TMI Blog2022 (1) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 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 of raw materials Naphtha and Natural Gas and after availing the benefit of exemption from the payment of purchase tax did not himself/itself used the same, but, instead, sold the same to another entity EPL and the said another entity EPL used the said raw materials for generating the electricity, which thereafter came to be sold to the respondent - ESL pursuant to the power purchase agreement - the submission on behalf of the respondent that as Naphtha and Natural Gas were transferred to EPL for generating the electricity, which in turn came to be used by the respondent ESL for manufacture of HRC, and it cannot be said that there is a breach of condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for availing the exemption under the original Entry No.255(2) dated 05.03.1992? - HELD THAT:- The eligibility criteria/condition that the eligible unit shall actually use the goods remain 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) - Even as per Form No. 26 (Entry No.255), as per the declaration filed by the respondent, being eligible unit while purchasing goods for use in manufacturing goods, it was declared that the raw materials so purchased will be used by it in the manufacture of goods for sale. Thus, by not using the raw materials so purchased by it, the respondent eligible unit ESL has violated the declaration given in Form No.26. Therefore, the respondent was not entitled to the exemption even under the first/parent notification. Even the reasoning given by the Tribunal and the High Court that the demand of purchase tax is hit by the principle of promissory estoppel also cannot be accepted. In the present case, first of all, the principle of promissory estoppel to the exemption sought ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years were wrongly given, cannot be a ground to continue the wrong and to grant the benefit of exemption though not eligible under the exemption notification. 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 imposed by the Assessing Officer are also hereby quashed and set aside. The order passed by the Assessing Officer levying the demand of purchase tax and imposing the penalty is hereby restored. Appeal allowed - decided in favor of Revenue. - CIVIL APPEAL NOS. 7710-7714 OF 2021 - - - Dated:- 21-1-2022 - HON'BLE MR. JUSTICE M.R. SHAH AND HON BLE MR. JUSTICE SANJIV KHANNA. For Appellant(s) Mr. Maninder Singh, Sr. Adv. Ms. Deepanwita Priyanka, AOR For Respondent(s) Mr. Neeraj Kishan Kaul, Sr. Adv. Mr. Ritin Rai, Sr. Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. That the Unit No.2 of the ESL was granted Sales Tax exemption in terms of Entry No.255(2) of the Notification dated 05.03.1992 issued under Section 49(2) of the Act, 1969 for the period from 22.02.1993 to 21.02.2007 up to a maximum monetary limit of ₹ 2050 crores. 2.2 At this stage, it is required to be noted that the said exemption as per Entry No.255(2) vide Notification dated 05.03.1992 was subject to fulfilling certain conditions provided in the said original Entry No.255(2), which shall be dealt with hereinafter below. 2.3 That the exemption granted to Unit No.2 of the respondent was an exemption from payment of purchase tax on raw materials for (i) Naphtha; and (ii) Natural Gas. The applicable purchase tax at the relevant time on Naphtha was @16% on the taxable value and for Natural Gas, it was @20% on taxable value. At this stage, it is also required to be noted that this exemption had been made available to steel manufacturing units and the units/entities engaged in generating electricity were specifically excluded from this exemption by placing them in the list of industries Not Eligible for this incentive. 2.4 As per the original Entry No.255(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial unit. 2.8 The Officers of the Sales Tax conducted a surprise visit at the premises of the respondent ESL in the month of July, 2001. A notice was issued by the Sales Tax Officer calling for certain information including details of branch transfers, deemed exports, transfer of finished goods etc. The Sales Tax Department thereafter raised a dispute inter alia regarding breach of declaration given in Form No.26 while purchasing Naphtha/Natural Gas having been committed by the respondent ESL on the ground that the goods so purchased were transferred to EPL for generation of electricity, which was then used in Unit No.2 for the manufacture of HRC. A notice was issued on 30.06.2002 by the Sales Tax Officer calling upon the ESL to give clarification in respect of the purported breach of conditions of exemptions, including the transfer of Naphtha/Natural Gas to EPL for generation of electricity. That the Assessing Officer passed the Assessment Orders in respect of Unit No.2 for Assessment Years 19951996 to 1997-1998 and 2000-2001 holding inter alia that no tax was due and payable by the respondent ESL on account of any purported breach of the conditions of the exemption admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay any tax, interest or penalty on the disputed transactions, the State preferred the present appeals before the High Court being Tax Appeal Nos. 136 of 2016 to 140 of 2016 . By impugned common judgment and order, the High Court has dismissed the said appeals mainly on the ground of promissory estoppel and also observing that the respondent ESL has not violated any of the conditions provided under the original Entry No.255(2) dated 05.03.1992. 2.12 Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the High Court, the State has preferred the present appeals. 3. Shri Maninder Singh, learned Senior Advocate appearing on behalf of the appellant State of Gujarat has vehemently submitted that the impugned common judgment and order passed by the High Court is patently erroneous and unsustainable. 3.1 It is vehemently submitted by Shri Maninder Singh, learned senior counsel appearing on behalf of the State that in the present case, the Notification dated 05.03.1992 can be said to be a parent notification and all other subsequent Notifications dated 14.11.2000 and 16.01.2002 were either clarificatory in nature and/or expanding the scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d though ESL was required to use the raw materials - Naphtha and Natural Gas in their own unit, after availing the exemption from payment of purchase tax, the ESL did not use the said raw materials in its unit but sold the said raw materials to another company EPL, and EPL used the said raw materials Naphtha and Natural Gas for generating the electricity, which came to be subsequently sold to the ESL. It is submitted that, thus, through such circuitous method, the ESL passed on the benefit of exemption to EPL, which otherwise the EPL was not eligible and/or entitled to. 3.5 It is submitted that, thus, the interpretation advanced by the assessee ESL accepted by the High Court and the Tribunal would completely defeat the purpose of exemption notifications and would be giving premium to such dishonest assessee/dealer, who after availing the exemption would sell the raw materials to another industry/entity, who as such are not entitled to and/or eligible for such an exemption. It is submitted that if the interpretation advanced by the assessee is accepted, in that case, it would permit industries, which are eligible for exemption to simply purchase the raw materials; not use t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition that the eligible unit shall have to furnish to the selling dealer a certificate in Form No.26 that the raw materials purchased shall be used as input in its industrial unit only. It is therefore submitted that as such the subsequent Notification dated 14.11.2000 by no stretch of imagination can be said to be modifying the basic conditions of availing the exemption provided in the parent Entry No.255(2) dated 05.03.1992. 3.10 It is submitted that as such the clarificatory notification dated 14.11.2000 had made it abundantly clear and beyond any pale of doubt that any such exemption on purchase of raw materials, shall be available only to the unit when it is consuming the raw materials for manufacture of goods in the very same unit. It is submitted that it is a settled position of law that any such amendment being only clarificatory in nature, applies to all entities uniformly and from the date of original notification granting the exemption itself. Reliance is placed on the decision of this Court in the cases of Union of India and Anr. Etc. Etc. Vs. V.V.F. Limited and Another, Etc. Etc. (supra) and Bengaluru Development Authority Vs. Sudhakar Hegde and Ors., (2020) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L and EPL as such has no bearing on the liability of the respondent assessee to fulfill its tax obligation. It is submitted that even otherwise in the present case, the raw materials Naphtha and Natural Gas purchased by the eligible unit ESL though was required to be used by Essar Steel in its own units, the ESL sold the same to the EPL and EPL used the said raw materials for generation of electricity, which came to be sold to the ESL under the power purchase agreement. It is submitted that as submitted hereinabove, the electricity generation companies were as such put in the not eligible list and, therefore, as such the EPL was not eligible for exemption under parent Entry No.255(2) dated 05.03.1992 and, thus, through the circuitous methodology or modus operandi, the EPL got the benefit of exemption though not eligible . 3.13 In the alternatively, it is submitted by Shri Maninder Singh, learned Senior Advocate appearing on behalf of the State that even assuming that the subsequent amended Entry No. 255(2) issued vide Notifications dated 14.11.2000 and 16.01.2002 are not to be made applicable, which according to the High Court was hit by principle of promissory estoppel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged to Essar Steel India Limited (ESIL). It is submitted that Essar Steel India Limited was admitted into insolvency under the Insolvency and Bankruptcy Code, 2016 ( IBC ) on 02.08.2017 and the Corporate Insolvency Resolution Process has been concluded in the approval of a Resolution Plan for ESIL submitted by Arcelor Mittal India Private Limited, which has been upheld by this Court vide its judgment and order in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta Ors., (2020) 8 SCC 531). It is submitted that pursuant to the same, the 100% shareholding of the respondent- Essar Steel India Limited now vests with the Arcelor Mittal India Private Limited. It is submitted that even subsequently, the name of ESIL has been changed to Arcelor Mittal Nippon Steel India Limited. 4.2 It is submitted by Shri Rai, learned Senior Advocate appearing on behalf of the respondent that in the present case there are concurrent findings in favour of the original writ petitioner - respondent herein by both, the Tribunal as well as the High Court, whereby it is held that the Essar Steel Ltd. is eligible for exemption under the parent Entry No.255(2) vide F.D. s Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that on commissioning of Unit No. 2, Natural Gas and Naphtha purchased by the respondent Essar Steel Ltd. against declarations in Form No.26 were converted into electricity through Essar Power Limited and utilized as an input for the purpose of manufacturing HRC in the industrial unit of the respondent ESL. It is submitted that this was done by nature of a job-work arrangement and after complying with all the necessary statutory formalities from 1994-95. 4.6 It is submitted that the respondent was/is duly eligible under the parent Entry No.255(2)/parent Notification dated 05.03.1992 to seek exemption from payment of the purchase tax. It is submitted that even the Commissioner of Sales Tax in its earlier order dated 16.8.2002 and thereafter by the Assessing Officer in the assessment orders for the Assessment Years 1995-1996 to 1997-1998 and 2000-2001 also allowed and/or permitted the respondent-Essar Steel Ltd. to avail the exemption under parent Entry No.255(2) dated 05.03.1992. It is submitted that in the present case, even for the subsequent Assessment Years also the Tribunal as well as the High Court have also held that the respondent- Essar Steel Ltd. was/is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al approach should be adopted. Reliance is placed on the decision of this Court in the case of Assistant Commissioner (CT) LTU and Anr. Vs. Amara Raja Batteries Limited, (2009) 8 SCC 209. 4.11 It is submitted that admittedly, the respondent's Unit No.2 was eligible to get the exemption prior to the second notification. The appellant - State did not raise any objection, nor did they levy any tax liability prior to the second notification. It is submitted that rather vide letter dated 16.08.2002 issued by the Commissioner of Sales Tax, the appellant State confirmed that there has been no breach by the respondent. It is submitted that therefore, once the Unit No.2 was found to be eligible under the parent notification, unless it changed its modus operandi, it ought to have been given the exemption under the first/parent notification. 4.12 It is further submitted that it was never the case on behalf of the State that the respondent was in breach of the first/parent notification. It merely alleged that the conditions as substituted under second notification have been violated. It is submitted that therefore it is imperative to assess if the second and third notifications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the eligibility certificate for the manufacture of goods for dispatch to its another unit or division situated within the State of Gujarat for use in the manufacture of another goods for sale by such another unit or division or to such another unit or division situated outside the State for use in the manufacture of other goods for sale by such other unit. 4.18 It is submitted that the Scheme and the first notification as initially enacted permitted the use of Natural Gas and Naphtha for generation of electricity outside the unit when the electricity was used in the eligible unit as was accepted in the assessment orders for the preceding years. Similarly, the amendments made vide third notification permit the use of purchased goods in the manufacture of goods in the unit, for transfer to other unit as well, within or even outside the State of Gujarat for use in the manufacture of other goods. It is submitted that, thus, pursuant to the amendment, use of the goods even in other unit within or outside the State of Gujarat has been permissible. 4.19 It is submitted that therefore when the notification initially enacted on 05.03.1992 and amended vide third notification w.e.f. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romissory estoppel and legitimate expectation as observed and held by the Tribunal as well as by the Hon ble High Court. 4.25 It is submitted that the respondent invested a sum of ₹ 5000 crores for the manufacture of HRC in its Unit No. 2 by relying upon the incentives provided by the appellant-State. The said incentive provided in the Scheme and the first notification imposes a condition that the goods purchased by the eligible entity would be used by it within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods to be sold by the eligible entity. It is submitted that therefore thereafter the State is estopped from amending the conditions required to be met for obtaining the incentives, since the respondent acted upon the assurance of the State that as long as it met the conditions, it would be eligible for receiving exemptions for a fixed amount of time as contemplated under the Scheme. 4.26 It is submitted that based on the assurance of the State, the respondent had changed its position irretrievably by making huge investments in Unit No. 2 and by entering into various agreements including the one with Essar Pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy of the penalty. 4.31 Making above submissions, it prayed to dismiss the present appeal. 5. Heard the learned counsel appearing for the respective parties at length. 6. The questions which are posed for consideration of this Court in the present appeals are: (i) Whether the respondent -dealer-assessee Essar Steel Ltd. (erstwhile) was/is entitled to the exemption from payment of the purchase tax as per the original Entry No.255(2) vide F.D. s notification dated 05.03.1992? (ii) Whether subsequent amended Entry No.255(2) issued vide Notifications dated 14.11.2000 and 16.01.2002 in any way alters or amends the basic requirements/conditions stipulated as per the first notification dated 05.03.1992? (iii) Whether the subsequent amended Entry vide Government Notifications dated 14.11.2000 and 16.01.2002 in any way takes away the right of the respondent to avail the exemption under the first/parent Entry No.255(2) issued vide Notification dated 05.03.1992? (iv) Whether there was any breach of the declaration filed by the respondent as per Form No.26? (v) Whether in the facts and circumstances of the case, the demand of the purchase tax on and after 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 goods so manufactured. Conditions: 6. The eligible unit shall actually use the goods purchased as raw materials, processing materials or consumable stores in its industrial unit for which it has obtained the eligibility certificate 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 goods so manufactured. (c) In Form 26, for the words within the State of Gujarat the words in the industrial unit for which the eligibility certificate has been obtained have been substituted. 3. Amendment in Entry No.255(2) vide Government Notification dated 16.01.2002. 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) Insertion of condition (IA) after condition (I) or (IA) If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificate was in force on the date of the aforesaid purchase of goods. Place: Date: Signature : Status : 9. Form-26 (Entry No.255) as applicable in years 2000/2002 after the amended Entry No.255(2) vide Notifications dated 14.11.2000 and 16.01.2002 reads as under:- FORM-26 [Entry 255] Certificate by an eligible unit purchasing, goods for use in manufacturing 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 ______ (1) [in the industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted 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 of raw materials Naphtha and Natural Gas and after availing the benefit of exemption from the payment of purchase tax did not himself/itself used the same, but, instead, sold the same to another entity EPL and the said another entity EPL used the said raw materials for generating the electricity, which thereafter came to be sold to the respondent - ESL pursuant to the power purchase agreement. The submission on behalf of the respondent that as Naphtha and Natural Gas were transferred to EPL for generating the electricity, which in turn came to be used by the respondent ESL for manufacture of HRC, and it cannot be said that there is a breach of conditions of original Entry No.255(2) dated 05.03.1992, cannot be accepted. 11.1 The original Entry No.255(2) dated 05.03.1992 does not provide that the eligible unit after purchase of the raw materials instead of using the same by itself or himself can transfer/sold to another unit and the another unit can use the said r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any of the conditions provided in the original Entry No.255(2) dated 05.03.1992. 14.1 While the exemption notification should be liberally construed, beneficiary must fall within the ambit of the exemption and fulfill the conditions thereof. In case such conditions are not fulfilled, the issue of application of the notification does not arise. 14.2 It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in industrial policy and the exemption notifications. 14.3 The exemption notification should be strictly construed and given meaning according to legislative intendment. The Statutory provisions providing for exemption have to be interpreted in the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Entry No.255(2). In the subsequent notification, instead of the word him , the word used is it and it is specifically made clear that the raw materials so purchased shall be used in its industrial unit for which it has obtained the eligibility certificate for the manufacture of goods for sale within the State or outside the State of Gujarat or as packing materials in the packing of goods so manufactured. Even as per the original Entry No.255(2) dated 05.03.1992 and even as per the Form No.26 appended thereto, the eligible unit was required to actually use the raw materials purchased. In the subsequent notification, it is made explicitly clear that the raw materials so purchased are to be used by the eligible unit in its industrial unit. Therefore, the basic requirement that the eligible unit has to actually use such raw materials purchased by him is in no way modified and/or amended. On the contrary, the subsequent amended Entry No.255(2) dated 14.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led 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(2). Therefore, even assuming that the subsequent amended Entries vide second and third notifications are not to be made applicable in that case also the respondent -Essar Steel Ltd. being eligible unit was required to comply with and/or fulfill all the eligibility criteria/conditions mentioned in the original Entry No.255(2), which as observed hereinabove, by not actually using the raw materials by himself and transferring/selling the same to the non-eligible unit, the respondent was not entitled to avail the benefit of exemption even under the original Entry No.255(2). 18. Even as per Form No. 26 (Entry No.255), as per the declaration filed by the respondent, being eligible unit while purchasing goods for use in manufacturing goods, it was declared that the raw materials so purchased will be used by it in the manufacture of goods for sale. Thus, by not using the raw materials so purchased by it, the respondent eligible unit ESL has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provide that in such a situation also and despite the fact that raw material is not actually used by the eligible unit, which was required to be used even as per the declaration in Form No.26, such eligible unit shall be entitled to the exemption. No such promise was given. The wordings and the language used in the exemption notifications are very clear, simple and unambiguous. Therefore, when there was no such promise and/or representation, the demand cannot be said to be hit by the principle of promissory estoppel as observed and held by the Tribunal as well as the High Court in the impugned judgment and order. 20.2 The doctrine of promissory estoppel is an equitable remedy and has to be moulded depending on the facts of each case and not straitjacketed into pigeonholes. In other words, there cannot be any hard and fast rule for applying the doctrine of promissory estoppel but the doctrine has to evolve and expand itself so as to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 and to grant the benefit of exemption though not eligible under the exemption notification. 23. Now, so far as the levy of penalty is concerned, it is to be noted that the penalty is leviable under Section 45 and such a penalty is leviable under sub-sections (5) and (6) of Section 45 of the Act, 1969 and the penalty is leviable on purchase tax assessed. It provides that if the difference of tax paid and tax leviable/assessed is more than twentyfive percent, in that case, the dealer shall be deemed to have failed to pay the tax to the extent of the difference between the amount so assessed/re-assessed and the amount paid and, in that case, there shall be levied on such dealer a penalty not extending one and one-half times the difference as per sub-section (5). Therefore, there being difference of more than twenty five percent, penalty to the aforesaid extent shall be leviable. This is a clear case of false and wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X
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