set out in the annexure and the category to which it belongs ; (d) that the industry has commenced production after April 1, 1981 ; (e) that the assessee has not opted for the deferment scheme. These conditions are many and detailed and do not leave anything to the discretion of the Director of Industries. We fail to understand what need there was to lay down any elaborate procedure therefor. Even if there was, and the earlier procedure by way of application form, declaration form and form of certificate were to be adapted, that procedure, by itself, did not, as pointed....
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.... Madhya Pradesh or the Central Government ; or (d) holding a licence under the Industries (Development and Regulation ) Act, 1951 (No. 65 of 1951 ) ; and who, in each case, has or may set up a new industrial unit in any district of Madhya Pradesh if eligible for grant of the facility of deferred payment of tax under the scheme providing for grant of incentive to entrepreneurs for setting up new industrial units in the State as the State Government may make in this behalf, may make deferred payment subject to such restrictions and conditions as may be specified in such scheme." Thereafter, the State Government framed the M. P. Deferment of Payment of Tax Rules, 1983, which were gazetted on September 1, 1983, but with retrospective effect from April 1, 1981 (that is, even anterior to the date of the notification). Rules 3, 4 and 14 are relevant and may be set out here. " 3. Eligibility for grant of facility of deferred payment of tax..-(1) A new industrial unit other than a unit specified in rule 14 which is covered by any of the categories specified in section 22D of the Act and which is engaged in the manufacture and sale of any goods shall qualify for deferred payment of the t....
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....rm as may be directed by the Commissioner and shall not enforce recovery of the tax payment whereof has been shown to have been deferred in the certificate of eligibility. (3) The new industrial unit shall be entitled to defer the payment of the tax for a period of ten years. This entitlement shall be available only on receipt of the certificate of eligibility to it under sub-rule (1). The certificate of eligibility shall show the duration for which the payment of the tax has been deferred. The year in which the tax pertaining to any accounting year of the industrial unit is required to be paid consequent upon deferment of tax shall also be shown in the certificate of eligibility. The entire tax assessed pertaining to any accounting year shall be payable by the industrial unit in lump sum on the expiration of duration of deferment and payment of such tax shall be made within thirty days of the date on which the period of ten years from the end of the relevant accounting year expires. 14. Non-availability of facility of deferred payment. -The benefit of the scheme of deferred payment of tax shall not be available to the following new industrial units, namely: (A) (1) flour mills (....
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.... tax." first sight, that since the relief by way of deferment It might appear, at of tax is only in the nature of an alternative to the provision for exemption and the former is not available to traditional industries because of rule 14 above, the same should be the position in regard to the exemption provision also. There are, however, several difficulties in accepting this suggestion. In the first place, the rules relate to tax deferment and not tax exemption. It is open to the State Government, particularly in view of section 22D, to frame such scheme for the purpose as it may deem fit. The provision for exemption, however, needs to be spelt out, under section 12, in statutory notification. Secondly, if, as is being urged on behalf of the State, it is explicit even on the terms of the notification that traditional industries are excluded, it is not necessary for the rules of deferment to specifically provide that they will not be available to the industries listed in rule 14 particularly when rule 4 has incorporated the requirement of an eligibility certificate in accordance with the previous instructions for the said purpose. Thirdly, rule 1-4 excludes from the scheme not mer....
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....d would be insufficient to found the claim of estoppel particularly when it has been found that the assessees started production after January 12, 1983, and claimed exemption very much later. But since, in our view, the terms of the notification are clear and envisage no denial of exemption to traditional industries, this question does not survive. Before we conclude, we have to refer to one aspect which we have touched upon at the very beginning of this judgment and that is the dismissal, in limine, of the special leave petition filed in this court by the petitioners before the Full Bench. It has been pointed out that the above petition was dismissed notwithstanding that the special leave petition in the case of G. S. Dall and Flour Mills was also then pending for admission. It would perhaps have been better if both the special leave petitions had been taken up and dealt with together. However, the special leave petition against the Full Bench decision was dismissed and two of us having been members of the Bench that dismissed it, we may observe that Sri Salve is perhaps right in saying that it was the content of paras 20 and 21 of the Full Bench judgment that persuaded this cour....