TMI Blog1994 (6) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... The first appellant is a registered dealer under the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the Act" for short) and it comes within the jurisdiction of fourth respondent for assessment under the Act. 4.. It is the case of the second appellant that he is the shareholder of the first appellant-company. 5.. According to the appellants, the first respondent, Government of Karnataka, in order to encourage industrialisation in the State, issued an order dated September 27, 1990 sanctioning a revised package of incentives and concessions for new industrial investment in the State with effect from October 1, 1990. The package included an incentive in the nature of sales tax concessions. Pursuant to the above, the first respondent also issued a notification under section 8A of the Act which exempted goods manufactured and sold by new industrial units in the manner specified therein. By the said notification goods manufactured and sold by "new industrial units" situated in Zone IV are entitled to 100 per cent tax exemption without any monetary limit for 5 years from the date of commencement of commercial production. The term "new industrial unit" means a unit certifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Act. However, in utter disregard of the eligibility of the 1st appellant for exemption from payment of sales tax in terms of the Government Order dated September 27, 1990, exemption notification dated June 19, 1991, issued under section 8A of the Act and the eligibility certificate dated December 1, 1992, the 4th respondent issued three notices under section 1213(2) of the Act for the months of April, May and June, 1993, dated August 12, 1993 (marked and produced along with writ petitions as annexures H, J and K) denying the benefit of exemption on the sale of blended packet tea manufactured at the Dharwar unit and proposed to levy and recover the sales tax accordingly. The 1st appellant replied to the said notices drawing the attention of the 4th respondent to the fact that its turnover relating to blended packet tea was not exigible to tax in view of the exemption granted by the Government. The 1st appellant produced all the necessary documents including the eligibility certificate issued by the second respondent in terms of the exemption notification issued under section 8A of the Act. The appellants further contended that while the 1st appellant was expecting respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase is not binding the quasi-judicial authority under the Act. As noted earlier, that has brought the appellants by way of the present appeals. It may be mentioned that ultimately 4th respondent passed assessment orders, annexures S, T, U, V, confirming the demands on the ground of clarification issued by the 3rd respondent and also on merits that the Government exemption notification does not apply to the product of "blended tea" as brought forth by the appellants as there was no process of manufacture involved therein. 11.. The said assessment orders are with reference to the demand of sales tax on "blended tea" sold by the appellants in April, 1993, May, 1993, June, 1993 and in the accounting year 1992-93. These four assessment orders, annexures S, T, U and V are brought in challenge in the present proceedings by getting the writ petitions amended as per interlocutory applications filed in these appeals and which interlocutory applications are allowed by us after hearing both sides. Therefore, now these appeals are ultimately confined to the challenge to these assessment orders though the earlier notices are also sought to be challenged along with them. 12.. These appeals we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incentives desired to establish its new industrial unit in Zone No. 4. That it was not covered by the exclusive list denying the benefits to the listed industries contained therein. Mr. Chidambaram further contended that pursuant to the said Government policy, offering a package of incentives to the new industrial entrepreneurs, notifications were issued under section 8A of the Sales Tax Act and Central Sales Tax Act on June 19, 1991. The said notifications have to be read in harmony with the Government Policy dated September 27, 1990 and cannot be read de hors it. It was submitted that as per explanation I contained in the said notification under section 8A of the Act which is annexure B to the petition, a certificate is to be issued by the Director of Industries and Commerce or his authorised nominee to the effect that the new industrial unit duly certified was to be eligible for exemption under the notification, was to be treated as final and binding on the assessing authorities under the Sales Tax Act. That even according to the said procedure laid down by the notification under section 8A, certificate is duly issued on December 1, 1992, by the competent authority under the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d "output" as employed by annexure A will give colour to the word "manufacture" as employed by annexure B and so construed in the light of the relevant clauses of these notifications, annexures A and B, the word "manufacture" must mean what is produced or what is the out-turn of the concerned industry. It is, therefore, that the word "manufacture" accordingly is not to be construed in a technical sense but from a broad common sense point of view so as to subserve but not sub-plant the parent policy of package incentives as laid down by annexure A. (2) Even packing units are covered by exemption notification under section 8A, annexure B to the petition and therefore, the appellants' unit would be covered by the said notification, even apart from the question whether the activity of blending of tea which is carried on by the appellants' industry at Dharwar may be called manufacturing activity or not. (3) Even assuming that the notification under section 8A, annexure B, requires the manufacturing activity of the new industrial unit in its strict sense, even in that sense, the blending of tea undertaken by the appellant by mechanical process can be considered to be a manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als are already admitted and they are at the final hearing stage wherein all the contentions on merits have been canvassed by learned counsel for the appellant. And, secondly and more importantly because in the counter filed by the respondents in these appeals a common case is put up by all the respondents including the State of Karnataka, assessing authority as well as appellate authority under the Sales Tax Act and issues are joined by them on merits. No plea is raised in the counter for relegating the appellants to the alternative remedy by way of appeals before appellate authority. We will therefore deal with the contentions canvassed by Sri P. Chidambaram for the appellant on merits. 18.. So far the merits of the case are concerned learned Advocate-General at the outset submitted for the respondents that the Government order, annexure A, is a general order laying down a scheme of package of incentives to be offered to new industries and to existing industries for encouraging them to diversify their activities in this State. This Government order is not under section 8A of the Act. That section 8A order is found only at annexure B and that order is rightly treated by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of any promise under annexure A nor under annexure B so far as sales tax exemption was concerned. As there was no promise there is no question of promissory estoppel especially when the appellant had not changed its position on the basis of any such promise by competent authority. It was next contended by the learned Advocate-General that the letter written by the Industries Commissioner on December 1, 1992 could not bind the sales tax authorities nor had the appellant acted on the same and had invested anything thereafter. On the contrary its commercial production started on September 8, 1992 almost 3 months prior to the said certificate issued by the Industries Commissioner. Consequently, there is no question of any promissory estoppel in this case. 19.. Learned Advocate-General next contended that on a correct interpretation of annexure B notification, the certificate issued by the Industries Commissioner is to be treated only for the purpose of enabling the concerned certified new industry to apply for sales tax exemption under annexure B to the assessing authority. That the certificate had nothing to do with the moot question whether the condition precedent to earn the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not help the appellants. 23.. In rejoinder, learned Senior Counsel Sri P. Chidambaram for the appellants tried to refute these contentions and reiterated his submissions on merits and stated that both annexures A and B should be treated as issued under section 8A of the Act and must be given due effect and must be harmoniously construed. 24.. In the light of the aforesaid rival contentions, the following points arise for our determination: (1) Whether the Government policy, annexure A, and the notification, annexure B, are to be construed conjointly and in that light the term "manufacture" as employed in annexure B has to be broadly construed? (2) Whether the appellants' packing unit at Dharwar is covered as such by the exemption notification, annexure B? (3) Whether the blending of tea undertaken by the appellants at Dharwar can be said to have been subjected to manufacturing process? (4) Whether the appellants are entitled to relief on the ground of promissory estoppel? (5) Whether the certificate issued by the competent authority on December 1, 1992, under the notification annexure B is binding on the sales tax authorities, and as such, exemption from sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rting agricultural lands to industrial lands. 11.. Incentives for rehabilitation of sick industries. 12.. Rectification of anomalies in the earlier package of incentives and concessions. 13.. Special incentives for large industrial investments. 26.. It is easy to visualise that in this package of incentives and concessions various types of incentives were offered to attract new industries in the State. In these proceedings we are concerned with only the type of incentive, viz., sales tax exemption for which appellant is clamouring. Government Order in paragraph IVB laid down that, all new industrial units in the above sectors shall be exempted from payment of sales tax (CST and KST), on the output of such industrial units as per details given below. For Zone IV exemption limit was 100 per cent and period of exemption was for 5 years from the date of commencement of commercial production. It is not disputed that the appellant established a tea-blending and packaging industry in Dharwar which is in Zone IV. As per the said scheme of incentives as laid down by Government Order, annexure A, any new industry established in Zone IV was to get 100 per cent sales tax exemption on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry especially in any of the zones mentioned in sub-para "B" of para IV of Government Order, annexure A. 28.. We may now turn to Government notification, exhibit B, issued under section 8A dated June 19, 1991, gazetted on June 21, 1991. That notification in terms lays down that in exercise of powers conferred under sub-section (1) of section 8A of the Karnataka Sales Tax Act, the Government of Karnataka exempts with immediate effect the tax payable under the said Act in respect of the goods manufactured and sold by new industrial units mentioned in column (2) of the Table located in the zones specified in column (3) to the extent indicated in column (4) and during the period mentioned in column (5) thereof. And this is followed by the Table indicating the type of industry, its location, extent of sales tax exemption and period of exemption. The appellants' case falls in serial No. 3 being the medium scale industrial unit situated in Zone No. IV. He claims 100 per cent sales tax exemption without any monetary limit for 5 years from the date of commercial production. It will at once be clear on a conjoint reading of the Government Order, annexure A and notification annexure B that p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 8A shall be laid as soon as may be after it is published before each House of the State Legislature while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if before the expiry of the session in which it is so laid or the sessions immediately following, both Houses agree in making any modification in the rule or notification or both Houses agree that the rule or notification should not be made, the rule or notification shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or notification." It was submitted that therefore, section 8A notification has a statutory flavour and efficacy. It is a product of delegated legislative function while the package of incentives issued by the Government Order, annexure A, has no such efficacy and in any case once annexure A is followed by annexure B which is a statutory notification it would supersede the former. In support of this contention learned Advocate-General heavily relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t authorities for the proposition that even if statutory procedure of gazetting the notifications and laying them before both the Houses of Legislature is not followed, these notifications or orders can still be treated to be issued in exercise of statutory power conferred by section 8A of the Act. The question with which we are concerned is directly answered by the Supreme Court only in the case of [1993] 90 STC 47; AIR 1993 SC 2414 (Bengal Iron Corporation v. Commercial Tax Officer). Therefore, it must be held that as Government order, annexure A, is admittedly not gazetted nor it has been subjected to the procedure of section 39 of the Karnataka Sales Tax Act, it cannot be treated to be an exemption notification under section 8A. Under these circumstances, the only exemption notification which has a legal effect of granting exemption from sales tax to new industries is the notification, annexure B, and not the Government order, annexure A. In fact the appellants themselves have so considered the situation by insisting from the beginning as we will show later on that they are entitled to exemption from payment of sales tax only on the basis of notification annexure B and they pit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een issued under section 8A of the Act, let us see whether the situation is changed in any manner. We have already seen earlier that annexure A uses the word "output " of new industries, while annexure B uses the words "goods manufactured and sold by new industries". In the context and collocation of these notifications especially when both of them have a common objective of granting exemption to these goods from sales tax for a period of five years from the date of their commencement of commercial production, which are a result of converting inputs into different outputs, it has to be held that both these phrases are almost synonymous and they emphasise that new industries must manufacture or produce or new outputs or new commodities known as such in the commercial world. But even if we proceed on the assumption of Sri P. Chidambaram for the appellants that annexure A has wider coverage, then also it must be held that later exemption notification, annexure B, issued under section 8A of the Act by the 1st respondentState being subsequent in point of time would represent a new scheme of exemption and will cover all new industries established after the promulgation of exemption notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , does not subplant the policy of package incentive laid down by annexure A, on the contrary it effectuates the same by exercise of statutory power of exemption under section 8A of the Act. That it would not amount to giving any technical meaning to the word "manufacture" but the meaning which is contemplated by the scheme of exemption laid down by notification, annexure B. We will deal with this aspect of the matter in greater details when we come to consider point No. 3. Point No. 1 is therefore answered against the appellant and in favour of the respondents. 33.. Point No. 2: This takes us to the consideration of Mr. P. Chidambaram's argument that even on the broad construction of the notification, exhibit B the word "manufacture" as employed by it has to be construed as outturn or product of the new industry which may not necessarily involve process of manufacturing such product. For that purpose he invited our attention to items Nos. 4 to 11 of column No. 2 of the Table containing the notification, describing the types of industries covered by the sweep of this notification. He submitted that industries described at serial Nos. 4 to 9 are referred to as industries in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they will be covered by the sweep of exemption notification but those products which are not manufactured but are simply stored or which are produced without any manufacturing process being undergone will not be covered by the sweep of the notification. Therefore, it cannot be said the catchwords "goods manufactured" and sold by the new industries cannot apply to new industries listed at items Nos. 4 to II of the notification or that these items would become otiose. If the word "manufacture" is insisted upon in its technical sense for covering the products of such industries we find considerable force in this contention of the learned Advocate-General. So far as industries listed at items 4 to 9 are concerned, the thrust sector industries found at annexure II to Government Order, annexure A, include various industries which necessarily undertake process of manufacture while bringing out their output. For example electronics, telecommunication, leather and leather products including leather garments, ready-made garments (non-leather), equipment for non-conventional sources of energy and energy conservation, equipment for pollution control, sericulture based industries including reel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if it purchases milk-powder manufactured by other industry and by process of manufacture converts this milk-powder into condensed milk and after bottling it and storing it in cold storage sells it, such manufacture of condensed milk stored in cold storage by this industry may get the benefit of exemption notification. Same is the case with green-houses, tissue culture laboratory, etc., mentioned in item No. (d) of annexure II of Government Order, annexure A. 35.. Therefore, it is not possible to agree with the broad proposition canvassed by Mr. Chidambaram for the appellants, that merely because the industries mentioned in annexure II to Government Order, Annexure A, are listed for exemption under notification annexure B at serial Nos. 4 to 9 the words "goods manufactured and sold" by these industries must be held to be goods which are the output of such industries even though they might not have gone through any process of manufacture at their ends. Same is the case with the industries listed at item No. 10 Table annexure B and industries listed at item No. 11 in the said Table. Informatic (software) industries are mentioned at both item No. 10 in Table, annexure B as well as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n countries under prior contracts of sale. Under section 5(3) of the Central Sales Tax Act, 1956, the assessee would be entitled to exemption from payment of sales tax on the sale of sea-food products, if it was shown by the assessee that the very same commodity, sea-food, which he purchased was being exported after processing and dressing it. The assessee contended that only because he processed or dressed the prawns and lobsters, they did not change their character as such and they were never a distinct commodity and they remained the original prawns and lobsters. Hence, when they were subjected to export pursuant to the earlier contract, the assessee was entitled to get the benefit of exemption of sales tax as per section 5(3) of the Act. The Revenue contended that once the prawns were processed, after freezing them, a new and distinct commodity emerged and therefore, the assessee was not entitled to benefit of section 5(3) exemption. The Supreme Court took the view in favour of the assessee by holding that process of freezing lobsters did not result in any new and distinct commodities, but they retained the same character and identity, as the original shrimps, prawns and lobste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re "B". Consequently, no different meaning can be attached to the words "manufacturing and sale of goods" as employed by annexure "B" as a condition precedent to earn the benefit of exemption under that notification, so far as the listed industries, item Nos. 1 to 11 of the Table, are concerned. It may also be mentioned that it is not the case of the appellants that they are entitled to the benefit of exemption notification, annexure "B", because it is a packaging unit as mentioned in note 2 in para 5 of the Government Order, annexure "A". It has rested its case only on item No. 3 of Table at annexure "B", on the ground that it is a medium scale industry which is a new industry situated in zone IV and it is entitled to cent per cent exemption from payment of sales tax for five years from the date of commencement of its commercial production. Even otherwise, as we have discussed earlier, a packaging unit also, even assuming that appellant acts as packaging unit, can claim exemption under notification annexure "B", if it is shown that the output or the final product which it produces is manufactured and sold by it as a new industry. Only then exemption from sales tax would be earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of manufacture. If that is so, it would not be producing any output after subjecting it to the process of manufacture so as to earn exemption under notification annexure "B" on the very express language of the said notification. 39.. Before parting with the discussion on this point, we may mention that relying on the rules of interpretation as laid down by the Supreme Court in Girdhari Lal Sons v. Balbir Nath Mathur AIR 1986 SC 1499 and in Administrator, Municipal Corporation v. Dattatraya Dahankar AIR 1992 SC 1846, it was contended by Mr. Chidambaram for the appellants that such notifications and statutory instructions should be broadly construed, so as to give effect to the real intention of the Legislature underlying such instruction. On the other hand, learned Advocate-General for the respondents submitted placing reliance on the decisions of the Madras High Court in Jaya and Company v. State of Tamil Nadu [1991] 83 STC 512 and the Supreme Court in Hotel Balaji v. State of Andhra Pradesh [1993] 88 STC 98; AIR 1993 SC 1048 at paragraphs 59 and 72 that in case of exemption notifications, the court has to strictly construe the conditions precedent which are to be satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or the process of making goods by machine or other agency or the production of articles from materials by giving such material new shapes would amount to manufacture. There cannot be any dispute on this aspect. However, the moot question is whether the appellants' factory manufactures any commodity in its factory at Dharwar when it blends and mixes different tea purchased from different gardens and packs the mixture in suitable packets and then sells the same to wholesalers. 41.. In this connection, our attention was invited by Mr. Chidambaram to the flow chart at page 112 of the first paper book. The said chart shows that garden tea is subjected to delidding machine, tipping and through conveyor belt it is taken to reserve chamber and through mobile hopper, it gets quality tested and after passing through automatic weigher, it is sent through automatic packing machine and via conveyor belt blended tea is subjected to bundling and wrapping and then it is brought out at the factory gate. On the basis of this flow chart, it is submitted by Mr. Chidambaram that the garden tea after getting blended and quality tested and being packed in suitable packets becomes a new commercial co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere made in para 7 of the report (page 395 of STC): "7. Unlike many agricultural products tea-leaves are not marketable in the market fresh from the tea gardens. Nobody eats tea-leaves. It is meant to be boiled for extracting juice out of it to make tea liquor. Tea-leaves are, therefore, only fit for marketing when by a minimal process they are made fit for human consumption. Of course, the processing may stop at a particular point in order to produce inferior quality of tea and a bit more may be necessary to be done in order to make it a bit superior. But that by itself will not substantially change the character of the tea-leaves, still they will be known as tea-leaves and sold as such in the market. In my opinion, all the six processes enumerated above from the primary findings of fact recorded in the order of the revising authority were necessary for the purpose of saving the tea-leaves from perishing, making them fit for transporting and marketing them. The process applied was minimal. Withering, crushing and roasting the tea-leaves will be surely necessary for preserving them. The process of fermentation or final roasting with charcoal for obtaining suitable flavour or colo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Rules. The Supreme Court, speaking through Bhagwati, J. (as he then was), held that the blending of different qualities of ore possessing different chemical and physical composition so as to produce ore of the contractual specifications cannot be said to have involved any process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together but the operation of blending would amount to "processing" of ore within the meaning of section 8(3)(b) of the Central Sales Tax Act. Now it has to be appreciated that section 8(1) lays down that if any dealer during the course of inter-State trade or commerce sells to the Government any goods or sells to a registered dealer other than the Government, goods of the description referred to in sub-section (3), he shall be liable to pay tax under this Act, which shall be 3 per cent of his turnover. Section 8(3)(b) describes goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture can be said to take place'. The test that is required to be applied is: does the processing of the original commodity bring into existence a commercially different and distinct commodity? On an application of this test, it is clear that the blending of different qualities of-ore possessing differing chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together. What is produced as a result of blending is commercially the same article, namely ore, though with different specifications than the ore which is blended and hence it cannot be said that any process of manufacture is involved in blending of ore." It is true that thereafter the Supreme Court considered the alternative question whether this process of blending can be treated to be processing the ore and that was answered in the affirmative by the Supreme Court disagreeing with the Bombay view that with any mechanical process if blending was done, there will be no processing. But we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Schedule therein, it examined the question whether the blending of tea by the Jamnagar factory of Brooke Bond India Ltd., can be said to be a manufacturing process covered by the sweep of Central Excise Act. We are not concerned with any such contingency. But, even that apart, Gujarat view cannot prevail in the light of the Supreme Court decisions discussed above on the point which clearly took a contrary view. Similarly, reliance placed on the judgment of the Calcutta High Court in [1988] 34 ELT 590 (Brooke Bond India Ltd. v. Union of India) cannot be of any avail to the appellants as the decision of the Supreme Court on the point would be law and it will be binding under article 141 and contrary views of High Courts cannot prevail in that connection. 44.. It was next contended by Mr. Chidambaram, that anomalous position would arise if this view is taken as on the blended tea which is packed and sold to wholesalers by the appellant by removing it from the factory gate at Dharwar, the appellants were already paying Central excise under the Central Excises and Salt Act on the very commodity and it is only because of the exemption granted in the subsequent years that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factured after that process. It is on that basis, that it was held by the Supreme Court in Empire Industries Limited v. Union of India [1987] 64 STC 42; AIR 1986 SC 662 that fabric subjected to bleaching, dyeing and printing may be said to have been subjected to manufacturing process within, the meaning of the said term in the Central Excise Act. As we have noted earlier, in the Karnataka Sales Tax Act, there is no such definition. Therefore, the pith and substance of the charging section in Central Excise Act cannot be injected into the charging section in the Karnataka Sales Tax Act or for that matter for interpreting the meaning of the term of "manufacture" as used by the exemption notification, annexure B. The aforesaid decision of the Supreme Court or the reliance on Central Excise Act or Tariff are also of no avail to the learned counsel for the appellants. In the case of Laminated Packaging (P) Ltd. [1990] 4 SCC 51, the Supreme Court was concerned with the question whether by lamination of kraft paper with polythylene different goods come into being. Laminated kraft paper was held to be known in the market as different from the kraft paper even though both these goods were c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which have taken place between the parties." Therefore, it has to be seen in the light of the aforesaid decision, whether any promise was held out by the State of Karnataka to the appellants by annexure A or B and whether the appellant has acted on such promise and changed its position. 47.. So far as Government Order, annexure A, is concerned, it has to be kept in view that it sought to offer a package of incentives of various types as detailed earlier in this judgment and amongst them one of the incentives was exemption from payment of sales tax to the products of new industries for a specified period. The Government Order, annexure A, was issued on September 27, 1990. It is not the case of the appellants that on the basis of that Government Order, it took any steps in establishing any new industry at Dharwar. On the contrary, the evidence on record clearly shows that the first step taken by the appellant in this connection was on December 20, 1991, when it filed an application before the State Government for clearance of its project. By that time, annexure B exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ka and State Government order dated September 27, 1990 and the Government notification dated June 19, 1991. That letter is addressed by the vice-president of the appellant-company. It is clearly mentioned therein that the attention of the Commissioner of Commercial Taxes is drawn to the notification dated June 19, 1991 (annexure B) issued by the Government of Karnataka granting sales tax exemption to the new industries as per the terms and conditions specified therein and in order to avail of the above package of incentives, appellant was contemplating setting up an agro food processing unit for the manufacture of "blended tea packets" at the growth centre in Dharwar, Karnataka. Having mentioned salient points, about the project it was ultimately stated in the last paragraph of the letter that they would like to have confirmation for their proposed industry whether it is within the list of industries which are not eligible for incentives as given in the Karnataka Government order dated September 27, 1990, and they understood that the grant of exemption as per the notification dated June 19, 1991 (annexure B) is applicable to them. They further requested the Commissioner to kindly c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch of other incentives available under annexure A and de hors the benefit of sales tax exemption. It may also be noted that so far as Sales Tax Commissioner is concerned not only no promise was held out by the Sales Tax Commissioner to the effect that the appellants' product will be covered by sales tax exemption as per annexure B, but on the contrary, it was clearly informed to the appellant by communication dated April 2, 1992, with reference to the appellant's letter dated November 25, 1991 referred to hereinabove, that in terms of notification cited meaning thereby annexure B, the appellant was not eligible for the benefit of tax exemption on the sale of blended tea. Despite that clear letter, the appellant went ahead with completion of the project and started commercial production on September 8, 1992. Mr. Chidambaram, in this connection submitted that on April 24, 1992, the Commissioner for Industrial Development and Director of Industries and Commerce, Karnataka, had already written to the Commissioner of Sales Tax that the appellants' project was eligible for sales tax exemption for a period of five years from the date of commencement of commercial production and signator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the appellant addressed letter to Chief Secretary to Government of Karnataka making grievance that the appellant was eagerly looking forward for the confirmation for his proposed unit whether it would be entitled to incentives offered under the exemption notification, so that they can invest in the project freely. Even despite that neither the Chief Secretary nor the Commissioner of Sales Tax offered any information to the appellant that its unit would be entitled to incentives offered under the Sales Tax Act. On the other hand, by reply dated June 10, 1992, the Commissioner and Secretary to Government, Industries and Commerce Department, informed the appellant that they would like to assure him that the State Government is bound by the 1990 package of incentives and concessions and the same would be made eligible to new industrial units coming up in the State and that they would like to assure him that the State would extend all assistance in setting up their future projects. Even in that letter, no promise is held out or assurance is given that the appellant would be entitled to sales tax exemption as per annexure B. Even if it is stated that the State Government was bound b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to meet the addressee and explain the entire matter so that confirmatory letter as requested in their letter dated November 25, 1991, could be issued to them at the earliest. Even this letter clearly shows that no confirmation letter was ever issued by the Commissioner of Sales Tax to the appellant as demanded by the letter dated November 25, 1991. It is true that the reference is made to the oral assurance of Mr. Mathai. But even that oral assurance was not relied upon by the appellant and appellant insisted for written confirmation which never came. On the contrary, the very fact that Mr. Mathai is alleged to have assured that confirmatory letter is being issued in a day or two shows that the appellant wanted a confirmatory letter from the Commissioner of Sales Tax and was not prepared to rely only on oral confirmation. Such a letter was never issued by the Sales Tax Department. Therefore, the oral assurance of Mr. Mathai if any, remained of no avail especially when the appellant itself was not willing to act on such oral assurance of Mr. Mathai who had left the charge of Commissioner of Sales Tax. Therefore, it sought to meet the new Commissioner so that he can get the confirma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the Government in Finance Department. On facts, therefore, it must be held that no promise was held out to the appellant that its industry would earn exemption under notification, annexure B, on its product of blended tea to be produced at the factory nor had the appellant acted on such a promise. The appellant cannot be said to have moved towards establishment of its factory relying on any promise contained in annexure B. Under these circumstances, there is no question of granting any relief to the appellant on the basis of such non-existing promise so far as respondents-sales tax authorities are concerned nor can the State be directed to make necessary amendments in the notification on the doctrine of promissory estoppel as the said doctrine is not attracted in favour of the appellant on the facts and circumstances of the case. Point No. 4 is, therefore, answered against the appellants and in favour of the respondents. 50.. Point No. 5: So far as this point is concerned, reliance is placed by the learned counsel for the appellant on the certificate issued by the Joint Director in the Department of Industries and Commerce dated December 1, 1992 to the effect that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y/small-scale/medium-scale/large-scale industrial unit, a certificate in original issued by the Director of Industries and Commerce, or his authorised nominee certifying: (i) that it is a unit registered as such; (ii) that investment in the unit having been made on or after October 1, 1990, it is eligible for exemption under this notification. (iii) the date of commencement of its commercial production; (iv) the serial number of the Table above under which it is eligible for exemption; and (v) that no part of its plant and machinery at the time of commencement of its commercial production is old/used/second-hand, with the exception of imported second-hand machinery. A conjoint reading of Explanation I and procedure for eligibility under the exemption notification as new industrial unit, shows that the concerned unit must arm with a certificate issued by the Director of Industries and Commerce or his authorised nominee certifying in connection with the eligibility conditions mentioned at paragraphs (i) to (v) of clause (a) of Part 1 of the procedure. Therefore, new industrial unit claiming such exemption under annexure B must show that it is a new industrial unit and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial unit and are sold by such new industrial unit. Mr. Chidambaram, in this connection submitted that the second condition mentioned in the procedure para 1(a)(ii) would meet this requirement. It is difficult to agree. That requirement only shows that the certificate would mention that the investment in the unit having been made on or after October 1, 1990, it is eligible for exemption under this notification. That eligibility for exemption is connected with the certification that investment in the new unit is done on or after October 1, 1990 and nothing more. That eligibility for exemption would only guarantee that investment is made after October 1, 1990 by the new industrial unit and nothing more. It would not go beyond the said limited purpose of certification and cover the further requirement that the goods manufactured by such unit are also manufactured by the said unit and sold in Karnataka State. It is therefore, not possible to agree with the contention of the learned counsel for the appellant that the certificate issued by Industries Director or his authorised nominee on December 1, 1992, under the procedure laid down in the said notification would also remain binding on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the assessing authorities under the Customs Act. Such are not the facts in the present case as we have discussed earlier. In fairness, the certificate dated December 1, 1992, issued by the Director of Industries and Commerce does not certify that appellants' blended tea is manufactured by it. It has rightly never certified in this connection as he cannot certify on this aspect which was purely within the domain of assessing authorities before whom exemption notification is pressed in service by the appellant. Point No. 5 also, therefore, will have to be answered against the appellant and in favour of the respondents. 52.. Point No. 6: That takes us to the last point for consideration. It is true that the impugned assessment orders, annexures S, T, U and V have referred to clarification dated April 2, 1992, issued by the Commissioner of Commercial Taxes and they treat this clarification as one under section 3(2) of the Karnataka Sales Tax Act, 1957. But the said reference in the assessment orders is patently erroneous. If we turn to the letter of the Commissioner of Sales Tax dated April 2, 1992, we find that it is addressed to the appellant and only states that with refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said reply of the Commissioner of Commercial Taxes dated April 2, 1992, addressed to the appellant by any stretch of imagination cannot be said to be instruction issued by the Commissioner under section 3A(2) to its subordinates. Therefore, that reply could never have been relied upon by the assessing authority while exercising its independent quasi-judicial power in assessing the appellants' product. It is also now well-settled by a catena of decisions of the Supreme Court that general executive instructions cannot bind the assessing authorities discharging quasi-judicial functions under the Act. In the case of Bengal Iron Corporation [1993] 90 STC 47; AIR 1993 SC 2414, it has been in terms laid down by the Supreme Court that such clarifications and circulars issued by the Central Government or State Government regarding taxability of certain items represent merely their understanding of the statutory provisions. It is doubtful whether such clarifications and circulars bind the quasijudicial functioning of the authorities under the Act; while acting in quasi-judicial capacity, they are bound by law and not by any administrative clarifications or circulars. It must, there ..... 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