TMI Blog1990 (9) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... dvocates, for the respondent. Prithvi Raj, Senior Advocate (R.B. Mishra, Uma Nath Singh, S.K. Gambhir, Vivek Gambhir, Satish K. Agnihotri, Ashok Singh and Mrs. V.D. Khanna, Advocates, with him) for the appellants. JUDGMENT The judgment of the court was delivered by RANGANATHAN J. - The Civil Appeal and S. L. P. No. 12054 of 1987 are by the State of Madhya Pradesh (M. P.). The respondents in these two matters and the petitioners in the other five special leave petitions are certain concerns in Madhya Pradesh assessable to sales tax (hereinafter compendiously referred to as "the assessees"). All these matters can be conveniently disposed of by a common judgment as they raise a common issue. The assessees' claim for exemption from sales tax for certain periods in question was accepted by the High Court in the case of G. S. Dail and Flour Mills and, following it, in the case of Mohd. Ismail (a case where the exemption sought for was originally granted but subsequently revoked). However, subsequently, a Full Bench of the High Court, in the case of Jagdamba Industries [1988] 69 STC 1, disapproved the view taken by the Division Bench in G. S. Dail and Flour Mills' case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer or class of dealers from any provision of the Act for such period as may be specified in the notification. (2) Any notification issued under this section may be rescinded before the expiry of the period for which it was to have remained in force and on such rescission such notification shall cease to be in force. A notification rescinding an earlier notification shall have prospective effect." In exercise of this power, the State Government issued the following notification on October 23/26, 1981, which it is necessary to extract in full here along with its annexure. It reads : "In exercise of the powers conferred by section 12 of the Madhya Pradesh General Sales Tax Act, 1958 (No. 2 of 1959), the State Government hereby exempts the class of dealers specified in column (1) of the Schedule below who have set up industry in any of the districts of Madhya Pradesh specified in the annexure to this notification and have commenced production after lst April, 1981, from payment of tax under the said Act for the period specified in column (2), subject to the restrictions and conditions specified in column (3) of the said schedule :-- ------------------------------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of commencement of production. 3. Dealers who-- (a) hold certificate of (a) 3 years, in the The dealer specified in registration under the M. P. case of an industry column (1) shall produce General Sales Tax Act, 1958 located in any of the tehsils before the assessing (No. 2 of 1958) ; of a district specified authority at the time of his in Part I of the annexure. assessment a certificate (b) are registered as (b) 5 years, in the issued by the Director of industrial units with the case of an industry Industries, Madhya Pradesh, Director-General of Technical located in any of the tehsils or any officer authorised by Development or by any of a district specified him for the purpose of certi- authority duly empowered in category 'A' of Part II fying that the dealer is elig- to do so by State or Central of the annexure ; ible to claim such exemption Government or hold a licence under the scheme of the under the Industrial (Deve- Industries Department being lopment and Regulation) the first dealer to have Act, 1951 (No. 65 of 1951), commenced production in have a fixed capital investment the industry set up by him between Rs. 1 crore in the tehsils refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n instructions that had been issued by the Government on January 12, 1983, pertaining to, the "grant of certificate of eligibility to new industrial units claiming exemption from/ deferment of payment of sales tax". The High Court took the view that these rules and instructions had no relevance to the claim for exemption put forward under the notification of October 23, 1981, and that, in any event, the executive instructions could not override the provisions of the statutory notification. This judgment was delivered on October 7, 1986, by Sohani C. J. and Faizanuddin J. The Full Bench, in its judgment of November 2, 1987 (Jagdamba Industries v. State of M. P. [1988] 69 STC 1 (MP)) took a different view. It has, in effect, attached importance to the rules and instructions referred to above and relied considerably on the history of the sales tax levy in the State as furnishing a proper and necessary background in which the terms of the notification of October 23, 1981, have to be read and interpreted. This history has, therefore, to be set out now in order to appreciate the validity of the conclusions of the Full Bench. Before doing this, it may be mentioned that the Full Bench co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and was elaborately set out in para 8 which need not be extracted here. A note added to para 8 had this to say: " Note . - (1) Unit which is otherwise entitled to subsidy may on its request be considered for grant of interest-free loan to the extent of entitlement of the subsidy. (2) No unit availing of concession under the scheme will be allowed to change the location of the whole or any part of the industrial unit or effect (sic) any substantial part of its total fixed capital investment within a period of five years after its going into production. (3) In case the ownership of a new unit changes during the period of availability of this concession, the new owner would be entitled to this concession for the balance period. (4) A closed unit which is re-started by an entrepreneur will not be considered to be a new unit for the purpose of this concession." Another set of "rules" came into force with effect from April 1, 1977, and superseded the earlier rules. These were more or less on the same lines as the earlier ones and were to apply to "new industrial units", and "existing industrial units", as defined in rules 2(a) and (b), on fulfilment of certain terms and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t them here. It is sufficient to set out their purport, quoting from the "instructions" of January 12, 1983, referred to a little later : "According to the first notification, the new industrial units are exempted from payment of sales tax. This notification covered sales tax payable by them on the products manufactured by them. It entitled them to exemption from payment of purchase tax on purchases made by them from unregistered dealers. According to the second notification, an industrial unit making purchases of its raw material from a registered dealer is exempted from payment of sales tax on the raw materials so purchased by him from the registered dealer. In other words, registered dealers selling raw materials to a new industrial unit are not required to charge any sales tax from the new industrial unit on sales made by them to such unit. The third notification exempts the goods manufactured by the new industrial units from the levy of sales tax even when these goods are sold by the dealers who have purchased these goods from the new industrial units. In other words, by issue of this notification, the goods manufactured by the new industrial units are fully exempted from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons granted earlier. The 1981 notification was intended to bring about only a: change in the mode of relief to the same categories of industries as were covered by the earlier schemes. The court observed (at page 11 of 69 STC) : "It appears that the mode of concessions granted by the aforesaid instructions involved some inconvenience to the industrial units and duplication of procedure inasmuch as the industrial unit had to first collect the sales tax and the tax so collected and paid along with the returns were later on refunded to the industrial unit in the shape of subsidy. To avoid the duplication of procedure the State Government thought it fit to altogether exempt the industrial units from payment of sales tax or defer the payment of sales tax." The court observed, vis-a-vis the various instructions referred to above (at page 12 of 69 STC) : "These instructions also contain a complete procedure for application and grant of eligibility certificate by the Industries Department. Thus, it is clear from these instructions that the question of grant of eligibility certificate by the Industries Department is not an empty formality but, before granting the certificate, the Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any concession or exemption from payment of sales tax was ever given to the traditional industries and not a single example to that effect is available. The State Government while issuing instructions from time to time have been specifically excluding the traditional industries. Thus the executive authorities and the highest agency and its officers charged with the duty of the administration and enforcement of the said notification are not only conversant with the underlying policy of the Government but they are also intimately acquainted with the economic significance of the tax in question and exemption therefrom. The interpretation of the Government regarding the construction of the 1981 notification read with the instructions (annexures R. I, II and III) excluding the traditional industries, which has been consistently followed and acted upon accordingly for a period over a decade, cannot be given a go-by but has to be accepted. In view of the above discussion the impugned notification dated July 3, 1987 (annexure G), is hardly of any consequence. More or less it is a clarification of the 1981 notification and not a rescission of any grant." The contention that "instructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se is the correct one and not that enunciated by the Full Bench, also raised an alternative contention on the footing that, at best, the notification of 1981 was ambiguous and lent itself to two plausible interpretations. Assuming that there was initially some ambiguity regarding the applicability of the notification of October 23, 1981, to traditional industries, it had been dispelled by the instructions of January 12, 1983. Once these instructions were published, any assessee setting up a traditional industry took a calculated risk on the issue as to whether the notification should be confined, on proper interpretation, only to non-traditional industries and could not rely on the doctrine of equitable estoppel. Pointing out that the assessees in the Full Bench case were persons who had set up their industries after January 12, 1983, Sri Salve argued that the dismissal of the special leave petition against the Full Bench judgment will not affect his case as this assessee had set up its industry, admittedly, before January 12, 1983. The position is similar in the case of Mohd. Ismail. Learned counsel, therefore, submitted that, even if the 1983 instructions were rightly held by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and that the Director of Industries should have granted them a certificate to this effect. It is the denial of this certificate which has brought the assessees to court. The question for consideration is whether the Director of Industries can refuse the exemption certificate on a consideration not specified in the notification. Prima facie, no. All the conditions for exemption have to be, and are, set out in the notification itself and all that the Director of Industries has to do is to satisfy himself that those conditions are fulfilled ; he cannot travel beyond the terms of the notification. He can see whether the dealer falls under the description in column No. (1), whether he has set up a new industry in the M. P. State, whether he has commenced production after April 1, 1981, and whether he has opted for the deferment scheme. The condition about the dealer filing returns regularly would seem to be one under the purview of the Sales Tax Officer rather than one under the Director of Industries. If these conditions are fulfilled, the exemption certificate will have to be granted. That seems the straight and simple interpretation of the notification. But, it is said for the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are other difficulties in reading the provisions of the earlier schemes into the notification. In the first place, the earlier schemes specifically provided that "traditional industries" were outside their purview. The language of the notification, which is a piece of subsequent legislation, is silent about this. This is itself indicative of a legislative intent to widen the scope of relief and grant exemption to traditional industries as well: vide G. P. Singh : Interpretation of Statutes, 4th edition, pp. 767-768. The omission to specifically exclude "traditional industries" as was done in the earlier schemes in the notification gains added significance in view of section 12 which specifically requires that all conditions and restrictions governing an exemption should be specified in the notification. Secondly, the attempt of the State to read a further condition into the notification excluding "traditional industries" from the exemption is based on the words which require that the Director of Industries should grant a certificate (a) that the dealer is entitled to claim the exemption and (b) that he has not opted for the scheme of deferring the payment of tax under the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this context a notification of October 21, 1986, referred to by the High Court outlining exemptions under sections 6 and 7AA. It excludes from exemption, in addition to saw mills, flour mills etc. (which the State calls traditional industries), various other industries (total numbering 26) specified in clause XIII thereof. This changing definition of eligibility for exemption also shows that there was no common or identical group of beneficiaries intended under the various instructions or notifications and that each set of instructions or notifications issued from time to time defined only the categories exempted from its purview and nothing else. The exemption list under one was not meant to be carried over into another. We are, therefore, of the opinion that it is not permissible to restrict the scope of the notification in the manner suggested. We may point out that, in construing the notification thus, we are only giving effect to a well-settled rule that may be illustrated by a reference to the decision in Hansraj Gordhandas v. H. H. Dave [1969] 2 SCR 253 ; AIR 1970 SC 755. In that case, notifications had been issued under rule 8 of the Central Excise Rules, 1944, granting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the construction of the words of the notification or by necessary implication therefrom, the matter is different but that is not the case here. In this connection we may refer to the observations of Lord Watson in Salomon v. Salomon and Co. [1897] A. C. 22, 38: 'Intention of the Legislature is a common but very slippery phrase, which, popularly understood may signify anything from intention embodied in positive enactment to speculative opinion as to what the Legislature probably would have meant, although there has been an omission to enact it. In a Court of Law or Equity, what the Legislature intended to be done or not to be done can only be legitimately ascertained from that which it has chosen to enact, either in express words or by reasonable and necessary implication.' It is an application of this principle that a statutory notification may not be extended so as to meet a casus omissus. As appears in the judgment of the Privy Council in Crawford v. Spooner [1846] 6 Moo P. C. 1, 9: '. . . We cannot aid the Legislature's defective phrasing of the Act, we cannot add, and mend, and, by construction, make up deficiencies which are left there.' Learned counsel for the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption from sales tax", the pamphlet stated that "new industrial units coming into production after April 1, 1981," will be entitled to exemption for a period depending upon the district where it is set up or could alternatively exercise an option to defer payment of sales tax by a period of 10 years. It did not mention anywhere that the industry should not be a traditional industry. (2) The Nigam allotted a plot of land of the extent of one acre to enable the assessee to establish its unit in the Industrial Area, Mandideep, District Raisen. (3) Other incentives as to power, interest and capital subsidy were extended to the assessee. Thus, says counsel, the State "lured" the assessee to set up a unit in a record time of ten months and with a substantial capital outlay of over Rs. 10 lakhs in a backward area. These incentives were meant to be co-extensive with the concession regarding sales tax. He contends that these representations and acts are sufficient to found a claim of "equitable estoppel" against the State. We are unable to accept this argument. The respondents have stated in their counter-affidavit that the Nigam had acted in error and misconstrued the notification and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stems P. Ltd. v. Union of India [1989] 65 Comp Cas I ; [1988] 2 SCC 299, para 61. But this apart, the principle will not be applicable here for two reasons. In the first place, the instructions of 1983 do not anywhere "expound" the terms of the notification. They do not give any indication that the State had applied its mind to the precise terms of the notification or their interpretation. They do not explain or clarify that, though the notification is silent, it has been intended that the limitations of the previous schemes should be read into it. Secondly, the cases referred to will show that the doctrine applies in cases where the plea is that, though the language of the statute may appear to be wide enough to seem applicable against the subject in particular situations, the State itself--which was the progenitor of the statute--had not understood it in that way. But, to apply the doctrine to widen the ambit of the statutory language would, however, virtually mean that the State can determine the interpretation of a statute by its ipsi dixit. That, certainly, is not, and cannot be, the scope of the doctrine. The doctrine can be applied to limit the State to its own narrower inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be obtained by the industrial unit. However, pending the issue of the scheme, the grant of certificate of eligibility should not be held up." Incidentally, we may point out that the first part of the para does not clarify that the eligibility certificate is not to be granted to "traditional industries". But, so far as the present point is concerned, it is categorically stated that no further notifications are required to be issued and that they are needed only to define the scheme for deferment of tax. Indeed, rules were framed in order to implement the deferment scheme which came into force with effect from April 1, 1983. We shall refer a little later to these rules. Secondly, there is no warrant for assuming that the notification envisages conditions for the issue of the eligibility certificate other than those specified by itself. There is nothing in the language of the notification to suggest that anything further is needed to enable the Director of Industries to grant the exemption. Without the guidelines, the requirement for an exemption certificate would not become an "empty formality" as suggested by the Full Bench. The Director of Industries has to issue the same after s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or based on past practice, it is liable to be struck down on the ground of impermissible delegation of legislative power to the executive. This, certainly, they cannot do. A further development which has been relied on by the State but does not really seem to help its case may now be referred to. State Act 25 of 1982 inserted section 22D in the Act in the following terms : "22D. Special provisions relating to deferred payment of tax by industrial units. -Notwithstanding anything contained in any other provision of this Act, a registered dealer, who is, (a) registered as a small-scale industrial unit with the Industrial Department of the Government of Madhya Pradesh ; or (b) registered with the Director-General of Technical Development as an industrial unit ; or (c) registered as an industrial unit by any authority duly empowered to do so by the Government of Madhya Pradesh or the Central Government ; or (d) holding a licence under the Industries (Development and Regulation ) Act, 1951 (No. 65 of 1951 ) ; and who, in each case, has or may set up a new industrial unit in any district of Madhya Pradesh if eligible for grant of the facility of deferred payment of tax und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d instructions. The application shall be made to the General Manager, District Industries Centre of the district, where the new industrial unit is or is proposed to be located and shall be processed further in accordance with the said instructions. The certificate of eligibility in respect of large and medium scale units shall be issued by the Director of Industries (Government of Madhya Pradesh) and in respect of small scale units by the said General Manager, and shall carry a specific and distinct number given by the said officer. (2) A copy of the certificate of eligibility shall be forwarded by the officer issuing the certificate to the appropriate Sales Tax Officer, i.e., the Sales Tax Officer in whose circle the industrial unit is registered as dealer. The Sales Tax Officer receiving a copy of the certificate of eligibility shall maintain a record of the same in such form as may be directed by the Commissioner and shall not enforce recovery of the tax payment whereof has been shown to have been deferred in the certificate of eligibility. (3) The new industrial unit shall be entitled to defer the payment of the tax for a period of ten years. This entitlement shall be avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax, the Government in the separate Revenue Department have already issued the following notifications : (i) F. No. A3-41-81(35)-ST-V, dated 23rd October, 1981. (ii) F. No. A3-41-81(25)-ST-V, dated 1st May, 1982. (iii) F. No. A3-41-81(24)-ST-V, dated 1st May, 1982. (iv) F. No. A3-41-81(3l)-ST-V, dated 29th June, 1982. With a view to enabling those new industrial units who opt for the alternative concession of deferment of payment of tax, a special provision in the shape of section 22D has been inserted in the Madhya Pradesh General Sales Tax Act, 1958, with effect from 1St April, 1981, according to which the facility of deferring the payment of tax will become available subject to the provisions of the scheme providing for the grant of incentives for setting up the new industrial units ; The aforesaid rules have, therefore, been framed to formulate the scheme of deferred payment of tax." first sight, that since the relief by way of deferment It might appear, at of tax is only in the nature of an alternative to the provision for exemption and the former is not available to traditional industries because of rule 14 above, the same should be the position in regard to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on can be given to a notification rescinding an exemption granted earlier. In the interpretation we have placed on the notification, the July 3, 1987 notification cannot be treated as one merely clarifying an ambiguity in the earlier one and hence capable of being retrospective ; it enacts the rescission of the earlier exemption and, hence, can operate only prospectively. It cannot take away the exemption conferred by the earlier notification. We would like to add that we agree with the view of the Full Bench that, if the notification is interpreted as done by it or even hold it to be ambiguous, there is no scope for the assessee to invoke the doctrine of promissory estoppel. We have already dealt with this aspect in regard to the cases in which the State has appealed. In the other cases covered by the Full Bench decision, the mere fact that an exemption was initially granted and then revoked would be insufficient to found the claim of estoppel particularly when it has been found that the assessees started production after January 12, 1983, and claimed exemption very much later. But since, in our view, the terms of the notification are clear and envisage no denial of exemption to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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