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TMI Blog2022 (1) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... t is entitled to the exemption from payment of amount of sales tax as per the original Entry No.255(2) vide F.D.'s Notification dated 05.03.1992, which was issued under Section 49(2) of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "Act, 1969"), the State of Gujarat has preferred the present appeals. 2. That the respondent herein - assessee -dealer (earlier known as Essar Steel Ltd.) is engaged in the activity of manufacture and sale of Hot Briquetted Iron (HBI) and Hot Rolled Coil (HRC) at its two units located at Hazira in Surat, Gujarat. The respondent holds registration certificate under the Gujarat Sales Tax Act, 1969 and also under the Central Sales Tax Act, 1956. The respondent made eligible investment in Unit No.1 pursuant to Resolution dated 07.05.1986 issued by the Industries, Mines and Energy Department of the Government of Gujarat. Therefore, the respondent was certified as entitled to avail incentives during the eligible period from 01.08.1990 to 31.07.2004 up to the upper monetary limit of Rs. 237.59 crores. 2.1 The Government of Gujarat vide Resolution dated 26.07.1991 announced a scheme known as "The Scheme for Special Incentives to Prestigious Units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry No.255(2) came to be further amended vide Notification dated 16.01.2002, which provided that the eligible units, who claim exemption from purchase tax on purchase of the goods even if the goods are used as raw materials, processing materials or consumable stores in its industrial units for which it has obtained the eligibility certificate in the manufacturing of goods for dispatch to its another unit or division situated within the State of Gujarat or outside the State of Gujarat for use in the manufacture of other goods for sale by such other unit. 2.6 At this stage, it is required to be noted that under all the aforesaid three notifications, one of the main requirements was that the eligible unit furnishes to the selling dealer a certificate in Form No. 26 and obtained from the registering authority, declaring inter alia that the goods shall be used by it as raw materials, processing materials or consumable stores in its industrial unit for which it has obtained the eligibility certificate, for the manufacture of goods in its industrial unit as per the conditions provided under the three notifications. 2.7 On commissioning of the Unit No.2, the Natural Gas and Naphtha pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent - ESL should deposit 50% of the tax dues within the time stipulated in the order. The assessment orders by the Deputy Commissioner of Sales Tax came to be challenged by way of appeals before the Joint Commissioner. The Joint Commissioner - the first Appellate Authority vide order dated 30.04.2013 imposed purchase tax under Section 50 of the Act for the years 1998-1999 and 1999-2000. However, the first Appellate Authority accepted in the first appeal that till the amendment took place in Entry No.255 on 14.11.2000, even if the purchased goods were used for manufacture at any place in the State of Gujarat, there was no breach of the conditions stipulated in Form No.26 and for the said assessment years, the purchase tax together with interest and penalty imposed came to be set aside. Thus, the Joint Commissioner/first Appellate Authority confirmed the levy of purchase tax in respect of the purchase of goods till 14.11.2000. 2.10 Being aggrieved against the order passed by the Joint Commissioner dated 30.04.2013, both, the respondent -dealer - ESL and the State Government preferred the appeals before the Tribunal. That by order dated 29.01.2015, the Tribunal allowed the second ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials for manufacture of goods in that unit itself. It is submitted that the wordings used in the notification are clear and unambiguous that the exemption shall become available only if the said eligible unit utilizes the raw materials for manufacture of goods in the very same 'eligible unit'. It is submitted that therefore the raw materials - Naphtha and Natural Gas were required to be used by the 'eligible unit - Essar Steel Ltd.' in the very same steel unit and for manufacture of the steel only. 3.3 It is submitted that if the interpretation made by the High Court and the Tribunal is accepted, in that case, even when the eligible unit does not itself utilizes the raw materials, it may, after availing the exemption, simply transmit the raw materials to any other unit or entity, even the said entities are 'not eligible' to the exemption and such entities though are 'not eligible' would then get the benefit of exemption. It is submitted that that could not be the object and purpose of granting exemption to the 'eligible units' only. 3.4 It is submitted that while introducing the incentive scheme, the Department issued the list of industries of 'eligible units' and 'non eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of an exemption notification are to be construed strictly. It is submitted that even in the case of any perceived ambiguity, the provision has to be construed in favour of the Revenue. Reliance is placed on the decision of the Constitution Bench of this Court in the case of Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar and Company and Others, (2018) 9 SCC 1 (para 66) as well as another decision of this Court in the case of Union of India and Anr. Etc. Etc. Vs. V.V.F. Limited and Another, Etc. Etc., (2020) SCC Online SC 378 (paras 53-55). 3.8 It is further submitted by Shri Maninder Singh, learned Senior Advocate appearing on behalf of the State that what is weighed with High Court that levy of the purchase tax is hit by the principle of promissory estoppel by observing that by the subsequent Notifications dated 14.11.2000 and 16.01.2002, the State could not have taken the rights which are available under the parent Notification dated 05.03.1992. 3.9 It is submitted that as such the subsequent Notification dated 14.11.2000 can be said to be clarificatory in nature and therefore, conditions provided in the parent Entry No. 255(2) dated 05.03.1992 cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent notifications the benefit of exemption under Entry No.255(2) dated 05.03.1992 cannot be taken away. 3.12 It is further submitted by Shri Maninder Singh, learned Senior Advocate appearing on behalf of the State that even the High Court has erred in observing that denying the benefit of exemption under 1992 notification would result in denying the respondent - ESL facility of using the electricity generated by EPL. It is submitted that the said finding of the High Court is patently erroneous and unsustainable. It is submitted that as per the settled proposition of law, any tax exemption granted under a statutory provision by the Government is a concession, which does not create any legally enforceable right against the Government and the Government is always empowered to vary or withdraw the said exemption and that the principle of promissory estoppel shall have no applicability in this behalf. Heavy reliance is placed on the decision of this Court in the case of Union of India and Anr. Etc. Etc. Vs. V.V.F. Limited and Another, Etc. Etc. (supra) (paras 40 to 45) and another decision of this Court in the case of Kothari Industrial Corporation Limited Vs. Tamil Nadu Electricity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit for the period prior to 2000 erroneously. It is submitted that that does not take away the right of the State to levy the tax, which otherwise is permissible under the law and which is levied in accordance with law. 3.15 It is further submitted that in the present case, considering the modus operandi adopted by the ESL and the EPL and despite being fully aware of the clear and unambiguous terms of the exemption notification and despite the power producing companies were specifically made 'ineligible' for availing the exemption and despite the fact that as per the conditions provided in the parent Entry, the raw materials - Naphtha and Natural Gas were required to be used by the assessee - ESL in its own unit, the raw materials came to be sold to an 'ineligible' entity - EPL and the 'ineligible unit' indirectly/directly got the benefit of exemption though not entitled to and/or eligible and used the said raw materials in their own unit for generation of electricity, the respondent - assessee is liable to pay the penalty in terms of Section 45(5). It is submitted that therefore the orders passed by the Joint Commissioner setting aside the penalty confirmed by the Tribunal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.08.1990 to 31.07.2004 up to upper monetary limit of Rs. 237.59 crores. It is submitted that, thus, the investment made in Unit No. 1, started manufacturing HBI for which sales tax exemption incentives were admissible under Entry 118 of the notification issued by the Government of Gujarat under Section 49(2) of the Gujarat Sales Tax Act, 1969. 4.4 It is submitted that on 26.07.1991, the State of Gujarat by way of a resolution announced a Scheme known as "The Scheme for Special Incentives to Prestigious Units, 1990-95 (Modified)" for attracting investment in core sector industries. Pursuant to the aforesaid scheme, the respondent undertook investment of approximately Rs. 5,000 crores for the manufacture of HRC in its second unit (Unit No. 2) and it was entitled to incentives during the eligible period from 22.02.1993 to 21.02.2007 up to the monetary limit of Rs. 2050 crores. It is submitted that for Unit No. 2 as an eligible unit, the respondent was entitled to exemption under Entry 255 of the Notification issued by the Government of Gujarat under Section 49(2) of the Act, 1969. 4.5 It is further submitted that the respondent, in accordance with the eligibility certificate and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first/parent notification was that the goods so purchased must be used in the unit and anywhere within the State of Gujarat. It is submitted that the conditions mentioned in the first/parent notification does not restrict the use of goods in the eligible unit, but on the contrary, it provides for use anywhere within the State of Gujarat. It is submitted that even as per the condition No.6, the eligible unit was permitted to actually use the goods purchased within the State of Gujarat as raw materials. 4.9 It is therefore submitted that when the goods were transferred to Essar Power Limited, which is situated within the State of Gujarat for conversion to electricity, on job-work basis and the power so generated was used in the manufacturing of goods by the respondent -Essar Steel, the conditions set out in the first/parent notification stood fully satisfied. It is submitted that the Scheme under the first/parent notification never envisaged or provided for use of goods in the same form in which they were purchased. It is submitted that in the present case, Naphtha and Natural Gas purchased, were used in the form of power in Unit No. 2 and, therefore, there was no breach of declarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s change in the original condition was not permitted since the first/parent notification only stipulated imposition of additional conditions and did not envisage an amendment of the original condition. 4.15 It is further submitted that the second notification would be applicable only for the industries that were setup after 14.11.2000. It is submitted that the first notification was issued pursuant to the incentive Scheme. It is submitted that in terms of the said Scheme, the respondent was entitled to incentives during the eligible period from 22.02.1993 to 21.02.2007 up to the monetary limit of Rs. 2050 crores if the conditions prevalent at the time of grant of the incentives were met. 4.16 It is submitted that a conjoint reading of the Scheme along with the first notification would indicate that the State invited industries to invest in its State by offering incentives, which once granted would be valid for a fixed period i.e., till 21.02.2007 in case of the respondent, subject to the eligibility conditions being met. It is submitted that the first notification only stipulated imposition of additional conditions which had to be complied with by the eligible entities. 4.17 It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to fresh industrial units/entities which would become eligible after 14.11.2000. The amended notification would not be applicable on industries that were setup pursuant to, and eligible under the first notification and whose rights had crystallised for 14 years under the first notification. 4.22 It is submitted that as such the respondent - Essar Steel has not committed any breach of declarations given in Form No. 26. Merely because Natural Gas and Naphtha were used for generation of electricity through EPL, which was ultimately used in the eligible unit, the respondent - ESL cannot be said to have breached the given conditions. 4.23 It is submitted that even assuming that the second and the third notifications were applicable to the respondent - ESL, the amended condition does not require "direct" use of purchased goods in the unit and therefore even when Natural Gas/Naphtha after conversion into electricity is used in the unit, the condition is satisfied. It is submitted that there are concurrent findings of fact both, by the High Court and the Tribunal that there is no diversion of the fuel purchased by the respondent- ESL at a concessional rate, and the same was given to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State has mechanically imposed the penalty, at the maximum rate of 150%, without any application of mind or adjudication. It is submitted that therefore, the imposition of penalty without appreciating the factual circumstances surrounding the dispute is arbitrary, unjust, and illegal, and therefore the Tribunal as well as the Hon'ble High Court has rightly set aside the imposition of penalty. 4.29 It is further submitted that as held by this Court in several judgments the imposition of penalty is the result of a quasi-criminal adjudication. Reliance is placed upon the decision of this Court in Hindustan Steel Ltd. Vs. State of Orissa, (1969) 2 SCC 627 and Excel Crop Care Limited Vs. Competition Commission of India and Anr., (2017) 8 SCC 47. 4.30 It is submitted that in the facts of the present case the respondent had been under a genuine bona fide belief that it was eligible to claim exemption under the first notification based on the declaration made in Form No. 26 and that the amended notifications would not govern the respondent since the incentives had been assured under the Scheme for a fixed period of time and such belief of the incentive was also upheld by the let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumable stores in the manufacture of goods for sale within the State of Gujarat or as packing materials in packing of the goods so manufactured. (2) If the eligible unit fulfils the conditions specified hereunder and further conditions as may be laid down from time to time. Conditions:- 6. The eligible unit shall actually use the goods purchased within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat or as packing materials in the packing of the goods so manufactured. 2. Amendments in Entry No.255(2) vide Government Notification dated 14.11.2000 Entry No. Class of Sales of Purchases Conditions 255 (2) Sale or raw materials, processing materials, consumable stores or packing materials by a registered dealer to an eligible unit. (1) If the eligible unit furnishes to the selling dealer a certificate in Form 26 appended hereto and obtained from the registering authority, declaring inter alia that the goods shall be used by it as raw materials, processing materials or consumable stores in its industrial unit for which it has obtained the eligibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turing goods. [See Entry at serial No.255 inserted by Government Notification, Finance Department No. (GHN-8) GST-1092/ (S.49)-(249)-TH dated the 5th March, 1992 issued under section 49(2) of the Gujarat Sales Tax Act,1969] I, ________ of M/s. Address ____________ certify the I/the said ______ as/is a registered dealer holding a certificate of registration No._____ dated ______ and also holding a certificate No. ________ dated _______ granted by the Commissioner of Sales Tax, Gujarat State under Government Notification No. (GHN-8) GST-1092 (S.49)-(249) TH, dated the 5th March, 1992 and that the goods being raw materials, processing materials mentioned in bills/cash memo/invoice No. ______ dated ___________ of M/s ___________ will be used by me/the said _______ in the manufacture of goods for sale or being the packing materials mentioned in bill/cash memo/invoice No._______ dated _________ of M/s. _________ will be used in the packing of the goods so manufactured, namely _____________ I further certify that the aforesaid certificate was in force on the date of the aforesaid purchase of goods. Place: Date: Signature : Status :" 9. Form-26 (Entry No.255) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or as packing materials in packing of goods so manufactured; and (ii) That the eligible unit shall actually use the goods purchased within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat as packing materials for the packing of the goods so manufactured. 10.1 Therefore, only in a case where the raw materials, processing materials or consumable stores are used by the eligible unit and the eligible unit actually uses the goods purchased within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods, there shall be exemption from payment of purchase tax/sales tax to the extent provided in the said Entry. 11. In the present case, it is an admitted position that after furnishing a declaration in Form No.26, the goods - raw materials, processing materials or consumable stores so purchased were to be used by ESL, but the respondent - ESL after purchase o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted, in that case, it would completely defeat the purpose of the exemption and it would permit industries, which are eligible for exemption to simply purchase the raw materials; not use them for manufacturing in their own units, and simply transmit them for use and manufacture to other units, even though such units are not eligible for exemption under the notification. 14. Thus, by transfer of Naphtha and Natural Gas by the eligible unit - ESL to another unit - EPL, after availing the exemption from payment of purchase tax and not using the Naphtha and Natural Gas (raw materials) for its own use for manufacture of the goods so manufactured by it, it can be said to be violating the eligibility criteria/condition mentioned in the original Entry No.255(2) dated 05.03.1992 and it can be said that the respondent -Essar Steel Ltd. Committed a breach of the declaration given in Form No.26. Therefore, the High Court has committed an error in holding that the respondent did not commit any breach of any of the conditions mentioned in the original Entry No.255(2) dated 05.03.1992 and that the respondent fulfilled all the conditions provided in the said Entry and that there was no breach of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le shall not be applicable to construction of an exemption notification, as it is clear and not ambiguous. Thus, it will be for the assessee to show that he comes within the purview of the notification. Eligibility clause, it is well settled, in relation to exemption notification must be given effect to as per the language and not to expand the scope deviating from the language. There is a vast difference and distinction between a charging provision in a fiscal statute and an exemption notification. 15. Now, the next question, which is posed for the consideration of this Court is whether the subsequent amended Entries vide notifications dated 14.11.2000 and 16.01.2002 can be said to be clarificatory and/or take away any of the rights under the original Entry No.255(2) dated 05.03.1992 and/or the subsequent notifications modifies/amends the basic conditions for availing the exemption under the original Entry No.255(2) dated 05.03.1992? 15.1 Having gone through the second notification dated 14.11.2000/the amended Entry No.255(2), it can be seen that the same is clarificatory in nature and there is no change in the basic eligibility criteria/conditions mentioned in the original Entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main the same even in the said amended Entry No.255(2) dated 16.01.2002. Therefore, the subsequent notifications/amended Entries cannot be said to be in any way in conflict with the first/parent notification/Entry No.255(2). 17. As observed hereinabove, even under the first/ original Entry No.255(2) dated 05.03.1992 and even as per the declaration furnished in Form No.26, the eligible unit - respondent - ESL was required to actually use the goods by him/within the State of Gujarat as raw materials, for manufacture of goods by him. But by actually not using the raw materials so purchased by which it got the benefit of exemption from payment of purchase tax, sold the said raw materials, which in fact were required to be used by him, to another unit/entity, which another unit used it for manufacture of its goods - generating the electricity and which in turn the EPL sold to the ESL. Thus, the ESL- eligible unit did not comply with and/or fulfilled the eligibility criteria/conditions even as per the original Entry No.255(2) and therefore, was/is not entitled to the exemption from payment of the purchase tax as per the exemption notification dated 05.03.1992 vide original Entry No.255( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the State Government, the power generating company was put in the list of 'ineligible industries' and thus, independently was not entitled to the exemption under the original Entry No.255(2). Thus, by such a transfer/sale from the eligible unit to another unit the benefit of exemption is availed by the 'ineligible' industry, which is wholly impermissible and that cannot be said to be the intention of the Government while providing the incentive in the form of exemption from payment of purchase tax. Such a benefit of exemption was available only to eligible units/industries and the steel industry of which Essar Steel Ltd. belonged being one of the eligible industries. Therefore, there was no question of applicability of principle of promissory estoppel. 20.1 Even otherwise in the facts and circumstances of the case narrated hereinabove, the principle of promissory estoppel shall not be applicable. ESL had furnished wrong and false declarations. In the original notification/entry, it was not provided that even if the raw materials so purchased is not used by itself after availing the exemption, the same can be sold to another entity, which is 'ineligible' industry. It did not pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive years irrespective of the fulfilling of the eligibility conditions. Applicability of the incentive is directly related to the eligibility and not dehors the same. If it is found that the industrial undertaking does not fulfil the eligibility criteria, it cannot claim the incentive/exemption. 22. Therefore, the submission on behalf of the respondent - assessee that as in the earlier assessment years benefit of exemption was granted to the respondent and, therefore, in the subsequent assessment years also, despite the fact that it is found that the respondent was/is not eligible for the benefit of exemption under the original Notification/Entry No.255(2) cannot be accepted. If such a submission is accepted in that case it will be perpetuating the illegality and granting the benefit of exemption to 'ineligible industry', who did not fulfill and/or comply with the eligibility criteria/conditions mentioned in the exemption notification. The principle of promissory estoppel shall not be applicable contrary to the Statute. Merely because erroneously and/or on misinterpretation, some benefits in the earlier assessment years were wrongly given, cannot be a ground to continue the wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable by such transfer of raw materials by the Essar Steel Ltd. to Essar Power Limited. As observed hereinabove, there is a breach of declaration in Form No.26 also. Therefore, in the facts and circumstances of the case, the levy of penalty is justified and warranted. The Joint Commissioner, the Tribunal as well as the High Court have committed a grave error in quashing and setting aside the penalty imposed by the Assessing Officer. 24. In view of the above and for the reasons stated above, the impugned common judgment and order passed by the High Court as well as that of the Tribunal quashing and setting aside the demand of purchase tax from the respondent are hereby quashed and set aside. It is held that the respondent -Essar Steel Ltd. - the eligible unit was not entitled to the exemption from payment of purchase tax under the original Entry No.255(2) dated 05.03.1992, firstly, on the ground that it did not fulfill the eligibility criteria/conditions mentioned in the original Entry No.255(2) dated 05.03.1992 and secondly that there was a breach of declaration in Form No.26 furnished by the respondent - eligible unit -Essar Steel Ltd. The orders setting aside the penalty impo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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