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2016 (2) TMI 436 - SUPREME COURT

2016 (2) TMI 436 - SUPREME COURT - [2016] 89 VST 1 (SC) - Repayment schedule of deferred tax scheme after conversion of sales tax scheme to value added tax (VAT) scheme - Exemption (deferment of sales tax) scheme was not available after the Jharkhand Value Added Tax Act, 2005 (JVAT Act) came into force - Principle of promissory estoppel - Held that:- The concept of exemption is distinct from the concept of deferment of tax. After the JVAT Act came into force, under the statutory provisions, ther .....

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stipulated in the notification. The said authority cannot travel beyond the stipulations of the notification. The language employed in the notification conveys that the grant of certificate has to be such that after expiration of the eligibility period, the amount has to be paid back within a span of 5 years but the gap cannot exceed 13 years from the date of start of deferment. - In the case at hand, the claim of the assessee that the repayment schedule has to continue for a period of 13 y .....

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The repayment schedule is 5 years from the expiry of eligibility period of deferment. The period of 5 years has to be so arranged that it does not go beyond 13 years from the date of deferment. - Thus analysed, the irresistible conclusion is that the repayment schedule has to end on 31.08.2013 within a span of 5 years from the expiration of the eligibility period. - Imposition of interest and penalty under the JVAT Act. Rule 66 - the question of levy of penalty as envisaged under Rule 66 .....

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of Bihar had on 22.12.1995 formulated an industrial policy for tax exemption and/or deferment to such industrial units which started production between 01.09.1995 and 31.08.2000. The said policy was issued in exercise of power conferred by Section 23A of the Bihar Finance Act, 1981 (for short, the 1981 Act ) and the purpose of framing the policy was industrial growth of the State. The policy stipulated that such industrial units should have the registration certificate indicating that the unit w .....

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se of material from the date of commencement of production as stipulated in the policy. Keeping in view the purpose incorporated in the policy, exemption notification under the 1981 Act was issued. The appellant expressed its willingness to install a cold rolling mill in Jamshedpur by investing ₹ 2000 crores. After a final decision was taken upon due deliberation, the 1st respondent sought a confirmation from the State of Bihar to assure the commitment to grant sales tax exemption as state .....

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spondent invested nearly ₹ 2000 crores on its own and the commercial production commenced from 01.08.2000. 2. When the matter stood thus, the Bihar Reorganisation Act, 2000 came into existence on 15.11.2000 as a result of which Jamshedpur became part of a newly carved out State, namely, Jharkhand. After coming into force of the new State, on 15.12.2000, the Governor of Jharkhand by notification ordered that the 1981 Act, the Central Sales Tax (Bihar) Rules, 1956 and the notifications made .....

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rolling mill. Be it stated that the said certificate was issued after holding proper enquiry by the concerned Joint Commissioner. After due enquiry, he had opined that though the raw materials for the manufacture of CR product is HR product, the CR product is totally different, both in its metallurgical components and the end-use, and the two products were commercially recognised as different products. Hence, the cold-rolled products manufactured by the new unit being different from the hot-roll .....

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ng different commodities, the benefit of exemption was not available. 3. Being aggrieved by the order passed by the Commissioner, the 1st respondent filed a writ petition before the High Court of Jharkhand which ultimately remanded the matter to the competent authority to examine whether HR product and CR product manufactured by the two units of the company are one and the same or two different products. 4. The aforesaid order came to be assailed before this Court in Tata Iron & Steel Co. Lt .....

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turing both. Of course, if such an issue were to be raised the burden would have been on the appellant to establish the same. When such an issue is not raised it is not necessary for the appellant to establish that fact by any such intrinsic evidence. The material produced before the Joint Commissioner was in our opinion sufficient to decide whether the product manufactured by the appellant is CRM or not and the said Joint Commissioner having given a positive finding and that finding having not .....

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State of Bihar, at every stage the appellants tried to verify and confirm whether they are entitled to the benefit of exemption or not and they were assured of that exemption. It is based on these assurances that the appellant invested a huge sum of money which according to the appellant is to the tune of ₹ 2000 crores but the State says it may be to the tune of ₹ 1400 crores. Whatever may be the figure, the fact still remains that the appellants have invested huge sums of money in i .....

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ith the fact that at no stage of the proceedings which culminated in the judgment of the High Court, the respondent State had questioned this fact except for the technical ground taken by the Commissioner which is found to be erroneous, we find the ends of justice would not be served by remanding the matter for further inquiry. 5. After so stating, this Court allowed the appeal and set aside the order of the High Court and restored the proposal made by the Joint Commissioner for grant of exempti .....

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995 and SO nos. 57 and 58 dated 02.03.2000 with immediate effect, as a result of which the facility of exemption from payment of sales tax on the purchase of raw materials and also facility of exemption of sales tax on its finished products was withdrawn. On 30.03.2006, a notification bearing SO no. 202 under Section 8(5)(a) of the Central Sales Tax Act, 1956 was issued withdrawing notification no. 481 dated 22.12.1995. 7. At this juncture, it is relevant to refer to Section 95(3) (ii) of the JV .....

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ting the facility of deferment of payment of tax for the un-expired period or percentage of value of fixed asset as determined, as might have been allowed to such dealer under that Act, by a notification published in Official Gazette by the State Government. 8. Rule 64 of the Jharkhand Value Added Tax Rules, 2006 (for short the Rules ) deals with deferment. The said rule reads as under:- 64. Deferment.-(1) (a) All such Industrial units, which were availing the benefit of deferment of tax under t .....

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or un-availed percentage of gross value of fixed assets, before the In-charge of the Circle, in which such unit is registered. (b) All the procedure and provisions issued for availing deferment in the Repealed Act shall continue to be in operation and shall be deemed to have been adopted for the purpose of the Act. (c) The In-charge of Circle, on receipt of such application mentioned in sub-rule (a) shall issue a revised eligibility certificate, indicating therein the balance un-expired period o .....

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tax on the sales of their finished products, granted under clause (b) of sub-section (3) of Section 7 of the Repealed Act, and who have not availed of their full entitlement as on Appointed Day, may be allowed to opt for deferment of payment of tax for the balance unexpired period or unveiled percentage of value of fixed assets as determined, whichever is earlier, in accordance with sub-section (3)(ii) of Section 95 of the Act. Provided no dealer eligible for deferment under sub-rule (2), shall .....

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(3)(ii) of Section 95 of the Act. Provided also that, if such notification is issued by the State Government, the Industrial Unit opting to changeover to deferment the tax for the remaining unexpired period or unveiled percentage of value of fixed assets, shall apply within fifteen days of publication of such notification before the In-charge of the circle in which such unit is registered, and thereafter the In-charge of the Circle shall issue revised eligibility certificate for the balance unex .....

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of payment of tax. We expressed our strong protest for withdrawing the said exemption of Tata Steel and replaced by deferment of payment of Tax provision. We also pray you to review the provision of the said deferment of payment of tax and allow us to continue availing the existing Sales Tax exemption on purchase of raw materials and other goods for production of CR products as well as on selling the CR Products as per the Bihar Industrial Policy, 1995 and the Notification made thereunder till 3 .....

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ii) and Section 96(3) of the JVAT Act. It also challenged the withdrawal of the notification and asserted that the company was entitled to get the benefit of exemption that had already been granted and that there was no justification for withdrawal of the same. The Division Bench of the High Court took up the said petition along with others and came to hold thus:- 55. After holding that the principle of promissory estoppels is enforceable in the present case, the question arises what relief the .....

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e VAT Act. However, the State cannot justify the issuance of the impugned notifications in view of our findings on various aspects, upholding the enforceability of doctrine of promissory/equitable estoppel when it is intended to even deny legitimate tax deferment benefit under Sec. 95(3) of the VAT Act. We, therefore, quash the impugned notifications S.Os. 201 and 202 both dated 30th March, 2006 as also order dated 5th May, 2006 rejecting claim for deferment of tax under Section 95(3) of VAT Act .....

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n 95(3) of the VAT Act. The aforesaid order is the subject matter of assail in this civil appeal by special leave. 11. We have heard Mr. Ajit Kumar Sinha, learned senior counsel for the appellants and Mr. Dushyant A. Dave, learned senior counsel for the 1st respondent. 12. At the very outset, it is necessary to state that the 1st respondent had enjoyed the benefit of exemption from payment of sales tax on cold rolling mills products w.e.f. 01.08.2000 to 31.03.2006. Initially, the exemption was g .....

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referred an appeal by special leave but the same has already been disposed of. It has been fairly stated at the Bar that the issue that is seminal to the present lis is benefit of deferment and the period of repayment. 13. When the special leave petition was listed on 04.05.2007, the following interim order was passed:- Till the hearing and final disposal of the matter the assessee will open a separate account and the tax which is being deferred from today will be shown in that account which wil .....

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in six monthly instalments till the entire amount of ₹ 186.70 crores is paid to the appellant-applicant, excluding the amount of ₹ 20 crores already paid to the appellant-applicant. The first instalment of ₹ 25 crores shall be paid by 31.8.2013. 15. We have been appraised at the Bar that the said amount has been paid. We may repeat at the cost of repetition that the issue of exemption is not alive and it has been fairly accepted by Mr. Dave, learned senior counsel for the 1st r .....

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tax. The gravamen of the grievance pertains to the period within which the amount was liable to be paid. Submission of Mr. Sinha, learned senior counsel appearing for the State is that the deferment of tax has to be computed in such a manner so that the period of thirteen years as provided in the notification is calculated from the year 2000 ending with the year 2013. In essence, his argument is, as the assessee had failed to make the repayment of deferred tax within the prescribed period, the .....

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w units which started production between 01-09-1995 to 31-08-2000 and which have the registration certificate issued from the prescribed authority and been given eligibility certificate for this purpose, are allowed to defer the payable sales tax on the sale of manufactured finished goods for a prescribed period under the following terms and conditions: x x x x x 5. Repayment of deferred tax amount by industrial units:- Repayment of deferred tax amount by industrial units:- (1) The repayment of .....

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nterest at the rate of 2.5 percent per month on repayable amount shall be payable till the month in which payment is made. For the purpose of this part, a part of month will be treated as full month. (3) If any unit defaults in repayment of the deferred amount within the prescribed period, then for the recovery of due amount alongwith interest as stated in part(2) above, all the suitable provisions of the Bihar Finance Act, 1981 Part I related to recovery of tax, realization of dues and impositi .....

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nterpreted to convey to be determinative on the foundation of individual case of deferment but they have to be understood that the grant of benefit of deferment is associated with the repayment of deferred tax and in that context it has to be so done that the period of repayment is completed within 13 years, that is, 31.08.2013. 18. Refuting the said submission, it is canvassed by Mr. Dave, learned senior counsel appearing for the assessee that the date of start of deferment has to be the date w .....

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or the said purpose, he has placed reliance on the authority in Hansraj Gordhandas v. H.H. Dave, Assistant Collector of Central Excise & Customs, Surat and Two ors. (1969) 2 SCR 252. 19. We have already reproduced the relevant paragraphs of the notification. Regard being had to the language employed therein, we have to appreciate what has been laid down in Hansraj Gordhandas (supra). The passage from which Mr. Dave, learned senior counsel has drawn inspiration reads as follows:- It was conte .....

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gh the cooperative effort should produce cloth. The intention was that the goods produced for which exemption could be claimed must be goods produced on its own behalf by the society. We are unable to accept the contention put forward on behalf of the respondents as correct. On a true construction of the language of the notifications, dated July 31, 1959 and April 30, 1960 it is clear that all that is required for claiming exemption is that the cotton fabrics must be produced on power-looms owne .....

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calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different, but that is not the case here. [Underlining is ours] 20. Thus, the aforesaid decision makes it quite clear that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language o .....

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se involved therein. 21. In this context, we may recapitulate the words of Lord Reid in Maunsell v. Olins (1975) 1 All ER 16, 21, 18 wherein it has been observed as follows:- Then rules of construction are relied on. They are not rules in the ordinary sense of having some binding force. They are our servants not our masters. They are aids to construction, presumptions or pointers. Not infrequently one rule points in one direction, another in a different direction. In each case we must look at al .....

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their ordinary meanings. Where the grammatical construction is clear and manifest and without doubt, that construction ought to prevail unless there are some strong and obvious reasons to the contrary. Nothing has been shown to warrant that literal construction should not be given effect to. See Chandavarkar S.R. Rao v. Ashalata (1986) 4 SCC 447, 476 approving 44 Halsbury s Laws of England, 4th Edn., para 856 at page 552, Nokes v. Doncaster Amalgamated Collieries Limited 1940 AC 1014, 1022. It m .....

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he meaning of the statute, is primarily to be sought in the words used in the statute itself, which must, if they are plain and unambiguous, be applied as they stand. … The aforestated principle has been reiterated in Keshavji Ravji and Co. and others vs. Commissioner of Income Tax (1990) 2 SCC 231. 24. In this regard, reference to Mahadeo Prasad Bais (Dead) vs. Income-Tax Officer A Ward, Gorakhpur and Another (1991) 4 SCC 560 would be absolutely seemly. In the said case, it has been held .....

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tra, J. has opined that interpretation should serve the intent and purpose of the statutory provision. In that context, the learned Judge has referred to the authority in State of T.N. v. Kodaikanal Motor Union (P) Ltd. (1986) 3 SCC 91 wherein this Court after referring to K.P. Varghese v. ITO (1981) 4 SCC 173 and Luke v. IRC (1964) 54 ITR 692 : 1963 AC 557 (HL) has observed:- The courts must always seek to find out the intention of the legislature. Though the courts must find out the intention .....

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uld seek to endeavour to avoid an unjust or absurd result. We should not make a mockery of legislation. To make sense out of an unhappily worded provision, where the purpose is apparent to the judicial eye some violence to language is permissible. 26. Sabharwal, J. (as His Lordship then was) has observed thus:- … It is well-recognised rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. It was held that construction .....

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aid that it is now well-settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the court may modify the language used by the legislature or even do some violence to it, so as to achieve the obvious intention of the legislature and produce a rational construction. In such a case the court may read into the statutory provision a condition which, though .....

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e to be done after the completion of eligibility period of deferment or the prescribed percentage limit of fixed capital investment, whichever reaches earlier. In the case at hand, the period of exemption has been converted to period of deferment of tax. It is for 8 years. There is no dispute that the assessee had availed the exemption for a period of 6 years and he is entitled to deferment of tax for the rest of the period which commenced in 2006. It is the next part of the said sub-para which .....

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escribed authority and that, most importantly, it has been given an eligibility certificate for the said purpose. The policy would come into play only if these conditions are satisfied and then the assessee will be allowed to have the benefit of deferment of sales tax on the sale of manufactured finished goods for a prescribed period. Therefore, the authority has been given the power to lay down the prescribed period for grant of deferment. In the beginning, the 1st respondent was granted exempt .....

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ital investment, whichever is earlier. The prescribed authority can grant an eligibility certificate but he has to keep in view the terms and conditions stipulated in the notification. The said authority cannot travel beyond the stipulations of the notification. The language employed in the notification conveys that the grant of certificate has to be such that after expiration of the eligibility period, the amount has to be paid back within a span of 5 years but the gap cannot exceed 13 years fr .....

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n not only causes serious violence to the language employed in the notification but if it is allowed to be understood in such a manner, it shall lead to an absurd situation. That apart, the intention can be gathered from the notification that it has to relate back to the date of eligibility with a maximum limit of 13 years. It cannot be construed to mean 13 years from the date of completion of the eligibility period. The repayment schedule is 5 years from the expiry of eligibility period of defe .....

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