of Rajasthan & Anr Vs. J.K. Udaipur Udyog Ltd. & Anr  Insc 592 (28
RUMA PAL & ARUN KUMAR WITH
C.A. Nos.8194-8201 OF 2003, C.A. Nos. 8203-8206 OF 2003 RUMA PAL A scheme was
framed by the first appellant granting exemption to industrial units from
payment of sales tax on intra-state and inter-state sale of goods and
by-products manufactured within the State of Rajasthan. By a subsequent
notification the extent of the percentage of exemption available to sick
industries was sought to be corrected. The disputes in these appeals relate to
the interpretation of the scheme and the effect of the corrigendum.
The scheme was part of the New 4th Industrial Policy of the State. The
Policy stated that the object of the scheme was to make Rajasthan "a most
favoured destination for industries" and to encourage the setting up of
industries in the State. The policy describes the nature of the exemptions
which were sought to be granted to the different kinds of industries with
exemption/ deferment incentives for 11 years in respect of some industries and
14 years for others. A greater incentive was granted to industries being set up
in the five industrial growth centres in the State. The incentives available
during the first year were to be gradually tapered off to a particular
percentage of the fixed capital investment at different rates in respect of
However, in respect of cement industries the percentage of exemption
proposed was at a flat rate of 25% for 11 years.
According to the policy the scheme would also give benefits for the first
time to sick units. The sick units were classified into two categories as
(1) "Those units which have not availed of any benefits in the past
will get full benefits at par with a new unit.
(2) Those units which have availed of sales tax benefits in the past will
get ST benefit on a tapering basis up to 11 years (maximum 80% and minimum10%
exemption/deferment on a tapering basis)".
Pursuant to this Policy the Rajasthan Sales Tax/Central Sales Tax Exemption
Scheme for Industries, 1998 (referred to as 'the scheme') was framed and
notified in exercise of the powers conferred on the State Government by section
15 of the Rajasthan Sales Tax Act, 1994 (referred to as "RST Act") and
by sub- section (5) of Section 8 of the Central Sales Tax Act, 1956 (referred
to as 'the CST Act"), The scheme came into force from 1st April 1998.
Clause 1-(b) of the scheme envisages that "an industrial unit which
commences commercial production during the operative period of this scheme,
shall be entitled to claim benefits under this scheme." Clause 3(a)
provides that the scheme shall be applicable to:
(i) the new industrial units;
(ii) the industrial units going for expansion;
(iii) the industrial units launching diversification; and (iv) the sick
A "New Industrial Unit" has been defined in clause 2(k) as:- (i)
"New Industrial Unit" means an industrial unit which commences
commercial production during the operative period of this Scheme including a
unit set up on the site of an existing industrial unit by making separately
identifiable capital investment; subject however, that where an industrial unit
manufacturing the same product is established on the site of an existing unit,
the benefit permissible for a new unit shall be available to it only on the
production in excess of 80% of the installed capacity of the existing unit.
(ii) "New Industrial Unit" shall also include a sick unit:- (a)
which has not availed of any benefits of exemption from tax or deferment of
(b) which has been appraised by financial institution and appropriate
rehabilitation plan has been formulated; and (c) which has been purchased by a
new management other than by way of collusive transfer and such management has
made additional fixed capital investment not less than 25% of the depreciated
value of the assets of such unit".
The respondents in these appeals viz M/s. J.K.
Udyog and J.K. Synthetics Ltd were writ petitioners before the High Court of
Rajasthan and are companies which manufacture cement in different units within
the State of Rajasthan. The respondent-companies in these appeals are
The description of the type of units, extent of the percentage of exemption
from tax liability, the maximum exemption permissible under the scheme and the
maximum time limit for availing the exemption under the scheme have been set
out in Annexure 'B' to the Scheme.
We set out below the material portion of Annexure B to the exemption scheme.
Type of Units Extent of the percentage of exemption from total tax liability
Maximum exemption in terms of percentage of eligible fixed capital
investment(FCI) Maximum availing limit for exemption from tax.
1 2 3 4 5 1 New Units other than the units mentioned at S.No.2 and 3 and
units going in for expansion or diversification 1st year 2nd year 3rd year 4th
year 5th year 6th year 7th year 8th year 9th year 10th year 11th year 100 % 90%
80% 70% 60% 50% 50% 40% 40% 30% 30% 100%of eligible fixed capital investment in
cases where such investment exceeds Rs.1,50,00 Iacs, and 125% of eligible FCI
in cases where such investment does not exceed Rs.150,00 lacs Eleven years 2 .
(a)New Units of knitwears, gems and jewellery, textile, electronics and
telecommunications, computer software, foot wears and leather goods, and
ceramic (b) Very Prestigious Units 1st year 2nd year 3rd year 4th year 5th year
6th year 7th year 8th year 9th year 10th year 11th year 12th year 13th year 100
% 100 % 90% 80% 70% 60% 50% 50% 40% 40% 30% 30% 30% 30% 125% of eligible fixed
capital investment Thirteen years 3 All categories of cement Plants/ units
including pioneering to Prestigious unit Very prestigious/Premier Units except
mini cement plants mentioned in Annexure-A 25% of total liability 100% of
eligible FCI Eleven years 4 Sick Units:
(a) Sick units which have not availed of benefits of exemption from tax or
determent of tax previously, Same benefits which are available to new Units at
S. No.1 Eleven years (b) Other sick units which have availed of the benefits of
exemption from tax or deferment of tax 1st year 2nd year 3rd year 4th year 5th
year 6th year 7th year 8th year 9th year 10th year 11th year 80% 70% 60% 50%
40% 30% 20% 10% 10% 10% 10% 100% of eligible fixed capital investment in cases
where such investment exceeds Rs.150.00 lacs and 125% of FCI in cases where
such investment does not exceed Rs.150.00 lacs Eleven years It is apparent from
this annexure that for the purposes of deferring the rate of exemption the
industries were classified into three categories under Srl. Nos. 1, 2 and 3
according to the kind of Industry. Cement plants/units have been separately
placed in Srl.No.3.
According to the respondent-companies, however, sick units were treated as a
special category, and irrespective of the nature of the industry, were covered
by Srl.4. It is the respondent's case that as far as their cement units were
concerned they were not covered by Srl.
No 3 but by Srl. No.4 (a) and thus, according to them, they were entitled to
the higher benefits accorded to new units under Srl. No.1. According to them
the words under column 3 against Srl. No.4 made this clear.
According to the appellants on the other hand, this was never the intention
of the State Government which had wanted to treat sick industrial units of a
particular kind on par with new industrial units of that kind in the matter of
grant of exemption. But we are anticipating the dispute which is considered in
detail subsequently. Returning to the scheme : - the procedure for obtaining
exemption under the scheme has been provided in clause 4, the relevant extract
of which reads as under:
"Sanction of benefits under the Exemption Scheme and issue of
Eligibility Certificate:- (a) In order to avail the benefit under this Scheme,
the applicant industrial unit shall have to obtain sanction from the State
Level Screening Committee or District Level Screening Committee, as the case
may be. The Screening Committees shall act as quasi- judicial authorities whose
decisions shall be final subject to other provisions provided for in this
(b) (c) ..
(e) The appropriate Screening Committee shall, after having examined the
application of an industrial unit and after having gathered or collected such
other information, documents or evidence as may be considered necessary and
after having got conducted such further enquiry as deemed proper in the
circumstances of the case, sanction the benefits under this Scheme to the said
unit if it is found fully covered by the provisions of this Scheme and is not
in any way debarred or disqualified to claim the said benefits.
However, in particular, the said Screening Committee shall reject the
application of the applicant, unit (i) where its case does not fall within the
parameters of this Scheme, or (ii) where it has failed in spite of adequate
opportunity being given, to supply any information asked for or adduce any
evidence required for; or (iii) where any case of avoidance or evasion of tax
is pending against it at any forum or it is found penalized for such offence,
within a period of two years immediately preceding the date of the filing of
the application; however, the said Screening Committee may waive this
disqualification in an appropriate case if the offence is technical or venial
in nature or has been compounded.
(f) In case of sanction of benefits under the Scheme, such sanction shall be
communicated in writing to the Assessing Authority of the applicant unit, who
shall issue Eligibility Certificate to the said unit in FormC, appended to this
notification, within a period of seven days from the date of the receipt of the
sanction, and a copy of such Certificate shall also be sent to the Member
Secretary of the concerned Screening Committee.
(g) The Eligibility Certificate issued under this Scheme shall remain in
force till the permissible exemption from tax in accordance with the provisions
of this scheme is not exhausted, or till such Certificate is not amended,
suspended or revoked.
(h) The benefits under this Scheme shall be available from the date of the
application filed by the applicant unit completed in all respects, as certified
by the member Secretary of the appropriate Screening Committee.
(i) During the currency of the Eligibility Certificate, the unit concerned
shall be exempted from payment of tax on the intra-State sales/inter-State
sales of the goods and by-products manufactured by it within the State
including the waste items derived therefrom and the packing material used
therewith." The order in which the steps envisaged for grant of benefits
under this clause of the scheme was therefore;
1) making of an application by the industrial unit;
2) the certification of the application as complete and the provisional
availability of the benefits (clause 4(h) );
3) The examination of the application by the Screening Committee after
collecting information/enquiry etc Clause (4( e));
4) The sanction or rejection of the application by the Screening Committee .
5) In case of sanction, the communication of the sanction to the Assessing
Authority. (Clause (4 (f)) 6) The issuance of Eligibility Certificate by the
Assessing Authority within seven days. (Clause 4( f));
7) The availability of exemption from payment of tax during the currency of
the Eligibility Certificate until the exemption was either exhausted or unless
the certificates were amended, suspended or revoked.
The respondent companies applied for exemption under the scheme claiming
benefits at par with units under Srl.No.1. As far as M/s. J.K. Synthetics
Limited is concerned, the Director of Industries certified that the application
was complete. The certificate issued under Section 4(h) on 20th February, 1999
made it clear:
"This certificate will not be treated as sanction of incentive under
the Sales Tax Exemption Scheme, 1998. Incentive if any availed under Clause
4(h) of the aforesaid scheme will be entirely at the risk of the unit, subject
to decision of the State level Screening Committee. A suitable undertaking
shall be taken by the concerned assessing authority in this regard from the
unit." In terms of the requirement, M/s. J.K. Synthetics Limited gave an
undertaking in writing to the effect that the incentives availed by the company
from the date of completion of the application till the grant of sanction of
eligibility certificate would be entirely at the risk of the company and in
case the company's application was rejected for any reason, the company shall
pay the tax which was being availed of on the basis of the certificate of
While the application of M/s. J.K. Synthetics was pending for consideration
by the Screening Committee, the corrigendum was issued on 30th September, 1999,
by the Finance Department inter-alia, amending the third column against Srl.No.4
of Annexure B by replacing the phrase "New units at Srl. No. 1" with
"New units at Srl. No. 1,2 and 3 as the case may be". Thus sick
cement units under Srl.No.4 (a) were expressly put on par with new cement units
M/s. J.K. Synthetics Limited submitted a representation to the Screening
Committee that the corrigendum should not affect the company. The Screening
Committee deferred its decision on the ground that as the particular unit of
Synthetics Limited in respect of which the exemption was claimed was not
sick, although the company itself had been declared sick, it should await the
rehabilitation programme duly approved by the BIFR providing the benefit of
sales tax incentives scheme to all such units. While deferring the case till
the approval of the rehabilitation programme by BIFR, the Screening Committee
said that the unit could avail of the benefit under the scheme to the extent
permissible under the corrigendum. Neither any sanction under clause 4(e) and
consequently no Eligibility Certificate under clause 4(f) have been issued to
M/s. J.K. Synthetics Limited under the scheme till today.
As far as M/s. Udaipur Udyog Limited is concerned, its application under the
scheme was certified as complete under Clause 4(h)on 26th July, 1999 and was
sanctioned on 30th December, 1999. However the quantum of benefit was granted
in terms of the corrigendum from the date of issuance of the corrigendum. The
eligibility certificate was issued to M/s. J.K.
Udyog on 29th February, 2000 also restricting the benefits under the scheme
on the basis of the corrigendum.
Since the respondent had been availing of the higher rates of exemption
against Srl.No.1, consequent upon the decision of the Screening Committee
granting the benefits under the corrigendum, provisional assessment orders and
notices were issued to both the respondent companies by the Sales Tax
Authorities over the differential sales tax.
M/s. J.K. Synthetics Limited and J.K. Udyog Limited filed separate writ
petitions before the High Court of Rajasthan challenging the corrigendum dated
30th September, 1999; in the alternative a prayer was made to hold that the
corrigendum had no application to the respondent companies; for quashing the
decisions of the Screening Committee in so far as the respondent companies were
given the benefit of the exemption scheme on the basis of the corrigendum and
for quashing the provisional assessment orders and notices.
The submission of the respondent companies before the High Court inter alia
was that the scheme as originally framed allowed the companies to avail of the
benefit of the exemption scheme under the Srl.No. 4(a) read with Srl. No. 1 for
a period of 11 years up to a maximum limit of hundred percent of the companies'
eligibility fixed capital investment at percentages of the total tax liability
ranging from 100% in the first year to 30% in the 11th year. These rights of
the companies under the scheme were claimed to be crystalised with effect from
the date of the certification of their applications under clause 4 (h), which
could not be taken away by the corrigendum with retrospective effect.
The learned single judge accepted the submission of the respondent companies
that the impugned corrigendum really amounted to an amendment of the scheme.
But it was held that the State Government was competent to modify the scheme
and, therefore, the respondent companies were entitled to relief in terms of
the scheme as originally notified up to the date of amendment and subsequent
thereto as provided in the corrigendum. Since the corrigendum had been
published in the Official Gazette on 7th January, 2000 it was held that it
would be applicable with effect from that date.
Several appeals were preferred both by the State of Rajasthan as well as by
the respondent companies from the decision of the learned Single Judge. The
Division Bench disposed of all the appeals by the judgment impugned before us.
The Appellate Court agreed with the learned Single Judge that the corrigendum
notification was in fact an amendment of the scheme and therefore, this would
operate only prospectively i.e. from 7th January, 2000. The plea of the
respondent companies that the State Government was bound by the principles of
promissory estoppel from modifying or amending the scheme was negated by the
Division Bench. The respondent companies have not sought to challenge this
conclusion before us. The Division Bench however held that the rights of the
respondent companies of enjoying the benefit under the original scheme including
the maximum amount of exemption, the maximum period of exemption, and the
percentage of exemption were available to the respondent companies with effect
from the date of certification of their applications under clause 4(h) and were
substantive and that these rights could not be affected adversely unless the
subsequent notification clearly manifested an intention to do so. It was held
that the corrigendum did not contain any such explicit provision nor could any
inference be drawn that accrued rights were to be affected. It was held that
even if this proposition was unacceptable, the amendment was arbitrary and
violative of Article 14 being discriminatory vis-`-vis other sick industries.
It was further held that the amendment could not discriminate against sick
cement plants which had not availed of benefits of tax exemption earlier, so
that such sick industries were treated in a manner worse than sick cement
industries which had availed of exemptions from sales tax earlier.
The Division Bench accordingly held that the respondent companies were
entitled to avail of the benefits under the scheme as originally notified in
the manner provided in column 3 of Serial No. 1 of Annexure B read with Serial
No. 4(a) and that such rights were not affected by the corrigendum published on
7th January, 2000. However. the corrigendum notification itself was not quashed
as had been prayed for.
The appellants have impugned the decision of the Division Bench and have
contended that the Division Bench had erred in fact and in law in coming to the
conclusion that the respondent companies had a vested right to the benefits of
the scheme as available to new units under Srl. No. 1 of Annexure 'B' to the
scheme. It is pointed out that as far as J.K. Synthetics is concerned its application
has not been sanctioned at all. It is contended that the corrigendum
notification was in fact a corrigendum and not an amendment, and that the
corrigendum merely made explicit the intention of the State Government to treat
the sick units of a particular industry on par with new units of such
industries. It is further contended that even if the corrigendum were construed
as an amendment, the State Government had the power to withdraw or modify the
benefit of the scheme not only under Section 15 of the RST Act read with
Section 8(5) of the CST Act but also under clause (9) of the scheme which
provides for the power to the State Government to review or modify the
exemption scheme "as and when needed in public interest". It is
submitted that an exemption is in the nature of a concession and was by that
reason a defeasible right. It is submitted that exemptions granted could not
create any vested right in the beneficiaries of the exemption to the continued
grant of the exemption until and unless the beneficiary was able to establish
that the State Government was bound by the principles of promissory estoppel
from modifying or withdrawing the concession. It is submitted that since the
respondent companies had failed to establish any promissory estoppel on the
part of the State Government, the Government could withdraw or modify the
concession given at least from the date of the publication of the corrigendum
notification. As far as the High Court's findings on the issue of
discrimination is concerned, it is submitted that in fact there were no other
cement units in the State in comparison with which it could be said that the
respondents-companies were being unfairly treated. The language of Srl. No.3 in
Annexure B was also relied upon to contend that the corrigendum was not
discriminatory and merely treated sick cement units and new cement units
Counsel for the respondent-companies has submitted that there was no power
in the State Government to issue the corrigendum with retrospective effect. It
is submitted that the scheme was issued not only under Section 15 of the RST
Act but also under Section 8(5) of the CST Act. The exercise of the power was
thus, to use counsel's language, 'inseverable'. It is argued that as there is
no power under Section 8(5) of the CST Act to withdraw an exemption with
retrospective effect the entire exercise of issuing the corrigendum must fail.
In addition, it is submitted that even Section 15 of the Act did not allow the
State Government to withdraw an exemption with retrospective effect.
It is stated that under clause 4(h) read with clause 5(g), on the date on
which the respondents-companies' application was certified as being complete,
rights accrued to the industrial units which could not be withdrawn and it was
not necessary to rely upon the principle of promissory estoppel for the purpose
of claiming continued exemption. It is submitted that the subsequent
notification was not a corrigendum but an amendment of the scheme and could not
be construed as amounting to withdrawal of the rights conferred under the
scheme as originally published. It is submitted that sick units have been
treated as a class apart irrespective of the nature of industry. It is also
submitted that the corrigendum if construed in the manner advocated by the
appellants, would be violative of Article 14. Finally, it is submitted that in
any event this Court should protect the respondent-companies in so far as they
had availed of the benefits of the scheme as originally published at least from
the date of the order of the High Court. It is submitted that the High Court
had struck down the corrigendum notification, Therefore, Annexure B as
originally notified would revive. The decision of the High Court not having
been stayed by this Court, the respondent-companies had not and indeed could
not recover the sales tax from their customers by virtue of Section 14(2) of
the RST Act and it would in these circumstances be inequitable to saddle them
with sales tax liability for the period subsequent to the decision of the High
Court. Reliance has been placed on the decision of this Court in State of
Rajasthan V. Mahaveer Oil Industries and Ors. 1999 (4) SCC 357 in support of
The issue whether the subsequent notification should be read as a correction
or an amendment of the scheme as originally notified would be relevant only if
the appellants sought to give retrospective effect to it. Since the appellants
have stated before us that they do not intend to take away the benefits which
may have actually been enjoyed by the respondent companies prior to the date of
publication of the corrigendum viz 7th January, 2000, a determination of the
issue would be an academic exercise and a consideration of the several
decisions cited with regard to the principles for deciding whether a statutory
provision has retrospective effect, is unnecessary. The question is whether the
subsequent notification could operate as far as the respondent companies are
concerned with effect from 7.1.2000.
The answer to this question would depend upon the nature of the rights of
the respondent companies under the scheme.
An exemption is by definition a freedom from an obligation which the
exemptee is otherwise liable to discharge. It is a privilege granting an
advantage not available to others. An exemption granted under a statutory
provision in a fiscal statute has been held to be a concession granted by the
State Government so that the beneficiaries of such concession are not required
to pay the tax or duty they are otherwise liable to pay under such statute. The
recipient of a concession has no legally enforceable right against the
Government to grant a concession except to enjoy the benefits of the concession
during the period of its grant. This right to enjoy is a defeasible one in the
sense that it may be taken away in exercise of the very power under which the
exemption was granted. [See: Shri Bakul Oil Industries & Anr. V.State of
Gujarat; 1987 (1) SCC 31;
Kasinka Trading v. Union of India (1995)1 SCC 274; Shrijee Sales Corpn. v.
Union of India (1997) 3 SCC 398].
In this case the scheme being notified under the power in the State
Government to grant exemptions both under Section 15 of the RST and Section
8(5) of the CST in the public interest, the State Government was competent to
modify or revoke the grant for the same reason. Thus what is granted can be
withdrawn unless the Government is precluded from doing so on the ground of
promissory estoppel, which principle is itself subject to considerations of
equity and public interest.
[See: Sales Tax Officer v. Shree Durga Oil Mills (1998) 1 SCC 572]. The
vesting of a defeasible right is therefore, a contradiction in terms. There
being no indefeasible right to the continued grant of an exemption (absent the
exception of promissory estoppel), the question of the respondent companies
having an indefeasible right to any facet of such exemption such as the rate,
period etc. does not arise.
In any event, the High Court erred in fact in holding that M/s. J.K.
Synthetics had a vested right to the benefits of the scheme. Clause 4 of the
scheme clearly provides that the benefits under the scheme were subject to the
sanction of the Screening Committee. No sanction has been issued to M/s. J.K.
Synthetics till date.
Apart from this, the exemption being a creature of the scheme is subject to
the scheme. Clause 9 of the scheme makes it clear that the right under the
scheme was temporary in the sense that the scheme could be modified or
reviewed. It is true that clause 9 also provides that such review or
modification could take place only in the public interest. But nevertheless the
right conferred was a modifiable or revocable one. If any right under the
scheme is held to be unmodifiable it would be contrary to the scheme itself.
Therefore even if one were to assume that the respondent companies were
entitled to the benefits of the scheme on par with new units under Srl.No.1
with effect from the date of the certification of their application under
clause 4(h), the right could be modified with effect from the date on which the
scheme was modified. The further argument of the respondent that the subsequent
notification could not be construed as a modification and would apply only to
subsequent applicants is unacceptable.
There is no ambiguity in the language of the subsequent notification. On the
contrary the use of the word corrigendum itself indicates the intention was to
correct and to rectify what the State Government thought had been erroneously
Coming now to the question of public interest. The 4th New Industrial Policy
pursuant to which the scheme had been framed by the State Government was
indisputably in the public interest.
Therefore, if the intention of the State Government was to effectuate the
policy by issuing the subsequent notification it cannot be said that the State
Government was not acting in the public interest. The Industrial Policy which
resulted in the exemption scheme expressly provided that the rate of benefits
which were to be given to sick industrial units which had not availed of any
such benefits in the past would be at par with a new unit. But does this mean
that the words "new unit" in the policy referred to industries under
Srl. No.1 ? We think not. New units of different kinds of industries had been separately
classified both under the policy and under Srl.Nos.1,2 and 3 of Annexure B to
the scheme. Each of the three categories at Srl.Nos.1,2 and 3 have been granted
different rates of exemption Serial No.1 relates to new industries not covered
by Srl.No.2 and 3. It is therefore, the residuary category and any new industry
covered by Srl. Nos. 2 and 3 would not be covered by Srl.No.1. Serial No.2
speaks of particular industries such as knitwears, gems and jewellery, textile,
electronics telecommunications, computer software, footwear and leather goods
and ceramics. This category of industries has been sub-classified under the
heads of (a) "new units" and (b) very prestigious units". A very
prestigious unit is not defined in the scheme itself but is referred to in the industrial
policy as those industries which have a fixed capital investment of Rs.50 crore
or more and regular employment of 250 persons. Srl.No.3 makes no such
distinction and refers to "all categories" of cement plants except
mini cement plants mentioned in Annexure 'A' to the scheme. Subject to the
exception of Annexure A all categories of cement plants/units including new
units have been allowed exemption of 25% of the total tax liability for 11
years. There is no tapering of the incentive for the 11 years that the benefit
was to be available as is the case under the other Serial Numbers. "All
categories" would necessarily include new cement plants and sick
industrial units falling within the definition of Clause 2(k)(ii), which was
also entitled to the same level of benefit as all other new cement units.
It would be incongruous to grant sick industrial units which do not fall
within clause 2(k)(ii) higher benefits than sick industrial units which do.
Since a sick industrial unit is granted a particular benefit subject to the
fulfillment of various conditions, it implies that the industry which fulfils
the conditions would be better off than the one which does not. If we were to
accept the respondents' interpretation of the original notification under Srl.No.4(a)
and (b), higher benefits would be available to sick industrial units which did
not comply with the conditions imposed under clause 2(k)(ii). Such a conclusion
is not only illogical but would serve to make a distinction between sick
industrial units on an irrational basis. Clause 2(k)(ii) therefore indicates
that the highest benefit that a sick industrial unit can claim under the
scheme, is to be treated at par with new industries.
The thrust of the industrial policy was to give an incentive to new
entrepreneurs. It is true that there are separate provisions for 'sick
industries' but given the main object of the policy to make Rajasthan a
"most favoured destination for industries", it could not have been
the intention of the State Government to give a lower benefit to new industries
and to give higher benefits to sick industrial units already established in the
State. However, when the scheme was first notified although the body of the
scheme effectuated the objective, the entry under column 3 against Srl.No.4 in
Annexure B did not clearly reflect this. Doubtless the interpretation put by
the respondent companies and accepted by the High Court on the entries against
Srl.No. 4 as it originally stood in Annexure B, is a possible interpretation,
but in our opinion Annexure B was equally susceptible of the interpretation put
forward by the appellants before us particularly in the context of the
It was to clarify this ambiguity that the subsequent notification was issued
by the State Government to correct or amend Annexure B to the extent that it
could be interpreted in a manner not in keeping with the published industrial
policy of the State and the substantive provisions of the scheme.
For these reasons also the corrigendum cannot be said to be violative of
Article 14. On the contrary, if the corrigendum were not to be given effect to,
the entire scheme would operate irrationally by making an invidious distinction
between sick cement units as we have already said. The irrationality is also
apparent vis-a-vis industries referable to Srl.No.2. Under the scheme, the
highest rate of exemption and greatest benefits is granted to new units under
Srl.No.2. If the respondents' interpretation of the corrigendum is accepted, a
sick industry of a particular kind which otherwise falls under Srl.No.2 would,
by virtue of the entry against Srl.No.4, be entitled to much lesser than new
units of the same kind of industry as it would be treated on par with new units
of different kinds of industries under Srl.No.1. This is perhaps the reason why
the corrigendum was not challenged by those industries covered by Srl. No.2
which are sick and which are not new industrial units within the meaning of
clause 2(k)(ii) of the scheme. Although it appears to us that Srl.No.3 would
include all categories of cement industries, the question whether Srl. No. 4(b)
would relate to sick cement industries not covered by clause 2(k) (iii) or Srl.
No.4(a) is not an issue which requires to be finally decided in this case,
particularly when there is no such industry before us which claims the benefit
of clause 4(b).
Learned counsel for the respondents' additional contention is that the
Screening Committee had proceeded on the basis that the sick cement units were
covered under Srl.No.4 and not Srl.No.3. It is argued that such decision of the
Screening Committee being final in terms of Clause 4(a) of the scheme, it was
not open to the State to contend otherwise. The argument is without force. The
finality given to the decision of Screening Committee in terms of Clause 4(a)
is "subject to other provisions provided for in the scheme". Any
decision of the Screening Committee cannot be contrary to the provisions of the
Besides all that the Screening Committee has held is that the respondent
companies are to be treated on par with other cement companies, with effect
from the date of the subsequent notification. That is also what the appellants
contend, namely that Srl.No.4(a) expressly puts sick cement units on par with
new cement units under Srl.No.3.
The respondent companies are therefore required to avail of the benefits
under the scheme on the basis of the corrigendum with effect from 7.1.2000.
Learned counsel for the respondent companies may be right in his contention
that if a sanction is granted and an Eligibility Certificate issued on the
basis of the sanction, then having regard to the provisions of Section 4(h) the
period of exemption under the sanction ought to cover the date of the
certification of the application as complete under Clause 4(h).
But it is again unnecessary to decide the ambit of the Screening Committee's
power, as the appellants have not argued that the benefits of the higher rate
of exemption already availed of by the respondent companies with effect from
the date of certification under clause 4(h) up to 7th January, 2000 should be
taken away from them.
This brings us to the last argument of the respondent companies viz. that
they should not be made liable for the sales tax on the basis of the corrigendum
for the period they had availed of the exemptions after the decision of the
High Court. The submission proceeded on the basis that the High Court had
quashed the corrigendum Notification. As we have noted earlier the Division
Bench had not quashed the corrigendum notification but had contented itself
with construing it. The mere fact that this Court has not granted a stay of
operation of the decision of the High Court would not give the respondent
companies any right to the fruits of that decision if the decision is
ultimately reversed by this Court. Besides the respondent-companies should have
been aware that with the admission of the appeal from the High Court's order
their rights thereunder were precarious. [See: Union of India v. West Coast
Paper Mills Ltd. 2004(2) SCC 747, 753].
The mere circumstance that the respondent companies having availed of the
exemption scheme were prohibited from collecting the tax from its customers or
that they had not collected the sales tax from their customers, (which assertion
is strongly disputed by the appellants), is of no consequence. The primary
liability to pay the Sales Tax is on the seller. The seller may or may not be
entitled to recover the same from the purchaser. The State Government is
entitled to recover the same from the respondent-companies irrespective of the
fact that the respondent-companies may have lost the chance of passing on their
liability to pay sales tax to their purchasers.
It is true that this Court has on some occasions granted relief from payment
of sales tax to an assessee despite having found against the assessee on
equitable considerations. But on every occasion there was something more than
the mere impossibility of the assessee passing on the tax to its purchasers.
Thus in the case of British Physical Lab India Ltd.
V. State of Karnataka and Anr. 1999 (1) SCC 170, the State Government had
itself issued a notification reducing the rate of tax. The notification was
struck down by Court. The State Government then sought to recover the difference
between the reduced rate as had been notified by it and the rate generally
applicable. This Court granted relief to the assessee since the State
Government had itself issued the notification concerned.
Similarly in Shree Cement Limited and Anr. v. State of Rajasthan and Others
2000(1) SCC 765, relief was granted having regard to the peculiar history of
the case. By three notifications covering 1990 to 1994 issued by the State of
Rajasthan the rate of tax payable by local dealers in respect of inter-state
sales had been reduced. The notifications were challenged by cement
manufacturers from outside the State.
The High Court rejected the challenge. When the non local cement
manufacturers came to this Court, this Court held that the notifications were void
and quashed them. [Shri Digvijay Cement Companies v. State of Rajasthan, 1997
(5) SCC 406].
A fourth notification was subsequently issued by the State of Rajasthan
similar to the earlier three notifications which had been quashed. The fourth
notification was challenged directly before this Court by means of a writ
petition under Article 32.
This time the Bench which entertained the writ petition disagreed with the
view expressed earlier by this Court in respect of Shri Digvijay Cement and
referred the matter to a larger Bench. The Constitution Bench overruled the
decision in Shri Digvijay Cement. The question then was whether the local
manufacturers would be entitled to the benefit of the decision of the
Constitution Bench despite the fact that the notifications under which they had
availed of a lower rate of tax had been decided against them in Shri Digvijay
Cement. This Court held in favour of the local manufacturers. The circumstance
that the notifications were subsequently held to be valid by a larger Bench
operated to protect them from liabilities which had arisen by virtue of the
earlier erroneous decision.
In State of Rajasthan and anr. v. Mahaveer Oil Industries & others
1999(4) SCC 357, this Court allowed the assessee to retain benefits under a
scheme upto 4.4.1994 despite the fact that the assesses were held not entitled
to such benefits, on the ground that in another proceeding this Court had
allowed similar industries to retain the benefit up to 4.4.1994.
What is of significance is that the assesses were denied further benefit
even though they had been successful before the Single Judge, before the
Division Bench of the High Court and no stay had been obtained from this Court
at any stage. It was said:
"The respondents have been aware throughout that the judgment of the
Single Judge was appealed against. Even after the Division Bench dismissed the
appeal the matter was carried further by filing the present special leave
petition/appeal before this Court.
The respondents continued to enjoy the benefits of the said two Schemes
since no stay was obtained. Nevertheless, the question whether the respondents
are entitled to the said benefits, has been sub judice throughout. Since the
appeal is now being decided against the respondents, they cannot claim the
benefit of an eligibility certificate which was granted entirely on account of
a judgment of a Single Judge in their favour which is now being set
aside." As far as M/s. J.K. Synthetics is concerned, their right to obtain
benefits under the scheme by reason of clause 4(b) was in any event
provisional. The undertaking given by this company was to the effect that the
benefits of the scheme were being availed at the risk of the company till the
sanction was granted by the Screening Committee. Since no sanction has been
granted to the company, the company was aware that its rights to the benefits
under the scheme were conditional and that it might be called upon to meet its
sales tax liabilities in the event sanction was not granted on its application.
In such circumstances it must be open to the State Government to recover
sales tax dues as it is entitled to under the RST Act allowing the respondent
companies to only keep such benefits as had been already availed of by then
upto 7th January, 2000 and thereafter at the rates specified and according to
the provisions of the scheme as modified by the corrigendum notification.
However no interest or penalty will be charged from the respondent companies by
the appellants on the differential amounts for the period the matter was sub
judice before this Court provided the respondent companies pay the principal
amount of sales tax within such time as may be specified by the appellants in
We, therefore, allow the appeals and set aside the impugned decision without
any order as to costs.