TMI Blog2006 (3) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... with interest at the rate of 9 per cent in the event of the State succeeding in this civil appeal. However, since we are dismissing the appeal filed by the State, the question of refund by Tata Cummins Ltd. to the State, of the balance amount, i.e., Rs. 14.5 crores with interest, does not arise. - Civil Appeal No. 10272 of 2003, 1006 of 2004, W.P. (T.) No. 2587 of 2003 - - - Dated:- 24-3-2006 - ASHOK BHAN AND KAPADIA S.H. JJ. T.R. Andhyarujina, Senior Advocate (Pallav Sishodia, S. Sukumaran, Ms. Sushma Sharma, Akhil Chhabra, Ms. Kanika Gomber and Rajan Narain, Advocates, with him), for the respondents. Ajit Kumar Sinha and Gopal Prasad, Advocates, for the appellants. -------------------------------------------------- The judgment of the Court was delivered by S.H. KAPADIA, J. This civil appeal by grant of special leave is directed against the judgment and order dated July 31, 2003, passed by a division Bench of the High Court of Jharkhand by which it has been declared that Tata Cummins Ltd., an assessee under the Bihar Finance Act, 1981, is entitled to the benefit of the Industrial Policy, 1995, read with the Notifications Nos. 478 and 479 both dated Decembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be in favour of the proprietor of the unit or any partner of the firm or in favour of the holding company. 3.. According to Tata Cummins Ltd., it had taken a lease of the land from TELCO, its partner in the joint venture, though a formal lease had not been executed. TELCO had a registered lease for a term of 99 years from TISCO which had a valid lease from the Government at the time when lease was granted by TISCO to TELCO. Since the land was held by TELCO, which had 50 per cent interest in Tata Cummins Ltd., the unit was eligible for the benefit. Its more important claim was that it was the owner of the building in which its factory was set up and under the first part of the no- tification, the exclusive ownership of the building being with Tata Cummins Ltd., it was entitled to the benefit of exemption regarding sales tax as envisaged in clauses 16.1 and 16.2 of the Policy. 4.. Tata Cummins Ltd. applied to the Deputy Commissioner of Commercial Taxes claiming the benefit of exemption under the above two notifications. 5.. On December 2, 1998, the Deputy Commissioner rejected the claim of Tata Cummins Ltd. on the ground that the head lease from the Government in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner came to the conclusion that the assessee had neither legal title nor ownership over the land on which the factory was established and nor was it in a position to produce a registered lease deed for a term of 15 years or more for getting the benefit of exemption under the above two notifications. 11.. This order of the Joint Commissioner dated May 24, 2003, was challenged by Tata Cummins Ltd. and TELCO vide Writ Petition No. 2587 of 2003. By the impugned judgment See page 323 supra., the division Bench of the High Court held that Tata Cummins Ltd. was the exclusive owner of the building in which the factory was located and consequently the assessee had fulfilled/complied with clause 6 of the said Notification No. 478 read with clause 8 of the said Notification No. 479. The division Bench also noticed the contention of the assessee having invested Rs. 302 crores in the project and having paid taxes to the tune of about Rs. 600 crores. 12.. By the impugned judgment, Tata Cummins Ltd. was declared to be entitled to the benefit of the Industrial Policy, 1995, read with the above two Notifications Nos. 478 and 479 both dated December 22, 1995. Accordingly, the State Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units. New units, in addition to the benefit of 'exemption'/set-off of sales tax on purchases, will also have the option to choose deferment or exemption of sales tax [both Bihar sales tax (BST) and Central sales tax (CST)] on sale of finished goods for a period of 10 years for category 'A' and 8 years for category 'B' districts from the date of production of the unit with a ceiling of 100 per cent of the fixed investment made by the unit. However, those industries which are considered 'thrust industries' as listed earlier in para 15 (excluding telecommunication, computers, software/hardware and electronics industries) as also industries located in 'A' category backward districts the ceiling of deferment would be 150 per cent of the fixed investment. The ceiling for deferment linked to the fixed investment in regard to telecommunication, computers, software/hardware and electronics industries would be 300 per cent of the fixed investment made by the unit. The amount of sales tax collected under sales tax deferment option would require to be returned in equal six monthly instalments in such a manner so that the entire amount is returned by the 13th year from the commencement of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en. It is based on the principle of ability or capacity to pay. It is a manifestation of the taxing power of the State. An exemption from payment of tax under an enactment is an exemption from the tax liability. Therefore, every such exemption notification has to be read strictly. However, when an assessee is promised with a tax exemption for setting up an industry in the backward area as a term of the Industrial Policy, we have to read the implementing notifications in the context of the Industrial Policy. In such a case, the exemption notifications have to be read liberally keeping in mind the objects envisaged by the Industrial Policy and not in a strict sense as in the case of exemptions from tax liability under the taxing statute. 17.. Applying the above tests to the facts of the present case, the object behind enactment of the Industrial Policy, 1995, was to confer incentives on industries set up in the State. As part of the incentives, the Industrial Policy envisaged allotment of land/building in growth centres to companies for setting up industrial units on lease for 99 years with an option for renewal. As a part of the incentives, it was also envisaged under clause 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises (building or land or both), provided that the lease shall be of the minimum period of 15 years. As stated above, the eligibility criterion is that of a fixed investment by a genuine investor. In the present case, as stated above, we have to go by the interpretation of the notification(s) in the light of the Policy. However, even if one goes by the strict interpretation of the notification(s) we are in agreement with the view expressed by the High Court that the first part of the notification(s), as distinct from the second part, does not refer to the "land". If the argument of the department is accepted that the first part of the notification would apply only if Tata Cummins Ltd. is the owner of the land and building in which its factory is located then we are not only giving a narrow interpretation to the notification which would defeat the object underlying the incentive policy but also it would be against the very text of the said notification(s) which omits the word "land" from the first part of the notification. 21.. Before concluding, we may reiterate that at one stage of the matter the Department had taken the position that Tata Cummins Ltd. was not entitled to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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