TMI Blog2003 (8) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... had started production on March 31, 1995. The sale of iron rods and bars is exigible to the levy of tax under the Kerala General Sales Tax Act, 1963. The appellant is registered as a dealer under the Act. 3.. Section 10 of the Act empowers the Government to exempt a class of dealers from the levy of tax. In exercise of the power under section 10, the Government issued a notification dated November 4, 1993. A copy of this notification has been produced as annexure 2. The notification was published in the Government Gazette dated November 4, 1993. By this notification, exemption from payment of tax under the Act was granted to the small scale, medium as well as large scale units. Detailed provisions defining the conditions of eligibility, extent of exemption and the period during which the benefit could be availed of, were laid down. One of the provisions specifically made in the notification was that the "aggregate exemption in respect of sales tax, purchase tax, surcharge and Central sales tax payable together shall not exceed 100 per cent of the fixed capital investment in the unit". 4.. In pursuance to the notification, the appellant submitted an application for the grant o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st for the grant of exemption on the basis of the investment made during the period from July 1, 1995 to March 31, 1997 was declined in view of the "latest clarification issued by the Government vide letter No. 14716/B3/2000/ID dated July 5, 2000". Aggrieved by this order, the appellant approached this Court through two petitions under article 226 of the Constitution. The petitions were admitted. The respondents filed counter-affidavit. After hearing the counsel for the parties, the learned single Judge dismissed the petitions. There were two separate petitions in respect of the claims for the two periods. Hence, these two appeals. 9.. Mr. Giri, learned counsel for the appellant has made a twofold submission. Firstly, it has been contended that the impugned order does not conform to the statutory Notification dated November 4, 1993, a copy of which has been produced as annexure 2. Secondly, it has been contended that the second respondent has erred in rejecting the claim on the basis of the order dated November 26, 1993 as clarified vide letter dated July 5, 2000. On these premises, it has been contended that the view taken by the authority as well as by the learned single Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old by them within the State; and (ii) on the turnover of goods, taxable at the point of last purchase in the State, which are used by such units for manufacturing the goods referred to in sub-clause (i) above for sale within the State or inter-State; and (b) in respect of the surcharge payable under section 3 of the Kerala Surcharge on Taxes Act, 1957 (Act 11 of 1957) in relation to the goods referred to in sub-clause (a) above." The conditions and restrictions were embodied in paragraph 10. In sub-clauses (iii) and (iv), it was provided as under: "(iii) In the case of new industrial units other than public sector undertakings under medium and large scale industries, the aggregate exemption in respect of sales tax, purchase tax, surcharge and Central sales tax together shall not exceed 100 per cent of the fixed capital investment of the unit. (iv) In the case of existing medium and large scale industrial units, other than public sector undertakings, which undertake expansion, modernisation or diversification, the aggregate exemption in respect of sales tax, purchase tax, surcharge and Central sales tax shall not exceed 100 per cent of the additional fixed capital inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arted commercial production on March 31, 1995. It was granted exemption from payment of tax on the basis of its capital investment for an amount of Rs. 2,65,70,965. Initially, the installed capacity was 30,000 metric tonnes. Thereafter, the appellant had invested an amount of Rs. 96,49,307.41 during the period from July 1, 1995 to March 31, 1996. Another investment of Rs. 4,95,40,974 has been made from April 1, 1996 to March 31, 1997. This investment had been made during the period of seven years from the date of commencement of production. In view of the provisions of the notification dated November 4, 1993, the appellant was entitled to the grant of exemption from payment of tax. However, its case was rejected by the Manager, District Industries Centre, Kozhikode on the ground that vide notification dated November 27, 1993, "industrial units having power requirements more than 2,500 KVA" had been brought under the negative list. The order was challenged. It was quashed by the court. Thereafter, the claim was again rejected vide order dated October 21, 2000, when the matter was examined in pursuance of the directions of the High Court. The relevant portion of the order reads as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not come under negative list". 15.. It was in view of the above clarification that the benefit of exemption was denied to the appellant. The ground was that the unit had a total connected load of more than 2,500 KVA. The cost factor as mentioned in the notification of November 27, 1993 was totally ignored. 16.. Mr. Giri contends that this reason was wholly irrelevant and could not be the basis of the rejection of the claim. However, on behalf of the respondents, Mr. Raju Joseph has submitted that this condition had been laid down vide notification dated November 27, 1993. It had been rightly invoked by the authority and that the order was in conformity with the conditions stipulated in this order. 17.. A perusal of the notification dated November 27, 1993 shows that it was issued by the Department of Industries. The notification refers to Government Orders dated December 6, 1991 and May 28, 1993. A reference has also been made to D.O. Letter dated July 15, 1993 issued by the Director of Industries and Commerce. This notification does not refer to the statutory notification regarding the reduction in the rate of tax to industrial units. It did not refer to the Act. Unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not entitled to the grant of exemption. Is it so? 19.. Mr. Giri has pointed out and we think rightly, that the notification dated November 27, 1993 does not refer to the Sales Tax Act at all. In fact, it does not refer to the notification dated November 4, 1993. A perusal of the documents shows that the reference has been made only to the two Government Orders dated December 6, 1991 and May 28, 1993. Reference has also been made to the D.O. letter dated July 15, 1993. However, the document clearly shows that the authority was not even remotely adverting to the notification issued under section 10 of the Kerala General Sales Tax Act, 1963. Thus, there was no intention to modify the Notification dated November 4, 1993. Another fact, which deserves mention, is that the Notification dated November 27, 1993 had not been issued by any authority under the Sales Tax Act. Still further, it is the admitted position that the Industries Department, even under the Rules of business, has no connection with the Department of Taxes. 20.. In this context, it deserves mention that section 10 specifically provides that the Government can, if it is satisfied that it is in public interest to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sub-clause (ix) of clause 11 the following shall be inserted, namely- '(x) Industrial units manufacturing the following items shall not be eligible for the concessions under this notification- (a) biscuits (b) cement paint (c) packing cases, tea chests, plywood, splints, veneers, wooden crates and wooden cable drums (d) bricks and tiles'. This notification shall come into force on the 1st day of April 1994. Explanatory Note.-(This does not form part of the notification but is intended to indicate its general purport.) In the budget speech 1994, while announcing tax concessions on biscuits manufactured by small-scale industrial units, cement paint and soft wood purchased for the manufacture of packing cases, tea chest, plywood splints and veneers it was also announced that tax exemption now available for industrial units manufacturing these items would not be available from April 1, 1994. The above notification is intended to achieve this object. Such instances can be multiplied. It appears that from 1994 to 2000, various notifications had been issued. The latest one, which has been placed on record as a part of annexure 19, was made effective from January 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer." We are not concerned wth any electro thermal or electro chemical processors. Thus, this part of the stipulation can be overlooked. The remaining provision contemplates that in the case of a unit where total power requirement exceeds 2,500 KVA of contract load and where cost of power is more than 25 per cent of the cost of production, the unit will fall in the negative list. In other words, the stipulation was that the requirement of power must be in excess of 2,500 KVA and the expense of the power must exceed 25 per cent of the cost of production. Both the factors had to co-exist. 25.. Mr. Raju Joseph submits that the two provisions have be read dis-junctively. If so read, every unit consuming electricity in excess of 2,500 KVA as well as the units where the consumption was below 2,500 KVA but the cost of power exceeded 25 per cent of the cost of production, the concession was not available. This contention cannot be accepted. Firstly, nothing has been placed on record to show that the Department had ever taken such a view in any case. Despite being asked, Mr. Raju Joseph has not been able to show that even when the appellant's contract load of power was only 1,500 KV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated October 21, 2000 the Director of Industries had not straightaway taken the view that the appellant was not entitled to the benefit of tax exemption in the light of the notification dated November 27, 1993. He had felt constrained to seek clarification. This clarification was given by the Government in the Industries Department vide letter dated July 5, 2000. While doing so, the views of the State Level Committee were taken into account. It was observed that the units having connected load in excess of 2,500 KVA were included in the negative list even when the "cost of power is less than 25 per cent of the cost of production". This was a mere expression of opinion. It was not a decision of the Government. It cannot be read to mean that by the expression of this opinion, the statutory notification dated November 4, 1993 as also the notification dated November 27, 1993 were modified. In fact, a statutory notification cannot be modified by an executive order. Resultantly, the impugned order, which is solely based on the communication dated July 5, 2000, cannot be sustained. 29.. Lastly, it deserves mention that the notification dated November 27, 1993 is general. It pri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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