State of
Madhya Pradesh & Anr Vs. G.S. Dall and Flour
Mills [1990] INSC 293 (19
September 1990)
Rangnathan,
S. Rangnathan, S. Mukharji, Sabyasachi (Cj) Saikia, K.N. (J)
CITATION:
1991 AIR 772 1990 SCR Supl. (1) 590 1992 SCC Supl. (1) 150 JT 1990 (4) 430 1990
SCALE (2)756
CITATOR
INFO : E&D 1992 SC2014 (23)
ACT:
M.P.
Sales Tax Act, 1958/M.P. (Deferment of payment of Tax) Rules, 1983. Section
12/Rule 13--Sales Tax--Eligibility for exemption --Effect of Notification dated
July 3, 1987.
HEAD NOTE:
In exercise
of the powers conferred by section 12 of the Madhya Pradesh General Sales Tax
Act, 1958 the State Govern- ment issued a notification dated 23.10.1981
exempting the specified class of dealers who had set up industry in any of the
specified districts of Madhya Pradesh and had commenced production after 1st
April, 1981 from payment of tax under the said Act for a specified period
subject to certain restrictions and conditions. However, when the assesses
approached the Director of Industries for the certificate of exemption, it was
denied to them on the ground that the industries run by them were
"traditional industries" which were not eligible for exemption.
The
assesses went to the court and urged that the con- cept of "traditional
industries" was one unspecified in the notification, and that the
authorities had no jurisdiction to travel outside the terms of the notification
and import extraneous considerations to deny the assesses an exemption they
were entitled to under the notification.
The
State on the other hand, relied on the provisions of the M.P. (Deferment of
payment of Tax) Rules, 1983. notified on 1.9.83 (in particular, rule 13
thereof) and on certain instructions that had been issued by the Government on
12.1.1983 pertaining to the "grant of certificate of eligi- bility to new
industrial units claiming exemption from or deferment of payment of sales
tax".
The assessee's
claim for exemption from sales tax was accepted by the Division Bench of the
High Court in the case of G.S. Dhall & Flour Mills and, following it, in
the case of Mohd. Ismail. The Division Bench took the view that these rules and
instructions had no relevance to the claim for exemption put forward under the
notification of 23.10.1981 and that, in any event, the executive instructions
could not override the provisions of the statutory notification.
591
Subsequent to the decision of the Division Bench, the State Government issued a
notification on 3.7.1987, intended obviously to overcome the effect of the said
decision.
Subsequently,
however, a Full Bench of the High Court, in the case of Jagadamba Industries
disapproved the view taken by the Division Bench in G.S. Dhall case. The Full
Bench attached importance to the rules and instructions referred to above and
relied considerably on his history of the sales-tax levy in the State as
furnishing proper and necessary background in which the terms of the
notification of 23.10.1981 had to be read and interpreted.
The
Full Bench, after considering the scheme and in- structions of the Government,
came to the conclusion that the scope of the exemption notification of 1981 was
not intended to be wider than that of the concessions granted earlier, and that
the 1981 notification was intended to bring about only a change in the mode of
relief to the same categories of industries as were covered by the earlier
schemes.
The
contention that "instructions" could not override the effect of the
statutory notification was repelled by the Full Bench on the ground that the
validity and effectiveness of the instructions could be supported by reference
to Article 162 of the Constitution as filling up a lack of guidelines in the
notification.
The
Full Bench considered the 1983 instructions to be conclusive on two grounds on
the doctrine of contemporanea exposition and on the principle that executive
instructions could always be issued to supplement statutory instruments so as
to fill up areas on which the latter were silent.
The
State, aggrieved by the judgment of the Division Bench in the two cases, and
the assessee by the judgment of the Full Bench in the other case, have filed
the appeals and Special Leave Petitions.
Before
this Court the parties reiterated their submis- sions in support of either of
the two judgments. The main submission on behalf of the State was that, since
the 1981 notification did not set out the conditions on which, and the
procedure in accordance with which the Director of Industries was to issue the
eligibility certificate, the earlier scheme of subsidy/loan and its procedure should
be read into the notification for this purpose. This contention was contested
by the assesses inter alia on the ground that the earlier scheme and the
exemption now 592 proposed were totally different in their object and scope.
Dismissing
the appeals of the State, and allowing the appeals preferred by the assesses,
this Court while observ- ing that the Division Bench laid down the correct law
and not the Full Bench,
HELD:
(1) The 1981 notification does not expressly, or even by necessary implication,
exclude "traditional" indus- tries from its scope.
(2)
Prima facie, the Director of Industries cannot refuse the exemption on a
consideration not specified in the notification. All the conditions for
exemption have to be, and are, set out in the notification itself and all that
the Director of Industries has to do is to satisfy himself that those
conditions are fulfilled; he cannot travel beyond the terms of the
notification.
(3)
Even granting that the 1981 policy was to replace the earlier subsidy/loan by
an exemption, it does not neces- sarily follow that the units intended to be
covered by the new scheme were only those that were covered by the earlier
scheme and that no wider exemption was contemplated.
(4) No
factual foundation has been laid to establish the hypothesis that the exemption
conferred in 1981 was to be a mere extension or substitution of the benefits
conferred earlier.
(5)
The notification does not authorise the Director of Industries to say that,
though the applicant fulfill the terms of the notification. he will not grant
the eligibility certificate because,Under the previously prevalent schemes, he
could not issue an eligibility certificate to "tradition- al
industries". For granting a certificate that the appli- cant is eligible
for exemption under the notification, the director has to look to the
conditions set out in the noti- fication and nowhere else.
Changing
definition of eligibility for exemption also shows that there was no common or
identical group of benefi- ciaries intended under the various instructions or notifica-
tions and that each set of instructions or notification issued from time to
time defined only the categories exempt- ed from its purview and nothing else.
The exemption list under one was not meant to be carried over into another.
Hans
Gordon Dan v .H.H. Dave, [1969] 2 NCR 253. referred to.
593
(7) The 1983 document is not a statutory instrument--neither a notification nor
a rule framed under the statute.
(8) It
is true that the principle of contemporanea exposition is invoked where a
statute is ambiguous but is shown to have been clearly and consistently
understood and explained by the administrators of the law in a particular
manner. But. to apply the doctrine to widen the ambit of the statutory language
would, however, virtually mean that the State can determine the interpretation
of a statute by its ipsi dixit. That, certainly, is not, and cannot be the
scope of the doctrine. The doctrine can be applied to limit the State to its
own narrower interpretation to favour of the subject but not to claim its
interpretation in its own favour as conclusive.
Varghese
v. 1. T.O., [1982] 1 SCR 629 and Doypack Sys- tems P. Ltd. v. Union of India,
[1988] 2 SCC 299, referred to.
(9)
Executive instructions can supplement a statute or cover areas to which the
statute does not extend. But they cannot run contrary to statutory provisions
or whittle down their effect.
(10)
There is nothing in the language of the notifica- tion to suggest that anything
further is needed to enable the Director of Industries to grant the exemption.
Without the guidelines, the requirement for an exemption certificate would not
become an "empty formality".
(11)
If the statutory notification is construed as permitting the State by rules or
executive instructions to prescribe other conditions for exemption, whether new
or based on past practice. it is liable to be struck down on the ground of
impermissible delegation of legislative power to the executive. This,
certainly, they cannot do.
(12)
The 3/7/87 notification cannot be treated as
one merely clarifying an ambiguity in the earlier one and hence capable of
being retrospectively; it enacts the rescission of the earlier exemption and,
hence, can operate only pro- spectively. It cannot take away the exemption
conferred by the earlier notification.
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 2211 (NT) of 1988 etc. etc.
From
the Judgment and Order dated 7.10.1986 of the Madhya Pradesh High Court in M.P.
No. 1861 of 1983.
594 Prithvi
Raj, R.B. Mishra, Uma Nath Singh, S.K. Gambhir, Vivek Gambhir, Satish K. Agnihotri,
Ashok Singh and Mrs. V.D. Khanna for the Appellants.
Harish
N. Salve, Ms. Lira Goswami and D.N. Misra for the Respondent.
The
Judgment of the Court was delivered by RANGANATHAN, J. The Civil Appeal and
S.L.P. 12054/87 are by the State of Madhya Pradesh (M.P.). The respondents in
these two matters and the petitioners in the other five Special Leave Petitions
are certain concerns in M.P. assess- able to sales tax (hereinafter compendiously
referred to as the assesses'). All these matters can be conveniently dis- posed
of by a common judgment as they raise a common issue.
The
assesses' claim for exemption from sales tax for certain periods in question
was accepted by the High Court in the case of G.S. Dhall & Flour Mills and,
following it, in the case of Mohd. Ismail (a case where the exemption sought
for was originally granted but subsequently revoked).
However,
subsequently, a Full Bench of the High Court, in the case of Jagadamba Industries,
disapproved the view taken by the Division Bench in the G.S. Dhall & Flour
Mills case and, following the Full Bench, the writ petitions filed by certain
other assesses were dismissed by the High Court. The State is aggrieved by the
judgment in the first two cases and the assesses by the High Court's decision
in the other cases. Hence these appeals and special leave petitions.
Before
dealing with the appeals on merits, an important circumstance needs to be
referred to, which is this: The judgment of the Full Bench in the case of Jagadamba
Indus- tries was itself the subject matter of Special Leave Peti- tions in this
Court but those petitions (S.L.P. Nos. 15688- 90/87) were dismissed, at the
stage of admission, on 9.2. 1988, with the observations: "We are in
agreement with the views expressed by the High Court. The Special Leave Peti- tions
are dismissed". In view of this, the State submits that C.A. 22 11/87
should be allowed and that the assesses' S.L.Ps. should be dismissed in limine.
On the other hand, counsel for the assesses seek to distinguish the Jagadamba
case by contending that this Court had refused leave against the Full Bench
judgment on account of certain special facts which were considered sufficient
to disentwine the assesses in those 595 cases from claiming the exemption. They
contend that, in view of this and the fact that the G.S. Dhall & Flour
Mills case is in appeal before we may grant leave in the S.L.Ps. and dispose of
all the appeals on merits. We accept this plea and grant leave in the S.L.Ps.
condoning a delay in the filing of S.L.P. 12054/87. We shall, however, touch
upon the above aspect of the matter in the course of our judgment.
The
issue raised is, at first blush, a simple one. S. 12 of the M.P. Sales Tax Act
(hereinafter referred to as `the Act') enables the State Government to grant
exemption from the levy of sales tax in certain circumstances. It says:
12.
Saving: (1) The State Government may, by notification, and subject to such
restrictions and condi- tions as may be specified therein, exempt, whether prospec-
tively or retrospectively, in whole or in part-- (i) any class of dealers or
any goods or class of goods from the payment of tax under this Act for such
period as may be specified in the notification;
(ii) any
dealer or class of dealers from any provision of the Act for such period as may
be specified in the notifica- tion.
(2)
Any notification issued under this section may be re- scinded before the expiry
of the period for which it was to have remained in force and on such rescission
such notifica- tion shall cease to be in force. A notification rescinding an
earlier notification shall have prospective effect." In exercise of this
power, the State Government issued the following notification on 23/26.10.1981
which it is neces- sary to extract in full here along with its Annexure. It
reads:
"In
exercise of the powers conferred by section 12 of the Madhya Pradesh General
Sales Tax Act, 1958 (No. 2 of 1959) the State Government hereby exempts the
class of dealers specified in column (1) of the Schedule below who have set up
industry in any of the districts of Madhya Pradesh specified in the annexure to
this notification and have commenced production after 1st April, 1981, from
pay- ment of tax under the said Act for the period specified in column (2),
subject to the restrictions and conditions specified in column (3) of the said
schedule:
596
------------------------------------------------------------ Class of dealers
Period Restrictions and conditions subject to which exemption has been granted
1 2 3 ------------------------------------------------------------
1.
dealers who-- Two years The dealer specified in (a) hold a certifi- from the
column (1) shall continue cate of regis- date of to furnish the pres- tration
under The commence- cribed returns under the M.P. General Sales ment of M.P.
General Sales Tax Tax Act, 1958: production Act, 1958 and shall pro- duce
before the assessing (b) are registered authority at the time of small scale indus-
his assessment a certifi- trial units with cate issued by the Direc- the
Industries Dep- tor of Industries, Madhya artment of Govt. of Pradesh or any
officer au- M.P., and thorised by him for the purpose, certifying that (c) have
set up ind- such dealer is eligible to ustry in any of the claim the exemption
and districts specified that he has not opted for in part I of the the scheme
of deferring Annexure the payment of tax under the rules framed for this
purposes.
2.
Dealer who-- --do-- (a) hold certifi- (a) 3 years cate of registra- in case of
an tion under the industry loca- M.P. General Sales ted in a district Tax Act,
1958 specified in `A' (No.2 of 1959); of part II of the Annexure.
(b) are
registered (b) 4 years, in the as Small scale Ind- case of an industry ustrial
units with located in category the Industries De- `B' of Part II of partment of
Govt. of of the Annexure;
M.P.
or are regis- and tered with the Di- rector General of Technical Develop- ment
as an indus- trial unit or are registered 597 as industrial units by any
authority duly empowered to do so by the State Govt. or Cen- tral Govt. or hold
a licence under the In- dustries (Development & Regulation) Act 1951 (No.65
of 1951); and (c) have set up indus- (c) 5 years, in --do-- try in any of the dis-
the case of an tricts specified in industry located part II of the Anne- in a
district spe- xure. cified in category `C' of part II of the Annexure; from the
date of commen- cement of production.
3.
Dealers who--- (a) hold certificate (a) 3 years in The dealer speci- of
registration under the case of an fied in column (1) the M.P.General Sales
Industry loca- shall produce be- Tax 1958 (No.2 of ted in any of fore the
assessing 1959); the tehsils of authority at the a district spe- time of his
assess- fied in part I ment a certificate of the Annexure; issued by the Direc-
tor of Industries, Madhya Pradesh or any (b) are registered (b) 5 years in
officer authorised by as industrial units the case of an him for the purpose
with the Director industry located of certifying that General of Technical in
any of the the dealer is eligi- Development or by any tehsils of a ble to claim
such authority duly em- a district spe- exemption under the powered to do so by
cified in cate- scheme of the Indus- State or Central gory `A' of Part tries.
Department Government or hold II of the Anne- being a first dealer licence
under the xure; to have commenced Industries (Develop production in the ment
and Regula- industry set up by him in the tehsils referred to in col- umn (2)
and that such dealer has not opted for the scheme of deferring the pay- ment of
tax under the rules framed for this purpose.
598 tion)
Act, 1951 (No.65 of 1951) have fixed a capital in- vestment between Rs.1 crore
and Rs.10 crores and;
(c)
are the first to (c) 7 years in set up the industry the case of an in any tehsil
of the industry loca- district of Madhya ted in any of Pradesh specified in the
tehsils of the Annexure. a district spe- cified in cate- gory `B' of Part II of
the Anne- xure;
(d) 3
years in the case of an industry located in any of the tehsils to a district
specified in category `C' of Part II of the Annexure;
from
the date of commencement of production.
ANNEXURE
Part I
1. Indore
2. Ujjain 3. Bhopal 4. Jabalpur 5. Gwalior 6. Durg Part II Category `A'
1. Bilaspur
2. Raipur 3. Dewas 4. Handsaur 5. Morena 6. Vidisha 7. Hoshangabad 8. Ratlam 9.
Khandwa 10. Satna 11. Shahdol 599 Category `B'
1. Geoni
2. Balaghat 3. Betul 4. Raigharh 5. Guna 6. Chindwara 7. Damoh 8. Sagar 9. Narsimhpur
10. Senor 11. Rajmandgoo Category `C'
1. Panna
2. Sidhi 3. Rewa 4. Chhatarpur 5. Tikamgarh 6. Khargone 7. Surguja 8.Mandla 9. Bhind
10. Shivpuri 11. Datia 12. Raisen 13. Shajapur 14. Dhar 15. Rajgarh 16. Jhooua
17. Bastar
It is
not in dispute that the assessees before us fulfil the qualifications mentioned
in the notification. However, when they approached the Director of Industries
for the certificate of exemption envisaged under column (3) of the
notification, it was denied to them on the ground that the industries run by
them are "traditional industries" which were not eligible for
exemption. The assessees went to Court contending that this was totally
unjustified. They said, the concept of "traditional industries" was
one unspecified in the notification. The authorities had no jurisdiction to
travel outside the terms of the notification and import extraneous
considerations to deny the assessees an exemption they were entitled to under
the notification. It is this contention that was accepted in the G.S. Dhall and
Flour Mills case. The State had relied on the provisions of the M.P. (Deferment
of Payment of Tax) Rules, 1983, notified on 1.9.83 (in particular, rule 13
thereof) and on certain instructions that had been issued by the Government on
12.1.1983 pertaining to the "grant of certificate of eligi- bility to new
industrial units claiming exemption from/deferment of payment of sales
tax". The High Court took the view that these rules and instructions had
no relevance to the claim for exemption put forward under the notifica- tion of
23.10.1981 and that, in any event, the executive instructions could not
override the provisions of the statu- tory notification. This judgment was
delivered on 7.10.1986 by Sohani, C.J. and Faizanuddin, J.
The
Full Bench, in its judgment of 2.11.1987 took a different view. It has, in
effect, attached importance to the rules and instructions referred to above and
relied considerably on the history of the 600 sales-tax levy in the State as
furnishing a proper and necessary background in which the terms of the
notification of 23.10.1981 have to be read and interpreted. This history has,
therefore, to be set out now in order to appreciate the validity of the
conclusions of the Full Bench. Before doing this, it may be mentioned that the
Full Bench comprised of Ojha C.J., Faizanuddin, J. and Adhikari, J. In fact,
the judgment was written by Faizanuddin, J. who has explained in detail the
reasons for his change in view. It may also be mentioned, as a matter of record,
that, subsequent to the decision of the Division Bench in G.S. Dhall and Flour
Mills, the State Government appears to have issued a notifi- cation on 3.7.
1987, intended obviously to overcome the effect of the said decision. We shall
refer to this later in this judgment.
Now,
to turn to the history relied on by the Full Bench, we start with a
"scheme for the grant of subsidy/interest free loan to new industries set
up in Madhya Pradesh". The scheme was to be effective from 15.9.69 and
till the end of the Fourth Five Year Plan period (1970) "or such further
period as may be extended by the State Government from time to time". It
would appear that the scheme was being adminis- tered informally under
executive instructions even beyond 1970. Though certain "rules"
appear to have been framed for the first time on 30.8.73, these rules, it would
seem, were not statutory but were only in the nature of executive instructions.
We shall, however, refer to them as "rules".
Rule 3
was clear as to the persons eligible to avail of it.
It
read:
"Rule
3--"It shall be applicable to all new industrial units except traditional
industries like oil mill, flour mill, dall mill, rice mill, ginning and
printing factories, who set up in Madhya Pradesh, provided further that such appli-
cants register themselves with the department after 15.9.69 but before 31.3.74
and in case of SSI units go into produc- tion within a period of one year and
in case of Large and Medium Industries go into production within 3 years of
their date of registration provided further that in case of delay in going into
production the period of availability of subsidy or concession will be reduced
by the period of delay in going into production. This will come into force from
1.4.74.
Note:--Small
Scale Industries who are already registered with the department need not
register separately for this concession." 601 It would also appear that
the districts of the State were divided into two categories--advanced and
backward--and the latter into three categories `A', `B', `C'. The amount and
period of the subsidy/loan depended upon this classification and was
elaborately set out in para 8 which need not be extracted here. A note added to
para 8 had this to say:
Note:--(1)
Unit who is otherwise entitled to subsidy may on his request be considered for
grant of interest free loan to the extent of entitlement of the subsidy.
(2) No
unit available concession under the scheme will be allowed to change the
location of the whole or any part of the industrial unit or effect any
substantial part of its total fixed capital investment within a period of five
year after its going in to production.
(3) In
case the ownership of a new unit changed during the period of availability of
this concession, the new owner would be entitled to this concession for the
balance period.
(4) A
closed unit, which is re-started by an entrepre- neur will not be considered to
be a new unit for the purpose of this concession." Another set of
"rules" came into force with effect from 1.4.1977 and superseded the
earlier rules. These were on more or less the same lines as the earlier ones
and were to apply to "new industrial units", and "existing
industrial units", as defined in rules 2(a) and (b), on fulfillment of
certain terms and conditions but industries enumerated in rule 3 were specifically
excluded from the purview of the definition. Rule 3 made it clear that the
rules shall not be applicable to "the following traditional
industries". The list of such industries, in addition to those mentioned
in the earlier set of rules (excluding roller flour mills and solvent
extraction plants in oil mills), took in also saw mills, ice factories and
"such other industries as may be notified by the Government from time to
time". The period and extent of the subsidy/ loan here again depended upon
the district--advanced or backward, and in the latter category `A' or `B' or
`C'--in which the industry was set up Rule 7 is of some relevance and may be
set out:
"7.
An industrial unit eligible for this concession will apply 602 to the Asst.
Director of Industries of the district con- cerned for verification of the date
of going into commercial production and other particulars of new industrial
unit or substantial expansion in respect of which the concession is sought. The
Asst. Director of Industries will make verifica- tion in accordance with rules
5(1) and send within 15 days of the receipt of the application his report to
the sanc- tioning authorities, Dy. Director of Industries or Director of
Industries indicating the date of going into commercial production of the unit.
A copy will be furnished to the applicant." The form of the certificate to
be issued by the office of the Director of Industries read thus:
"No.
-Date The particulars furnished by M/s ......... ........
............
have been checked and verified from records including those of consumption of
power and raw materials and output of finished products. The date of
commencement of commercial production by the industrial unit is The date from
which the unit has exceeded, on a sustained basis production over the licensed
or installed capacity of the unit is ..............
Asst.
Director of Industries" It appears that the Government had announced
"conces- sions" regarding the payment of sales tax by new industrial
units including pioneer units going into production after 1-4-1981 not only
under the notification dated 23/10/81 but also under other notifications dated
1-5-82 and 29-6-82. Two of these notifications are on record before us. It is,
however, unnecessary to extract them here. It is sufficient to set out their
purport, quoting from the "instructions" of 12-1-83, referred to a
little later:
"According
to the first notification, the new industrial units are exempted from the
payment of sales tax. This notification covered sales tax payable by them on
the products manufactured by them. It entitled them to exemption 603 from
payment of purchase tax on purchase made by them from unregistered dealers.
According to the second notification an industrial unit making purchases of its
raw material from a registered dealer is exempted from payment of sales tax on
the raw materials so purchased by him from the registered dealer. In other
words, registered dealers selling raw materials to a new industrial unit are
not required to charge any sales tax from the new industrial unit on sales made
by them to such unit. The third notification exempts the goods manufactured by
the new industrial units from the levy of sales tax even when these goods are
sold by the dealers who have purchased these goods from the new indus- trial
units. In other words, by issue of this notification, the goods manufactured by
the new industrial units are fully exempted from the payment of sales tax right
upto the stage they reach the consumer. These three notifications only deal
with the grant of exemption from payment of sales tax under the M.P. General
Sales Tax Act. that is to say from the payment of the State Sales Tax.
The
fourth notification exempts the new industrial units from payment of the
Central Sales Tax on the sale of goods manufactured by them in the course of
interstate trade or commerce. This notification has exempted the new units from
payment of sales tax w.e.f. 1-7-82." In view of these notifications, the
Government considered it necessary to issue certain instructions "for the
grant of certificate of eligibility to new industrial units claiming exemption
from/deferment of payment of sales tax" on 12-1- 1983. These instructions
also proceed on the same lines as the earlier ones. "Traditional"
industries, as listed in para 5. are said to be outside the purview of the
scheme.
Para 5 enumerated the following as
"traditional industries":
flour
mills (excluding roller flour mills), oil mills (excluding solvent extraction
plants, dall mills. saw mills, rice mills, printing presses of all types,
cotton ginning and pressing factories, in factories and such other indus- tries
as may be notified from time to time. It also stated (a) that "industrial
units undertaking expansion/modifica- tion or diversification will not be
eligible for these concessions, (b) that a closed unit revived by the entrepre-
neur will not be considered as a new unit for the purpose of availing of these
concession and (c) that units claiming interest free loans as an existing unit
will not be eligible for these concessions. A certificate of eligibility had to
be obtained in the prescribed manner 604 and this procedure was made more
elaborate. District Level Committees and a State Level Committee were
constituted for this purpose and they took a decision on the application of the
unit read with the comments thereon by the Director of Industries, though the
certificate was actually issued by the Director of Industries or the General
Manager of the District Industries Centre in a prescribed form.
The
Full Bench, after considering the scheme and in- structions of the Government
discussed above, came to the conclusion that the scope of the exemption
notification of 1981 was not intended to be wider than that of the conces- sions
granted earlier. The 1981 notification was intended to bring about only a
change in the mode of relief to the same categories of industries as were
covered by the earlier schemes. The Court observed:
"It
appears that the mode of concessions granted by the aforesaid instructions involved
some inconvenience to the industrial units and duplication of procedure
inasmuch as the industrial unit had to first collect the sales tax and the tax
so collected and paid along with the returns were later on refunded to the
industrial unit in the shape of subsidy. To avoid the duplication of procedure
the State Government thought it fit to altogether exempt the industri- al units
from payment of sales tax or defer the payment of sales tax." The Court
observed. vis-a-vis the various instructions referred to above:
"12
......... These instructions also contain a complete procedure for application
and grant of eligibility certifi- cate by the Industries Department. Thus it is
clear from these instructions that the question of grant of eligibility certificate
by the Industries Department is not an empty formality but before granting the
certificate the Industries Department has to see whether all the requirements
as con- tained in the instructions are fulfilled and complied with or not.
13.
All the Government Instructions discussed above, issued from time to time right
from 1973 onwards till 1983 (Annex- ure R-I, II and III) clearly indicate not
only the consist- ent Government policy in the matter of grant of 605 Sales Tax
concessions to the New Industrial Units but also the consistent practice that
has been followed throughout whereby these concessions were not at any time
made avail- able to the Traditional Industries like Flour Mills and Dall Mills
etc. Not a single instance is available to show that any of these concessions
were ever made available to any Traditional Industries. It may be pointed out
that all these facts and the Government policy as also all the aforesaid
Government Instructions on the subject were not placed before the Division Bench
which heard and decided Misc. Petition No. 1861 of 1983 (G. S. Dall Mills v.
State of M.P.). However, after the decision of
M.P. No. 1861/83 the State Government while issuing a Notification No. 351
dated 21st October, 1986 under section 12 of the Act, a photostat copy of which
has been filed on record of M.P. No. 2710/87 (See at page 94 of the paper book)
exempting the Industrial Units specified therein from payment of tax under
section 6 and 7-AA of the Act again specifically provided in clause (xiii) of
the said Notification that the said exemption shall not be available to the
Industrial Units enumerated therein including Flour Mills and Dall Mills
etc." It was true, the Court agreed, that a notification has generally to
be construed on its plain language. But, here:
"as
pointed out earlier, column 3 of the 1981 Notification (Annexure B) does not
contain any guidelines or a procedure in the matter of grant of eligibility
certificate or refusal thereof by the Industries Department and as the grant or
refusal of such certificate cannot be an empty formality and, therefore, in
order to avoid the possibility of arbi- trariness and injustice to any one the
State Government was justified in issuing executive instructions laying down
the guidelines and procedure for the same." The Full Bench, therefore,
observed:
"16.
From what has been stated and discussed above it is clear that at no point of
time any concession or exemption from. payment of sales tax was ever given to
the Traditional Industries and not a single example to that effect is avail-
able. The State Government while issuing instruction from 606 time to time have
been specifically excluding the Tradition- al Industries. Thus the executive
authorities and the high- est agency and its officers charged with the duty for
the administration and enforcement of the said Notification are not only
conversant with the underlying policy of the Gov- ernment but they are also
intimately acquainted with the economic significance of the tax in question and
exemption thereof. The interpretation of the Government regarding the
construction of 1981 Notification read with the instructions (Annexure R. I, II
and III) excluding the Traditional Indus- tries, which has been consistently
followed and acted upon accordingly for a period over a decade cannot be given
a go-by but has to be accepted.
17. In
view of the above discussion the impugned Notifica- tion dated 4-7-1987
(Annexure G) is hardly of any conse- quence. More or less it is a clarification
of 1981 Notifica- tion and not rescission of any grant." The contention
that "instructions" could not override the effect of the statutory
notification was repelled by the Court on the ground that the validity and
effectiveness of the instructions can be supported by reference to Article 162
of the Constitution as filling up a lack of guidelines in the notification. An
argument based on the doctrine of promissory estoppel was also rejected as
"the petitioners were well aware of the fact that the exemption was not
available to their new units and they had not established their units because
of the exemption". The Court explained the position thus:
"20.
In this behalf firstly it may be pointed out that all the petitioners had
established their Industrial Units after the Government issued the executive
instructions (Annexure R. III) dated 12-1-1983, of which clause 5(b) specifically
speaks that the concessions will not be available to Tradi- tional Industries
like Flour Mills and Dall Mills etc. To say that the petitioners were not aware
of these executive instructions would be incorrect because clause 6 of these
instructions contemplates that New Industrial Units desirous of availing the
said concessions shall have to apply in Form I accompanied with a declaration
in Form II appended to the said Instructions and the petitioners applied in
Form I with declaration in Form II (See Annexure D, D/I and D/2 in M.P. No.
2710/87). Further these 607 applications for exemption were made by the
petitioners only after the order dated 7-10-1986 was passed in G.S. Flour Mills
v. State (M.P.) No. 1861 of 1983) which shows that the petitioners were aware
of the fact that they were not entitled to exemption and it was only after the
aforesaid decisions that they considered to apply for exemption. This fact is
further fortified from the conduct of the petition- ers themselves as they
continued to submit returns right from 1983 onwards and continued to pay the
tax as assessed against them without taking any steps to claim exemption. In
this behalf paragraphs 8 and 9 of the petitions are self explanatory. Thus
having regard to all these facts, the. question of application of principle of
promissory estoppel in the present case does not arise and the petitions
deserve to be dismissed." Sri Harish Salve, appearing for the G.S. Dhall
& Flour Mills, apart from pleading that the view taken in this case is the
correct one and not that enunciated by the Full Bench, also raised an
alternative contention on the footing that, at best, the notification of 1981
was ambiguous and lent itself to two plausible interpretations. Assuming that
there was initially some ambiguity regarding the applicabil- ity of the
Notification of 23.10.81 to traditional indus- tries, it had been dispelled by
the instructions of 12, 1.83. Once these instructions were published, any assessee
setting up a traditional industry took a calculated risk on the issue as to
whether the Notification should be confined, on proper interpretation, only to
non-traditional industries and could not rely on the doctrine of equitable estoppel.
Pointing
out that the assesses in the Full Bench case were persons who had set up their
industry after 12.1.83, Sri Salve argued that the dismissal of the Special
Leave Peti- tion against the Full Bench judgment will not affect his case as
this assessee had set up its industry, admittedly, before 12.1. 1983. The
position is similar in the case of Mohan. Ismail. Learned counsel, therefore,
submitted that, even if the 1983 instructions were rightly held by the High
Court to have validly supplemented the terms of the 1981 Notification, they can
have no application to the two earli- er cases which had to be decided solely
on the terms of the 1981 Notification.
To
answer these contentions, one has to look first at the statutory instruments in
this case viz. S. 12 of the Act and the notification thereunder. S. 12(1)(i),
with which we are concerned, lays down four requirements for the grant of
exemption from the provisions of the Act:
608 (i)
that any exemption to be granted under the section has to be by a notification;
(ii)
that the notification may exempt any class of dealers or any goods or class of
goods from the payment of tax under the Act in whole or in part but only for a
definite period to be specified in the notification;
(iii) that
the exemption will be subject to such restric- tions and conditions as may be
specified in the notifica- tion;
(iv) that
such exemption could be prospective or retrospec- tive.
We are
concerned here with the scope of the second and third requirements mentioned
above. So far as the class of dealers entitled to the exemption are concerned,
the notifi- cation spells out the following requisites:
(i) they
must belong to one of the classes Of dealers speci- fied in column No. (1) of
the schedule;
(ii) they
must have set up industry in any of the districts of Madhya Pradesh specified
in the annexure;
(iii) they
must have commenced production after 1.4. 1981.
The
period of exemption is also specified in the notifica- tion. So far as the
"restrictions and conditions" subject to which the exemption has been
granted, they are, as per column No. (3) of the Schedule:
(a)
that the dealer should continue to furnish the pre- scribed returns under the
Sales Tax Act; and (b) that they should produce, at the time of their
assessment, a certifi- cate from the Director of Industries certifying that
such dealer is eligible to claim exemption and has not opted for the
"scheme of deferring the payment of tax under the rules framed for the
purpose".
It is
not anybody's case that the assesses before us did not fall within the class of
dealers specified in column (1) or that they did not comply with (a) above or
that they had opted for the scheme of deferment of tax. This being so, the
assesses claim that they are eligible for the exemption under the notification
and that the Director of Industries should have granted them a certificate to
this effect. It is the denial of 609 this certificate which has brought the
assesses to Court.
The
question for consideration is whether the Director of Industries can refuse the
exemption certificate on a consid- eration not specified in the notification. Prima
facie, no.
All
the conditions for exemption have to be. and are, set out in the notification
itself and all that the Director of Industries has to do is to satisfy himself
that those condi- tions are fulfilled; he cannot travel beyond the terms of the
notification. He can see whether the dealer falls under the description in
column (1), whether he has set up a new industry in M.P. State, whether he has
commenced production after 1.4.1981 and whether has opted for the deferment
scheme. The condition about the dealer filing returns regu- larly would seem to
be one under the purview of the sales Tax Officer rather than one under that of
the Director of industries. If these conditions are fulfilled, the exemption
certificate will have to be granted. That seems the straight and simple
interpretation of the notification.
But,
it is said for the State, this is not the intend- ment or effect of the
notification. It is said that the argument overlooks the reference in column
(3) to the grant of an eligibility certificate by the Director of Industries.
This
is one of the important conditions for the grant of this exemption. It is pointed
out, in this context, that there had been in force in the State, for several
years past, a scheme of subsidy/loan. That scheme was also depend- ant on a
certificate of the Director of Industries but that certificate could be denied
to "traditional industries". It is argued that, since the
notification does not set out the conditions on which, and the procedure in
accordance with which the Director of Industries is to issue the eligibility
certificate, that earlier scheme and procedure should be read into the
notification. Sri Salve objected to this reading of the notification, infer alia,
on the ground that the earlier scheme and the exemption now proposed are total-
ly different in their object and scope and that, while the former scheme was
intended as an incentive to any one who set up a new industry in the State so
that "traditional" industries did not get any benefit, the
notification presently under consideration was issued with the object of industrialising
the backward areas of the State and so it was immaterial what type of industry
went in there and whether the industry proposed to be set up was a
"tradition- al" one or not. This contention does not appear to be
quite correct. It has been pointed earlier that even the earlier schemes
provided for graded incentives for industrialisation effective for varying
periods depending upon the backward- ness or otherwise of the district in which
the industry was proposed to be set up. But, even granting that the 1981 policy
was to replace the earlier subsidy/loan by an exemp- tion, it does not
necessarily follows that the 610 units intended to be covered by the new scheme
were only those that were covered by the earlier scheme and that no wider
exemption was contemplated. Indeed, there were four new concessions introduced
in 1981-82 and there is no mate- rial which would justify these being tied down
to the param- eters of the earlier schemes. No factual foundation has been laid
to establish the hypothesis that the exemption con- ferred in 1981 was to be a
mere extension or substitution of the benefits conferred earlier. There are
other difficulties in reading the provisions of the earlier schemes into the
notification. In the first place, the earlier schemes spe- cifically provided
that "traditional industries" were out- side their purview. The
language of the notification, which is a piece of subsequent legislation, is
silent about this.
This
is itself indicative of a legislative intent to widen the scope of relief and
grant exemption to traditional industries as well: vide, G.P. Singh:
Interpretation of Statutes, 4th Edition, pp. 767-8. The omission to specifi- cally
exclude "traditional industries" as was done in the earlier schemes
the notification gains added significance in view of S. 12 which specifically
requires that all condi- tions and restrictions governing an exemption should
be specified in the notification. Secondly, the attempt of the State to read a
further condition into the notification excluding "traditional
industries" from the exemption is based on the words which require that
the Director of Indus- tries should grant a certificate (a) that the dealer is
entitled to claim the exemption and (b) that he has not opted for the scheme of
deferring the payment of tax under the rules framed for the purpose. But these
words do not carry the State's case further, for what the Director of
Industries has to do is to certify that the applicant is entitled to the
exemption on the terms and conditions set out in the notification and not on
the basis of any further requirements not so set out. The notification does not
authorise him to say that, though the applicant fulfills the terms of the
notification, he will not grant the eligibility certificate because, under the
previously prevalent schemes, he could not issue an eligibility certificate to
"tradition- al industries". He could not grant an eligibility certifi-
cate under the earlier schemes because the instructions which outlined the
scheme specifically excluded traditional industries. Actually, even under the
earlier schemes, nei- ther the application form nor the form of certificate,
which have been extracted earlier, make any reference to the assessee concerned
not being a `traditional industry'. Be that as it may, for granting a
certificate that the appli- cant is eligible for exemption under the
notification, the director has to look to the conditions set out in the noti- fication
and nowhere else. To say that, when the notifica- tion requires an eligibility
certificate from the Director it means a certificate on the terms prescribed
under the earlier scheme is to read into 611 the notification something which
is not there. Thirdly, the interpretation advocate by the State really narrows
down the class of dealers entitled to the exemption as set down in column (1)
of the notification. It amounts to substituting, for the word
"dealers" in column 1 of the notification the words "dealers
other than those carrying on traditional industries". Such an
interpretation also virtually amounts to allowing certain executive
instructions issued in a different context to cut down the scope of a statutory
notification. This cannot clearly be done. Lastly, a perusal of the earlier
schemes would show that the concept of "traditional industries" is a
vague one. The nomenclature of these industries has varied from time to time.
The note in the 1977, and the definition in the 1983, instructions show the
eligibility under the earlier schemes was denied not only to "traditional
industries" but also certain other industries such as revived or
reconstructed industries. We may also mention in this context a notification of
21.10.1986 referred to by the High Court outlining exemp- tions under Ss. 6 and
7AA. It excludes, from exemption, in addition to saw mills, flour mills etc.
(which the State calls traditional industries) various other industries (total
numbering 26) specified in cl. (xiii) thereof. This changing definition of
eligibility for exemption also shows that there was no common or identical
group of beneficiaries intended under the various instructions or notifications
and that each set of instructions or notification issued from time to time
defined only the categories exempted from its purview and nothing else. The
exemption list under one was not meant to be carried over into another. We are,
there- fore, of opinion that it is not permissible to restrict the scope of the
notification in the manner suggested.
We may
point out that, in construing the notification thus, we are only giving effect
to a well settled rule that may be illustrated by a reference to the decision
in Hansraj Gordhandas v. H.H. Dave, [1969] 2 SCR 253. In that case
notifications had been issued under S. 8 of the Central Excises and Salt Act,
1944 granting exemption to (a) "cotton fabrics produced by any cooperative
society formed of owners of cotton powerlooms ....." and (b) "cotton
fabrics pro- duced on powerlooms owned by any cooperative society or owned by
or allotted to the members of the society .....
".
The appellant had sought exemption from excise duty under these notifications
in respect of cotton fabrics which had been got manufactured by him on the powerlooms
belonging to a cooperative society in pursuance of an agreement entered into
with it. The excise authorities rejected the claim on the ground that the
exemption under the notifications could be claimed only when the cotton fabrics
were manufactured by a cooperative so- 612 ciety for itself. Upholding the assessee's
claim, this Court observed:
"It
was contended on behalf of the respondent that the object of granting exemption
was to encourage the forma- tion of co-operative societies which not only
produced cotton fabrics but which also consisted of members. not only owning
but having actually operated not more than four power-looms during the three
years immediately preceding their having joined the society. The policy was
that instead of each such member operating his looms on his own. he should
combine with others by forming a society which.
through
the cooperative effort should produce cloth. The intention was that the goods
produced for which exemption could be claimed must be goods produced on its own
behalf by the society. We are unable to accept the contention put forward on
behalf of the respondents as correct. On a true construction of the language of
the notifications. dated July
31, 1959 and April 30.
1960 it is clear that all that is required for claiming exemption is that the
cotton fab- rics must be produced on power-looms owned by the coopera- tive
society. There is no further requirement under the two notifications that the
cotton fabrics must be produced by the Cooperative Society on the power-looms
"for itself". It is well-established that in a taxing statute there
is no room for any intendment but regard must be had to the clear meaning of
the words. The entire matter is governed wholly by the language of the
notification. If the tax-payer is within the plain terms of the exemption it
cannot be denied its benefit by calling in aid any supposed intention of the
exempting authority. If such intention can be gathered from the construction of
the words of the notification or by necessary implication therefrom. the matter
is different, but that is not the case here. In this connection we may refer to
the observations of Lord Watson in Salomon v. Salomon & Co., [1897] A.C.
22, 38:
"Intention
of the legislature is a common but very slippery phrase, which, popularly
understood may signi- fy anything from intention embodied in positive enactment
to speculative opinion as to what the legislature probably would have meant
although there has been an omission to enact it. In a Court of Law or Equity,
what the Legislature intended to be 613 done or "not to be done can only
be legitimately ascertained from that which it has chosen to enact, either in
express words or by reasonable and necessary implication." It is an
application of this principle that a statutory notification may not be extended
so as to meet a casus omissus. As appears in the judgment of the Privy Council
in Crawford v. Spooner, 6 Moo. P.C.C. 8.
"
...... We cannot aid the legislature's defective phrasing of the Act, we cannot
add, and mend, and, by construction, make up deficiencies which are left
there." Learned Counsel for the respondents is possibly right in his submission
that the object behind the two notifications is to encourage the actual
manufacturers of handloom cloth to switch over to power-looms by constituting
themselves into Cooperative Societies. But the operation of the notifica- tions
has to be judged not by the object which the rulemak- ing authority had in mind
but by the words which it has employed to effectuate the legislative
intent." In our view, this principle applies here squarely.
Indeed,
even granting that the notification may be inter- preted having regard to the
past history and the possible intention of the Government while issuing the
notification, the position of the assesses here is much stronger for, while in
the reported case the State was trying only to effectuate the clear object of
the notification, here it is not at all clear, for the reasons discussed above,
that the State intended the exemption to be confined only to the cases covered
by the subsidy/loan schemes prevalent earlier.
The
1981 notification does not expressly, or (for the rea- sons discussed above)
even by necessary implication, exclude "traditional" industries from
its scope.
Sri
Salve contends that, even if a lenient view is taken and a more liberal
construction is sought to be placed on the notification, the best that could be
said for the State would be that the notification was ambiguous. One could
either say that the previous procedure and requirements prevalent for obtaining
an exemption certificate were in- tended to be incorporated by the words
requiring such a certificate (as suggested for the appellant or one could say,
with equal plausibi- 614 lity, that the exemption certificate is to be based
only on the conditions and requirements mentioned in the notifica- tion (as
contended for by the assesses). In such a state of law, he contends, one can
have regard to the conduct of the parties and how they understood the
notification. His argu- ment is that the State, by its conduct, had held out to
the assessee that it would also be eligible for the exemption.
In
this context, he drew our attention to the following circumstance:
(1)
The M.P. Audhyogik Vikas Nigam, a State instrumen- tality, which was
administering the notification issued, in November 1981, a pamphlet setting out
the various incentives the State was offering for new industries proposed to be
set up in the State. As to "exemption from sales tax", the pamphlet
stated that "new industrial units coming into production after
1.4.81" will be entitled to an exemption for a period depending upon the
district where it is set up or could alternatively exercise an option to defer
payment of sales tax by a period of 10 years. It did not mention anywhere that
the industry should not be a traditional industry.
(2)
The Nigam allotted a plot of land of the extent of 1 acre to enable the assessee
to establish its unit in the Industrial Area. Mandideep, Dt. Raisen.
(3)
Other incentives as to power, interest and capital subsidy were extended to the
assessee. Thus, says counsel, the State "lured" the assessee to set up
a unit in the record time of ten months and with a substantial capital outlay
of over Rs. 10 lakhs in a backward area. These incen- tives were meant to be
coextensive with the concession regarding sales tax. He contends that these
representations and acts are sufficient to found a claim of "equitable estoppe"
against the State. We are unable to accept this argument. The respondents have
stated in their counter affidavit that the Nigam had acted in error and
misconstrued the notification and was not acting under the authority of the
Government in issuing the pamphlet. The other conces- sions extended to the assessee
pertained to the setting up of a small scale industry in the State and were
unrelated to the exemption from sales tax. In our opinion, there is force in
these submissions. The circumstances and material relied on by the assessee do
not spell out any clear promise of exemption from sales tax even for
traditional industries.
The
notifications or guidelines under which the other facil- ities were granted
have not been 615 placed before us and no material is available on record to
correlate them to the sales tax exemption or to show that all these were
inextricably connected so as to form part of a single "relief
packet". We, therefore, reject this conten- tion of Sri Salve. However, on
the interpretation of the notification. we accept the contention of the
assesses that the notification does not warrant denial of exemption solely on
the ground that the applicant is having a "traditional industry".
We
have indicated earlier that the assesses whose writ petitions were disposed of
by the Full Bench had set up their industries after 12.1. 1983 by which time
elaborate instructions had been issued to explain the State's point of view,
The question is whether this makes a difference. We think not. Even the 1983
document is not a statutory instru- ment-neither a notification nor a rule
framed under the statute. The Full Bench has considered those instructions to
be conclusive on two grounds--on the doctrine of contempora- nea exposition and
on the principle that executive instruc- tions can always be issued to
supplement statutory instru- ments so as to fill up areas on which the latter
are silent.
In our
opinion, neither of these grounds is tenable. It is true that the principle of contemporanea
exposition is in- voked where a statute is ambiguous but is shown to have been
clearly and consistently understood and explained by the administrators of the
law in a particular manner. This doctrine has been explained and applied in a
numbers of cases of this Court (e.g. See Varghese v. L.T.O., [1982] 1 S.C.R.
629, in addition to the cases referred to by the Full Bench). As pointed out by
Sri Salve, its applicability in the construction of recent statutes. and that
too in the first few years of their enforcement, has been doubted.
vide: Doypack
Systems P. Ltd. v. Union of India. [1988] 2 S.C.C. 299, para 61. But, this
apart, the principle will not be applicable here for two reasons. In the first
place, the instructions of 1983 do not anywhere "expound" the terms
of the notification. They do not give any indication that the state had applied
its mind to the precise terms of the notification or their interpretation. They
do not explain or clarify that, though the notification is silent, it has been
intended that the limitations of the previous schemes should be read into it.
Secondly, the cases referred to will show that the doctrine applies in cases
where the plea is that, though the language of the statute may appear to be
wide enough to seem applicable against the subject in particular situations,
the State itself--which was the progenitor of the statute--had not understood
it in that way. But, to apply the doctrine to widen the are bit of the
statutory language would, however, virtually mean that the State can determine
the interpretation of a statute by its 616 ipsi dixit. That, certainly, is not,
and cannot be, the scope of the doctrine. The doctrine can be applied to limit
the State to its own narrower interpretation in favour of the subject but not
to claim its interpretation in its own favour as conclusive.
The
second ground on which the Full Bench has sought to invoke the instructions is
also not correct. Executive instructions can supplement a statute or cover areas
to which the statute does not extend. But they cannot run contrary to statutory
provisions or whittle down their effect. The Full Bench seems to think that,
unless the instructions are brought in, the notifications would have been in
danger of abuse for want of proper guidelines as to the grant of exemption
certificates. It is suggested that the notification contemplates rules to be
issued for the purpose and that, since no rules had been issued, Directors of
Industries were left with no parameters for the issue of exemption certificates
and might act capriciously or arbi- trarily in granting or refusing
certificates. The instruc- tions, it is said, have been issued to fill in this
lacuna and are hence valid. There are two misconceptions in this line of reasoning.
The first is that. though the last few words in column (3) of the notification
are capable of a wider meaning, it would appear that these words govern only
the immediately preceding words; rules envisaged are not in relation to the
grant of exemption certificates and condi- tions therefore but in respect of
the circumstances in which the assesses can exercise the option between
exemption and deferment of sales tax. This view derives support from the
instructions of 1983. As pointed out earlier, the instruc- tions first set out
the scope of the various notifications as granting exemption from sales tax;
the instructions thereafter proceed to say:
"The
grant of exemption from the payment of sales tax is contingent upon the issue
of a certificate of eligi- bility to the new industrial units. This certificate
of eligibility is required to be issued by the Director of Industries or an
officer authorised by him for this purpose.
In so
Jar as the grant of concessions relating to the exemption from payment of sales
tax is concerned, no further notifications are required to be issued. For ena- bling
the new industrial units to avail of the second con- cession viz., that of
deferment of payment of sales tax, a scheme is being issued separately. For
availing of the benefit of the deferment of concession too, a certificate of
eligibility is required to be obtained by the industrial unit. However.
617
pending the issue of the scheme, the grant of certificate of eligibility should
not be held up." (underlining ours) Incidentally, we may point out, the
first part of the para does not clarify that the eligibility certificate is not
to be granted to "traditional industries". But, so far as the present
point is concerned, it is categorically stated that no further notifications
are required to be issued and that they are needed only to define the scheme
for deferment of tax. Indeed, rules were framed in order to implement the
deferment scheme which came into force with effect from 1-4-1983. We shall refer a little later to these rules.
Secondly,
there is no warrant for assuming that the notifi- cation envisages conditions
for the issue of the eligibility certificate other than those specified by itself.
There is nothing in the language of the notification to suggest that anything
further is needed to enable the Director of Indus- tries to grant the
exemption. Without the guidelines, the requirement for an exemption certificate
would not become an "empty formality" as suggested by the Full Bench.
The Direc- tor of Industries has to issue the same after satisfying himself
that the applicant industry falls within the terms of the notification in the
following respects—
(a) that
the assessee is one of the class of dealers set out in column ( 1);
(b) that
he has set up an industry in the State;
(c) that
it has been set up in one of the districts set out in the annexure and the
category to which it belongs;
(d) that
the industry has commenced production after 1-4-81;
(e) that
the assessee has not opted for the deferment scheme.
These
conditions are many and detailed and do not leave anything to the discretion of
the Director of Industries. We fail to understand what need there was to lay
down any elaborate procedure therefore. Even if there was, and the earlier
procedure by way of application form, declaration form and form of certificate
were to be adapted, that proce- dure, by itself, did not, as pointed out
earlier, contain any reference to the assessee being a traditional industry or
otherwise. To assume first that the conditions specified in the notification
are not exhaustive or suffi- 618 cient and may lead to abuse of power by
executive authori- ties unless canalised by procedural guidelines and then to
say that such a conclusion is borne out by the mere refer- ence to a
certificate being granted by the Director of Industries because, under some
earlier schemes, such certif- icate was being granted on a restricted basis,
does not appear to be sound logic. We are, therefore, of opinion that the
notification is quite clear and leaves no area of vacuum which needs to be
supplemented by guidelines. Thirdly, if we read the last part of the entry in
column (3) of the notifi- cation as envisaging rules to be framed for the grant
of the eligibility certificate, no such rules were flamed. Only instructions
were issued. These instructions say that even an assessee, who fulfills all the
requirements of the noti- fication, will not be eligible for exemption unless
he fulfills one more condition outside the notification. They travel beyond and
counter to the notification. They restrict the scope of exemption under the
notification. They deny exemption to a person who qualifies for it under the statu-
tory notification. Indeed, there is force in the contention that if the
statutory notification is construed as permit- ting the State by rules or
executive instructions to pre- scribe other conditions for exemption, whether
new or based on past practice, it is liable to be struck down on the ground of
impermissible delegation of legislative power to the executive. This,
certainly, they cannot do.
A
further development which has been relied on by the State but does not really
seem to help its case may now be referred to. State Act 25 of 1982 inserted S.
22 D in the Act in the following terms:
"22-D.
Special provisions relating to deferred payment of tax by Industrial
Units--Notwithstanding anything contained in any other provisions of this Act,
a registered dealer, who is-- (a) registered as a small scale industrial unit
with Indus- trial Department of the Government of Madhya Pradesh;or (b)
registered with the Director General of Technical Devel- opment as an
industrial unit; or (c) registered as an industrial unit by any authority duly
empowered to do so by the Government of Madhya Pradesh or the Central
Government; or (d) holding a licence under the Industries (Development and
Regulation) Act, 1951 (No. 65 of 1951).
619
and who in each case has or may set up a new industrial unit in any district of
Madhya PradeSh if eligible for grant of the facility of deferred payment of tax
under the scheme providing for grant of incentive to enterpreneurs for set-
ting up new industrial units in the state as the State Government may make in
this behalf may make deferred payment subject to such restrictions and
conditions as may be speci- fied in such scheme." Thereafter, the State
Government framed the M.P. Deferment of Payment of Tax Rules, 1983 which were gazetted
of 1.9.83 but with retrospective effect from 1.4. 1981 (that is, even anterior
to the date of the notification). Rules 3, 4 and 14 are relevant and may be set
out here.
"3.
Eligibility for grant of Facility of Deferred payment of tax--(1) A new
industrial unit other than a unit specified in rule 14 which is covered by any
of the categories speci- fied in section 22D and of the Act and which is
engaged in the manufacture and sale of any goods shall qualify for deferred
payment of the tax payable by it provided it is eligible for grant of the
concession of exemption from payment of tax in terms of notification No. A
3-41-81 (35)- ST-V, dated the 23rd October, 1981 and No. A-3-41-81(31) ST-V, dated the 29th June, 1982 as amended from time to time
subject to the provisions of the act. The period pertaining to which the tax
which the new industrial unit can defer will be the same for which it could
have obtained the con- cession of the exemption from payment of tax, i.e., the
period pertaining to which the tax can be deferred will be the period shown in
column (2) of the said notification. (2) The new industrial unit shall be
eligible to defer only the payment of tax which is due from it under the Act.
4.
Application for Scheme of deferred payment and grant of certificate of
eligibility--(1) A new industrial unit opting for the scheme of deferred payment
of tax shall apply for and obtain a certificate of eligibility in accordance
with the instructions issued by State Government in the Commerce and Industries
Department for the said purpose. An applica- tion in writing shall be submitted
within forty five days of the publication of these rules or of commencement of
the production whichever is later. In the application form the 620 new
industrial unit shall indicate that it has opted for scheme of deferred payment
of tax. The option once exercised shall be irrevocable. The form of the
application as well as the certificate of eligibility shall be as specified in
the said instructions. The application shall be made to the General Manager,
District Industries Centre of the district where the new industrial unit is or
is proposed to be locat- ed and shall be processed further in accordance with
the said instructions. The certificate of eligibility in respect of large and
medium scale units shall issued by the Director of Industries (Government of
Madhya Pradesh) and in respect of small scale units by the said General
Manager, and shall carry a specific and district number given by the said
officer.
(2) A
copy of the certificate of eligibility shall be for- warded by the officer
issuing the certificate to the appro- priate Sales Tax Officer, i.e. the Sales
Tax Officer in whose circle the industrial unit is registered as a dealer.
The
Sales Tax Officer receiving the copy of the certificate of eligibility shall
maintain a record of the same in such form as may be directed by the
Commissioner and shall not enforce recovery of the tax payment whereof has been
shown to have been deferred in the certificate of eligibility.
(3)
The new industrial unit shall be entitled to defer the payment of the tax for a
period of ten years. This entitle- ment shall be available only on receipt of
the certificate of eligibility to it under sub-rule (1). The certificate of
eligibility shall show the duration for which the payment of the tax has been
deferred. The year in which the tax per- taining to any accounting year of the
industrial unit is required to be paid consequent upon deferment of tax shall
also be shown in the certificate of eligibility. The entire tax assessed
pertaining to any accounting year shall be payable by the industrial unit in
lump sum on the expiration of duration of deferment and payment of such tax
shall be made within thirty days of the date on which the period of ten years
from the end of the relevant accounting year expires.
14.
Non-availability of facility of deferred payments--The result of the scheme of
deferred payment of tax shall not be available to the following new industrial
units, namely:
621
(A)
(1) flour
mills (Excluding Roller Flour Mills);
(2)
Oil mills (excluding Solvent Extraction Plants);
(3) dall
mills;
(4)
saw mills; rice mills;
(6) printing
presses of all types;
(7) cotton
ginning and pressing factories;
(8) ice
factories;
(9) such
other industries as may be notified by Government from time to time.
(B) industrial
units undertaking expansion, modernisation or diversification;
(C) a
closed unit revived by an entrepreneur;
(D) units
claiming interest free loans as an existing unit establishing a new unit;
(E) an
industrial unit set up by transferring or shifting or dismenting an existing
industry.
A note
was also published in the Gazette explaining the background of the rules. It
reads thus:
"NOTE
EXPLAINING THE BACKGROUND OF THE SCHEME OF DEFERRED PAYMENTS TAX The Government
of Madhya Pradesh, with a view to accelerat- ing the pace of industrialisation
have announced concessions regarding the payment of tax under the Madhya
Pradesh Gener- al Sales Tax Act, 1958 and the Central Sales Tax Act, 1956 by
new industrial units going into production after 1st April, 1981 which contemplate--
(a) total exemption from payment of tax whether State or Central by new
industrial units going into production after 1st April, 1981 for varying
periods depending upon the district in which the new industrial unit is set up;
622
(b) deferment of the payment of tax in lieu of the above said exemption for a
period of ten years.
To
give effect to the concession of exemption from payment of tax, the Government
in the Separate Revenue Department have already issued the following
notifications:
(i) F.
No. A3-41-81(35)-ST-V, dated 23rd October, 1981.
(ii)F.
No. A3-41-81 (25)-ST-V, dated 1st May, 1982.
(iii)
F. No A3-41-81(24)-ST. V, 1st May, 1982.
(iv)
F. No. A3-41-81 (31)-ST-V, dated 29th June, 1982.
With a
view to enabling those new industrial units who opt for the alternative
concession of deferment of payment of tax, a special provision in the shape of
section 22-D has been inserted in the Madhya Pradesh General Sales Tax Act,
1958 with effect from 1st April, 1981, according to which the facility of
deferring the payment of tax which become available subject to the provisions
of the scheme providing for the grant of incentives for setting up the new industri-
al Units;
The
aforesaid rules have therefore been framed to formulate the scheme of deferred
payment of tax." It might appear, at first sight, that since the relief by
way of deferment of tax is only in the nature of an alterna- tive to the
provision for exemption and the former is not available to traditional
industries because of rule 14 above, the same should be the position in regard
to the exemption provision also. There are, however, several diffi- culties in
accepting this suggestion. In the first place, the rules relate to tax
deferment and not tax exemption. It is open to the State Government,
particularly in view of S. 22D, to frame such scheme for the purpose as it may
deem fit. The provision for exemption, however, needs to be spelt out, under S.
12, in a statutory notification. Secondly if, as is being urged on behalf of
the State, it is explicit even on the terms of the notification that
traditional industries are excluded, it is not necessary for the rules of
deferment to specifically provide that they will not be available to the
industries listed in rule 14 particularly when rule 4 has incorporated the
requirement of an eligibil- ity certificate in accordance with 623 the previous
instructions for the said purpose. Thirdly rule 14 excludes from the scheme not
merely "traditional indus- tries" covered by para (A) but also
industrial units (which may not be `traditional industries') falling under paras
(B) to (E). Fourthly, the rules are not inconsistent with the interpretation
that, while all industries fulfilling the terms of the notification can claim
exemption under it, only some of those units, which do not fall under rule 14,
can opt for the alternative of determent. We are, therefore, of opinion that
even the retrospective promulgation of these rules provide no assistance in the
interpretation of the notification.
A
reference has now to be made to the notification of 3/7/87 amending the 1981
notification with retrospective effect so as to exclude what may be described
in brief as `traditional industries' though, like rule 14 of the defer- ment
rules, the exclusion extends even to certain other non-traditional units
operating in certain situations.
Though
this notification purports to be retrospective, it cannot be given such effect
for a simple reason. We have held that the 1981 notification clearly envisages
no exclu- sion of any industry which fulfills the terms of the notifi- cation
from availing of the exemption granted under it. In view of this
interpretation, the 1987 amendment has the effect of rescinding the exemption
granted by the 1981 notification in respect of the industries mentioned by it.
S. 12
is clear that, while a notification under it can be prospective or
retrospective, only prospective operation can be given to a notification
rescinding an exemption granted earlier. In the interpretation we have placed
on the notifi- cation, the 3/7/87
notification cannot be treated as one merely clarifying an ambiguity in the
earlier one and hence capable of being retrospective: it enacts the rescission
of the earlier exemption and, hence, can operate only prospec- tively. It
cannot take away the exemption conferred by the earlier notification.
We
would like to add that we agree with the view of the Full Bench that, if the
notification is interpreted as done by it or even hold it to be ambiguous,
there is no scope for the assessee to invoke the doctrine of promissory estoppel.
We
have already dealt with this aspect in regard to the cases in which the State
has appealed. In the other cases covered by the Full Bench decision, the mere
fact that an exemption was initially granted and then revoked would be
insufficient to found the claim of estoppel particularly when it has been found
that the assesses started production after 12.1. 1983 and claimed exemption
very much later. But since, in our view, the terms of the notification are
clear and envisage no denial of exemption to traditional indus- tries, this
question does not survive.
624
Before we conclude, we have to refer to one aspect which we have touched upon
at the very beginning of the judgment and that is the dismissal, in limine, of
the Special Leave Petition filed in this Court by the petitioners before the
Full Bench. It has been pointed out that the above petition was dismissed
notwithstanding that the Special Leave Peti- tion in the case of G.S. Dhall
& Flour Mills was also then pending for admission. It would perhaps have
been better if both the S.L.Ps. had been taken up and dealt with together.
However,
the S.L.P. against the Full Bench was dismissed and, two of us having been
members of the Bench that dis- missed it, we may observe that Sri Salve is
perhaps right in saying that it was the content of paras 20 and 21 of the Full
Bench judgment that persuaded this Court to dismiss the S.L.P. there against.
The Full Bench has there pointed out that even if it could be said that two
interpretations of the notification were equally plausible. the assesses in
those cases had set up the industries after the explicit instructions of 12.1.
1983 were made public and thus took a deliberate risk and had only themselves
to thank. Neverthe- less, the fact is that the view taken by us on the scope of
the notification runs counter to the Full Bench decision which must be treated
as overruled.
For
the above reasons, we have come to the conclusion that the G.S. Dhall and Flour
Mills case laid down the correct law and not the Full Bench. We would like to
add that we are not quite happy to arrive at this decision. It does seem likely
that the State Government had not intended the exemption to be availed of by
certain categories of industries. But it has failed to achieve this purpose on
account of the wide language in which it couched the exemp- tion notification.
We find ourselves unable, for the reasons discussed above, to discover any
valid legal basis on which the exemption clearly granted can be withheld from
the assesses here. We, therefore, dismiss the appeals of the State and allow
the appeals preferred by the assesses and hold them entitled to the exemption
under the 1981 notifica- tion. We, however, make no order regarding costs.
R.S.S.
Appeals filed by State dismissed and other appeals allowed.
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