IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR. JUSTICE P.BHAVADASAN THURSDAY, THE 3RD MARCH 2011 / 12TH PHALGUNA 1932 WA.No. 991 of 2003(E) ------------------------------ AGAINST THE JUDGEMENT/ORDER IN OP.32947/2000 Dated 10/04/2003 .................... APPELLANT(S): PETITIONER ------------------------------------------ PEEKAY RE-ROLLING MILLS (P) LIMITED, A COMPANY INCORPORATED UNDER THE COMPANIES ACT REPRESENTED BY ITS MANAGING DIRECTOR P.K.AHAMMED HAVING ITS REGISTERED OFFICE AT KOYASSAN KOYA ROAD, KOZHIKODE. BY SRI.S.GANESH SENIOR ADVOCATE BY ADV. SRI.C.P.MOHAMMED NIAS RESPONDENT(S): RESPONDENT ---------------------------------------------- 1. THE SECRETARY TO GOVERNMENT, FINANCE AND TAXES, GOVT. OF KERALA, SECRETARIAT, THIRUVANANTHAPURAM. 2. THE COMMISSIONER OF TAXES , REVENUE DEPARTMENT, GOVT. OF KERALA, SECRETARIAT, THIRUVANANTHAPURAM. 3. THE DIRECTOR OF INDUSTRIES, DIRECTORATE OF INDUSTRIES AND COMMERCE, TRIVANDRUM. 4. ASST. COMMISSIONER OF SALES TAXES (ASSESSMENT), SPECIAL CIRCLE- I, KOZHIKODE. SPL. GOVERNMENT PLEADER SRI.VINOD CHANDRAN (TAXES) THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 23/12/2010, ALONG WITH WA NO. 1316 OF 2003 WA NO. 1561 OF 2003 WPC NO. 19516 OF 2009 THE COURT ON 03/03/2011 DELIVERED THE FOLLOWING: tss THOTTATHIL.B.RADHAKRISHNAN & P.BHAVADASAN, JJ. ----------------------------------------------------------------------------- WA Nos.991, 1316, 1561 of 2003 & WP(C) No.19516/09 ----------------------------------------------------------------------------- Dated 3rd March 2011 Judgment “C.R.” Bhavadasan, J. As common issues arise for consideration and since the parties are also same, these writ appeals are heard together and disposed of by this common judgment. 2. The question raised for consideration in all these writ appeals is whether the refusal to grant exemption from payment of sales tax to the petitioners' unit for various periods, is justified in law. 2A. WA No.991/03 arises from the judgment in OP No.32947/00, WA No.1316/03 arises from OP No.32807/00 and WA No.1561/03 from OP No.23472/01. Since the facts of the three original petitions are almost identical, for the purpose of these writ appeals, the facts as narrated in OP No.32947/00 are being referred to in this judgment. WA 991/03 & connected cases 2 3. According to the petitioner, his unit is run by a company incorporated under the Companies Act. It produces steel ingots and iron rods. It is a medium scale industrial unit. The unit was registered on 06.09.1991 as per Ext.P1 certificate. According to the petitioner, the motivation and incentive for setting up the unit was a notification issued by the State Government, offering tax exemption as per Ext.P2. The notification has been issued under Section 10 of the KGST Act and it is a statutory notification. As per Ext.P2, the exemption is made available to various units for a period of seven years. It was acting on Ext.P2 that various units like the petitioner's unit were set up. The benefit under Ext.P2 notification can be taken aid of only from the date of commencement of production. The only restriction imposed was that the aggregate of the exemption contemplated under Clause 4 of Ext.P2 shall not exceed 100% of the capital investment of the unit. The petitioner's unit commenced production on 31.03.1995. WA 991/03 & connected cases 3 Going by Clause 11 of Ext.P2, his unit is entitled to exemption. Subsequent to 31.03.1995, an additional capital investment was made by the petitioner. As on 31.03.1996, the total capital investment of the petitioner's unit was 3,96,62,211.62. Since the petitioner's unit satisfied all the necessary conditions for exemption as envisaged under Ext.P2, his unit got tax exemption for a period of 7 years from 31.03.1995 to 30.03.2002. 4. Initially, the petitioner's unit started production with a high tension capacity of 1500 KVA. Subsequent to the commencement of production and additional capital investments made, for making the unit more efficient and productive, the petitioner needed more power. After commencement of the production on 31.03.1995, the petitioner made an application for exemption from payment of sales tax before the Director of Industries and Commerce. The said authority has to issue an eligibility certificate and that was issued on 20.06.1997. By WA 991/03 & connected cases 4 proceedings dated 19.12.1997, a certificate of exemption was issued to the petitioner, finding that the petitioner's unit is eligible for sales tax exemption to the tune of Rs.2,65,70,965/- for a period of seven years form 31.03.1995 to 30.03.2002. A copy of the said proceedings is produced and marked as Ext.P3. Even while the initial application was pending, the petitioner had invested heavily, i.e., nearly to the tune of five crores in the industry, resulting in additional contract load of 4500 KVA. Claiming exemption for the additional investment, Ext.P4 application was made by the petitioner. It had to be routed through the Director of Industries and Commerce. However, without any justification, Ext.P4 application was rejected by order dated 27.05.1998 on the ground that the petitioner's unit is a power incentive unit having a load of more than 2500 KVA and therefore, it is not entitled to tax exemption. The said order was produced as Ext.P5. The petitioner challenged the said order by filing OP No.20154/98. The learned Government Pleader submitted that a mistake had been committed by the authority and on that basis, the OP WA 991/03 & connected cases 5 was disposed of directing the respondents therein to forward the application for exemption to the State Level Committee for consideration. The petitioner claims to have made a representation dated 17.03.1998 to the State Level Committee. Since no action followed either by the Director of Industries and Commerce or the State Level Committee in pursuance of the directions issued in the judgment in the above said OP, the petitioner had to move this court again by filing OP No.24212/99, seeking a writ of mandamus commanding the second respondent to act on the application of the petitioner. In the said OP, the State took the stand that the Director of Industries and Commerce had sought for a clarification from the Government as to the eligibility of the units by the petitioner from sales tax exemption for the additional investment made by him, relying on the Government Orders dated 26.11.1993 and 24 11.1998. According to the petitioner, Ext.P9 GO has only prospective effect and it cannot apply to the unit of the petitioner. WA 991/03 & connected cases 6 5. According to the Director of Industries and Commerce, the petitioner's unit came to be included in the negative list on account of clause 7 of Ext.P8 which excluded the units whose total power requirement exceeded 2500 KVA. The petitioner points out that it was without adverting to GO (MS) No.102/94/ID dated 19.04.1994 that the application for exemption filed by him was kept pending. That Government Order stated that the exemption continued to be available to all such industries, which were provisionally registered before 31.12.1993. The petitioner's unit having been registered on 06.09.1991, was entitled to the benefit. OP No.24212/99 was disposed of with a direction to the Government to furnish the clarification sought for within a prescribed time limit and directing the authorities concerned to take appropriate decision on the basis of the clarification issued by the State. The petitioner had preferred a writ appeal against Ext.P11 judgment. Pursuant to the directions in Ext.P11 judgment, the Director of Industries and Commerce passed an order declining sales tax exemption in respect of the WA 991/03 & connected cases 7 capital investment for the period from 01.04.1996 to 31.03.1997. Copy of the said order is Ext.P12. Ext.P12 was challenged on various grounds. 6. In OP No.32807/00, the very same unit challenged the rejection of exemption for additional investment as per Ext.P3 order for the period from 01.07.1995 to 31.03.1996. 7. In OP No.23742/01, the very same unit sought tax exemption for the period from 19.11.1996 to 23.12.2000 as per Ext.P6 application. That was rejected by Ext.P8 order. The same is challenged on the same grounds as in the other original petitions. 8. The common grounds taken in all these original petitions were that the petitioner was entitled to exemption as per S.R.O. No.1729/93 issued under Section 10 of the KGST Act. It was contended on behalf of the petitioner that the reasons given for rejecting their application for exemption was untenable and the interpretation given to clause 7 of the Gos concerned namely, 26.11.1993 and 24.11.1998 cannot be accepted. WA 991/03 & connected cases 8 The petitioner in these original petitions also contended that since the unit has been registered provisionally prior to the cut off date mentioned in the GO dated 19.04.1994, the unit is entitled to the benefit of the exemption, which the authorities have not considered. 9. In all the original petitions, the State took the stand that going by the Government Orders dated 26.11.1993 and 24.11.1998, units like the petitioner's unit became ineligible for exemption as they had a consumption of power exceeding 2500 KVA. Thus, the State sought to sustain the rejection of exemption. The original petitions were heard jointly and the learned Single Judge accepted the contentions of the State and dismissed all the writ petitions. The petitioner carried the matter in respective writ appeals as already mentioned. The writ appeals were allowed and the State was directed to grant tax exemption to the petitioner. 10. The State took up the matter in appeal before the Apex Court as Civil Appeal Nos.8031, 8032 and 8033 of 2004. The contention taken by the appellants WA 991/03 & connected cases 9 before the Apex Court was that clause 7 of the Government Order dated 27.11.1993 was a comprehensive one, covering various industries made mention of therein. The State contended that the exemption granted as per the notification dated 04.11.1993 i.e., Annexure-2, stood withdrawn by the issuance of the GO dated 27.11.1993. The Apex Court approved the GO dated 27.11.1993. The Apex Court also held that the GO dated 24.11.1998 had retrospective effect. When the GO dated 19.4.1994 came up for consideration before the Apex Court, it was noticed that the said GO has not been considered by this Court while dealing with the matter. 11. According to the Apex Court, clause 3 of the said GO has considerable impact on the issues involved in the proceedings. The Apex Court also observed that the order dated 21.10.2000 issued by the Director of Industries had also not been considered by this court. It was also observed by the Apex Court that this Court had omitted to consider clause 3 of the GO dated 01.11.1995. The specific contention taken by the State before the Apex WA 991/03 & connected cases 10 Court was that this Court ought to have read the word “and” contained in clause 7 of the said GO as “or”. The Apex Court said that since this specific issue has not been considered by this court, the matter requires reconsideration by this Court and accordingly, remanded the matter to this court. This is how, the writ appeals have come up before this court again. WP(C) No.19516/09 12. The petitioner in this case was also running a manufacturing unit of iron rods and ingots. The unit is said to have been set up in 1992 and it was claimed that it was eligible for exemption. According to the petitioner, during the year 1999-2000, massive investments were made availing of financial assistance so as to increase the efficiency of the units. When exemption was sought for, it was declined on the ground that the petitioner's unit fall within the negative list. The petitioner says that he had taken up the matter before this court and this court declined to interfere. The matter was pending in a writ appeal. While so, the petitioner was served with Ext.P2 WA 991/03 & connected cases 11 order purportedly issued under Section 23(3) of the KGST Act. In the meanwhile, the petitioner would say that the writ appeals filed by him were allowed and it was declared that his unit was entitled to exemption. The State took up the matter before the Apex Court. The Apex Court set aside the judgments in the writ appeals passed by this court and remanded the matter for fresh consideration with certain directions. Without prejudice to the right of the petitioner, he paid the amount under the Amnesty Scheme. This would be evident from Ext.P3. The petitioner claims that his unit is liable to get the exemption and he points out that by way of abundant caution, he had filed an appeal before the appellate tribunal as evident from Ext.P5. The petitioner claims similar benefits as the writ appellants in the writ appeal. 13. The learned senior counsel for the appellant Sri.S.Ganesh raised the following three points for consideration : WA 991/03 & connected cases 12 (i) According to the learned counsel, in clause 7 of Annexure-8 Government Order, the latter portion should be read conjunctively and not distinctively. In other words, the word 'and' should be read as 'and' only and not as 'or'. (ii) Even assuming that it cannot be so done, the petitioner's unit having been registered before 31.12.1993, goes out of the negative list as stated in the notification as per clause 2 of the same notification. (iii) The authorities have understood the notification in a particular manner and have given effect to it. Almost all other units, except the petitioner's unit, have been given exemption and the petitioner's unit alone has been isolated and discriminated. That could not be done. The learned counsel for the appellant relied on the decisions in “Organo Chemical Industries v. Union of India (1979) 4 SCC 573), Berger Paints India Limited v. Commissioner of Income Tax (2004) 12 SCC 42), R&B Falcon (A) Pty. Limited v. Commissioner of Income Tax (2008) 12 SCC WA 991/03 & connected cases 13 466), State of Karnataka v. Balaji Computers (2007) 2 SCC 743), Union of India v. Kaumudini Narayan Dalal (2001) 10 SCC 231) and Indian Oil Corporation Limited v. Collector of Central Tax (2007(13) SCC 803), in support of his contentions. 14. The learned Government Pleader, on the other hand, contends that the word 'and' occurring in the Government order produced as Annexure-8 should be read as 'or' and if that be so, the decision taken by the Revenue, declining exemption to the petitioner, is perfectly justified. In support of his contention, the learned Government Pleader relied on the decision report in Attorney General v. Beauchamp (1920(1) KB 650) and R. v. Oakes (1959) 2 All.E.R. 92). As regards clause 2 relied on by the appellant, it was contended that it should be read along with clause 3 and clause 2 cannot be read in isolation. As regards the third contention, it was pointed out that merely because a wrong has been committed in favour of the WA 991/03 & connected cases 14 person, it does not mean that the petitioner is also entitled to the same benefit. Point No.1 : - In order to appreciate the controversy involved in these appeals, it will be necessary to refer to Annexure-2 SRO No.1729/93 dated 03.11.1993 published on 04.11.1993 issued under Section 10 of the KGST Act. That is the basic Government Order. As far as the cases on hand are concerned, the unit of the petitioner falls within the 'medium and large scale units' contemplated under Annexure-II. Clause 4 of the Government Order mentions that new industrial units under 'medium and large scale industries' can enjoy tax exemption for a period of seven years from the date of commencement of the commercial production. As far as the existing units are concerned, which undertake diversification, expansion or modernisation on or after 01.04.1993, the same benefit is given from the date of such diversification, expansion or modernisation is completed. WA 991/03 & connected cases 15 15. There is no dispute that the petitioner's unit falls within the ambit of the aforesaid Government Order. As already noticed, he is, therefore, entitled to tax exemption for a period of 7 years from the date of commencement of production. Clause 10 may also have some relevance. Sub-clause (iii) of Clause 10 reads as follows : “In the case of new industrial units other than public sector undertakings under medium and large scale industries, the aggregate exemption in respect of sales tax, purchase tax, surcharge and central sales tax together shall not exceed 100% of the fixed capital investment of the unit.” 16. The next relevant GO is Annexure-8 dated 26.11.1993. It refers to the earlier Government orders. Annexure-8 GO happened to be issued due to power shortage and it was decided to withdraw all types of concessions to industrial units included in the negative list. This GO is of considerable importance in the present case. WA 991/03 & connected cases 16 The contention is regarding the interpretation to be given to sub-clause 7 and clauses 2 and 3 of the said GO. They read as follows : “7. Power intensive units based on electro thermal/electro chemical processors or units where total power requirement exceeds 2500 KVA of contract load and where cost of power is more than 25% of cost of production of the items manufactured except where the units generate their power requirements in excess of 2500 KVA of contract load by own captive power. 2. All units in the above list provisionally registered on or after 31.12.1993 will not be eligible for the State Investment Subsidy. Provisional registration for the purpose of large and medium units will be taken to mean, the date of S.I.A. registration/filling I.E.M. with Government of India Letter of Intent/submission of application for financial assistance, as the case may be. WA 991/03 & connected cases 17 3. Expansion/modernisation/diversification of existing units in the areas included in the list above shall also not be eligible for any financial assistance/loan/tax exemption from Government unless application has been made by the unit for the purpose and received on or before the cut off date viz. 31.12.1993.” 17. The next GO that may have relevance is Annexure-10 GO dated 19.04.1994. So far as the cases on hand are concerned, the relevant portion is clause 3, which reads as follows : “3. Government wish to clarify that the financial assistance/loan/tax exemption from Government, including electricity tariff concession and duty exemption will continue to be/will be available to all industries which were provisionally registered before 31.12.1993. Those industries listed out in para-1 of the GO WA 991/03 & connected cases 18 read above and provisionally registered on or after 31.12.1993 along be ineligible for financial assistance/loan/tax exemption from Government, including electricity, tariff concession and duty exemption. Provisional registration for the purpose of large and medium units will be taken to mean as in para-2 of the G.O. read above, viz., the date of S.I.A. registration/filing of I.E.M. with Government of India/letter of intent/submission of application for financial assistance, as the case may be.” Then comes Annexure-9 order dated 24.11.1998. Here also, we get a repetition of clause 7 contained in Annexure- 8 order. It is seen that all types of steel Re-rolling mills and units manufacturing iron ingots are brought within the negative list. However, it is stated that the said order will be effective from the date of order and will be applicable to all units taking provisional registration of ISI/SIA as the case may be, from the date of the order. WA 991/03 & connected cases 19 18. Annexure-20 order issued by the Industries Department reiterates clause 7 already made mention of and also asserts that the units that fall under the negative list will not be entitled to any exemption. However, it is significant to notice clause 3 which says that the units provisionally registered on or after 01.06.1993 will not be eligible for State Investment Subsidy, which indicates that those units which are registered before the said date will be entitled to that benefit. 19. In these cases, the interpretation to be given to clause 7 of Annexure-8 order comes up for consideration. As already noticed, clause 7 takes care of two situations. They are (1)In order to be excluded from the category of units, which are entitled to the subsidy and other benefits, the unit must be one based on electro- thermal/electro-chemical processors and (2) units where the total power requirement exceeds 2500 KVA of contract load and where cost of power is more than 25% of cost of production of the items manufactured. However, units WA 991/03 & connected cases 20 which generate the power requirement in excess of 2500 KVA of contract load by own captive power, are entitled to the benefit. 20. On a plain reading of the provision, it is clear that in the latter portion, in order to go outside the ambit of the benefits of tax exemption, the unit has to satisfy both the requirements i.e., it has to have the power requirement which exceeds 2500 KVA of contract load and the cost of power is more than 25% of the cost of production of the items manufactured. 21. The State, on the other hand, wants 'and' to be read as 'or'. For the said purpose, the learned Government Pleader relies on the decisions already made mention of. It is true that under certain circumstances, 'and' could be read as 'or' or vice versa in order to avoid resulting absurdity. 22. In the Principles of Statutory Interpretation by Justice G.P.Singh at page 250, this aspect is dealt with. It is stated that the word 'or' is normally WA 991/03 & connected cases 21 distinctive and 'and' is normally conjunctive, but at times, they are read as vice versa to give effect to the manifest intention of the Legislature as disclosed from the context. Usually, according to the author, a distinction can be made between positive and negative conditions prescribed by a statute for acquiring a right or benefit. Positive conditions separated by 'or' are read in the alternative but negative conditions connected by 'or' are construed as cumulative and 'or' is read as 'nor' or 'and'. 23. In Sutherland Statutory Construction Third edition at Note 4923, it is observed as follows : “Where to or more requirements are provided in a section and it is the legislative intent that all of the requirements must b fulfilled in order to comply with the statute, the conjunctive 'and' should be used. Where a failure to comply with any requirement imposes liability, the disjunctive 'or' should be used. There has been, however, so great laxity in the use of these terms that WA 991/03 & connected cases 22 courts have generally said that the words are interchangeable and that one may be substituted for the other, if to do so is consistent with the legislative intent.” In Earl.T.Crawford's Construction of Statutes, Note 188 deals with disjunctive and conjunctive words. The relevant portion reads as follows : “In ordinary use, the word 'or' is a disjunctive that marks an alternative which generally corresponds to the word 'either'. In fact of the meaning, however, the word 'or' and the word 'and' are often used interchangeably. As a result of this common and careless use of the two words in legislation, there are occasions when the court, through construction, may change one to the other. This cannot be done if the statute's meaning is clear, or if the alteration operates to change the meaning of the law. It is proper only in order to more accurately express, or to carry WA 991/03 & connected cases 23 out the obvious intent of the legislature, when the statute itself furnishes cogent proof of the error of the legislature and especially where it will avoid absurd or impossible consequences, or operate to harmonize the statute and give effect to all of its provisions.” The above aspect was considered in a recent decision reported in Competition Commission of India v. Steel Authority of India (2010(10) SCC 744), wherein it was held as follows : “43. It is a settled principle of law that the words 'or' and 'and' may be read as vice versa but not normally. '.....You do sometimes read 'or' as 'and' in a statute..........But you do not do it unless you are obliged, because 'or' does not generally mean 'and' and 'and' does not generally mean 'or'. (Green v.