IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR. JUSTICE P.BHAVADASAN FRIDAY, THE 4TH FEBRUARY 2011 / 15TH MAGHA 1932 WA.No. 1374 of 2010(E) ----------------------------- AGAINST THE JUDGEMENT/ORDER IN WP(C) NO.1455/2006 DATED 26/05/2010 ..................................... APPELLANT(S): PETITIONER ------------------------------------------- METROLLA STEELS LTD., PAIPRA, THRIKKALATHUR, MUVATTUPUZHA, ERNAKULAM DISTRICT, REPRESENTED BY ITS MANAGING DIRECTOR KURIAN VARGHESE. BY SRI.K.RAMAKUMAR, SENIOR ADVOCATE ADVS.SRI.K.S.HARIHARAN NAIR SRI.S.ANIL KUMAR (TRIVANDRUM) RESPONDENT(S): -------------------------- 1. STATE OF KERALA, REPRESENTED BY SECRETARY, TAXES (B) DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. 2. DY.COMMISSIONER (GENERAL), OFFICE OF THE COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. R1 & R2 BY GOVERNMENT PLEADER SHRI.VINOD CHANDRAN. THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 23/12/2010, ALONG WITH WA NO. 1542 OF 2010, THE COURT ON 04/2/2011 DELIVERED THE FOLLOWING: KRK THOTTATHIL B. RADHAKRISHNAN & P. BHAVADASAN, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - W.A. Nos. 1374 & 1542 of 2010 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 4th day of February, 2011. JUDGMENT Bhavadasan, J, Two writ petitions were disposed of by a common judgment. W.A. 1374 of 2010 is directed against the judgment in W.P.(C) 1455 of 2006 and W.A. 1542 of 2010 is against the judgment in W.P.(C) 16921 of 2006. 2. The petitioner company, which has two units, one engaged in manufacture of ingots and other engaged in the manufacture of iron rods and bars. The company was registered on 20.7.1995. According to the petitioner, he is entitled to exemption from payment of sales tax as per Ext.P2 notification, which is issued under Section 10 of the Kerala General Sales Tax Act. The said notification proposes an exemption from payment of sales tax for a period of seven years from the date of commencement of commercial production. In the case on hand, computation is to be made with effect from 24.12.1996. It is conceded that the exemption from payment of sales tax for a period of 7 years is restricted to the capital investment incurred by the unit. Additional investment will W.A. 1374 & 1542/2010. 2 not result in additional exemption. However, according to the petitioner, going by the wording of the notification, additional investment incurred by the unit after commencement of production , but during the period of exemption, would also be taken into account to arrive at the ceiling of exemption. This is discernible from the manual of tax exemption scheme, which is produced as Ext.P3. 3. The petitioner claimed that he had incurred additional investment by way of cost of construction of additional building, additional machinery etc. 4. The eligibility certificate for tax exemption has to be issued by the Kerala State Industrial Development Corporation. They issued Ext.P4 eligibility certificate produced in W.P.(C) 16921 of 2006. That was forwarded to the second respondent for further steps. However, relying on Ext.P9 Government Order, which is produced in W.P.(C) 1455 of 2005, the application was rejected by the second respondent. The petitioner filed a representation to the Government. After considering his request, by Ext.P11 reply, he was told that the matter was pending consideration before the Supreme Court and a decision would be taken after the Apex Court disposes of the petition before it. W.A. 1374 & 1542/2010. 3 5. In W.P.(C) 16921 of 2006, the petitioner has an additional grievance that KSIDC has not issued the necessary eligibility certificate. That compelled the petitioner to approach this court by way of W.P.(C) 16921 of 2006 to quash Ext.P14. 6. The respondents filed a counter pointing out that the final decision had not been taken in the matter since the issue was pending consideration before the Apex Court. It was pointed out that after the Apex Court disposes of the matters pending before that Court, a decision will be taken in the applications filed by the petitioner. While the petitions were pending, it appears that the Apex Court had disposed of the matters pending before it by remanding the matters to this court for fresh consideration. The learned Single Judge therefore deferred the decision in the writ petition till the writ appeals were disposed of by the court. It is against the said order that the present appeals have been filed. 7. W.A. 1477 of 2003, which was remanded from the Apex Court, has been disposed of by judgment dated 4.2.2011. 8. The claim of the petitioner in the present writ petitions is that going by Ext.P2 statutory notification he is entitled to tax exemption for the additional investment made during the pendency of W.A. 1374 & 1542/2010. 4 exemption, i.e. for a period of seven years from the date of commencement of commercial production. The investment so made cannot be treated as expansion, modernisation or diversification. It is contended that the view of the respondents that the petitioner will qualify for exemption only upto 23.11.1980 is unsustainable. According to him, the notification issued on that date is irrelevant in the case on hand. It is also contended that even assuming that there is such a notification, it cannot have retrospective effect. At any rate, it is contended that the additional investment will not fall within the definition of expansion, modernisation and diversification. Therefore, it is contended that the respondents are bound to grant exemption to the petitioner. 9. The contention that Ext.P9 produced in W.P.(C) 1455 of 2005, G.O.(Ms) No.169/98/ID dated 24.11.1998 cannot have retrospective effect cannot be countenanced in view of the specific finding of the Apex Court while remanding the writ appeals to this court that the said Government Order has retrospective operation. Therefore, the appellant is precluded from contending otherwise. 10. But the other contention needs to be considered. The appellant had specifically pointed out that the investment made W.A. 1374 & 1542/2010. 5 by them subsequent to the commencement of production does not fall within the scope of expansion, modernisation and diversification. These terms have been defined as follows: “(ii) 'Expansion' shall mean a total additional investment in fixed assets of not less than 25% of the 'Gross Block' as on the last day of the financial year immediately preceding the year in which the expansion was started and a minimum 25% increase in installed capacity compared to that the year immediately preceding the year in which the expansion was started. (iii) 'Modernisation' shall mean a total additional investment of not less than 25% in fixed assets compared to the 'Gross Block' as on the last day of the financial year immediately preceding the year in which such modernisation was started. (iv) 'Diversification' shall mean production of at least one new product and a total additional investment of not less than 25% in fixed assets compared to the 'Gross Block' as on the last day of the financial year immediately preceding the year in which such diversification was started.” This claim made by the petitioner needs to be scrutinized. Any how, the respondents have not taken a final decision in the matter and they had deferred their decision till the Apex Court had disposed of W.A. 1374 & 1542/2010. 6 the matter. As already noticed, the Apex Court had disposed of the matter and remanded the writ appeals to this court for consideration. This court disposed of W.A.1477 of 2003 by judgment dated 4.2.2011. The respondents are therefore directed to consider the claim made by the petitioner in accordance with what has been stated in the judgment in W.A.1477 of 2003. Thottathil B. Radhakrishnan, Judge P. Bhavadasan, Judge sb.