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Tata Iron & Steel Co. Ltd. v. State Of Jharkhand And Others
Factual and Procedural Background
The appeals concerned Tata Iron & Steel Co. Ltd. (TISCO), a company that has long manufactured steel through its Hot Rolled Mill (HRM) at Jamshedpur. In 1998, TISCO established a Cold Rolling Mill (CRM) under a fresh industrial licence and sought sales-tax incentives available to “new” or “diversified” units under the Bihar Industrial Policy, 1995. After a series of administrative and judicial proceedings—including a Supreme Court judgment in 2004 that recognised CRM as a distinct, new unit—TISCO obtained those 1995-policy benefits for CRM.
Subsequently, the State of Jharkhand promulgated its Industrial Policy, 2001, effective 15-11-2000, and issued three notifications (S.O. 65, 66 and 67 dated 12-1-2002) under the adopted Bihar Finance Act, 1981. These notifications allow set-off/adjustment of Jharkhand Sales Tax (JST) on raw-material purchases against tax on finished-goods sales for both “new” and “existing” industrial units, subject to stated conditions—most notably that an existing unit can claim the facility only if it is “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.”
TISCO applied for eligibility certificates to claim set-off for its HRM as an “existing unit.” The Deputy Commissioner and, on revision, the Commissioner of Commercial Taxes rejected the claim, reasoning that the company was already availing benefits for CRM. The Jharkhand High Court set aside those orders but remitted the matter, observing that the company as a whole was one existing unit and that CRM’s entitlement under the 1995 Policy could impact the HRM claim. TISCO appealed to the Supreme Court, which consolidated the matter with a linked appeal by another dealer whose fate depended on TISCO’s case.
Legal Issues Presented
- Whether the set-off/adjustment benefits under Notifications S.O. 65, 66 and 67 dated 12-1-2002 are to be granted unit-wise (HRM and CRM separately) or company-wise to a single dealer.
- Whether an “existing industrial unit” that is already availing benefits under an earlier policy for another unit can still claim additional benefits under the 2001 Jharkhand Industrial Policy.
- How strictly the eligibility clauses in exemption or incentive notifications must be construed when multiple industrial units operate under one tax registration.
Arguments of the Parties
Appellant’s Arguments (TISCO and allied appellant)
- The Industrial Policy, 2001 covers both new and existing units; since CRM is acknowledged as a “new” unit, HRM should be treated separately as an “existing” unit and granted set-off.
- The notifications speak of “industrial units,” not of a “company,” “assessee” or “dealer”; therefore each manufacturing unit can independently claim benefits regardless of a single tax registration.
- A liberal, purposive interpretation should be adopted to advance industrial growth; clause 6 dealing with return-verification is merely procedural and should not override the policy intent.
- (Linked appeal) Concession forms for 2% tax on gas supplies were withheld solely because TISCO’s eligibility for set-off was questioned; the outcome ought to follow TISCO’s main appeal.
Respondents’ Arguments (State authorities)
- The notifications were issued under Sections 22, 23 and 13(1)(b) of the Bihar Finance Act, 1981, which operate at the dealer level; hence exemptions or set-off must be claimed by the company as a whole.
- Because TISCO is already availing benefits for CRM, clause 5 of S.O. 65 bars any further benefit to its HRM.
- The eligibility clauses in fiscal incentives demand strict construction; liberal interpretation cannot override explicit statutory language.
- The effective dates for both new and existing units are identical; allowing multiple benefits would defeat the statutory scheme.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Tata Iron & Steel Co. Ltd. v. State of Jharkhand (2004) 7 SCC 242 | CRM is a distinct new unit and had already received 1995-policy benefits. | Used as an admitted fact establishing that TISCO is already availing incentives for one unit. |
| Commissioner, Trade Tax, U.P. v. DSM Group of Industries (2005) 1 SCC 657 | Liberal interpretation of incentive notifications to further industrial investment. | Court distinguished the case as factually different and not controlling. |
| Collector of Customs v. Maestro Motors Ltd. (2005) 9 SCC 412 | Assessee must meet every condition of a notification to claim benefit. | Reinforced strict compliance requirement for eligibility clauses. |
| Novopan India Ltd. v. CCE & Customs 1994 Supp (3) SCC 606 | Burden on assessee to prove eligibility under an exemption. | Cited to justify strict construction against the claimant. |
| State Level Committee v. Morgardshammar India Ltd. (1996) 1 SCC 108 | No vested right to exemption; conditions must be met. | Supported the view that courts cannot relax statutory conditions. |
| Textile Machinery Corpn. Ltd. v. CIT (1977) 2 SCC 368 | Concept of separate industrial undertaking under Income-tax law. | Referred to by appellant; Court held section was not pari materia and therefore inapplicable. |
| Municipal Commr. v. Century Enka Ltd. (1995) 6 SCC 152 | Assessment of expansion as a separate unit. | Cited by appellant; Court found factual matrix different. |
| CIT v. Straw Board Mfg. Co. Ltd. 1989 Supp (2) SCC 523 | Broader reading of product categories for incentives. | Not applied; Court held facts distinguishable. |
| Bajaj Tempo Ltd. v. CIT (1992) 3 SCC 78 | Liberal construction of incentive provisions. | Cited but not determinative. |
| CST v. Industrial Coal Enterprises (1999) 2 SCC 607 | Liberal interpretation of tax incentives. | Cited but not followed. |
| Pappu Sweets & Biscuits v. Commr. of Trade Tax (1998) 7 SCC 228 | State may selectively restrict incentive schemes. | Relied on to show that benefits can be limited by policy. |
| CCE v. M.P.V. & Engg. Industries (2003) 5 SCC 333 | Eligibility criteria must be strictly construed. | Used to underline strict approach to clause 5 of S.O. 65. |
| CCE v. Parle Exports (P) Ltd. (1989) 1 SCC 345 | Distinction between strict eligibility and liberal conditions. | Referenced within M.P.V. decision; same principle adopted. |
| Hira Tikkoo v. Union Territory, Chandigarh (2004) 6 SCC 765 | Limits on doctrine of legitimate expectation. | Used to dismiss arguments based on promissory estoppel or expectation. |
Court's Reasoning and Analysis
1. Statutory Framework Examined. The Court analysed Sections 22, 23 and 13(1)(b) of the Bihar Finance Act, 1981, which empower the State to grant set-off to “dealers.” Although a dealer files a single tax return, the Act does not prohibit the State from tailoring benefits unit-wise; the decisive factor is the wording of the notifications themselves.
2. Interpretation of Notifications S.O. 65–67. The notifications extend set-off to “new industrial units” and to “existing industrial units” that are not already enjoying any earlier benefit. Clause 5 of S.O. 65 expressly restricts existing units if they are availing earlier incentives.
3. Meaning of “Industrial Unit.” Rejecting the High Court’s broader reading, the Supreme Court held that “industrial unit” in these notifications does not require a generic, company-wide approach per se; however, the language and object of clause 5 make it clear that only one set-off can be claimed where earlier benefits are already operative for the same dealer.
4. Application to TISCO. Both HRM and CRM were “existing units” on 15-11-2000. Since CRM was already granted exemption under the 1995 policy, TISCO fell foul of clause 5 and could not claim an additional set-off for HRM.
5. Strict Construction of Eligibility. Relying on Novopan, Maestro Motors, M.P.V. & Engg. and similar cases, the Court reaffirmed that eligibility clauses in fiscal-incentive notifications must be strictly construed; purposive or liberal interpretation is permissible only after eligibility is established.
6. No Promissory Estoppel or Legitimate Expectation. The Court found no representation by the State capable of invoking these doctrines, noting that TISCO itself had earlier acknowledged its status as a single existing industry for purposes of set-off.
Holding and Implications
HOLDING — Appeals Dismissed.
Consequently, Tata Iron & Steel Co. Ltd. is not entitled to claim additional set-off/adjustment benefits for its Hot Rolled Mill under Notifications S.O. 65–67 dated 12-1-2002 because it is already availing benefits for its Cold Rolling Mill under the earlier 1995 policy. The linked appeal predicated on TISCO’s success also fails.
Implications. The judgment clarifies that under Jharkhand’s 2001 Industrial Policy an assessee operating multiple units cannot aggregate or duplicate fiscal benefits where one unit already enjoys incentives granted under an earlier scheme. It reinforces the principle that eligibility clauses in exemption or incentive notifications are to be applied strictly, limiting the scope for unit-wise fragmentation of benefits absent explicit statutory authorization. No new precedent on industrial-policy interpretation was set, but the ruling provides guidance on the interaction of successive incentive schemes.
S.B Sinha, J.— Leave granted in SLP (C) No. 15419 of 2004.
2. Interpretation and application of the notifications bearing Nos. 65, 66 and 67 dated 12-1-2002 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
3. The fact of the matter is being noticed from Civil Appeal No. 1912 of 2004.
4. 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
5. 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/modernised 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 — 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.
6. The appellant claimed benefits of the aforementioned Notifications 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 Taxes in exercise of his 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, 1956, they are not entitled to the benefits claimed.
7. Aggrieved, the appellant filed a writ petition before the Jharkhand High Court which was marked as CWJC No. 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 Taxes 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-à-vis hot rolled product.
8. 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 Tata Iron & Steel Co. Ltd. v. State of Jharkhand (2004) 7 SCC 242. This Court by judgment and order dated 25-8-2004 (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. … 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 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 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 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
9. In the meanwhile the State of Jharkhand declared its Industrial Policy on or about 25-8-2001 for the period 15-11-2000 to 31-3-2005; 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.
10. Three notifications bearing Nos. 65, 66 and 67 dated 12-1-2002 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 the rate of 2%. Such facility is to be allowed to those industrial units who come under the purview of set-off of tax.
11. The appellant as regards its existing unit viz. HRM applied for eligibility certificate before the Deputy Commissioner of Commercial Taxes stating that it had been “engaged in manufacture and sale activities of various iron and steel products and other materials”. The said application of the appellant was rejected by the Deputy Commissioner of Commercial Taxes 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 Taxes by an order dated 25-3-2003.
12. 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 the 1995 Policy in respect of CRP, it would be able to claim the benefit under the 2001 Policy of the State of Jharkhand.
Contentions
13. Mr Dushyant A. Dave and Mr Gourab Banerji, 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 12-1-2002 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 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.
14. Mr Punit Dutt Tyagi, learned counsel appearing on behalf of the appellant in SLP (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.
15. Mr Sunil Gupta, learned Senior Counsel appearing on behalf of the respondents, would submit that:
(a) All the aforementioned three notifications dated 12-1-2002 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 by it only as a whole and not in relation to each of its units.
(c) Industrial Policy being a multifaceted policy, although a diversified 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 the 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
16. 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.
17. 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.
18. 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, on sales of any goods or class or description of goods to or by any class of dealers.
19. 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;”
20. 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 have 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.
21. 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
22. 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.
23. 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.
24. Clause 16.3 of the said policy reads as under:
“16.3 Units undertaking expansion/diversification.—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 1-9-1995.
25. The following definitions mentioned in the annexure appended to the said policy and which are relevant for our purpose read as under:
“1. Effective date.—Effective date means the date on which the provisions of this policy come into force i.e 1-9-1995. This policy will remain in force for 5 years from 1-9-1995.
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 GOI or GOB for industrial development….
3. Existing industrial unit.—Existing industrial unit means an industrial unit which has gone into production before the effective date.
4. New industrial unit.—New industrial unit means an industrial unit which has come into production between 1-9-1995 and 31-8-2000.
7. Expansion/modernisation/diversification.—Expansion/modernisa-tion/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/modernisation/diversification should send intimation to the General Manager, District Industries Centre or the Managing Director, Industrial Area Development Authority and 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/modernisation programme. Such intimation should be accompanied by detailed expansion/modernisation/diversification proposal giving the specific period of proposed investment.”
26. S.O 479 dated 2-12-1995 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 1-9-1995 to 31-8-2000 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 I of the Bihar Finance Act, 1981 (Bihar Act 5 of 1981).”
Jharkhand Industrial Policy, 2001
27. We may, at this juncture notice certain provisions of the 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 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% and 3% against Form IX. Both these rates will be reduced to 2% in view of the provision for set-off as aforesaid.
Definitions
Effective date.—Effective date means 15-11-2000 from which date the new State of Jharkhand has been created, the date on which the provision of this policy came into force i.e 15-11-2000. This policy will remain in force till 31-3-2005.
‘Unit’ means any industrial project in large 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 No. from the Central Government excluding those mentioned in the negative list of industries at Annexure 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 the 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 15-11-2000 and 31-3-2005.”
Notifications
28. We have noticed hereinbefore that Notifications Nos. S.Os 65 and 66 dated 12-1-2002 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 the Bihar Finance Act, 1981 (Bihar Act 5 of 1981) (adopted), the State Government 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—
‘Unit’ means any industrial project of large 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 No. from the 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 the 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 industrial unit which has come into commercial production between 15-11-2000 and 31-3-2005.
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 an 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 of Industries in this regard shall be final.
5. Meaning of effective date shall be.—Effective date means 15-11-2000 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 31-3-2005.
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 the Bihar Finance Act, 1981 (adopted) against the Jharkhand sales tax payable on sale excluding stock transfer or consignment sale outside the State.
4. This set-off shall be available on the finished products manufactured from such raw material subject to purchases within six months or the same financial year from the date of purchase 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.
6. (a) The verification of monthly/quarterly return filed by each of the industrial units shall be done by the Commercial Tax Officer concerned. 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 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
29. 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/galvanised/coated/corrugated/painted/varnished steel sheets/strips/coils in the integrated steel plant for a proposed capacity of 12,00,000.00 tons. 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 which was in force for 5 years from 1-9-1995.
30. The Government of Jharkhand has declared its Industrial Policy on or about 25-8-2001, the effective date therefor being 15-11-2000. The said policy was put in force from 15-11-2000. 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 — restricted new units alone
31. The Industrial Policy of the State of Jharkhand is a multifaceted 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 Cooperation Framework for India Report. The mining and mineral-based 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 12-1-2002 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
32. The High Court in its impugned judgment held that the cold rolling mill is an independent unit established by the Company. The Company 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 15-11-2000.
33. 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 Notification No. S.O 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 Notification No. S.O 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
34. 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.
35. 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 components.
36. 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 the occasion arises therefor.
37. 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 unitwise 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.
38. 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 15-11-2000 and 31-3-2005”. 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.
39. The notification dated 12-1-2002, 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.
40. Mr Gupta in support of his contention that all units of the assessee must be treated in their entirety referred to a recent decision of this Court in Commr., Trade Tax, U.P v. 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 Rs 50 crores or more in terms of the Industrial Policy as also the exemption 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:
“14. It is an undisputed fact that the principal place of business of the Company is Dhampur, District Bijnor. 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 modernisation 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.”
41. 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. … As we have already seen, Section 4-A defines the term ‘unit’ to mean an industrial undertaking, which has undertaken expansion, modernisation 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, modernisation 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, modernisation 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 modernisation has taken place, is situated.”
The said decision, therefore, was rendered in a different fact situation.
42. Eligibility clause, it is well settled, in relation to exemption notification must be given a strict meaning.
43. In C ollector of Customs v. Maestro Motors Ltd. (2004) 10 Scale 253, (2005) 9 SCC 412 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.”
44. The principle that in the event a provision of fiscal statute is obscure such construction which favours the assessee may be adopted, 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. CCE and Customs 1994 Supp (3) SCC 606.)
45. In State Level Committee v. Morgardshammar India Ltd. (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 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.”
46. Mr Banerji has relied upon a large number of decisions for the proposition that such notifications must receive a liberal construction. We may now notice them.
47. In Textile Machinery Corpn. Ltd. v. CIT (1977) 2 SCC 368 this Court while construing Section 15-C of the Income Tax Act held:
“20. Section 15-C 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 15-C 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 15-C the industrial units set up must be new in the 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 15-C 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 15-C of the Income Tax Act, 1961 and on the factual matrix obtaining therein.
48. Section 15-C of the Income Tax Act is not in pari materia with the provision of Section 13(2)(b) of the 1981 Act.
49. In Municipal Commr. v. Century Enka Ltd. (1995) 6 SCC 152 a finding of fact was arrived at by this Court that Unit 2 had been set up to effect substantial expansion of the existing business.
50. In CIT v. Straw Board Mfg. 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 Industries (Development and Regulation) Act, 1951. The said decision has been followed in Bajaj Tempo Ltd. v. CIT (1992) 3 SCC 78 and CST v. Industrial Coal Enterprises (1999) 2 SCC 607. These decisions again were rendered in the fact situation obtaining therein and have no application herein.
51. In Pappu Sweets and Biscuits v. Commr. of Trade Tax, U.P (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 modernisation 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 Banerji.
52. In CCE v. M.P.V & Engg. Industries (2003) 5 SCC 333 a Division Bench of this Court of which one of us (B.P Singh, J.) was a member, has clearly held:
“11. … In dealing with the submission the Tribunal noticed the decision of this Court in CCE v. Parle Exports (P) Ltd. (1989) 1 SCC 345 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.”
We are concerned in this case with the eligibility criteria.
53. 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 v. Union Territory, Chandigarh (2004) 6 SCC 765.)
54. 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.
55. The appellant furthermore had also understood the legal position in the same manner as would appear from its letter dated 11-2-2002 wherein it was contended that it is an existing industry prior to 15-11-2000 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 Notifications Nos. S.Os 65 and 66 both dated 12-1-2002….
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.”
56. 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 12-1-2002.
57. For the reasons aforementioned, these appeals are dismissed. No costs.
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