CIVIL WRIT JURISDICTION CASE No.3574 of 2000 ( In the matter of an application under Article 226 of the Constitution of India) ******* M/S SHAKTI TUBES LTD., a company incorporated under the provisions of the Companies Act, 156 having its registered office at Maurya Lok Complex, Bailey Road, Patna, now at 401, Kashi Place, New Dak Bunglow Road, Patna, through its Director, Dilip Kumar Churiwal ……………..Petitioner Versus 1. THE STATE OF BIHAR 2. The Commercial Taxes Tribunal, Bihar, Patna 3. The Commissioner of Commercial Taxes, Bihar, Patna 4. The Deputy Commissioner of Commercial Taxes, Patna West Circle, Judges Court, Road, Patna 5. The Industrial Development Commissioner, Bihar, Patna 6. The Director of Industries, Bihar, Patna…Respondents ******* For The Petitioner : Mr. Ajit Sinha, Senior Advocate With Mr. S.D.SANJAY For The Respondents : Mr. Lalit Kishore Additional Advocate General no.III ******* P R E S E N T THE HON'BLE MR. JUSTICE SUDHIR KUMAR KATRIAR THE HON'BLE MR. JUSTICE JYOTI SARAN S K Katriar, J. This writ petition has been preferred with the prayer to set aside the order dated 7.3.2000 (Annexure 5), passed by the Commercial Tax Tribunal, Bihar, Patna, in Revision Case No. PT -193/99 (M/s Shakti Tubes Ltd. v. State of Bihar), whereby the order passed by the authorities under the provisions of the Bihar Finance Act (hereinafter referred to as `the Act’), has been upheld, and it has been held that the petitioner is not entitled to the benefit of exemption from payment of purchase tax on raw materials used for manufacture of the products to the extent of sales effected by the petitioner outside the State of Bihar by stock transfer, in terms of the Industrial Incentive Policy 1993. It relates to the assessment year 1994-95. 2. A brief statement of facts essential for the disposal of the writ petition may be indicated. The petitioner is a Private Limited Company, incorporated 2 under the provisions of the Companies Act 1956, and has set up a steel plant at Hajipur, district Vaishali. The State Government had issued its industrial policy for rapid growth of industries in the State of Bihar, whereby incentives were given to entrepreneurs to set up industrial units in the State of Bihar, vide its resolution no.13730, dated 1.9.1986, which was extended upto 1993, by various orders of the State Government. The State Government noticed that the desired industrial growth had not been achieved in all the districts of the State. It was also felt that in the context of new Industrial Policy 1991 of the Central Government, and with the withdrawal of freight equalization policy, the incentives granted by the said industrial policy of the Bihar Government required new dimensions to achieve balanced industrial growth in a planned manner so that natural and human resources of the State are fully utilised and developed and the opportunities for employment are progressively increased. With these objectives clearly stated in the preamble, the new Industrial Incentive Policy 1993 (hereinafter referred to as `the Industrial Policy’; Annexure 1) came to be issued, replacing the previous industrial policy. New incentives were granted to the entrepreneurs to promote industrial growth in the State. The same was approved by the Bihar Cabinet on 10.6.1993, and was enforced with effect from 1.4.1993 (Annexure 1). It is relevant to state that the petitioner company had already commenced production before 1.4.1993, and its capital investment was less than Rs. 15 crores. 3. In view of the provisions of Section 7(3)(b) of the Act, and in purported exercise of powers under Paragraph 10.5 read with the provision of Paragraph 10.4 of the 1993 Industrial Policy, the State Government issued S.O. No.95, dated 4.4.1994 (Annexure 2), along with the forms appended thereto, purporting to impose certain restrictions on the grant of industrial incentives. We shall confine ourselves to the restrictions in so far as relevant in the present context. It is further relevant to state that the State Government in the Department of Commercial Taxes had issued certificate of exemption to the petitioner company on 29.9.1995 (Annexure 12), declaring therein that it shall be 3 exempted from levy of sales tax and purchase tax on the items mentioned in Paragraph 4 therein. 4. The petitioner submitted its returns and, inter alia, in view of clause 10.4 of the 1993 Policy, claimed the benefit of exemption from payment of purchase tax on raw materials used for manufacture of its products. The learned Assessing Officer, namely, the Deputy Commissioner of Commercial Taxes, Patna West Circle, passed the order of assessment on 15.7.1997 (Annexure 3), whereby he, inter alia, held that the petitioner is not entitled to the benefit of exemption from payment of purchase tax on the purchase of raw materials to the extent the finished products were sold outside the State of Bihar by stock transfer (vk<+r). Aggrieved by the order, the petitioner preferred revision application which was rejected by order dated 3.2.1999 (Annexure 4), passed by the learned Commissioner of Commercial Taxes in Revision Case No.CCS (S) 361 and 361A/1997-98. Aggrieved by the same, the petitioner preferred second revision application before the Tribunal which has been rejected by the impugned order. The two revisional authorities have concurrently upheld the view taken by the learned assessing authority. 5. While assailing the validity of the impugned order, learned counsel for the petitioner submitted that in view of the preamble of the Government notification bearing S.O.no.95, dated 4.4.94 (Annexure 2), the same does not create any new condition so as to deprive the petitioner of the benefits of Paragraph 10.4 of the Industrial Policy with respect to its sale of finished products outside the State of Bihar. If any such indication is to be found in the notification or the forms thereto, the same would be clearly ultra vires the scheme of things. He also submitted that S.O.No.95, dated 4.4.94, cannot act in contravention of the Industrial Policy because it has to be subservient to the same and is only meant to help achieve the goals set out in the policy. He relied on the judgment of the Supreme Court in case of State of Orissa vs. Tata Sponge Iron Ltd. [2007(8) SCC 189] (paragraph 13). He submitted in the alternative that, if any such condition is to be found in S.O.no.95, the same falls foul of Paragraph 10.4 of the Policy and has to be ignored. He relied on the 4 judgment reported in the case of M/s Suprabhat Steel Ltd. vs. State of Bihar & Others [1995 (2) PLJR 536], which was upheld by the Supreme Court in the case of State of Bihar vs. M/s Suprabhat Steel Ltd. and the analogous cases, reported in (1999) 1 SCC 31. He also relied on the judgment dt. 20.5.2008 of a Division Bench of this Court in CWJC No.2916 of 2000 (M/s Kalyanpur Cement vs.State of Bihar).He next submitted that, in view of the aims and objects of the Industrial Policy, Paragraph 10.4 has to be given its full play to achieve the aims and objects. He next submitted that the petitioner is also protected by the principles of estoppel. He relies on the judgment of the Supreme Court in State of Punjab vs. Nestle India Limited & Another [(2004) 6 SCC 465] (paragraphs 24 to 30, and 47). He next submitted that the authorities seemed to have overlooked the legal position that the provisions of Section 4 of the Act are subject to the provisions of Sections 5, 6 and 7 of the Act. In other words, in his submission, once there is a policy decision in terms of Section 7 of the Act granting certain exemptions, the provisions of Section 4 become inoperative with respect to the persons or companies covered by the Industrial Policy. He relied on the judgment of the Supreme Court in Associated Companies vs. State of Bihar [(2004) 7 SCC 642]. He lastly submitted that S.O.no.95 was in the nature of sub-delegated legislation, and cannot be repugnant to the dominant policy. 6. Learned Additional Advocate General III submitted that the writ petition is not maintainable because the petitioner had already moved this Court earlier by preferring CWJC No.7467 of 1994 (M/s Shakti Tubes Ltd. v. State of Bihar), 1995(2) PLJR 536, where the petitioner had the opportunity to raise this issue. The writ petition is barred by the provisions of Order 2, Rule 2, CPC. He submitted in the same vein that the petitioner is, therefore, precluded from challenging the validity of S.O.No.95. He relied on the judgment of the Supreme Court in Inacio Martins vs Narayan Hari Nayak [(1993) 3 SCC 123] (para-6). He next submitted that S.O.no.95 has been framed with the object to promote industrial growth in this State for the benefit of the people of the State and enhance Government revenue. The petitioner has transferred 5 major portion of its finished products outside the State of Bihar by stock transfer as a result of which this State would be deprived of its revenues like Bihar sales tax or central sales tax. He next submitted that Paragraph 10.5 of the Industrial Policy fully authorizes the Sales Tax Department to put conditions to prevent misuse of the benefits thereunder. Section 7(3) of the Act contemplates exemption with respect to sales. Transfer of stock from this State to another State is not sale. He relied on the judgment of the Supreme Court in Collector of Central Excise vs. Parle Exports (P) Ltd. [(1989) 1 SCC 345] (Para 17). He also submitted that the decision in Suprabhat Steel Ltd (supra) is inapplicable in the present case because the factual position in that case was different. That was a case of complete deprivation of the benefits which is not the situation here, and is instead a case of imposing reasonable restrictions to prevent misuse. He relied on the following reported judgments of the Supreme Court:- (i) [(1996) 6 SCC 44] Union of India vs. Dhanwanti Devi (para 9) (ii) [(1990) 2 SCC 71] Goodyear India Ltd. v State of Haryana (para 22) He next submitted that Section 4 of the Act is subject to Sections 5, 6 and 7. If a case is covered by the terms of the notification under Section 7(3) of the Act, then the same shall to that extent be entitled to the benefit of exemption, otherwise shall be subject to the rigors of Section 4 of the Act. He relied on the judgment of the Supreme Court in Hafiz Din Mohammad v State of Maharastra [(1962) 13 Sales Tax Cases 292] (at page 295). He lastly submitted that the petitioner shall have to appreciate the purpose of exemption. He relied on the judgment of the Supreme Court in CST vs Crown Re-Roller (P) Ltd. [(2007) 3 SCC 659] (para 17). 7. We have perused the materials on record and considered the submissions of learned counsel for the parties. It is evident from a plain reading of the preamble of the Industrial Policy that the State Government had reviewed the implementation of its previous industrial policy of 1986, alongwith its subsequent amendment(s), and felt very dissatisfied with the achievements, 6 which fell far short of the aims, objects, and the expectations. The State Government, therefore, reviewed the entire situation and framed the Industrial Policy. Its preamble and the relevant provisions are reproduced hereinbelow:- “With the objective of accelerating the industrial progress in the state the industrial incentive policy was announced by the state government vide its resolution no. 13730 dt. 1.9.1986, the period of which was extended upto 31.3.1993 vide its Resolution no.10441 dt. 28.12.92, Resolution no. 46 AIDC dated 6.9.89, Resolution No.1810 dt. 21.2.90. It has been experienced that desired industrial progress has not been achieved in all the districts of this state. It has also been felt that in the Context of new industrial policy 1991 of the centre and with the withdrawal of freight equalization policy, these industrial incentives require new dimensions to achieve balanced industrial growth in a planned manner so that the natural & human resources of the State are fully utilized and developed and the opportunities for employment are progressively increased. In the light of above mentioned facts, the State Govt. has decided to introduce a new industrial policy. The provisions of this policy are as follows:- (a ) This industrial policy shall be applicable to those industrial units which would come into production from 1.4.1993 to 31.3.1998. In regard to the date of production of small industrial units, the certificate issued by the respective General Manager, District Industry centre or Managing Director, Industrial Area Development Authority will be considered. In case of any dispute in the date of production the decision of the Director of Industries shall be final. In the case of Large & Medium Industries the certificate issued by the Director, Technical Development/Director of Industries shall be considered. (b) Units coming into production before 1.4.1993 shall be entitled to the benefits for the period as announced by the previous incentive policy. The entrepreneurs who have invested capital for the establishment of industry on the basis of previously announced incentive benefits before 1.4.93, but could not begin production till 31.3.1993 will have to give in writing to the Director of Industries within 30-days from the date of issue of this resolution, whether they want to avail of the benefits as announced by the previous incentive policy or the benefits of the new industrial policy, which has come into effect from 1.4.93. These entrepreneurs shall be entitled either for the complete package of the benefits announced by the previous incentive policy or for the package of benefits announced by the new industrial policy which came into effect from 1.4.1993. But they will not be entitled for the partial benefits both from the previous incentive policy and from the new incentive which came into effect from 1.4.93.” It is thus evident on a plain reading of the extracted portion that the State Government had felt dissatisfied with the results achieved as per the old policy, and also in view of the subsequent developments like enforcement of the new industrial policy of the Central Government, and withdrawal of freight equalization policy. The State Government, therefore, decided to remove the 7 constraints which had impeded the previous industrial policy so that the objects of industrialization of the State, use of its human resources, and opportunities of employment are increased. In other words, a very liberal policy was conceived and incorporated in the Industrial Policy. Obviously, therefore, a wide and expansive meaning has to be given and, in case of doubt or difficulty, the Courts would lean in favour of a liberal approach, and in favour of the entrepreneur. 8. The admitted position in the present case is that the petitioner company qualified for the incentives under clause (b) set out hereinabove. In other words, the petitioner company had commenced production before 1.4.1993, and its investment was less than 15 crores. It is nobody’s case that the petitioner had already availed of the incentives under 1986 Policy. We, therefore, proceed to examine whether or not the petitioner is entitled to the incentives under the Industrial Policy. The petitioner claims exemption from levy of purchase tax as contemplated by Paragraph 10.4 of the policy. Paragraph 10.4 and Paragraph 10.5 of the Industrial Policy are reproduced hereinbelow. “10.4 SALES TAX EXEMPTION ON THE PURCHASE OF RAW MATERIAL: (i) The facility will be admissible to the industrial units mentioned in Annexure-V in the following manner: a) Industrial Units coming into production between 1.4.93 to 31.3.98 whose investment on plant & machinery does not exceed Rs. 15.00 Crores shall be entitled for this facility for a period of seven years from the date of production. b) Such old industrial units whose investment on plant & machinery do not exceed Rs. 15.00 Crores on 1.4.93 shall be entitled for this facility for a period of seven years from 1.4.93. (ii) All other industries units shall continue to enjoy the existing facility of purchase of raw material on concessional rate of tax as announced and made applicable by the Sales Tax Department as before. 10.5 A separate order/notification for sales tax exemption will be issued by the Commercial Tax Department and the condition mentioned in that order/notification shall be binding in the final terms.” 9. The admitted position is that the petitioner is covered by clause (b). The petitioner company has used the raw materials for manufacture of steel and iron products. Equally admitted position is that a substantial portion of its end products were transferred to other State(s) by stock transfer, and a comparatively small portion was sold in the State of Bihar. The statutory authorities under the Act granted exemption from payment of purchase tax on 8 purchase of its raw materials to the extent the end products were sold in Bihar. But the benefit of exemption has been declined on the raw materials used to the extent the manufactured products were sent outside the State of Bihar by stock transfer, and is the subject matter of adjudication before us. This issue arises in view of notification no.95, dated 4.4.94 (Annexure 2), issued by the Sales Tax Department in terms of Paragraph 10.5 of the Industrial Policy set out hereinabove, and is reproduced hereinbelow:- 2 vizhy 1991 ,l0 vks0 95 fnukad 4 vizhy 1994&&& fcgkj foRr vf/kfu;e 1981 ¼fcgkj vf/kfu;e 5 1981½ ds Hkkx&1 dh /kkjk 7 dh mi&/kkjk ¼3½ ds [kaM ¼[k½ }kjk iznRr 'kfDr;ksa dk iz;ksx djrs gq, fcgkj jkT;iky fuEufyf[kr ,slh vkS|ksfxd bdkbZ] tks fcgkj ljdkj ds m|ksx foHkkx vFkok Hkkjr ljdkj ds l{ke izkf/kdkjh }kjk vuqeksfnr ,oa fucfU/kr gks vkSj tks 1 vizhy 1993 ls 31 ekpZ 1998 dh vof/k esa mRiknu esa vkrh gS vkSj ftudk e'khujh rFkk IykaV ij iwath fuos'k 15 djksM+ :i;k ls vf/kd u gks dks mRiknu frfFk ls rFkk ,slh iqjkuh vkS|ksfxd bdkbZ ftudh 1 vizhy 1993 rd e'khujh rFkk IykaV ij iwath fuos'k 15 djksM+ :i;k ls vf/kd u gks vkSj tks jkT; esa vFkok vUrjkZt; O;kikj ,oa okf.kT; ds Øe esa fcØh ds fy;s ekyksa dk fofuekZ.k djrh gS rFkk ftUgksaus vU; fdlh Hkh vkS|ksfxd izksRlkgu uhfr ds v/khu fdlh izdkj dh lqfo/kk ;k ykHk dk miHkksx ugha fd;k gS] dks 1 vizhy 1993 ls lkr o"kksZ rd fcØh ds fy;s ekyksa ds fofuekZ.k esa izR;{k :i ls visf{kr dPpk eky dh [kjhn ij ns; fcØh ds fy;s mn~xzg.k ls fuEu 'krksZ vkSj fucU/kuksa ds v/khu foeqfDr iznku djrs gSA 10. Learned counsel for the petitioner has submitted that there is no additional eligibility condition indicated in the notification of 4.4.94 (Annexure 2). It is thus evident that interpretation of the relevant portion of the notification is the determining factor. It appears to us from the relevant portion of the same set out hereinabove that, in order to qualify for the exemption, the entrepreneur must have manufactured the finished products in Bihar and may have been sold within the State or outside the State. In other words, the primary emphasis is on manufacture within the State, and then on its sale in Bihar or outside. It is not in doubt that the petitioner’s unit is situate in Bihar and the entire raw materials on which it seeks exemption from payment of purchase tax during the period in question was used for manufacture of finished products. We are of the view that the condition sought to be imposed by the respondents that, in order to qualify for exemption, the finished products must necessarily be sold within the State of 9 Bihar, or during the course of inter-State sale, is not discernible from the preamble, the aims and objects, the other provisions of the Industrial Policy, and the Act. We see no such restriction in the notification dated 4.4.94. 11. We must also notice the relevant provisions of the Act. Section 4 is headed `Levy of purchase tax’, and is reproduced hereinbelow: “4. Levy of purchase tax.- Subject to the provisions of sections 5, 6 and 7 of this part, every dealer liable to pay tax under section 3, who purchases goods in circumstances in which no sales tax is payable or has been paid on the sale price of such goods and either consumes such goods in the manufacture of other goods for sale or otherwise disposes of such goods in any manner other than by way of sale in the State or sale in the course of inter-State trade or commerce, shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on the sale price of such goods under section 12. It opens with the non-obstante clause and states that the provisions of Section 4 are subject to Sections 5, 6 and 7. Section 7 is particularly relevant and is reproduced hereinbelow:- “7. Exemption.- (1) No tax shall be payable under this part on sales or purchases of goods which have taken place – (a) in the course of inter-State trade or commerce; (b) outside the State; (c ) in the course of import of goods into, or export of the goods out of the territory of India (2) The provisions of the Central Tax Act 1956 (LXXIV of 1956) shall apply for determining when a sale or purchase of goods shall be deemed to have taken place in any of the ways mentioned in clauses (a), (b) or (c) of sub-section (1). (3) The State Government may, by notification and subject to such conditions or restrictions as it may impose, exempt from the sales tax or purchase tax – (a) sales of any goods or class or description of goods; (b) sales of any goods or class or description of goods to or by any class of dealers; (c )any sale or category or description of sales; and (d) purchase of any goods by any class of dealers or any purchase or category or description of purchases of such goods. (4) Where exemption from the levy of tax under this part on any sale or purchase of goods is claimed by a dealer under the provisions of this section or section 21, the burden of proof shall lie on such dealer and the prescribed authority may require the dealer to substantiate the claim in the prescribed manner.” It is evident that once the State Government issues a notification of exemption in terms of Section 7, no tax under the Act shall be payable on sales or purchase of goods which have, inter alia, taken place outside the State. Once a notification under Section 7 is issued, Section 4 of the Act ceases to operate 10 with respect to a dealer engaged in the manufacture or sale of the products. We are mindful of the provisions of sub-section (3) of Section 7 which is to the effect that it is open to the government to impose such conditions or restrictions as it may decide. A few conditions have been imposed by the said notification dated 4.4.94 (Annexure 2), namely, the unit must have commenced production between 1.4.1993 to 31.3.1998, or even older units, but in both cases its investment must not exceed Rs.15 crores as on 1.4.1993, and manufacture of its products must have taken place in the State, for the purpose of sale. We see no such restrictions in the said notification of 4.4.1994, as is sought to be canvassed on behalf of the respondents. Neither do we see any such condition in the preamble of the notification dated 4.4.94, issued in terms of Section 7(3)(b) of the Act, nor in Paragraph 10.4 of the Policy. In that view of the matter, the terms of Section 7(1)(b) of the Act, i.e. sales outside the State, must be allowed to have its full play, and the benefit of exemption shall be available to the entrepreneur even if the sale of goods takes place outside the State of Bihar, may be after stock transfer or vk<+r. 12. Learned counsel for the petitioner has rightly relied