SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 1/14 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR. S.B. CIVIL SALES TAX REVISION PETITION NO.629/2000 Commercial Taxes Officer, Rajsamand. versus M/s Shri Rolex Marbles Pvt. Ltd., Gomati Choraha, Rajsamand. PRESENT HON'BLE Dr.JUSTICE VINEET KOTHARI Mr.Rishabh Sancheti, for Mr.V.K. Mathur, for the Revenue Mr.Dinesh Mehta, for the assessee. REPORTABLE DATE OF JUDGMENT : 26th February, 2009. JUDGMENT 1. This revision petition filed by the Revenue agaisnt the order of the Tax Board dtd.6.3.2000 calls for interpretation of notification Sr. No.827 dtd.6.12.1990, which is reproduced hereunder for ready reference: “S.No.827 : F.4(66) FDGr.IV/82-84 dated 6.12.1990 S.O.255:- In exercise of the powers conferred by S.4(2), RST Act, 1954, the State Govt. hereby exempts from tax, the sale of all machinery for setting up in Rajasthan of Cement, Ceramic, Tobacoo, Textiles, Sugar, Electronics, 100% E.O.Us. registered as such with Govt. SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 2/14 of India and having a fixed capital investment of Rs.1 crore or more, Food processing industries and local mineral based Industries on the following conditions :- 1. Only those Units which will come into production between 1.4.1990 to 31.3.1997 would be eligible to avail of this facility. 2. Such machinery is sold to a manufacturer, who holds a valid certificate of registration under sub-section (1) of S.6 or 6B of the said Act. 3. The manufacturer so purchasing the machinery gives to the selling dealer, a declaration in writing that the machinery will be used in the setting up of the above mentioned industries. 4. The selling dealer holds a valid E.C. For which a fixed annual fee of Rs.10/- is payable. 5. The dealer claiming exemption proves to be satisfaction of the AA that he has neither charged nor demanded any tax on sale of such goods. This notification shall be effective from 1.4.1990 and shall remain in force upto 31.3.1997. For pre. Ref. See S.No.578 dated 25.9.1985. Superseded by S.No.972 dated 27.3.1995. SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 3/14 2. The Tax Board held in favour of the respondent – assessee that under the said notification since the machinery in question was purchased by the assessee for setting up of the industry in Rajasthan of the specified nature, namely Mineral based industry and other requisite conditions of the notifications were also satisfied, the respondent – assessee was entitled to purchase the machinery excempt from the payment of tax under the said notification. The Assessing Authority had however imposed the tax @4% denying the benefit of exemption under the said notification and imposing tax under Section 5 (CC) of the RST Act, 1954 by resorting to reassessment powers under Section 12 of the Act. 3. The first appeal filed by the assessee before the Dy. Commissioner (Appeals) failed and therefore, the assessee preferred a second appeal before the Tax Board which held in favour of the assessee as aforesaid. 4. Mr. Rishabh Sancheti, learned counsel for the petitioner - Revenue urged that the words “setting up of industry” in the said notification dtd.6.12.1990 has to be construed in light of operative period of said notification being within 1.4.1990 to 31.3.1997 and as per condition No.1 of the said notification only those Units which will come into production between 1.4.1990 to 31.3.1997 would be eligible to avail of this facility. Therefore, admittedly, since the SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 4/14 respondent – assessee had commenced commercial production on 17.7.1990 as per the certificate issued by the Distt. Industries Centre, the process of setting up of industry has to be construed as over on the said date 17.7.1990 and purchase of machinery after the said date namely, on 29.11.1991 in question cannot be given the benefit of exemption under the said notification. He relied upon the decision of this Court in the case of ACTO V/s M/s Srinath Minerals Industries, Nathdwara – S.B. Sales Tax Revision No.493/2000 decided on 14.11.2005 in which the learned Single Judge of this Court held as under : “I have considered the submissions made by the learned counsel as far as word “setting” is concerned. It cannot be construed to mean expansion. Expansion has a very definite connotation given into it and expansion also has setting up into itself because in expansion, there is also setting up. Even in expansion, the machinery is set up. Such kind of expression are not available in the notification dated 06.12.90. Setting up will be required for a kind of activity as and when an industry is established for the first time. Even in expansion, setting up is required but that expansion cannot be included in the language as is given in the notification dated 06.12.90 because the setting up as has been SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 5/14 exempted from tax is for an industry which has a fixed capital of a designated amount. In cases of expansion, it would require otherwise calculations and this would mean additional amount. Investment of additional amount is not the one which is conceived if the notification dated. 06.12.90 is read in its entirety, it does not make out a case where bifurcation of the original investment and investment on expansion can be seen. If additional investment cannot be seen into it, then it has to be read in relation to a new industry. In that view of the matter, the order of the Tax Board is not liable to be sustained and is hereby set aside. The exemption has been granted on the terms which is un-sustainable in law. That being the position, the matter is remanded back to the Tax Board for decision in accordance with law.” Sd/- (Bhagwati Prasad),J. 5. As against this, the learned counsel for the respondent - assessee Mr. Dinesh Mehta submitted that upon a comparative study of the previous notification which was superseded by the aforesaid notification dtd.6.12.1990 in question would indicate that while the first notification serial No.578 dated 25.9.1985 in this regard did not have words “new industry” in it as is the case in the present notification dtd.6.12.1990, but in the notification which SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 6/14 came in between on 27.3.1995 namely serial No.972, the words were “setting up of new industry in Rajasthan”. He submitted that since the words “new industry” is conspicuous by its absence in the notification dtd. 6.2.1990 which is applicable in the facts of the present case as the machinery in question was purchased after the said notification came into force on 29.11.1991, therefore, irrespective of commencement of commercial production of the unit on 17.7.1990, the machinery in question purchased on 29.11.1991 was also eligible for availing exemption from tax under the said notification. He relied upon the decision of Rajasthan Taxation Tribunal created under Article 323B of the Constitution of India in the case of M/s Shurvi Colour Chem (P.) Ltd. V/s State of Rajasthan, Commercial Taxes Department reported in 1998 (3) STO 277 which substituted the jurisdiction of the High Court at the relevant point of time in sales-tax matters. In the said case, The Division Bench of the Taxation Tribunal (comprising of Hon'ble J.P. Bansal, Judicial Member and Hon'ble Mr. R.K. Nair, Technical Memver) held as under: “The notification of 6.12.1990 mentions only the setting up of industries in certain fields including local mineral based industries. The intention of extending such exemption is to encourage additional industrial investment in these fields in the State. It does not SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 7/14 mention that such exemption would be available only to new industrial units and would exclude investment made in expansion of existing industrial units. New industrial units are of course included but cases of expansion do not automatically get excluded. In any case, it warrants a liberal construction being placed in view of the notification's primary objective of encouraging additional industrial investment. Even in common parlance expansion would be a part or continuation or extension of the process of setting up of industries and the notification uses the words “setting up of industries” and not “setting up of new industries” and there can be no warrant for placing such a narrow construction on it so as to exclude cases of expansion from it. At any rate it is also settled law that in the case of ambiguity in taxation matters the interpretation most favourable to the assessee has to be preferred. The dealer, therefore, was entitled to avail of the exemption from tax on the purchase of machinery made by it. In this view of the matter the question of not having used the machinery for the declared purpose so as to incur the liability for penalty under section 16(1)(k) of the RST Act would not arise.” SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 8/14 6. The learned counsel for the assessee also relied upon another judgment of this Court in the case of ACTO V/s M/s Shri Vijaya Industries, Kesarpura, Sheoganj reported in 2007 (18) Tax Up Date 35 in which another coordinate bench of this Court dealing with earlier notification S.No.578 dtd.25.9.1985 and distinguishing the judgment in the case of Shri Nath Minerals Industries , relied upon by the learned counsel for the Revenue, held as under: “In Sri Nath Minerals Industries' case (supra), the controversy was entirely different inasmuch in that case, the contention of the assessee itself was that he purchased the machinery for expansion of its existing industrial unit. For expansion purpose, he purchased the machinery later on after few years. In said case, it was not even the case of the assessee that his initial project of establishing the industrial unit was in phased manner and the assessee could have started the production of certain goods on receipt of the machinery and thereafter he started the production of goods from another machinery after receipt of the machinery from the vendor. Contrary to above facts, in the present case, in the order of the Deputy Commissioner (Appeals), it is clearly mentioned that the original plan of the assessee was to SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 9/14 set up industry for manufacturing granite and marble slabs from the marble blocks as well for manufacturing of the granite and Marble tiles. It is also mentioned in the order itself that before start of the production even of marble slabs and granite slabs, the assessee gave order for the machinery for manufacturing of marble and granite tiles. In that view of the matter, the Deputy Commissioner (Appeals) as well as the Tax Board, Ajmer rightly held that the assessee purchased all the machineries for manufacturing of the marble and granite tiles for which order was placed prior to start of production of marble and granite slabs and it is not a case of expansion of the assessee's industrial unit but is a case of setting up the industry by the assessee by installing the machines for manufacturing of granite and marble slabs and manufacturing of the marble and granite tiles. Here in this case, it may be noticed that not only the order for purchase of machinery was placed prior to production from the earlier purchased machines but there is no much gap in getting another machines for manufacturing of the marble and granite tiles. In these circumstances, I do not find any merit in this revision and the same is hereby dismissed.” SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 10/14 sd/- (Prakash Tatia)J. 7. Having considered the rival submissions and upon closer study of the notification in question and judgments cited at the Bar, this Court is of the considered opinion that the respondent- assessee was entitled to exemption from tax under the said notification dated 6.12.1990 on the purchase of machinery in question on 29.11.1991. A perusal of the assessment order itself indicates that the stand taken by the respondent – assessee before the Assessing Authority was that orders for all the plants and machineries in question were placed at the same time, but the machinery in question was delivered late by the supplier and it came to the respondent – assessee's business premises only on 29.11.1991. All the machineries were ordered for setting up of the industry of specified nature. The date of commencement of the production falls within the operative period of notification dtd.6.2.1990 and the industry in question is of the specified nature and the fact that other relevant conditions of the notification are satisfied is not even in dispute from the side of the Revenue. The only thing which is sought to be argued and requires consideration is as to what meaning should be attributed to the words “setting up of industry in the State of Rajasthan”. The continuous tense of the verb “setting up” used in the notification in question itself indicates that the words “ setting up of industry” are intended to be a process of setting up of plant and machinery for the purpose of SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 11/14 production of certain things. It is only proper and conducive to construe this word “setting up of industries” as a continuous process rather than a 'switch on and switch off' thing. Setting up of industry takes its own time and can only be construed to be a continuous process which begins on a particular date and ends after a gap of time which may take months or years depending upon the nature of industries which is to be set up at any place. Though it is not endless or limitless process, but so long as it is commenced within the operative period of the notification and closed within a reasonable period thereafter, it can continue to be covered within the ambit and scope of the Notification dtd.6.12.1990. There is no need to take a narrow and pedantic approach in the matter and the beneficial legislation in the form of subordinate legislation contained in the notification in question does not call for any such narrow construction at all. The contention raised by the assessee before the assessing authority that the orders were placed for all the machineries simultaneously and delivery of one machinery in question was delayed by the supplier and therefore, it could be installed only after commencement of production with the machineries already received on 17.7.1990 viz. On 29.11.1991, was brushed aside by the assessing authority as an afterthought. One wonders how without holding any proper enquiry in this matter, it could be said to be so by the assessing authority. There is no mention of the date when the orders for these machineries were placed , when these machineries were received and SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 12/14 when it was actually installed in the assessment order itself. Brushing aside of the contention of the assessee in this manner by the Revenue Authority who is supposed to be a fact finding body and hold enquiry in this matter at the time of assessment can hardly be appreciated. It is such weak findings in the assessment order which leads to its crumbling when such orders are tested by the higher appellate authorities and the Courts of law. 8. Be that as it may, since other facts are not in dispute that the machinery in question was purchased during the operative period of notification dtd.6.12.1990 and the words “new industry” is conspicuous by its absence in the notification dtd.6.12.1990, the judgment relied upon by the learned counsel for the Revenue is of little help to the Revenue. On the contrary, the judgments relied upon by the learned counsel for the respondent in the case of M/s Shurvi Colour Chem (P.) Ltd. (supra) and ACTO M/s Shri Vijaya Industries, Kesarpura, Sheoganj (supra) clearly support the contention raised by Mr. Mehta. The judgment of learned Single Judge in Srinath Minerals' case did not take into account earlier Division Bench decision of Taxation Tribunal in Shurvi Colour Chem's case. It is also distinguishable from the facts of the present case, as it is not the claim of the assessee here that such exemption was claimed under expansion category, as it was in Srinath Minerals' case. The judgment of this Court in Vijaya Industries' case which turned in favour of the SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 13/14 assessee on akin facts, is applicable on all fours to the facts of the present case and therefore, Division Bench decision of Taxatino Tribunal in Shurvi Colour Chem's case and decision of coordinate bench decision in Vijaya Industries case are respectfully followed in the present case. 9. The commencement of commercial production on 17.7.1990 does not militate against the concept of setting up of industry in the State of Rajasthan under the notification dtd.6.12.1990, even if some part of the machinery to complete the process of 'setting up of industry” is received later than the date of commencement of commercial production which is verified and certified by the Dist. Industries Centre for variety of purposes like grant of subsidy etc. Even otherwise, this Court is of the opinion that the process of expansion of industry is also not excluded from the ambit and scope of notification dtd.6.12.1990 which is included within the scope of words 'setting up of industry”. There is no such exclusion in the notification. Thus, the concept of expansion and setting up of industry are not two different concepts militating against each other for the purpose of the said notification. One fails to understand for what purpose the assessee would have purchased the machinery in question except for 'expansion of its production capacity' or 'setting up of industry' itself. The exemption from tax is really on purchase of machinery which is on one single day depending upon the nature of SBS.T. REVISION PETITION NO.629/2000 – CTO, RAJSAMAND V/S M/S SHRI ROLEX MARBLES PVT. LDTD. AND ORS. JUDGMENT DTD.26.2.29009 14/14 purchase of contract like F.O.R. Destination or Ex-works etc. and fulfillment of condition of purchase of such machinery being for 'setting up of an industry' is an ex-post facto condition which is required to be fulfilled by the assessee industry. If the purchase of machinery is within the life period of the Notification, the basic condition of exemption is fulfilled. This does not, in the opinion of this Court, do any violence to the well settled cannons of interpretation of exemption under taxing statutes viz. strict scrutiny at the point of entry into the arena of exemption and thereafter useful play in the joints concept to give purposive interpretation to achieve the objective of exemption itself. Since no such cut off date or water tight compartment is sought to be placed in the said notification, this Court is not inclined to take a narrow view of the matter. The Courts must incline towards purposive interpretation rather than being in denying mode. Therefore, this Court is of the clear opinion that the assessee was entitled for exemption on the purchase of machinery in question under the said notification dtd.6.12.1990. 10. Accordingly this revision petition of the Revenue is found to be meritless and the same is hereby dismissed. No order as to costs. (Dr.VINEET KOTHARI)J. Item No.3 Ss/-