State of Haryana
& Ors. Vs. M/S. Baldev Spinners Pvt. Ltd. & Ors. [2009] INSC 419 (25
February 2009)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.1973 OF 2006 State of
Haryana & Ors. ... Appellant (s) Baldev Spinners Pvt. Ltd. & Ors. ...
Respondent (s) WITH Civil Appeal Nos. 1976, 1982, 1983 & 1986 of 2006 and
350 of 2007
1.
R.
V. Raveendran J., These appeals by special leave by the State of Haryana raise
the common question about the validity of withdrawal of the Eligibility
Certificate issued under Rule 28A of the Haryana General Sales Tax Rules 1975
(`Rules' for short).
2.
We
may first refer to the relevant legal provisions. Sections 13B and 25A of the
Haryana Sales Tax Act, 1973 (for short `the Act') enabled the state government,
if satisfied that it is necessary and expedient so to do in the interest of
industrial development of the state, to exempt from payment of tax, or defer
the payment of tax, by such class of industries, for such period, subject to
such conditions as may be prescribed. Chapter IV-A of the Rules consisting of
Rule 28A dealt with class of industries, period and other conditions for
exemption/deferment from payment of tax. The definitions of eligibility certificate,
exemption certificate and entitlement certificate in clauses (j), (k) and (l)
of sub-rule (2) of Rule 28A are extracted below:
"(j)
`Eligibility certificate' means a certificate granted in form S.T. 72 by the
appropriate Screening Committee to an eligible industrial unit for the purpose
of grant of exemption/deferment.
(k) `Exemption
certificate' means a certificate granted in form S.T.73 by the Deputy Excise
and Taxation Commissioner of the District to the eligible industrial unit
holding eligibility certificate which entitles the unit to avail of exemption
from the payment of sales or purchase tax or both, as the case may be;
(l) `Entitlement
certificate' a certificate granted in form S.T. 73 by the Deputy Excise and
Taxation Commissioner of the District to the eligible industrial unit holding
eligibility certificate which entitles it to get deferment of sales tax."
2.1) Sub-Rule (3)
gave an option to an eligible industrial unit either to avail benefit of tax
exemption or deferment. Sub-Rule (4) dealt with quantum and period of tax
exemption/deferment. Sub-rule (5) dealt with the 3 procedure for applying and
obtaining eligibility certificate. Sub-rule (8) dealt with withdrawal of
eligibility certificate. Relevant portions thereof, that is, clauses (a) of
sub-Rule (4), clauses (a), (b) and (h) of sub-rule (5) and clauses (a) and (b)
of sub-rule (8) are extracted below :- 4(a). Subject to other provisions of
this rule, the benefit of tax exemption or deferment shall be given to an
eligible industrial unit holding exemption or entitlement certificate, as the
case may be to the extent, for the period, from year to year in various zones
from the date of commercial production or from the date of issue of
entitlement/exemption certificate as may be opted, as under :
Quantum and period of
tax exemption/tax deferment :- (i) New Industrial Units.
Name of the Zone and
Small Scale Medium Scale/large Time Limit the area comprised scale therein Zone
`B' comprising 125% of fixed 100% of fixed capital 7 years areas other than
Zones capital investment but not `A' and `C' investment exceeding Rs.1.5 crores
Provided that in the case of exemption, the benefit shall extend to tax on
gross turn over and in the case of deferment, it shall extend to tax on the taxable
turn over of goods manufactured by the unit.
xxxxxx 5(a). Every
Eligible Industrial Unit which is desirous of availing benefit under this Rule
shall make an application in Form ST-70 in triplicate along with attested
copies of the documents mentioned therein to the General Manager, District
Industries Centre within 90 days of the date of its going into commercial
production or the date of coming into force of this rule whichever is later. No
application shall be entertained if not preferred within time. An application
with incomplete or incorrect particulars including the documents required to be
attached therewith shall be deemed as having not been made if the applicant
fails to complete it on an opportunity afforded to him in this behalf.
4 5(b). Applications
from small scale units will be considered by the Lower Level Screening
Committee and those from Medium/Large scale units by the Higher Level Screening
Committee.
xxxxxx 5(h). The
Eligibility Certificate will be issued by the General Manager, District
Industries Centre in cases approved by the Lower Level Screening Committee and
by the Director of Industries or any officer nominated by him not below the
rank of Additional Director in cases approved by the Higher Level Screening
Committee normally within a period of 45 days from the date of receipt of the
application in the office of the General Manager, District Industries Centre.
The certificate shall be valid from the date of commercial production or from
the date of issue of entitlement exemption certificate as the case may be for a
period as laid down under sub-rule (4) unless cancelled or withdrawn. A copy of
the Eligibility Certificate shall also be sent to the Deputy Excise and
Taxation Commissioner concerned.
xxxxxx 8(a). The
eligibility certificate granted to an industrial unit shall be liable to be
withdrawn at any time during its currency by the appropriate screening
committee, in the following circumstances - (i) if it is discovered that it has
been obtained by fraud, deceit, misrepresentation, misstatement or concealment
of material facts;
(ii) discontinuance
of its business by the unit or closing down of its business for a continuous
period exceeding six months except in case of fire, flood and other natural
calamities, riots, strike or lock- out which in the opinion of the committee
concerned is beyond the control of the unit;
(iii) disposal or
transfer by the unit of any of its fixed assets adversely affecting its
manufacturing or production capacity :
Provided that no
order of withdrawal of the eligibility certificate shall be made without
affording a reasonable opportunity of being heard to the affected unit.
8(b). When the
eligibility certificate is withdrawn, the exemption/ entitlement certificate
shall be deemed to have been withdrawn from the 1st day of its validity and the
unit shall be liable to payment of tax, interest or penalty under the Act as if
no entitlement certificate had ever been granted to it.
(emphasis supplied)
5 2.2) Thus, small scale industries requiring an eligibility certificate had to
apply in the prescribed form (Form ST-70) with an affidavit to the General
Manager, District Industries Centre for consideration by the Lower Level
Screening Committee (`LLSC' for short). Para (3) of the application form for Eligibility
Certificate required the applicant to produce the following annexures with the
application:
(i) Certificate from
Chartered Accountant regarding estimated liability of sales tax for the period
which application is made.
(ii) Certificate from
the Chartered Accountant regarding fixed assets on the date of commercial
production including the assets of the unit as erected at site and paid for
within 60 days to commercial production.
(iii) Latest copy of
partnership deed/Memorandum and Articles of Association, list of Directors and
10 major share-holders/partners.
(iv) Copy of the
power of attorney or certified copy of resolution passed by the Board of
Directors authorizing a particular person to apply for the grant of eligibility
certificate.
(v) In case of
agricultural land permission from the authority concerned for converting the
same for non-agricultural use;
and (vi) Copy of
Registration No./Letter of Intent/Industrial Licence/ DGTD Registration.
(emphasis supplied)
6 2.3) It is evident from requirement No. (v) that where agricultural land was
used for the non-agricultural purpose of constructing or putting up an
industrial unit, such change in land use had to be permitted/certified by the
Town and Country Planning Development by issue of a No Objection
Certificate/Change of Land Use Certificate (`NOC/CLU Certificate' for short).
Civil Appeal
No.1973/2006
3.
The
first respondent (for short `respondent'), a small scale industry, was
registered as a dealer under the Act. The respondent made an application dated
14.11.1995 to the General Manager, District Industries Centre, Panipat in the
prescribed form (ST-70) for grant of an eligibility certificate and enclosed
therewith the following annexures :
(1) Application form
in prescribed format.
(2) Option letter
seeking exemption to be given from the date of Commercial Production.
(3) Affidavit duly
attested by a First Class Magistrate.
(4) Chartered
Accountant's Certificate regarding Fixed Assets at site.
(5) Certificate from
Chartered Accountant regarding projected Sales Tax to be exempted for the
period of eligibility.
(6) Copy of
Resolution.
(7) Memorandum and
Article of Association and list of Directors.
(8) Copy of Permanent
SSI Registration.
(9) Copy of
Registration certificate under the Act.
7 The respondent did
not produce the NOC/CLU certificate, which was a document to be produced, if
the land was an agricultural land (Sl. No. (v) of list of annexures to be
produced, as per the prescribed application form).
The application was
processed and on 21.5.1996, the Lower Level Screening Committee resolved to
grant the eligibility certificate to the respondent. In pursuance of it, an
eligibility certificate was issued on 12.6.1996 stipulating the period of
eligibility as from 1.9.1995 to 31.8.2002 for availing exemption from payment
of tax of Rs.41,94,722/-. The respondent accordingly availed the exemption.
4.
The
LLSC at its meeting held on 19.6.1997 decided to withdraw the eligibility
certificate issued to the respondent, and the said withdrawal was communicated
to the respondent, by the District Industries Centre, by letter dated
30.6.1997. That was challenged by the respondent in CWP No.11383 of 1997. The
High Court by judgment dated 22.12.1997 allowed the said petition and quashed
the withdrawal of the eligibility certificate without notice or opportunity of
hearing as illegal, reserving liberty to the State government to proceed afresh
in the matter after affording an opportunity to the respondent to show cause
against the proposed action.
5.
Thereafter
the District Industries Centre, Panipat issued a show-cause notice dated
4.3.1998 proposing to withdraw the eligibility certificate on the ground that
the respondent had not complied with the basic requirement of furnishing a
NOC/CLU Certificate from the Town and Country Planning Department for change of
land use along with its application in Form ST-
70. The respondent
sent a reply dated 26.3.1988 stating that as its unit was situated in an area
surrounded by a large number of factories, the area should be considered as a
non-agricultural area. It also contended that the department was not earlier
insisting upon the production of such NOC/CLU certificate if the industry was
situated in an area, where several industries were situated. The LLSC gave a
hearing on 3.11.1998 to the respondent.
During the hearing,
the respondent's Director was informed that the District Town Planner, Panipat
on verification had informed the LLSC that the respondent's unit fell in an
area where, for setting up an industry, a NOC/CLU certificate was required from
the Town Planning Department.
The respondent's
director admitted that respondent had not obtained such NOC/CLU Certificate.
The LLSC therefore took a decision to withdraw the eligibility certificate
issued to the respondent for non-production of NOC/CLU certificate. The General
Manager, District Industries Centre, 9 Panipat, by letter dated 26.11.1998
informed the respondent about the decision of LLSC to withdraw the eligibility
certificate. The appeal filed by the respondent against the said decision was
rejected by the Higher Level Screening Committee by order dated 1.7.1999. The
respondent challenged the said decision in CWP 13865/2000. The High Court by
order dated 10.10.2000 directed the appellant authority to hear the appeal and
pass a fresh order. The appeal was heard again and dismissed on 6.2.2001. The
appellate authority noted that in spite of several opportunities being granted,
the respondent had failed to produce the NOC/CLU Certificate. It further held
that in view of the non-production of NOC/CLU certificate, the eligibility
certificate issued to the respondent was void ab initio. The respondent
challenged the said withdrawal of the eligibility certificate and the order of
the appellate authority in CWP No.9545 of 2001. The said petition was allowed
by order dated 10.12.2002. The High Court held that the eligibility certificate
once granted could be withdrawn only in one of the three circumstances
enumerated in clause (a) of Sub-Rule 8 of Rule 28A; and as non-production of
NOC/CLU certificate was not a ground on which the eligibility certificate could
be withdrawn under the said provision, the withdrawal was illegal and not
justified.
6.
The
said order is challenged in this appeal by special leave. The Appellant has
urged the following contentions:
(i) The grounds for
withdrawal of an eligibility certificate, enumerated in clause (a) of sub-rule
8 are not exhaustive. The power to withdraw an eligibility certificate on valid
grounds is implied in the power to grant the certificate, having regard to
section 19 of the Punjab General Clauses Act. Therefore, the eligibility
certificate could be withdrawn for any valid reason, even if such reason was
not enumerated in clause (a) of sub-rule 8.
(ii) Having regard to
the law relating to town and country planning, no agricultural land or land in
green belt could be used for industrial purposes without obtaining a NOC/CLU
certificate. Therefore, the prescribed application form for eligibility
certificate specifically required the applicants to produce the NOC/CLU
certificate to ensure that the industry does not violate the relevant law; and
where such a certificate is not produced, the industrial unit is not entitled
to an eligibility certificate. Where an eligibility certificate had been
wrongly issued on account of the small scale industry suppressing the fact the
land where its unit is situated is agricultural land, it is liable to be
withdrawn along with all consequential financial benefits extended under the
State Industrial Policy.
(iii) The High Court,
in rendering the impugned judgment ignored a binding decision of a Co-ordinate
Bench in Nice Spinners Pvt. that the requirement regarding production of
NOC/CLU 11 certificate, contained in Form No.ST-70 prescribed under the Rules
was a mandatory requirement.
7.
On
the contentions urged, the following two questions arise for our consideration
:
(i) Whether an
eligibility certificate issued under sub-rule (5) of Rule 28A could be
withdrawn on a ground other than those specified in clause (a) of sub-rule 8 of
Rule 28A.
(ii) Whether in this
case, withdrawal can be said to be on any of the grounds mentioned under clause
(a) of sub-rule 8 of rule 28A.
Re : Question (i) :
8.
Sub-rule
(8) provided for withdrawal of the eligibility certificate in three specific
circumstances mentioned in clause (a) thereof. Clause (b) of sub-rule (8)
provided that where the eligibility certificate is withdrawn, the
exemption/entitlement certificate shall be deemed to have been withdrawn from
the first date of its validity and the unit becomes liable to pay tax, interest
and penalty as if no entitlement certificate has ever been granted to it. This
penal provision was attracted only when the withdrawal was on any of the
grounds mentioned in clause (a) of sub-rule (8). It is not possible to hold
that the penal consequences under clause (b) of sub-rule (8) would 12 apply
even where the specified circumstances/grounds in clause (a) of sub- rule (8)
did not exist or occur. Where the rules prescribe the conditions for grant of a
benefit and also the conditions for withdrawal of such benefit, then the
benefit can be withdrawn only if any of the conditions prescribed exist, and
not otherwise, unless the provision relating to withdrawal/rescission also
reserves discretion to the authority concerned to exercise the power of
withdrawal wherever warranted.
9.
The
appellant placed reliance upon section of the Punjab General Clauses Act, which
provides that where any State Act confers a power to issue a notification or
orders, rules or bye-laws, then that power includes a power exercisable in the
like manner and subject to the like sanction and conditions (if any) to add to
amend, vary or rescind any notification, orders, rules or bye-laws so issued.
The question is, where the rules contain a specific provision as to the
circumstances in which the power to grant an eligibility certificate can be exercised
and the specific circumstances in which the eligibility certificate once
granted can be withdrawn, whether reliance can be placed upon the implied power
to rescind or withdraw under section 19 of the General Clauses Act, de hors the
specific provision in the statute. Section 19 of the Punjab General Clauses Act
(corresponding to section 21 of General Clauses Act, 1897) merely embodies a
rule of construction which can be displaced to the extent, the provisions, the
scheme and the object of any particular statute indicate a contrary intention.
It is intended to
apply only where the rules in question do not contain a specific provision
governing or regulating the matter. The question whether or not the said rule
of construction (the implied power to rescind or withdraw an order) would apply
or not, will depend on the subject matter, context and the effect of the
relevant provisions of the statute/rules under which the order is issued.
Therefore, the scheme, its object and all relevant provisions have to be
examined to decide the application of the said rule of construction. See : The
State of Bihar v. D.N.Ganguly [1959 SCR 1191], State of Kerala v. K.G.Madhavan
Pillai [1988 (4) SCC 669], H.C.Suman v. Rehabilitation Ministry Employees'
Cooperative House Building Society Ltd. [1991 (4) SCC 485], and Justice G.P.
Singh's principles of Statutory Interpretation (11th Edition), pages 999 &
1000.
10.
As
noticed above, clause (a) of sub-rule (8) specifically enumerated three
circumstances in which eligibility certificate is liable to be withdrawn.
They were : (i)
discovery that the certificate had been obtained by the applicant by fraud,
deceit, misrepresentation, misstatement or concealment 14 of material facts;
(ii) discontinuance/closing down of the business by the holder of the
certificate; and (iii) disposal/transfer of fixed assets by the holder of the
certificate, adversely affecting its manufacturing or production capacity. It
did not empower the appropriate screening committee to withdraw the eligibility
certificate under any other circumstance. Nor did it confer a general power
upon the screening committee to withdraw the certificate. It however required
that such withdrawal shall be after affording a reasonable opportunity of
hearing to the affected unit. Clause (b) of sub- rule (8) prescribed certain
penal consequences when the eligibility certificate was withdrawn. Obviously,
penal consequences could not be visited upon an assessee on grounds or
circumstances which were neither specified in the rules, nor stipulated in the
eligibility certificate. The legislative intent as can be gathered from the
scheme contained in the rules was that the eligibility certificate could be
withdrawn only in the circumstances enumerated in clause (a) of sub-rule (8)
and for no other reason. As a result, we reject the contention of the appellant
that the eligibility certificate issued under sub-rule (5) of rule 28A could be
withdrawn, if the circumstances warrant, on a ground other than the ground
specified in clause (a) of sub-rule (8).
11.
The
contention that High Court failed to follow the decision of a co-ordinate Bench
in Nice Spinners (supra) does not have any merit. Nice Spinners dealt with a
situation where the request for an eligibility certificate was rejected under
sub-rule (5) and did not deal with a situation relating to withdrawal of an
eligibility certificate already granted. Once an eligibility certificate was
granted, it can only be withdrawn in the circumstances mentioned in clause (a)
of sub-rule (8). Therefore, `non-production of NOC/CLU certificate' by itself
cannot be a ground for withdrawal as it is not one of the grounds/circumstances
mentioned in clause (a) of sub-rule (8).
Re : Question (ii)
12.
But
the matter does not end there. The next question will be whether the
non-production of NOC/CLU Certificate had any bearing on the three
circumstances or grounds for withdrawal enumerated in clause (a) of sub- rule
(8). Circumstances (ii) and (iii) mentioned in clause (a) of sub-rule (8) do
not admittedly apply as this is neither a case of discontinuance/closure of
business nor a case of disposal of fixed assets. What therefore remains to be
considered is whether it can be said that the eligibility certificate was obtained
by the respondent by fraud, deceit, misrepresentation, misstatement or
concealment of facts.
13.
The
prescribed form of application required the applicant to produce certain
documents as annexures to the application. Requirements (i) to (iv) and (vi) of
the prescribed form (extracted in para 2.3 above) were specific.
Requirement (v) was
slightly different. It required "in case of agricultural land",
permission from the authority concerned for converting the same for
non-agricultural use. This meant that where the unit was situated in non-
agricultural urban area, there was no need to produce the NOC/CLU certificate.
But, if the industrial unit was situated in an agricultural land, then a
NOC/CLU Certificate was required to be produced. The respondent did not produce
the NOC/CLU certificate. Nor did it disclose in its application that its unit
was situated in an agricultural land. It merely gave a list of the documents
produced, where NOC/CLU certificate did not find a place. It remained silent
about requirement (v). This amounted to suppression and concealment of a
material fact or an implied misrepresentation that NOC/CLU certificate was not
required to be produced. Where the NOC/CLU Certificate was not produced, and
the applicant did not state that the land was agricultural land, there was
every 17 likelihood of the concerned authority proceeding on the assumptions
that the industry was not situated in an agricultural land and therefore the
applicant was not required to produce the NOC/CLU Certificate. But if the unit
was situated in an agricultural land, it was mandatory to either produce the
NOC/CLU Certificate under requirement (v) or disclose the fact that though the
unit was situated in an agricultural land, it did not possess the required
certificate. The suppression of the fact that the land was agricultural was a
material concealment and misrepresentation which led the LLSC to assume that
the applicant had fulfilled the legal requirements. If the fact that the land
was situated in an agricultural land had been disclosed, the eligibility
certificate, would not have been issued, in the absence of NOC/CLU Certificate.
Therefore, while the non-production of the `NOC/CLU Certificate' by itself may
not be a ground to withdraw the eligibility certificate under sub-rule (8), the
omission to disclose that the land was an agricultural land and that it did not
possess or that it was not able to produce the NOC/CLU Certificate, was a
concealment, misstatement and misrepresentation of a material fact. When it was
discovered on enquiry that the land was agricultural land and the respondent
did not produce the NOC/CLU Certificate, the department was entitled to
withdraw the eligibility certificate under clause (a)(i) of Sub-Rule (8).
14.
A
faint attempt was made to contend that the ground of rejection was
`non-production of NOC/CLU Certificate' and not suppression or mis-
representation of a material fact relating to nature of land. There is no merit
in this contention. If the respondent had disclosed that the land was an
agricultural land, but failed to produce the NOC/CLU Certificate, and if the
department had issued the eligibility certificate, then it might not have been
possible for the department to withdraw the Certificate. In such an event, the
assessee could have contended that it had not suppressed any information and
the requirement was waived, or that it was not being insisted upon and that
therefore non-production was not a ground for cancellation. But where the
NOC/CLU Certificate was required because the unit was situated in an
agricultural land, but the applicant suppressed the fact that the land where
the unit was situated was an agricultural land, to avoid production of the
NOC/CLU Certificate, then it is a concealment and mis-representations of a
material fact, which squarely falls under Rule 8(a) (i). When the eligibility
certificate is withdrawn for non-production of NOC/CLU Certificate, and the
fact that land was agricultural land was not disclosed, the withdrawal can be
traced to the ground (i) under sub-rule 8(a) (i) of Rule 28A.
15.
In
view of the above, the appeal is allowed, the judgment of the High Court is set
aside and the challenge to the withdrawal of eligibility certificate is rejected.
Civil Appeal
Nos.1976/2006, 1982/2006, 1983/2006, 1986/2006 and 350/2007.
16.
The
facts in these appeals are similar to those in Civil Appeal No.1973/2006. In
all these cases also, the eligibility certificates issued to the respective
respondent was withdrawn on the ground that they did not produce the NOC/CLU
certificate. The High Court allowed the writ petitions filed by the respective
respondent in these appeals (by order dated 2.2.2004 in CWP No.79/2004, order
dated 9.12.2003 in CWP No.15989/2003, order dated 7.1.2003 in WP No.13058/2002,
order dated 7.1.2003 in CWP No.11967/2002 and order dated 10.2.2004 in CWP
No.9715/2003) by following its decision dated 10.12.2002 in Baldev Spinners
Private Ltd. which is the subject matter of CA No.1973/2006 considered above.
These appeals also stand allowed in terms of CA No. 1973/2006.
...............................J.
(R V Raveendran)
............................J.
New
Delhi;
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