TMI Blog2006 (5) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... Mukul Rohtagi, Senior Advocate (Anis Suhrawardy, Advocate, with him) for the respondents. -------------------------------------------------- The judgment of the court was delivered by B. P. SINGH J. The appellant herein claiming to be a "prestigious unit" having a capital investment of over Rs. 25 crores claimed exemption from payment of general sales tax and Central sales tax under Notification No. S.R.O. 247 of August 20, 1998, issued by the Government of Jammu and Kashmir pursuant to its Industrial Policy of 1998-2003. Under the said Industrial Policy, a package of incentives was offered to industrial units, and in particular to "prestigious units" having a capital investment of Rs. 25 crores or more. The appellant-company set up a soft drink manufacturing unit in Jammu. The claim of the appellant was negatived by the State Government, which led to the filing of two writ petitions before the High Court of Jammu and Kashmir. A learned single Judge of the High Court dismissed the writ petitions holding that the petitioner was not entitled to the incentives claimed under the aforesaid Industrial Policy, as it did not validly acquire the status of a "prestigio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, and the new SSI units for a period of 5 years from the date of production. 10.. Special provision for 'prestigious units' (1) Notwithstanding anything contained in paras. 7, 8 and 9 above, prestigious units, i.e., those having capital investment of Rs. 25 crores or above, shall have the option to avail of full exemption from payment of general sales tax, Central sales tax and special/additional toll tax for a period of 5 years from the date of production or until such amount of exemption reaches the level of 150 per cent of capital investment in the project whichever occurs earlier. (2) Notwithstanding anything contained in paras 7, 8 and 9 above those prestigious units which come into commercial production in the year 1998, shall have the option to avail a power tariff freeze at the rate of Rs. 1.50 per unit for a period of five years from the date of commercial production. For purposes of paras 7, 8, 9 and 10 above, all the new units shall also have the option to count the period of 5 years from the date of production or from the succeeding financial year." On August 20, 1998, a notification was issued by the Government of Jammu and Kashmir exempting "prestigious uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " and be entitled to all the incentives provided in the Industrial Policy for such a unit. The proposal was discussed in a meeting attended by the Chief Minister, Finance Minister, the Minister for Industries and Commerce, Chief Secretary, Principal Secretary, Managing Director SIDCO, and the Chairman of the appellant-company. The revised proposal was considered and it was observed that no departure from the new Industrial Policy was involved if the investment materialised concurrently with the availment of incentives. However, it was felt that a liberal view needed to be taken of the policy to the extent that if the investment of Rs. 25 crores or more materializes within the maximum period of six months from the date of commercial production, the company should be given the benefit of incentives. A memorandum of understanding (for short, "MOU") for this purpose had to be executed by and between Jammu and Kashmir SIDCO and the appellant-company. The proposal had the concurrence of the Finance Minister whereafter a memorandum was submitted to the Cabinet which was approved vide Cabinet decision No. 7/2 dated January 19, 2000. Accordingly, SIDCO, respondent No. 7, signed a MOU with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt that the industrial unit to be set up involved a minimum capital investment of Rs. 27.50 crores and was an industrial unit for the manufacture and bottling of soft beverages. It was also clearly understood that the commercial production was to start by the end of March, 2000, and the minimum investment of Rs. 25 crores must be made within a period of six months, i.e., by the end of September, 2000. In the event of the failure of the appellant to make investment as agreed, the appellant undertook to refund the incentive, if any availed of, as a "prestigious unit" together with interest. It was also clearly understood that the appellant shall become eligible to avail of and be entitled to all incentives and subsidies currently applicable to "prestigious units" in pursuance of the Industrial Policy as published on May 27, 1998, from the date of the commercial production. Pursuant to the MOU, on February 17, 2000, the SIDCO executed a deed of lease in favour of the appellant-company granting to it leasehold rights in respect of land measuring 133.6 kanals for a period of 90 years. On April 25, 2000, the SIDCO issued a certificate to the effect that the appellant was entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Manager, Jammu and Kashmir State Industrial Development Corporation Limited, Regional Office, Vir Marg, Jammu, vide No. IDG/ROJ/99/803 dated April 25, 2000, it is further certified that a memorandum of understanding has been signed by Jammu and Kashmir State Industrial Development Corporation (SIDCO) with M/s. Jai Beverages P. Ltd. (JBPL) to set up a bottling plant having an installed capacity of 800 BPM with a capital investment of more than 25 crores. This is pursuant to the cabinet decision No. 7/2 dated January 10, 2000. JBPL will avail of incentives as prestigious industry right from the date of commercial production in accordance with the new Industrial Policy 1998-2003 (in vogue), subject to the conditions that the company completes the investment before September 30, 2000, failing which they will refund the incentives availed of with interest. The S.R.O. 247 dated August 20, 1998, issued vide No. FD/ST/163/98 governing release incentives to prestigious units reads as under: 'The Government of Jammu and Kashmir hereby direct that the prestigious unit, i.e., having capital investment of Rs. 25 crores or above shall have the option to avail of exemption from payment of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verages. As between the parties, it was clearly understood that the unit to be set up by the appellant shall be entitled to avail of the package of incentives offered by the Industrial Policy to the "prestigious units". The commercial pro- duction was to commence by March 30, 2000, and the investment of Rs. 25 crores or more was to be made on or before September 30, 2000. The certificates issued by the authorities establish that commercial production had commenced as agreed and that investment of over Rs. 27 crores by way of capital investment had been made by September 30, 2000. By a communication dated July 4, 2002, addressed by the Under Secretary to the Government in the Department of Industries and Commerce to the Director, Industries and Commerce, it was conveyed that the competent authority had not agreed to grant exemption from payment of sales tax/toll tax to the appellant. Aggrieved thereby, the appellant filed the first writ petition before the High Court being OWP No. 613 of 2002 praying for quashing of the letter dated July 4, 2002, and for issuance of a writ of mandamus commanding the respondents to allow exemption from payment of sales tax and toll tax to the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... binding on the Sales Tax Department. The Finance Department could grant the exemption only if it found the unit eligible for such incentives in terms of S.R.O. Nos. 247 and 249. Fourthly, it was argued that since the Cabinet had reconsidered its decision and refused the exemption claimed, the Finance Department and the Sales Tax Department were justified in denying such incentives to the appellant, and in insisting upon payment of tax in accordance with the provisions of the Jammu and Kashmir General Sales Tax Act, 1962. On the other hand the appellant contended that there was no separate registration of a "prestigious unit". A medium or large scale unit was different from a "prestigious unit" in the sense that if the capital investment made in a particular industrial unit was Rs. 25 crores or more, it was granted the status of a "prestigious unit" and was eligible for the incentives available to a "prestigious unit". The appellant had invested a sum of over Rs. 27 crores within the period prescribed in the memorandum of understanding and, therefore, it was entitled to be regarded as a "prestigious unit". So far as the negative list was concerned, it was the case of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igious unit" under S.R.O. No. 247. Though not so clearly spelt out, the learned judge, came to the conclusion that S.R.O. Nos. 247 and 249 had to be read together and any medium scale or large scale industrial unit producing goods specified in the Schedule was not entitled to the incentives under those notifications. It was further held that the Director, Industries and Commerce, was not competent to declare the unit as a "prestigious unit", as it was only the Government which could take a decision in this regard by issuing a S.R.O. on being satisfied that the industrial unit was eligible to claim the incentives. On such findings the learned Judge by his judgment and order of July 30, 2004, dismissed both the writ petitions. The letters patent appeal preferred by the appellant was dismissed in limine by order dated October 4, 2004. Having regard to the facts and circumstances of the case and the findings recorded by the High Court, principally two questions fall for our consideration. Firstly, whether the industrial unit set up by the appellant fulfilled all the necessary conditions for being declared a "prestigious unit". In this connection it has to be considered whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of general sales tax and Central sales tax for a period of 5 years from the date of production or until such amount of exemption reaches the level of 150 per cent of the capital investment in the project, whichever occurs earlier. This exemption which was granted by the State Government in exercise of powers conferred by section 5 of the Jammu and Kashmir General Sales Tax Act, 1962, read with sub-section (5) of section 8 of the Central Sales Tax Act, 1956, does not refer to any negative list. On the other hand S.R.O. No. 249 issued on the same date provides that finished goods manufactured by newly established medium and large scale industrial units registered with the Department of Industries and Commerce shall be exempted from payment of general sales tax, which would have been otherwise payable, equivalent to 150 per cent of the total capital investment made by the unit or for a period of 5 years from the date of production whichever occurs earlier subject to the conditions specified therein. It is not necessary for us to notice the conditions specified therein, but the proviso to paragraph 6 of the notification is to the effect that the exemptions granted under S.R.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the matter of payment of general sales tax, except on items brought in the negative list. There is no mention of the negative list in paragraph 10 of the G. O. which clearly brings out the intention of the Government to treat "prestigious units" on a different footing altogether. Similarly, S.R.O. No. 247 which grants exemption to "prestigious units" from payment of general sales tax and Central sales tax does not refer to the negative list. Even S.R.O. No. 249 to which the negative list is appended as a Schedule, only refers to finished goods manufactured by newly established, "medium and large scale" industrial units but does not refer to "prestigious units" which are treated as a separate class altogether. It was sought to be argued before us that a "prestigious unit" also must fall in the category of medium or large scale industrial unit. Therefore, it was not reasonable to exclude the "prestigious units" while applying the negative list to medium and large scale industrial units. The submission is not tenable. This is a matter of policy, and if the Government decides as a matter of policy to treat the "prestigious units" on a different footing than medium and large scal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt agreed to grant incentives and subsidies to the appellant which were applicable to the "prestigious units" as per new Industrial Policy (1998-2003) from the date of commercial production, i.e., from the end of March, 2000. Thus the Government also, after considering the proposal at various levels, came to the conclusion that the plant for manufacture and bottling of soft beverages being set up by the appellant with an investment of about Rs. 27.50 crores was entitled to the package of incentives promised to the "prestigious units" in the new Industrial Policy. After the memorandum of understanding was signed and the industrial unit set up at a cost of over Rs. 27 crores, the Government appears to have changed its mind and, in our view, unreasonably. This takes us to the next question as to whether the industrial unit set up by the appellant qualifies as a "prestigious unit" in terms of S.R.O. No. 247 dated August 20, 1998. We have earlier reproduced the aforesaid notification. The notification contemplates a "prestigious unit" as being one which has a capital investment of Rs. 25 crores or more. Neither the aforesaid notification nor the Industrial Policy itself prescribes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materializes within the maximum period of six months from the date of commercial production, the appellant should be given the benefits of the incentives. This proposal had the approval of the Finance Department as also the approval of the Cabinet, which did not consider it as a departure from the policy announced. All these facts, therefore, lead to the only conclusion that having con- sidered its new Industrial Policy, and having considered the proposal made by the appellant, the Government took a conscious decision to grant the package of incentives to the industrial unit being set up by the appellant provided it went into commercial production by the end of March, 2000 and made the necessary investment of Rs. 25 crores or more on or before September 30, 2000. The documents and material on record disclose that the Government took this decision after full discussion on all aspects of the matter, and in particular by reference to the date by which the appellant was required to invest Rs. 25 crores in the industrial unit being set up by it. The State cannot be permitted to ignore its own conscious decision to permit the appellant to invest a sum of Rs. 25 crores or more by Sept ..... X X X X Extracts X X X X X X X X Extracts X X X X
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