IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON FRIDAY, THE 24TH JULY 2009 / 2ND SRAVANA 1931 WP(C).No. 10805 of 2007(J) -------------------------- PETITIONER(S): --------------- SOUTHERN ISPAT LTD, 19/629(1)-"SREYAS", NEAR YAKKARA SCHOOL BUS STOP, WEST YAKKARA, PALAKKAD-678 001, REPRESENTD BY ITS EXECUTIVE OFFICER SRI.K.K.AGARWALLA. BY ADV. SRI.S.RAMESH BABU RESPONDENT(S): --------------- 1. STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT,SECRETARIAT, THIRUVANANTHAPURAM. 2. THE DEPUTY COMMISSIONER (GENERAL), DEPARTMENT OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. 3. THE STATE LEVEL COMMITTEE, C/O. DIRECTOR OF INDUSTRIES AND COMMERCE, THIRUVANANTHAPURAM. *ADDL. R4 IS IMPLEADED R4: KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION, KESTON ROAD, KAWDIAR, THIRUVANANTHAPURAM-695 003. *(ADDL. R4 IS IMPLEADED AS PER ORDER DATED 11.06.2008 IN I.A. NO.7294 /2008.) R1 TO R3 BY GOVT. PLEADER SRI. V.K. SHAMSUDHEEN ADDL. R4 BY SENIOR ADVS. SRI. PATHROSE MATHAI, SC. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 24/07/2009 , THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Shg/ WP(C).No. 10805 of 2007(J) APPENDIX PETITIONER'S EXHIBITS: P1. COPY OF THE ELIGIBILITY CERTIFICATE DATED 01.12.1999. P2. COPY OF THE ELIGIBILITY CERTIFICATE DATED 03.05.2001. P3. COPY OF THE APPEAL PREFERRED BY THE PETITIONER BEFORE THE STATE LEVEL COMMITTEE. P4. COPY OF THE PROCEEDINGS DATED 05.11.2002. P5. COPY OF THE LETTER OF THE PETITIONER DATED 18.12.2002. P6. COPY OF THE JUDGMENT DATED 10.01.2005 IN W.P.(C) NO.37404/04. P7. COPY OF THE LETTER DATED 27.06.2005. P8. COPY OF THE EXTRACT OF THE MINUTES. P9. COPY OF THE LETTER DATED 25.08.2006. P10. COPY OF PLAN. P11. COPY OF THE SANCTION LETTER DATED 04.10.1995. P12. COPY OF THE MINUTES. P13. COPY OF THE LETTER DATED 06.11.1995. P14. COPY OF THE RECEIPT SHOWING PAYMENT OF RS.21,83,000/- RESPONDENTS' EXHIBIT: R4 (a): COPY OF LETTER DATED 04.07.2001 ISSUED BY THE ASSISTANT GENERAL MANAGER, KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION, TRIVANDRUM TO MR. K.K. AGARWALLA. //TRUE COPY// P.A. TO JUDGE sbg/ P.R. RAMACHANDRA MENON, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - W.P. (C) No.10805 OF 2007 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 24th day of July, 2009 J U D G M E N T The challenge involved in this writ petition is against the restriction of the benefit of Sales Tax exemption payable in terms of S.R.O 1729/93; the eligible extent as specified therein having not been given by the additional 4th respondent who is the competent/'surveying authority' concerned. 2. The petitioner, a public limited company, engaged in the manufacture of M.S. Ingots etc. sought for the benefit for the above S.R.O which provided for exemption for a period of 'seven' years from the date of commercial production. The extent of exemption is by 100% of the 'fixed capital investment' which term has been defined in the S.R.O itself. As stipulated, the eligibility of the petitioner has to be certified by the additional 4th respondent/financier. 3. Claiming the benefit of tax exemption, the petitioner preferred necessary application before the additional 4th WPC.No.10805 OF 2007 : 2 : respondent showing a 'fixed capital investment' of Rs.4,23,89,605/-. But after considering the facts and figures, the additional 4th respondent reckoned only a sum of Rs.2,36,90,203/- thus leaving out Rs.1,86,99,402/- allegedly for no reason at all. In the said circumstances, Exts. P1 and P2 certificates issued by the additional 4th respondent were subjected to challenge by filing Ext.P3 appeal before the 3rd respondent, as provided under clause 10(g) of the S.R.O. The appeal preferred by the petitioner was dismissed without hearing, as per Ext.P4 proceedings, whereupon the petitioner preferred Ext.P5 representation, seeking to review the same. Later, the petitioner approached this Court vide W.P(C) No.37404/2004, which led to Ext.P6 judgment, whereby the 3rd respondent was directed to issue a copy of the “detailed proceedings” considering the petitioner’s claim with reference to the investment and if there were no details on record, to have the matter reconsidered after calling for the proof of investment from the petitioner. It was accordingly, that Ext.P7 reply was given to the petitioner, forwarding a copy of the “minutes of the meeting” held by the State Level Committee as WPC.No.10805 OF 2007 : 3 : borne by Ext.P8. The petitioner challenges the correctness of the facts and figures, contending that the consideration of the relevant aspects was not in accordance with the norms/stipulations in the relevant S.R.O. 4. A counter affidavit has been filed by the second respondent, stating that necessary exemption payable to the petitioner in terms of the S.R.O. has been extended, based on the recommendations given by the additional 4th respondent and that the challenge raised against the impugned proceedings is not correct at all. The additional 4th respondent has filed their counter affidavit, asserting that the idea and understanding of the petitioner as to the evaluation to be effected to assess the investment made, is quite wrong and misconceived. It is further pointed out that all the relevant aspects have been considered and all the documents produced by the petitioner in this regard were dealt with and evaluated. The additional 4th respondent also contends that the entire land purchased by the petitioner as well as the entire buildings constructed by them could not have been considered for fixing the extent of exemption and only such extent, which is WPC.No.10805 OF 2007 : 4 : essential for running the unit alone could be considered, as stipulated in the S.R.O. 5. Learned counsel for the petitioner submits that the petitioner’s unit was financed jointly by the additional 4th respondent and also by the KFC. As per the terms in between, only 36.5% of the total capital investment was liable to be contributed by the financier. The very fact that the financier contributed a sum of Rs.168.65 lakhs shows that, the said amount was 36.5% of the total financial investment made by the petitioner, thus establishing the fact that the total capital investment of the petitioner was Rs.4.61crores, which did not require to be proved any further. Similarly, the learned counsel for the petitioner submits that the extent of land involved in the project is of 4.02 acres; out of which only 2 acres have been reckoned by the additional 4th respondent for fixing the capital investment as given in Ext.P8; stating that, the remaining portion of land was left unutilized. The learned counsel submits that the entire land was purchased as part of implementation of the project; which in turn was duly evaluated by the financier, leading to the contribution to the WPC.No.10805 OF 2007 : 5 : extent as specified. 6. With regard to the building, the case of the petitioner is that the total plinth area is 32,050 sq.ft., out of which only an extent of 5000 sq.ft. was left out; and as such only proportionate deduction should have been made by the KSIDC/additional 4th respondent, considering the fact that the total claim of the petitioner was of Rs.1,21,67,100/-. The position to be considered in this regard is the manner of evaluation to be effected in tune with the relevant manual notified by the Government as per GO(MS)No.169/95/ID dt. 1.11.95. It is stipulated under Clause 9 that, the building actually required by the unit and the cost of construction shall be reckoned on the basis of Rs.200/- per sq.ft. of the plinth area. 7. The learned senior counsel for the additional 4th respondent submits that the 'manual' and the manner of fixation of the value having not been subjected to challenge, the evaluation made by the additional 4th respondent is beyond challenge. Considering the fact that the evaluation has to be made reckoning Rs. 200/- per sq.ft. of the plinth area, the WPC.No.10805 OF 2007 : 6 : contention raised from the part of the petitioner that the proportionate deduction in respect of 5000 sq.ft. alone has to be made, reckoning the claim amount for the total area, cannot be accepted. The calculation on the basis of 'area' as well as the 'rate' is as stipulated in the 'manual'. The only question that remains for consideration is whether the entire area of the building is utilized for the purpose of production or whether any part is left out as showroom, office, canteen etc., to be excluded as contemplated under clause 9 of the manual. The materials on record deal with the issue of 'buildings' in just three sentences and hence this Court finds it much difficult to have an effective appreciation of the actual facts and figures. 8. With regard to the question of Electrification, the petitioner has got a claim that the petitioner produced Ext.P2 before the additional 4th respondent and the Cheque showing 'OYEC deposit' made to an extent of Rs.21,64,700/-which have been wrongly left out. It is stated that the said amount was claimed as included in the second application preferred in this regard. There is a contention for the additional 4th respondent, as raised in paragraph 4 of the counter affidavit, that the WPC.No.10805 OF 2007 : 7 : 'additional fixed capital investment' made after starting the commercial production, as claimed by the petitioner is not liable to be considered for exemption. However, it is also added that in respect of the second application submitted after the commercial production, the fixed capital investment to an extent of Rs.25,11,422/- has been reckoned. The deposit in respect of the 'OYEC' can be reasonably presumed as made much prior to the commercial production (ie, for obtaining the connection itself) and as such, it is very much liable to be exempted in view of the clear stipulation under the 'manual'. The learned counsel for the additional 4th respondent, concedes that, this aspect will be considered by the additional 4th respondent and the reason for the omission is stated as might be due to some failure or omission of the petitioner to produce the necessary documents in this regard. 9. With regard to the 'Machinery', the petitioner claims that some of the original bills were produced before the KFC. The petitioner has not chosen to implead the KFC in the party array and no materials are before this Court to draw an inference in favour of the petitioner and hence the said claim WPC.No.10805 OF 2007 : 8 : is rejected. 10. With regard to the investment made on 'land' having an extent of 4.02 acres, the counsel for the petitioner submits that the entire land is being made use of, for running the unit and that no portion of the same is liable to be declared as not fit for the purpose of claiming exemption. 11. The learned senior counsel appearing for the Additional 4th respondent, as well as the learned Government Pleader submit that the original plan and scope of the project was a wider one. Even as per the documents produced by the Petitioner, it was later confined to the modified extent and that the 'actual area' thus required for running the unit, has been correctly reckoned by the additional 4th respondent as '2 acres', leaving out the rest. 12. Learned counsel for the petitioner submits that sufficient land has to be ear marked for storing raw materials and for such other purpose; which has been omitted to be properly appreciated by the Additional 4th respondent, but for simply saying that 50% of the land is left unutilized. Here also, the factual particulars/split-up figures to assess the basis WPC.No.10805 OF 2007 : 9 : of evaluation are not reflected in Ext.P8, so as to enable this Court to assess the correctness of the reasoning given by the additional 4th respondent. 13. The petitioner further contends that, despite availing the remedy of filing an appeal as provided in the S.R.O, the same was finalized without giving any opportunity to hear the petitioner. The proceedings do not reveal that such an opportunity was given to the petitioner before the appeal was finalized. Learned Government Pleader submits that an opportunity can be given to the petitioner in this regard. But the question is whether it will be enough, since the factual position on different aspects as stated above has to be ascertained by the additional 4th respondent, who considered and fixed the extent of the amount invested by the petitioner; wrongly leaving out the 'OYEC' deposit effected vide Ext.P14. 14. In the above facts and circumstances, Ext.P4 is set aside and the additional 4th respondent is directed to reconsider the matter with regard to eligibility of the petitioner in respect of the specific heads, 'Land', 'Buildings' and 'Electrification', also with reference to the norms prescribed WPC.No.10805 OF 2007 : 10 : under the 'manual' as well as S.R.O 1729/93 and also the actual facts and figures available at sight. The above exercise shall be finalized with notice to the petitioner, as expeditiously as possible, at any rate within three months from the date of receipt of a copy of this judgment. Based on the fresh evaluation as above, the additional 4th respondent shall issue fresh Certificates, based on which, further consequential orders shall be passed by the second respondent, without delay, at any rate, within a further period of two months thereafter. The writ petition is disposed of as above. (P.R. RAMACHANDRA MENON, JUDGE) jma