Vividh Marbles Pvt. Ltd Vs. Commercial Tax Officer  Insc 199 (23 February
S.B. Sinha & Markandey Katju
[Arising out of SLP (Civil) 17056 of 2006] S.B. SINHA, J :
The State of Rajasthan pursuant to its industrial policy formulated 'Sales
Tax Incentive Scheme, 1987' (for short, '1987 Scheme') and 'Sales Tax New
Incentive Scheme for Industries, 1989' (for short, '1989 Scheme) .
In terms of 1987 Scheme exemption from payment of sales tax of 100% was
provided. 1989 Scheme which was notified in the Official Gazette on or about
06.07.1989 was given retrospective operation with effect from 05.03.1987. It
was to remain in force upto 31.03.1998. Sub-clause (b) of Clause (1) of 1989
Scheme reads as under :
(b) An industrial Unit, other than the new industrial unit covered by 1985
Dispensation, being covered by the Sales Tax Incentive Scheme for Industries,
1987 (hereinafter referred to as the Old Incentive Scheme) shall have an
alternative option to seek the benefits under the New Incentive Scheme."
Clause 4 of the said Scheme which is relevant for our purpose, reads as
" Exemption from tax on sales
An industrial unit, which is granted
eligibility certificate under this notification shall be exempted from payment
of tax on sales made within the State of the goods manufactured by it in
accordance with the parameters incorporated in Annexure "C" to this
for the purpose of arriving at the limit of tax exemption as
provided in Annexure "C" the aggregate of the following shall be
Aggregate amount of tax which would have been leviable under
the provisions of the RST Act 1954;
Aggregate amount of tax on inter-State sales which would have been leviable
under the provisions of the CST Act, 1956; and
Aggregate amount of tax, as and when
levied, on consignments.
When the limit of tax exemption
prescribed in Annexure "C" is exhausted, all sales thereafter shall be subject
to tax under the Act by the assessing authority concerned.
The Incentive available under this Scheme shall be subject to the
condition that the beneficiary industrial unit after having availed of any
benefit under this Scheme shall not make sales outside the State including
branch transfers of the goods manufactured by it exceeding 60% in case of SSI,
Medium and Large units and 80% in case of Pioneering and Prestigious units and
90% in case of Very Prestigious Units of its total production."
Appellant herein was eligible to obtain the benefits of the said Industrial
Policy both under 1987 and 1989 Schemes. It, however, opted for 1989 Scheme,
wherefor an application for grant of sanction of eligibility certificate was
filed before the Manager, District Industries Centre, Rajsamand on 01.04.1995.
Indisputably, the eligibility certificate was to be granted by the Industries
Department of the State. The said certificate was granted on 07.12.1996,
pursuant whereto exemption from tax liability was limited to 75%.
Contending, however, that it had altered its position on a representation
made by the State that 1987 Scheme would be applicable in its case, the
appellant alleged that it had not realized sales-tax from its customers. In
support of the said contention, it inter-alia relied upon an order of sanction
of eligibility for grant of exemption/deferment issued by the Member Secretary
of the Department to the Commercial Taxes Officer, Rajsamand, which is in the
following terms :
"The application has been prima-facie found eligible for the benefit of
exemption from tax/deferment of tax on the basis of 'A Industrial Unit'/' a New
Unit covered by 1985 dispensation/a sick Industrial Unit/ Expansion/
Diversification / under sales tax Incentive/ Deferment Scheme 1987/1989 under
PST and / or C.S.T. Act' on the sale of Marble Slabs.
Hence a formal eligibility certificate as per law be granted to the said
applicant. The application filled by the unit was completed in all respect on
The eligible fixed capital Investment as determined by the committee which
is subject to verification as per law is as follows :- a. Cost of land :
________ b. Cost of new building : 9.49 c. Cost of new plant and machinery or
imported second : 57.00 land machinery d. Installation expenditure capitalized
for P & M : ________ e. Capitalized interest during construction not
exceeding 5% of the total fixed capital investment : ________ f. Technical
know-how fees or drawing fees paid Laboratories recognized by the State Govt.
or the Central Government : ________ Total : 66.49 A copy of eligibility
certificate issued by you may also please be sent to this office. "
Reliance has also been placed on the order of assessment passed by the
Assessing Authority of the Commercial Taxes Department, wherein also exemption
had been stated to have been granted in terms of 1987 Scheme, a sample copy
whereof reads as under :
"Sale under Incentive Scheme From 6.5.95 to 5.5.2003 under the
Incentive Scheme, 1987 the assessee has already been allowed a heavy tax
exemption of Rs. 3,11,250.00. Eligibility Certificate No. 1/354 has been issued
to the Assessee.
Under the Incentive Scheme, 1987 the assesse has made a sale of marbles slab
of Rs. 5,42,063. On this sales tax @ 16 percent of Rs. 86,730 is being imposed
and being deducted from eligible amounts received under the Incentive
The mistake of the Assessing Authority, however, having been discovered, the
appellant was issued with a notice to show cause as to why it should not pay
the balance sales-tax on 25% of its turnover. A writ petition filed
thereagainst by the appellant has been dismissed by reason of the impugned
Mr. M.L. Verma, the learned Senior Counsel appearing on behalf of the
appellant, would submit that in view of the representation made by the
respondent, pursuant whereto or in furtherance whereof the appellant had not
collected any tax from the customers, the impugned order cannot be sustained.
In any event, it was urged that no penalty or interest should be levied on the
The learned counsel appearing on behalf of the respondent, however,
supported the impugned judgment.
It is not in dispute that the State formulated two Schemes; one in the year
1987 and another in 1989. The said Schemes provided for different nature of
incentives. Although 1989 Scheme was framed during pendency of 1987 Scheme, as
noticed hereinbefore, the same was given a retrospective operation in terms
whereof the entrepreneurs were given a choice to opt either for 1987 Scheme or
1989 Scheme. Appellant was aware thereabout.
It opted for 1989 Scheme. The sanction of eligibility provided that a formal
eligibility certificate as per law would be granted to the appellant. The
investment for capital, however, was determined at Rs.66.49 lacs. The said
sanction did not amount to a grant of a certificate. The eligibility
certificate, as indicated hereinbefore, was granted only on 07.12.1996, in
terms whereof clearly 1989 Scheme was applied. It was so explicitly stated in
the eligibility certificate also. It may be true that the Assessing Authority
committed a mistake in referring to the 1987 Scheme in its order of assessment,
but thereby the appellant cannot be permitted to derive any benefit to which it
was not entitled under the law. Appellant indisputably was eligible for grant
of exemption in terms of both the Schemes. It had opted for the latter Scheme.
While doing so, it must have taken into consideration the benefits under both
the Schemes separately. Having opted for the 1989 Scheme, in our opinion, now
the appellant cannot be permitted to turn round and contend that it should have
been granted the benefit of 1987 Scheme, only because at a later stage it found
the same to be more beneficial.
A contention was raised that the eligibility certificate dated 07.12.1996
was communicated on 02.07.2003. No. such contention was raised before the High
Court. Before the High Court, the principal contentions raised on behalf of the
appellant were :
It being eligible for grant of
exemption under both the Schemes, it preferred to avail of 100% exemption under
Notices seeking recovery of 25% tax
liability was contrary to the order of assessment; and
Respondent cannot now be permitted to
change its opinion to allow only 75% exemption under 1989 Scheme, because for
all practical purposes it had availed and had been granted exemption under 1987
There had been no representation whatsoever on behalf of the respondent that
the appellant would be entitled to exemption under 1987 Scheme. The eligibility
certificate was to be granted and in fact granted by the Industries Department.
The Sales Tax Authorities, therefore, were merely to pass an order of
assessment on the basis thereof.
The order of sanction being in a printed proforma referred to both the 1987
and 1989 Schemes. It was issued only for the purpose of determination of the
fixed capital investment. It had nothing to do with the grant of eligibility
certificate. If the Assessing Authority committed a mistake in referring to
1987 Scheme and allowed 100% exemption in terms thereof, the State cannot
suffer thereby. The statutory authorities are entitled to rectify their
mistake. When such mistakes are apparent on the face of the records even no
opportunity of hearing is necessary., [See Maharashtra State Seeds Corporation
Ltd. v. Hariprasad Drupadrao Jhadao & Another (2006) 3 SCC 690] Appellant
having opted for grant exemption under 1989 Scheme, the respondent was bound to
accept the same and, thus, it had not committed any illegality in doing so. In
that view of the matter, in our considered view, the appellant who is estopped
and precluded from raising a contention contrary to or inconsistent with its
assertion for grant of exemption.
Reliance has been placed by Mr. Verma on Indian Cement and Others v. State
of Andhra Pradesh and Others [(1988) 1 SCC 743], West Bengal Hosiery
Association and Others v. State of Bihar and Another [(1988) 4 SCC 134]; and
British Physical Lab India Ltd. v. State of Karnataka and Another [(1999) 1 SCC
In West Bengal Hosiery Association (supra), the question which arose for
consideration was as to whether the levy of sales-tax on goods imported into
one State from another may affect the free flow of trade and commerce and,
thus, attract Article 301 of the Constitution of India. Such a question does
not arise herein.
In Indian Cement (supra) preference to local manufacturers was held to be
ultra vires Part XIII of the Constitution of India.
In British Physical Lab India Ltd. (supra), it was opined that it was just
and equitable not to permit the State to collect the differential amount.
The said decision again has no application in the instant case.
Mr. Verma then submitted that at least a direction should be issued that the
appellant is not liable to pay any interest or any penalty. We do not see as to
how in a case of this nature such a direction can be issued.
Appellant herein knew the actual state of affairs. It at all material times
was aware of the extent of its entitlement thereto, which was confined to the
benefits under the 1989 Scheme. However, despite such knowledge if it had not
recovered any tax, it must thank itself therefor.
Furthermore, the question as to whether the appellant did show it bona fide
or not is a question of fact. Such a contention can be raised only in an
appropriate proceeding and not before us for the first time. Reliance placed on
Shree Cement Ltd. and Another v. State of Rajasthan and Others [(2000) 1 SCC
765] is misplaced. Therein, again dicta in Indian Cement (supra) and Shree
Digvijay Cement Co. Ltd. and Others v. State of Rajasthan and Others [(2000) 1
SCC 688] was followed In this case, there is no direction to the
respondent-State to recover the difference in tax.
In State of Rajasthan and Another v. J.K. Udiapur Udyog Ltd. and Another
[(2004) 7 SCC 673], whereupon again strong reliance has been placed, the Court
held that no penalty or interest should be charged, as the said proceeding had
been remained pending. Such a direction was issued by this Court in exercise of
its jurisdiction under Article 142 of the Constitution of India, having regard
to the fact that the lis was finally determined by this Court. The fact of the
present case, in our opinion, is completely different, as applicability of the
Schemes in question depended upon the volition of the appellant, wherewith the
respondent had nothing to do.
For the reasons aforementioned, there is no merit in this appeal, which is
dismissed accordingly, with costs. Counsel's fee is assessed at Rs.10,000/-
(Rupees ten thousand only).