IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER WEDNESDAY, THE 19TH NOVEMBER 2008 / 28TH KARTHIKA 1930 W.A.No.2193 of 2008(E) ------------------------------------------- AGAINST THE JUDGEMENT IN W.P.(C).NO.29428/2004-C, DATED 04/02/2005 .................... APPELLANT/ PETITIONER:- ---------------------------------------- M/S.PUTHANANGADI FLOUR & OIL MILLS, KALLETTUMKARA, THRISSUR DISTRICT, REPRESENTED BY ITS PARTNER, N.J.NIXON. BY ADV. SRI.ARIKKAT VIJAYAN MENON SRI.HARISANKAR V. MENON SMT.MEERA V.MENON SRI.MAHESH V.MENON RESPONDENTS/ RESPONDENTS:- ---------------------------------------------------- 1. DISTRICT INDUSTRIES CENTRE, THRISSUR, REPRESENTED ITS GENERAL MANAGER. 2. THE DEPARTMENT OF DISTRICT INDUSTRIES AND COMMERCE, REP. BY ITS DIRECTOR, THIRUVANANTHAPURAM. 3. STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT, DEPARTMENT OF INDUSTRIES (B), THIRUVANANTHAPURAM. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 19/11/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- H.L.Dattu,C.J. & A.K.Basheer,J. ------------------------------------------ W.A.No.2193 of 2008-E ------------------------------------------- Dated, this the 19th November, 2008 JUDGMENT H.L.Dattu,C.J. Appellant before us is a dealer, registered under the provisions of the Kerala General Sales Tax, 1963 (“Act” for short). (2) Appellant is engaged in the production and sale of coconut oil and oil cake. It is also a Small Scale Industrial Unit (“SSI Unit” for short). According to the appellant, it started its commercial production with effect from 14.1.1989. (3) On a request made by the appellant, the General Manager of District Industries Centre, Thrissur had granted sales tax exemption on the original investment made by the appellant-industry for a period of five years, with effect from 14.1.1989, for an amount of Rs.6,70,014/-. (4) The appellant could not enjoy the sales tax exemption so granted, by the General Manager of District Industries Centre, for various reasons. (5) The appellant-industry became a sick industrial unit. Thereafter, the industry made an application for grant of exemption from payment of tax due under the Act for the period from 7.10.1996 to 6.10.2001. The request of the appellant-industry was accepted by the General Manager of District Industries Centre, Thrissur. However, had restricted the exemption W.A.No.2193 of 2008-E - 2 - to the unavailed portion of tax exemption granted earlier in a sum of Rs.5,51,346/- for the period from 7.10.1996 to 6.10.2001. (6) The appellant-industry was not satisfied with the exemption so granted by the General Manager of District Industries Centre. Therefore, had filed an appeal before the Member Secretary, State Level Committee. The said authority, by its order dated 24.5.2003, while rejecting the appeal, has cancelled even the exemption that was granted by the General Manager of District Industries Centre, Thrissur in a sum of Rs.5,51,346/- with effect from 7.10.1996. For passing the impugned order, the authority has kept in view the notifications issued by the State Government - S.R.O.No.440/91 and S.R.O.No.1729/93. Apart from taking into consideration those notifications, the authority had also relied upon the Government Order, in number G.O. (Ms).169/95/ID dated 1.11.1995, which provides for sales tax benefit only to the specific industries. Oil Mill is not one included in the list. The order reads as under:- “The Committee examined the case and found that, as per proviso 5 of the manual for STE issued in G.O.(Ms) No.169/95/ID dated 1.11.1995, only those sick units in permitted lines of activity as at the time of applying for tax exemption would be eligible for tax exemption. Sales Tax Exemption to Coconut Oil Mills stands withdrawn with effect from 1.4.1991, vide SRO No.440/91. As at the time of the unit's applying for STE in 1997, the relevant notification in force is SRO No.1729/93 and it takes effect from W.A.No.2193 of 2008-E - 3 - 1.1.1994. As per proviso (ix) (a) to para 11 of SRO No.1729/93, crushing copra and producing coconut oil and oil cake is not eligible for STE. Therefore, it is also seen that the exemption granted to the unit for the unavailed quantum in 1997 for 5 years from 7.10.1996 is irregular. In the circumstances stated above, the SLC resolved to: (i) reject the unit's appeal for allowing the additional investments in D.G.Set and Copra Drier. (ii) direct the DLC, Thrissur to cancel the STE (unavailed portion of Rs.5,.51,346/-) sanctioned to the unit on 12.11.1997 for coconut oil and cake for 5 years period from 7.10.1996 after giving notice to the unit and report compliance. ORDER In the circumstances stated above the appeal of M/s.Puthenangadi Flour and Oil Mills, Kallethunkara, Thrissur for allowing the additional investment in DG set and copra drier is hereby rejected. The General Manager, District Industries Centre, Thrissur will cancel the Sales Tax Exemption (unavailed portion of Rs.5,51,346/-) sanctioned to the unit on 12-11-97 for coconut oil & cake for the 5 year period from 7-10-96 after giving notice to the unit and after placing the case before DLC and report compliance. Sd/- Director of Industries and Commerce.” (7) The aforesaid order was questioned by the appellant in W.P. (C) No.20329/03 by relying on the letter issued by the Secretary to W.A.No.2193 of 2008-E - 4 - Government dated 25.9.1993. This Court by its order dated 27.6.2003, had remanded the matter to the Director of Industries and Commerce, Thiruvananthapuram to reconsider the claim of the appellant in the light of letter issued by the Secretary to the Government dated 25.9.1993. (8) After disposal of the Writ Petition, the second respondent - State Level Committee by its order dated 26.2.2004 has rejected the appeal and while doing so has observed:- “The State Level Committee heard the representative of the unit. Relying Government letter dated 25.9.1993 (Ext.P5) it was contended that the pattern of assistance by way of sales tax exemption to Sick SSI units sanctioned in G.O.(MS) No.113/88/ID dated 28.7.1988 is different from the pattern of Sales Tax Exemption to new and existing units sanctioned in G.O.(P) No.94/89/TD dated 24.7.1989 and G.O.(P) No.68/90/TD dated 31.3.1990. Also contended that the withdrawal of sales tax exemption to new Oil Mills is no way connected with the units covered by SURP which is entirely a different scheme, and withdrawal of sales tax exemption to Oil Mills need not be a ban to extend the assistance to an oil mill under the SURP. It was, therefore, requested to reconsider the order passed and allow the benefit. The Committee considered all these and after detailed examination of the case held as follows:- (a) In Government letter dated 25.9.1003 (Ext.P5 in WP(c) No.20329/03) there was a clarification in the manner as contended by the petitioner. This was only a letter. (b) Subsequently, in 1995 Govt. had issued the rules W.A.No.2193 of 2008-E - 5 - and guidelines of the scheme of STE in the form of “Sales Tax Exemption Manual”, vide G.O.(Ms). No.169/95/ID dated 1.11.1995. In this Government order it has been specified that “only those sick units in permitted lines of activity as at the time of applying for Tax Exemption would be eligible for the benefit”. Therefore, the Govt. letter dated 25.9.1993 (Ext.P5) has no force with effect from 1.11.1995. Ext.P5 letter stands superceded by GO(MS) No.169/95/ID dated 1.11.1995. (c) Moreover, the petitioner's case for tax exemption has to be considered and disposed under relevant statutory notifications issued under Section 10 of the KGST Act. The relevant notification applicable to the petitioner is SRO No.1729/93 dated 3.11.1993 which came into force w.e.f. 1.1.1994. It is to be noted that the petitioner's unit undertook revival programme in 1996, i.e. much after 1.1.1994 when the said notification was in force. Ext.P5 Govt. letter dated 25.9.1993 ceased to be in force w.e.f. 1.11.1995 i.e. the date of the Govt. Order. As per SRO No.1729/93 in force with effect from 1.1.1994, coconut oil and oil cake are not eligible for STE with effect from 1.4.1994, vide para 11 (ix)(a) thereof. (d) The petitioner applied for the benefit in 1999. From (b) and (c) above it is very clear that as at the time of applying for the benefit of tax exemption, coconut oil and oil cake are not eligible for tax exemption and also that Ext.P5 Govt. letter ceased to be in force as on 1-11-1995. Hence the contention of the petitioner as raised in W.P.(C) No.20329/03 do not have merit. In view of the above the W.A.No.2193 of 2008-E - 6 - State Level Committee resolved that Order No.FC3/9222/02 dated 24.5.2003 (Ext.P4 in WPC No.20329/03) requires no revision and that it holds good. Sd/- Director of Industries and Commerce. (9). The first respondent by his order dated 27.7.04 has given effect to the order passed by the State Level Committee. It is the correctness or otherwise of these orders, is called in question by the appellant before this court in W.P.(C) No.29428/04. (10). The learned Single Judge has rejected the Writ Petition vide his order dated 30.11.2007. It is the correctness or otherwise of the said order, is the subject matter of this appeal. (11). The coconut oil industry, under those notifications, is mentioned in the negative list. Therefore, the authority is of the view that the General Manager, District Industries Centre, ought not to have granted any exemption to the appellant-industry, since it is running a SSI Unit, manufacturing coconut oil and oil cake. (12) Sri.Harisankar V.Menon, learned counsel appearing for the appellant, would submit, that, the 2nd respondent herein, even while rejecting the appeal filed by the appellant, ought not to have disturbed the orders passed by the first respondent granting exemption in a sum of Rs.5,51,346/-. Secondly, the orders so passed by the 2nd respondent could have given only prospective effect and the benefit should not have been W.A.No.2193 of 2008-E - 7 - withdrawn retrospectively. (13) To support his contention, the learned counsel relies upon the observations made by a learned Single Judge of this Court in Solaman P.Mathew v. State of Kerala & others [(2001) 9 KTR 166]. In the said decision, the Court has stated as under: “Held: The claim of the petitioner that the bona fide thought that his unit will be granted sales tax exemption because the authorities also granted exemption for other similar units and was under the legitimate expectation that the “eligibility” certificate would be granted to it and that is why he did not collect sales tax for the period from June 1, 1987, cannot be accepted. It is presumed that every citizen of the land is aware of the legal position. The ignorance of the District Industries Centre also in this regard will not come to the rescue of the petitioner. That apart, another aspect has to be noted in this connection. Though the petitioner applied for sales tax exemption that was granted only on November 1, 1989. So, the failure on the part of the petitioner in not collecting the sales tax can be justified only for the period thereafter till the date of cancellation of the certificate. In view of the matter, it has to be held that the petitioner is liable to pay sales tax for the period from 1st June, 1987 to 31st October 1989, ie., from the date of starting the business upto the date of granting the “Eligibility certificate”. The petitioner is not liable to pay sales tax for the period from 1st November 1989 to 16th November 1991 ie, from the date of issue of “Eligibility W.A.No.2193 of 2008-E - 8 - Certificate” to the date of the cancellation of the said certificate”. (14) The learned counsel also relies upon the communication of the Secretary to Government to the Director of Industries & Commerce, Thiruvananthapuram dated 25.9.1993, wherein the State Government has stated: “So withdrawal of Sales Tax Exemption to new oil mills is in no way connected with the units covered by SURP which is entirely a different scheme and withdrawn of S.T. Exemption to oil mills need not be a bar to extend assistance to an oil mill under S.U.R.P. Hence the benefits including S.T. exemption under the scheme in G.O.(Ms).113/88/ID. Dated 28.7.1988 may be given to all S.S.I. Units under SURP including such oil mills”. (15) We have carefully considered the submissions made by Sri.Harisankar V.Menon, the learned counsel appearing for the appellant. In our view, it is difficult to accept the contentions canvassed, for the reason, that, the appellant-industrial unit is engaged in the manufacture of coconut oil and oil cakes. Admittedly, that industry is put in the negative list in S.R.O. No.440/91 and S.R.O.No.1729/93 and the Government Order, in number G.O.(Ms).169/95/ID dated 1.11.1995. In view of these notifications, even the sick industrial unit, which is running the oil mill, since it is put in the negative list, is not eligible for any exemption from payment of tax under the Act. Without noticing this, the General Manager of District Industries Centre had W.A.No.2193 of 2008-E - 9 - granted certain exemptions to the appellant-industrial unit. The orders so passed by the General Manager of District Industries Centre is now corrected by the first appellate authority in the appeal filed by the appellant. The order passed by the General Manager of District Industries Centre, since it is contrary to the notifications issued by the State Government, the said order can be characterised as a void order and with the help of a void order, appellant cannot contend before this Court, that, while rejecting the appeal filed by the appellant-industry, the 2nd respondent ought not to have cancelled the exemption granted earlier. (16) In support of our thinking, we rely upon certain observations made by a Bench of this Court, to which one of us (H.L.Dattu,C.J.) was a member, in the case of K.Premerajan v. State of Kerala [(2008) 14 VST 202], wherein this Court has stated, that, if it is wrongly given, can be corrected by a competent authority to bring it in conformity with the notification. In view of the law declared by this Court in the aforesaid decision, in our opinion, we cannot be taking exception to Exhibit P7 order passed by the 2nd respondent. (17) In view of what has been said by us in the aforesaid decision, we do not know, whether, the decision rendered by a learned Single Judge of this Court in Solaman P.Mathew's case (supra) requires reconsideration. Therefore, without commenting on the said decision, by merely relying upon the decision of the Division Bench in K.Premerajan's W.A.No.2193 of 2008-E - 10 - case (supra), we reject the Writ Appeal. Ordered accordingly. H.L.Dattu Chief Justice A.K.Basheer vku/dk Judge