TMI Blog1992 (1) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 2309, 2310, 3148-3151 of 1989 - - - Dated:- 16-1-1992 - RANGANATHAN S. AND RAMASWAMI V. AND OJHA N.D. JJ. SENIOR ADVOCATES: K. Parasaran, D.D. Thakur, M.H. Beg, Raja Ram Agrawal, M.L. Verma, Prashant K. Goswami and Anil B. Divan. for the parties. Pramod Kohli, Advocate-General. for the parties OTHER ADVOCATES: P.H. Parekh, Hari Khanna, J.P. Pathak, Sandep Thakral, S.M. Tahkral, B.V. Desai, Ms. Vinita Ghorpade, E.C. Aggarwala, N.N. Bhatt, Dhiraj Singh and Ashok Mathur. for the parties -------------------------------------------------- The judgment of the Court was delivered by V. RAMASWAMI, J. -Civil Appeal No. 2309 of 1989 arises out of an order made by the High Court of Jammu and Kashmir in Writ Petition No. 87 of 1981 dismissing the writ petition filed by M/s. Pine Chemicals Ltd., which is a public limited company manufacturing rosin, turpentine and rosin derivatives and carrying on business at Bari Brahmana, Jammu Tawi. The appellants had prayed in the writ petition for quashing the order of assessment dated 20th January, 1981, made by the Assessing Authority, Incharge Sales Tax Circle, Jammu, under the Central Sales Tax Act, 1956, for the year e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the judgment in the writ petition was delivered only relying on the materials placed on record and therefore there was no need for giving an opportunity to the writ petitioners to file a reply statement, the learned Judges dismissed this miscellaneous petition also. Civil Appeals Nos. 3148 to 3150 of 1989 have been filed by M/s. K.C. Vanaspati, a firm of partnership manufacturing vanaspati ghee at Bari Brahmana, Jammu Tawi. They filed Writ Petition No. 52 of 1982 praying to quash a sales tax assessment order dated 16th January, 1982, assessing them to sales tax for the period from 2nd September, 1981, till the end of the month under the Jammu and Kashmir General Sales Tax Act. They also prayed for a mandamus directing the Government and the assessing officer not to assess them to sales tax or recover any amount on account of sales tax from them for a period of five years from 2nd September, 1981, when their industry started commercial production. This relief was prayed again on the ground that Government Order No. 159-Ind. dated 26th March, 1971, as amended by Government Order No. 414-Ind. dated 25th August, 1971, exempted the sales of their finished product of vanas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey have also referred elaborately to the representations, declarations and promises of the Government in support of the plea of promissory estoppel. The respondents had filed a counter-affidavit refuting these contentions of the appellants. The High Court dismissed all these three writ petitions by a common order dated 22nd February, 1989. Civil Appeals Nos. 3148 to 3150 of 1989 have been filed against this common order. Civil Appeal No. 3151 of 1989 has been filed by M/s. Kashmir Vanaspati Ltd., against the judgment of the High Court in Writ Petition No. 5 of 1989 in which they had prayed for a writ of certiorari to quash certain notices issued to the appellants, their selling agents and the owner of the premises where they have their sale depots, issued under section 17 of the General Sales Tax Act and for a declaration that the vanaspati ghee manufactured by the appellants is exempt from payment of tax at all stages up to January, 1992, i.e., for a period of 10 years from the date from which they have started their commercial production. In this writ petition also the appellants had relied on Government Order No. 159-Ind. dated 26th March, 1971 and Government Order No. 414-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable as admissible under the Urban Immovable Property Taxation Rules. By order of the Government of Jammu and Kashmir. Sd/- G.R. Renzu, Secretary to Government" This order was partially modified in G.O. No. 414-Ind. dated 25th August, 1971, which read as follows: "GOVERNMENT OF JAMMU AND KASHMIR INDUSTRIES AND COMMERCE DEPARTMENT Sub: Grant of incentives to the large and medium scale industries in the Jammu and Kashmir State. Ref: Director of Industries and Commerce's letter No. GSI-J/ 455/2251-52 dated 22nd July, 1971 Government Order No. 414-Ind. of 1971 dated 25th August, 1971 In partial modification of Government Order No. 159-Ind. of 1971 dated 26th March, 1971, item 2 may be read as under: Grant of exemption from the sales tax both on raw materials and finished products. The State sales tax paid by large and medium scale industries on the raw materials procured by them for the initial 5 years of the production would be refunded to such industries. Similarly such industries will be granted exemption from the payment of any State sales tax on their finished products for a period of five years from the date the unit goes into production. By order of the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 5 of the local Act they have taken the form of notification. Thus the pattern followed in Jammu and Kashmir seems to be that in respect of exemptions from payment of taxes following Cabinet decision on policy matters and incentive they have taken the form of a Government order. It is necessary to refer this aspect because in later modifications while superseding the earlier orders or notifications, the Government have followed the specific pattern and have used the word "orders" in cases of grant of incentive and the word "notifications" in the other cases. It may also be pointed out that the Government orders 159 and 414 were also understood and treated as such exemption orders as seen from the publicity given to them by the Government while inviting entrepreneurs to establish industries in Jammu and Kashmir and certain other communications to the parties. The booklet published by the Government in December, 1975, under the heading "Incentives to development of industries in Jammu and Kashmir" contained incentives available for small-scale industries as also large and medium scale industries. The abovesaid two Government orders were reproduced in this booklet as the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein similar orders of Government without specifying the source of power under which they were made and also not in the form of a notification, were considered to be orders granting exemption. In Pournami Oil Mills v. State of Kerala [1987] 65 STC 1; 1986 Supp SCC 728, this Court had occasion to consider almost identical Government orders as those we are concerned with in these appeals. The first was a Government order dated 11th April, 1979 and the relevant portion of the same reads as follows: "The Government has considered the recommendations and suggestions of the committee in detail and they are pleased to approve the following package of measures for promoting industrial development in Kerala: SMALL-SCALE INDUSTRIES: Sales tax concessions: New industrial units under small-scale industries set up after April 1, 1979, will be exempted from the payment of sales tax for a period of five years from the date of production............" The second was a Notification dated 21st October, 1980, made under section 10 of the Kerala General Sales Tax Act which read as follows: "In exercise of the powers conferred by section 10 of the Kerala General Sales Tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered by this Court. The first was whether the first Government order dated 11th April, 1979, was an exemption order referable to the powers of the Government under section 10 of the Kerala Act. On this issue this Court held that it was an exemption order and that since there was an enabling provision in the statute empowering the Government to give exemption, though the Government order did not refer to the statutory provision conferring such powers the order should be deemed to have been made under the said enabling provision and that therefore both the orders were made in exercise of the powers under section 10 of the Kerala Act. The second important point that was decided was that the second notification was prospective in operation and that industries set up on or after 1st April, 1979 and before the 21st October, 1980, would be entitled to the benefit of the whole exemption under the first Government order for the full period of five years from the date they started production and that right could not have been curtailed by the second Notification dated 21st October, 1980, as the Government was bound by the rule of estoppel from taking away that right which had accrued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee in that case for claiming the benefit of tax exemption for five years because the second notification was prospective in operation and would apply only to those new industries which were commissioned subsequent to the issue of that notification and since the assessee in that case commissioned the mill on 17th May, 1970, before the second notification he was not eligible for the benefit of second notification. However, the learned counsel for the respondents relied on the observation in the first paragraph at page 192 (at page 310 of STC) of the Bakul Oil Industries case [1987] 64 STC 304 (SC); [1987] 1 SCR 185, wherein the learned Judges have held that the State Government was under no obligation in any manner known to law to grant exemption and that it was fully within its powers to revoke the exemption by means of a subsequent notification. These observations will have to be understood in the light of the earlier statement that the second notification dated 11th November, 1970, was prospective; that is to say if the industry had been commissioned subsequent to 11th November, 1970, the assessee would have been entitled to the exemption for the full period of five years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing incentives and concessions to the entrepreneurs for starting new industries in Mysore State: (1) Sales tax-A cash refund will be allowed on all sales tax paid by a new industry on raw materials purchased by it for the first 5 (five) years from the date the industry goes into production, eligibility to the concessions being determined on the basis of a certificate to be issued by the Department of Industries and Commerce..............." Though this again was in the form of a Government order giving incentives and concessions, this Court held that since there is a power to grant an exemption or concessions under the statute the mere fact that it did not specify the power under which it was issued will make no difference and that the assessee would be entitled to the benefit of this order. The High Court was of the view that the Government orders are, as such, not exemption orders but only a policy decision. The learned Judges observed that section 5 of the General Sales Tax Act "does not speak of general order of exemption as the power to grant exemption is related to a class of dealers or goods and that too subject to restrictions and conditions as may be prescribed. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasoning of the learned Judges. The Government orders follow an earlier Cabinet decision to give incentives to large and medium scale industries. The intention was clear that they wanted to attract entrepreneurs from all over the country to come and establish industries in the State of Jammu and Kashmir. It is not with reference to any particular industrialist or industry that the order was intended to be operative. The subject in both the Government orders show that it is grant of incentives. In the light of the context in which the expressions came to be used we are of the view that "will be granted exemption " has the same meaning as "will be exempted" and does not in any way show that it requires a further follow up action. Even in Pournami Oil Mills case [1987] 65 STC 1 (SC); 1986 Supp. SCC 728, under the Government order dated 11th April, 1979, the industries which are to be benefited are those which are to be set up on or after 1st of April, 1979. The exemption is thus with reference to an industry which is to be established subsequent to the Government order. Therefore in that sense both expressions mean the same. It was then pointed out by the learned Judges of the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it will be taken up for consideration on 7th April, 1971, and any objection or suggestion which may be received in the Finance Department from any person with respect to the said draft before the said date will be considered by the Government. It is by reason of the fact that this draft rule has been published calling for objection the G.O. 159-Ind. itself stated that the grant of immovable property tax exemption would be available "as admissible under the Urban Immovable Property Taxation Rules". Thus on the day when the Government Order was made there was already the draft amendment rules, and, therefore, it could not be stated that the amendment was a follow up action in pursuance of the Government order. Rather the Government order refers to the draft and says as per the amendment they will be entitled to the exemption. So far as the toll tax is concerned the Notification dated 18th July, 1977, relied on by the learned counsel for the respondents only extended the benefit of exemption to large and medium scale industries in respect of additional toll leviable "till the construction phase is completed", that is in respect of tax on construction materials and it did not relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed there are Government orders exempting the industries covered by the notifications for a period of 10 years. The Finance Minister's statement made in March, 1978, only refers to a proposal to continue the grant of exemption from payment of sales tax for a period of 10 years. This statement also is not unambiguous. It may mean that the benefits under the Government Orders 159 and 414 may be continued for another 10 years without withdrawing the same. This is merely a budget proposal which could give rise to no right to the appellants. As no decision, order or notification is produced extending the period of exemption in relation to sales tax it is not possible to consider the claim of the appellants for exemption for 10 years on the ground of promissory estoppel. In exercise of the powers under section 4(7) of the General Sales Tax Act the Government notified that "In supersession of all the previous notifications on the subject, the Government hereby specify, in column 3 of the Schedule appended thereto, the point of tax on the turnover in the series of sales of goods specified in column 2 of the said Schedule". This was notified and published as S.R.O. 195 dated 31st March, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised. supplied). The said notification therefore could not and did not supersede the exemption notification made under section 5 of the General Sales Tax Act. When it is stated in the amending notification S.R.O. 448 dated 22nd October, 1982, that vanaspati and edible oils are taxable at the point specified therein it only means that those vanaspati and edible oils which are not exempted are taxable at the points specified in the Schedule. It may be noted that the Government order gave exemption only for five years from the date of commencement of the industry and those industries who had been manufacturing for more than that period and also those industries who were not entitled to the benefit of the said Government order would be liable to pay sales tax on the vanaspati manufactured by them and the said goods were liable to tax at the point specified in the Schedule. In the scheme of levy of single point taxation, there could be no doubt, the Government could fix any point in the series of sales for the Government have fixed the sale by the dealer, that if the second sale, as the taxable point no exception can be taken. In that sense no question of vires on the ground of lack o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Government orders above referred to are exemption orders and that in any case on facts they have established their case of promissory estoppel and the Government is bound to give exemption, stated as a ground that in the High Court the Advocate-General made a concession to the effect that "he was not disputing that if the appellants were entitled to exemption in respect of finished goods under section 5 of the Jammu and Kashmir General Sales Tax Act they would automatically be exempted under section 8(2-A) of the Central Sales Tax Act in respect of inter-State transaction". On the basis of this concession it appears that the appellants have also filed a review petition against certain observations made in the judgment of the High Court. However, in the reply filed by the State in the special leave petition in this Court the Government have denied that any concession was made by the Advocate-General of the State in the High Court and that in any case the concession referred to related to a question of law and that the State is entitled to press that point in this Court. In these circumstances we have permitted the State to raise the question that even if the said Government o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales. The rate of tax payable on inter-State sale is fixed at 4 per cent in the case of sales to a registered dealer of goods of the description coming under section 8(3) of the Central Sales Tax Act or where the sale is to a Government and at 10 per cent under section 8(2)(b) of the Central Sales Tax Act in the case of goods other than declared goods. In respect of declared goods under section 8(2)(a) of the Central Sales Tax Act tax shall be payable at twice the rate applicable to sale or purchase of such goods inside the appropriate State. In view of the provisions of section 15 the State law can impose tax on sale of declared goods only at a rate not exceeding four per cent of the sale price and such tax also shall not be levied at more than one stage. If the tax has been levied under the State law on declared goods and such goods are sold in the course of inter-State trade and tax has been paid under the Central Sales Tax Act the tax levied under the State law shall be reimbursed to the person making such sale in the course of inter-State trade. Section 8(2-A) of the Central Sales Tax Act is in the nature of an exception to these general provisions. That sub-section read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the liability of a dealer to pay tax under the Act on his inter-State sales turnover relating to any goods on the turnover relating to such goods if the sale had taken place inside the State is exempt from payment of sales tax under the sales tax law of the appropriate State. It provides that if an intra- State sale or purchase of a commodity by the dealer is exempt from tax generally or subject to tax generally at a rate which is lower than 4 per cent then his liability to tax under the Central Sales Tax Act when such commodity is sold on inter-State trade would be either nil or as the case may be shall be calculated at the lower rate. Explanation states as to when the sale or purchase shall not be deemed to be exempt from tax generally under the sales tax law. That is to say an intrastate sale or purchase of a commodity shall not be deemed as exempt from State tax generally if the exemption is given only (1) in specified circumstances or under specified conditions or (2) the tax is leviable on the sale or purchase of such goods at specified stages or (3) otherwise than with reference to the turnover of the goods. These conditions or limitations are therefore with reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the question whether the tax is leviable on the sale or purchase at "specified stages" does not arise for consideration. This is not also a case where the exemption is with reference to something other than the turnover of the goods. In this connection we may refer to two decisions of this Court reported as Indian Aluminium Cables Ltd. v. State of Haryana [1976] 38 STC 108 and Industrial Cables (1) Ltd. v. Assessing Authority [1987] 64 STC 349; [1986] Supp SCC 695. The question for consideration in these cases was whether the transaction of sale which would be covered by section 5(2)(a)(iv) of the Punjab General Sales Tax Act could be said to be exempt from tax generally within the meaning of section 8(2-A) of the Central Sales Tax Act. Section 5(2)(a) in effect provided that in determining the taxable turnover of a dealer his turnover on "(iv) sales to any undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910 (IX of 1910), of goods for use by it in the generation or distribution of such energy" is to be deducted. That is to say that the transactions covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to tax at all if it were an intrastate sale the inter-State sale of that commodity is also exempt from tax. Where an intrastate sale of a particular commodity is taxable at a lower rate than 3 per cent then the tax on the inter-State sale of that commodity will be at that lower rate. A sale or purchase of any goods shall not be exempt from tax in respect of inter-State sales of those commodities if as an intrastate sale the purchase or sale of those commodities is exempt only in specific circumstances or under specified conditions or is leviable on the sale or purchase at specified stages. On this interpretation section 6(1-A) as well as section 8(2-A) can stand together." In view of the pronouncement of this Court in the above decisions and on our interpretation we do not consider it necessary to refer to the decisions of the High Courts cited at the Bar. In the result we hold that the dealer "Pine Chemicals" is entitled to claim the benefit of exemption under G.O. No. 159 Ind. dated 26th March, 1971 and G.O. No. 414 Ind. dated 25th August, 1971, in respect of his turnover on inter-State sales and the benefit of exemption is available for a period of five years from the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Cabinet, exempting from payment of tax as an incentive to the industries. In any case the exemption for five years granted under the said Government orders could not be withdrawn so far as the appellants are concerned both on the ground that S.R.O. 80/82 was prospective in operation and also on the ground of promissory estoppel. There could be no doubt that S.R.O. 80/82 was prospective in operation. We have noticed in the earlier part of this judgment that the Government seems to have been following as a pattern, that is, in the case of incentives to industries the exemption orders had taken the form of a Government order. Government Orders 159 and 414 were also in pursuance of a Cabinet decision. S.R.O. 80/82 though a Government notification under the Business Rules it is issued by the Ministry concerned. In the circumstances we have also a serious doubt whether the said incentives could have been superseded by the said S.R.O. 80/82. In this connection we may also refer to Government Order No. 54-Ind. of 1983 dated 26th February, 1983, again an order made in pursuance of Cabinet decision which reads as follows: "CIVIL SECRETARIAT INDUSTRIES AND COMMERCE DEPARTMENT GOVE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refers to "supersession of all previous orders" and then speaks of package of incentives and then states as applicable to existing large and medium scale industries also. If S.R.O. 80/82 had superseded G.O. Nos. 159 and 414 does it mean that this Government order has superseded S.R.O. 80/82 and if that is so what are incentives available after S.R.O. 80/82 to the existing industries. This Government order is thus consistent with the pattern followed and deals only with incentives to industries. In the second paragraph an option has been given to the industry which has not utilised the full benefit of the earlier exemption either to continue to enjoy the earlier exemption given by way of incentive or to opt for the scheme of incentive under the new Government order. Thus all these provisions are consistent with the case of the appellants that neither S.R.O. 80/82 superseded G.O. Nos. 159 and 414 nor Government order 54 dated 26th February, 1983, took their right to continue to enjoy the exemption benefit for the total period of five years as provided in the said Government orders. The learned counsel for the appellants also contended that they are entitled to enjoy the benefit fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kashmir General Sales Tax Act the said amount is refundable to the Government. As has already been seen there was an assessment order for the period covering from 2nd September, 1981 to 30th September, 1981, which was the subject-matter of Writ Petition No. 52 of 1982. The same period merged in the assessment order 1st September, 1981 to 30th August, 1982 and consolidated assessment order was made and that was subject-matter of Writ Petition No. 822 of 1984. Both these assessment orders were regular assessment orders and they are not section 8-B orders of the local Act. They were made on the findings that Government Orders 159 and 414 above referred to are not exemption orders and the assessee could not be said to have acted upon any representation by the Government that they are exemption orders on the ground that if they had relied on those orders as exemption orders they would not have collected any tax in respect of their sales and that therefore the Government was not precluded by any principle of promissory estoppel from assessing their sales turnover. The assessees had challenged these assessment orders mainly on the ground that the Government orders were exemption orders a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded from collecting tax on any ground of promissory estoppel and that therefore the question of applicability of section 8-B of the local Act did not arise before the High Court. It may be mentioned it is not the case of the State that they had collected any amount in excess of the percentage of sales tax, i.e., collectable in respect of taxable vanaspati sales. In the light of our findings that the sales were exempt the question now arises whether the assessees had collected any tax and whether the amount was collected by way of tax and whether any element of sales tax has merged in the fixation of the price and that amounts to collection of sales tax. These questions will have to be decided if the State considers that the assessees had collected sales tax, in separate proceedings that may have to be initiated under section 8-B of the local Act or when the State demands payment of the money under section 8-B of the local Act. Suffice it to say that we are unable to agree with the observations of the learned Judges of the High Court that merely because in the balance sheet a reserve fund is made for payment of sales tax or on the basis of the letter of M/s. Kashmir Vanaspati giv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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