of Bihar & Ors Vs. Steel City Beverages
Ltd. & Anr  INSC 558 (18 November 1998)
G.T.Nanavati, B.N.Kirpal. Nanavati.J
short question which arises for consideration in this appeal is whether
investment made by Steel City Beverages Limited, respondent No. 1 herein and
hereafter referred to as "the Company"), in bottles and crates can be
said to be investment in "Plant" so as to amount to "Fixed
Capital Investment" under the Bihar Sales Tax Supplementary (Deferment of
Tax) Rules, 1990 (hereinafter referred to as "the Deferment Rules").
Company is engaged in the business of manufacturing softdrinks and beverages.
It is a registered dealer under the Bihar Finance Act, 1981. It filed a writ
petition being Civil Writ Jurisdiction Case No. 1118 of 1992, through its
Director-respondent No.2 in Patna High Court for a direction to the State
Government and its officers, appellants herein, to accord permission under Rule
42 (7) of the Bihar Sales Tax Rules, 1983 and exempt it from using Form No. XXVIII-B.
White the petition was pending before the High Court, it made an application
under the Deferment Rules to the competent authority for grant of an
eligibility certificate which would enable it to claim benefit of deferment of
payment of sales-tax scheme declared under the Deferment Rules. It was stated
in the application that under the Resolution of the State Government dated
6.9.1989 and the Deferment Rules, it was qualified to seek the benefit of
deferment. The High Court by its order dated 13.7.1992 directed the Deputy
Commissioner of Commercial Taxes, respondent No.4, to place that application
before the District Level Committee for Singhbhum District for its
consideration. The District Level Committee decided on 9.1.1995 that the
Company was entitled to the benefit of deferment of payment of sales-tax to the
extent of 90% of its fixed capital investment in fixed-capital assets.
it rejected the Company's claim that investment in bottles, crates,
electrification and tools was an investment in "Plant" and,
therefore, it was also a "fixed capital investment". The Company,
therefore, amended the writ petition and challenged that part of the decision
of the District Level Committee which was against it.
High Court after considering that under the Deferment Rules "fixed capital
investment" means investment inland, building, plant and machinery and
that they do not define the word "Plant", observed that it was
required to be construed according to its dictionary meaning or as understood
in common parlance and not in its technical sense. It then held that the word
"Plant" would include whatever apparatus is Used by a businessman for
carrying on his business; not his stock in trade which he buys or makes for
sales, but all goods and chattels fixed or movable which he keeps for
employment in his business and which have some degree of durability.
Considering the nature of business of the Company, namely, manufacturing soft
drinks and beverages, the High Court held that bottles and crates employed by
it for its business are also 'Plant' and, therefore, the Company is entitled to
get the benefit of deferment on the investment made in them. The High Court
quashed the decision of the District Level Committee which was under challenge
and directed the State and its officers to grant the benefit of deferment after
taking into account the investment made in bottles and crates also. The claim
in relation to electrification and tools was not pressed before the High Court.
Aggrieved by the decision of the High Court, the State has filed this appeal. '
' It was contended by Mr. B.B. Singh, learned counsel for the appellant-State
that the High Court has mis-interpreted the word "Plant" in Rule 2(v)
of the Deferment Rules. It was submitted by him that unless a thing is of
durable nature and fixed like land, building or machinery, it cannot be said to
be 'Plant' and. therefore, bottles and crates have been wrongly held as
'Plant'. He also submitted that all the decisions relied upon by the High Court
were under the Income-Tax Act, 1961 which defines the word "plant"
very widely and, therefore, they were really not relevant for the correct
interpretation of the word plant as used in Rule 2(v) of the Deferment Rules.
On the other hand, learned counsel for the respondents supported the decision
of the High Court on the grounds given by the High Court in its judgment.
what we have to consider is whether under the 'Deferment Rules'
"plant" would include bottles and crates employed by an industrial
unit manufacturing soft-drinks and beverages for carrying on its business. The
word plant has a very wide meaning and a variety of articles, objects or things
have been held to be plant.
have defined plant as land, building, fixtures, machinery, implements and
tools, and apparatus used in carrying on a mechanical operation or an
Court in C.I.T. v. Taj Mahal Hotel 11971] 82 ITR 44 and Scientific Engineering
House P. Ltd. v. CIT 119861 157 ITR 86 referred to with approval the observations
of Lindley LJ In Yarmouth v. France [1887) 19 QBD 647 that in its ordinary
sense plant includes whatever apparatus is used by a businessman for carrying
on his business, - not his stock-in-trade which he buys or makes for sale', but
all goods and chattels, fixed or movable, live or dead, which he keeps for
permanent employment in his business. In that case, this Court further held
that the test to decide whether a particular thing is plant would be :
"Does the article fulfil the function of a plant in the assessee's trading
activity ? Is it a tool of his trade with which he carries on his business ? If
the answer is in the affirmative, it will be a plant". Learned counsel for
the respondents, heavily relying upon this decision, submitted that the High
Court was right in interpreting the word plant in the Deferment Rules as
including bottles and crates also as they are used by the Company for carrying
on its business. We cannot agree with this contention as we are of the view
that the High Court was wrong in interpreting the word plant in Rule 2(v) so
widely. It failed to consider whether the object and scheme of the Deferment
Rules permit such a wide interpretation. The High Court also failed to
appreciate that the decisions of this Court in Tsj Mahal Hotel (supra) and
Scientific Engineering House (supra) were under the Income Tax Act and the
observations made and the test indicated therein were in the context of the
wide definition of the word plant given in mat Ad ana, therefore, not of
universal application. Obviously, if plant is defined differently under a
different provision or if the context so requires, it may have to be given a
different and a narrower meaning. The Deferment Rules do not define plant and,
therefore, what should have been considered by the High Court was what meaning
should be given to it in the context of the Deferment Rules.
in pursuance of the Government Resolution dated 6.9.1989 which declared its
policy of giving incentives to new industrial unit? and the existing industrial
units going for expansion that the State Government in exercise of the powers
conferred by sub-section (1) of Section 58 of the Bihar Finance Act, made the
Deferment Rules. An examination of these discloses that they provide for
deferred payment of sales-tax in respect of sale of goods manufactured by new
industrial units and existing industrial units under expansion. The deferment
is limited to 90 per cent of the fixed capital investment in fixed capital
assets at the time of grant of eligibility in the case of new industrial units
and 90 per cent of the additional fixed capital investment in the case of an
existing industrial unit undertaking expansion. For claiming the benefit of
deferred payment, an eligible unit has to apply for a certificate of
eligibility. The District Level Committee or the State Level Committee, as the
case may be, adjudges the eligibility of the industrial unit. An application
for grant of eligibility certificate made by a small-scale industrial unit is
required to be considered by the District Level Committee of the district in
which the industrial unit is situated. The District Level Committee, after
considering the report prepared by the District Industries Centre or the
Director of Industries and any other relevant information, decides whether and
to what extent the industrial unit is entitled to the benefit of deferment. The
extent of benefit is partly made dependent upon the 'Fixed Capital Investment'
made by the industrial unit and also upon its status viz. whether it is a large
scale industrial unit or a small-seals industrial unit, As disclosed by the
industrial policy and the Deferment Rules, the State agrees to suffer temporary
loss of revenue by not requiring immediate payment of sales-tax on sale of
goods produced or manufactured by an industrial unit if it makes new fixed
capital investment in the State.
the State desires and what the Deferment Rules require for getting the benefit thereunder,
is not capital investment but fixed capital investment. Rule 2(v) defines
'fixed capital investment' to mean investment in land, building, plant and
machinery. Thus, the nature of investment contemplated by the Deferment Rules
is investment in fixed assets which are ordinarily considered essential for
production or manufacture of goods and have some degree of permanency. The
second proviso to Rule 3 makes this position further clear. It states that
"Deferment shall be limited to 90 per cent of the fixed capital investment
in fixed capital assets". To explain how in business accounting
"fixed capital" and "fixed assets" are understood, Mr.
Singh, learned counsel for the State, drew our attention to the book titled
"Advanced Accounting" by Jamshed R. Batliboi. Therein, it is stated
that "fixed capital of a business consists of its fixed assets" and
"fixed assets are those which are acquired and intended to be retained
permanently for the purpose of carrying on a business, such as land, buildings,
plant and machinery etc.
the context in which the word 'plant' is used in Rule 2(v) indicates that it is
not used in its wider sense and does not include within its meaning land,
building and machinery. It also appears that the rule-making authority did not
intend 'plant' to mean what is not a fixed asset.
all these reasons, we are of the view that by 'plant' what is intended by the
rule-making authority is that apparatus which is used by the industry for
carrying on its industrial process of manufacture. In respect of an industry
manufacturing soft-drinks and beverages, it can be said that plant would mean
that apparatus which is used for manufacturing soft-drinks or beverages and not
articles like crates and bottles used for storing the manufactured product.
also relevant to refer to the two notifications of the Government of India in
the Ministry of Industry (Department of Industrial Development) dated 2.4.1991
and 1.1.1993 issued under Section 11-B of the Industries (Development &
Regulation) Act, 1951.
No.232 dated 2.4.1991 while staling what has to be included under fixed assets
while ascertaining whether a small-scale industrial unit's investment has
exceeded the limit of Rs.60 lakhs has clarified that the cost of storage tanks
which store raw material or finished products is to be excluded. The 1993
notification has amended the notification of 2.4.1991 and clarified by adding
Note No.2 that in calculating the value of plant and machinery, the cost of
storage tanks which store raw materials/finished products only and which are
not linked with the manufacturing process shall be excluded. On 8.5.1995, the
Government of India again issued a Circular, after having received
representations from the industry seeking clarification whether bottles and
crates are to be taken into account for determining the SSI status of the units
engaged in manufacture of soft drinks/concentrates, clarifying that investment
in bottles and crates in such units is in the nature of storage of finished
products and, therefore, such investment has to be excluded while computing the
value of plant and machinery.
pointed out in the affidavit in rejoinder, the Company had applied for an
Eligibility Certificate claiming the status of a small scale industry. It is,
in fact, registered as a small scale industrial unit. While declaring Its
investment at the time of seeking registration as a smallscale industrial unit
it did not include investment in bottles and crates under the head 'Plant and
Machinery'. The investment in bottles and crates was shown under a separate
head. It is further pointed out in the said affidavit that if the investment of
the Company in bottles and crates is included under the head 'Plant' then its
total fixed capital investment will reach the level of 137.36 lakhs and it can
no longer be regarded as a small scale industrial unit. As the Company had
applied as a SSI unit, the District Level Committee had to verify the status of
the Company as SSI Unit and, therefore, it was bound to take into account the
above referred two notifications of years 1991 and 1993 if under these
circumstances, the District Level Committee came to the conclusion that the
Company is not entitled to the benefit of deferment in respect of its
investment in bottles and crates, it cannot be said that it has acted contrary
therefore, allow this appeal, set aside the judgment of the High Court and
dismiss the writ petition filed by the Company.