Case: State Of Haryana  Vs. Bharti Teletech Ltd

to be tested on a different anvil, for it grants freedom from liability. In the case at hand, as we understand, it is ‘unit’ specific. The term ‘unit’ has not been defined. The grant of exemption unit wise can be best understood by way of example. An entrepreneur can get an exemption of a unit and thereafter establish number of units and try to club together the production of all of them to get the benefit for all. It would be well nigh unacceptable, for what is required is that each unit must meet the condition to avail the benefit.19. We will be failing in our duty if we do not address to a submission, albeit the last straw, of Mr. Jain that any provision relating to grant of exemption, be it under a rule or notification, should be considered liberally. In this regard, we may profitably refer to the decision in Hansraj Gordhanadas v. H.H. Dave, Assistant Collector of Central Excise and Customs, Surat and others [AIR 1970 SC 755 ] wherein it has been held as follows:- “...It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the tax-payer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different...” 20. In Commissioner of Sales Tax v. Industrial Coal Enterprises [(1999) 2 SCC 607] , after referring to CIT v. Straw Board Mfg. Co. Ltd. [(1989) Supp (2) SCC 523] and Bajaj Tempo Ltd. v. CIT [(1992) 3 SCC 78] , the Court ruled that an exemption notification, as is well known, should be construed liberally once it is found that the entrepreneur fulfills all the eligibility criteria. In reading an exemption notification, no condition should be read into it when there is none. If an entrepreneur is entitled to the benefit thereof, the same should not be denied. 21. In this context, reference to Tamil Nadu Electricity Board and Another v. Status Spinning Mills Limited and another [(2008) 7 SCC 353] would be fruitful. It has been held therein :- “It may be true that the exemption notification should receive a strict construction as has been held by this Court in Novopan India Ltd. v. CCE and Customs [1994 Supp (3) SCC 606], but it is also true that once it is found that the industry is entitled to the benefit of exemption notification, it would received a broad construction. (See Tata Iron & Steel Co. Ltd. v. State of Jharkhand [(2005) 4 SCC 272] and A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala [(2007) 2 SCC 725]) . A notification granting exemption can be withdrawn in public interest. What would be the public interest would, however, depend upon the facts of each case.” 22. From the aforesaid authorities, it is clear as crystal that a statutory rule or an exemption notification which confers benefit to the assessee on certain conditions should be liberally construed but the beneficiary should fall within the ambit of the rule or notification and further if there are conditions and violation thereof are provided, then the concept of liberal construction would not arise. Exemption being an exception has to be respected regard being had to its nature and purpose. There can be cases where liberal interpretation or understanding would be permissible, but in the present case, the rule position being clear, the same does not arise.23. At this juncture, it is apposite to refer to the pronouncement in State of Haryana and others v. A.S. Fuels Private Limited and another [(2008) 9 SCC 230] . In the said case, the State of Haryana had approached this Court as the High Court had construed the effect of sub-rule 10 (v) of Rule 28A of the Rules which authorises the department to withdraw the tax exemption certificate but had granted liberty to the State to scrutinize if it was a case for withdrawal of the eligibility certificate under sub-rule (8) of Rule 28A of the Rules and, thereafter, to proceed in accordance with the law. This Court, scanning the anatomy of Rule 28A, opined that under sub-rule (8)(b), when the eligibility certificate is withdrawn, the exemption/entitlement certificate is also deemed to have been withdrawn from the first day of its validity and the unit shall be liable to payment of tax, interest or penalty under the Act as if no entitlement certificate had ever been granted to it. Thereafter, the Court adverted to sub-rule 11 (a) and, in that context, it observed thus:- “...there are several conditions which are relevant; firstly, there is a requirement of continuing the production for at least next five years; secondly, consequences flowing in case of violation of the conditions laid down in clause (a). In other words, in case of non continuance of production for next five years, the result is that it shall be deemed as if there was no tax exemption/entitlement available to it. The proviso permits to the dealers to explain satisfactorily to the DETC that the loss in production was because of the reasons beyond the control of the unit. The materials have to be placed in this regard by the party. The High Court seems to have completely lost sight of sub-rule (11)(b).” 24. In the case at hand, as we have already held, clubbing is not permissible. It amounts to a violation of the conditions stipulated under Rule 11(a)(i) of Rule 28A and, therefore, the consequences have to follow and as a result, the assessee has to pay the full amount of tax benefit and interest. The approach of the High Court is absolutely erroneous and it really cannot withstand close scrutiny.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]22. From the aforesaid authorities, it is clear as crystal that a statutory rule or an exemption notification which confers benefit to the assessee on certain conditions should be liberally construed but the beneficiary should fall within the ambit of the rule or notification and further if there are conditions and violation thereof are provided, then the concept of liberal construction would not arise. Exemption being an exception has to be respected regard being had to its nature and purpose. There can be cases where liberal interpretation or understanding would be permissible, but in the present case, the rule position being clear, the same does not arise.23. At this juncture, it is apposite to refer to the pronouncement in State of Haryana and others v. A.S. Fuels Private Limited and another [(2008) 9 SCC 230] . In the said case, the State of Haryana had approached this Court as the High Court had construed the effect of sub-rule 10 (v) of Rule 28A of the Rules which authorises the department to withdraw the tax exemption certificate but had granted liberty to the State to scrutinize if it was a case for withdrawal of the eligibility certificate under sub-rule (8) of Rule 28A of the Rules and, thereafter, to proceed in accordance with the law. This Court, scanning the anatomy of Rule 28A, opined that under sub-rule (8)(b), when the eligibility certificate is withdrawn, the exemption/entitlement certificate is also deemed to have been withdrawn from the first day of its validity and the unit shall be liable to payment of tax, interest or penalty under the Act as if no entitlement certificate had ever been granted to it. Thereafter, the Court adverted to sub-rule 11 (a) and, in that context, it observedare several conditions which are relevant; firstly, there is a requirement of continuing the production for at least next five years; secondly, consequences flowing in case of violation of the conditions laid down in clause (a). In other words, in case of non continuance of production for next five years, the result is that it shall be deemed as if there was no tax exemption/entitlement available to it. The proviso permits to the dealers to explain satisfactorily to the DETC that the loss in production was because of the reasons beyond the control of the unit. The materials have to be placed in this regard by the party. The High Court seems to have completely lost sight of sub-rule (11)(b).In the case at hand, as we have already held, clubbing is not permissible. It amounts to a violation of the conditions stipulated under Rule 11(a)(i) of Rule 28A and, therefore, the consequences have to follow and as a result, the assessee has to pay the full amount of tax benefit and interest. The approach of the High Court is absolutely erroneous and it really cannot withstand close scrutiny.On a bare reading of the said Rule, it is evincible that the conditions which are imposed have been enumerated in clause I (ii) of the said11 (a) of Rule 28A to the effect that in the event ofof the quality of production after the expiry of the exemption, the assessee has to pay the tax benefit availed with interest. In the case at hand, the revenue has pressed clause I (ii) into service. The Division Bench has relied on the decision in R.K. Mittal Woolen Mills (supra) wherein the High Court was dealing with the withdrawal of eligibility of certificate as provided in8 and 9 of Rule 28A. After referring to8 of Rule 28A that deals with the withdrawal of eligibility certificate under certain circumstances. Analysing the said Rule, it was stated thusperusal of the aforesaidwould show that the grounds on which the eligibility certificate and be withdrawn are mentioned therein but the ground ofof the change of land use permission from the Town and Country Planning Department is not one of the grounds mentioned therein. Subrule (8) of Rule 28A being a part of a taxing statute has, in the nature of things, to be construed very strictly and, therefore, the eligibility certificate can be withdrawn only on the grounds mentioned therein and on no other grounds. The authorities cannot add any other ground to the saidWe are, therefore, satisfied that the eligibility certificate granted to the petitioner could not be withdrawn only on the ground ofof the change of land use permission by the Town and Country PlanningThe said decision, as we perceive, was rendered in a totally different context. In the present case, we are not concerned with the withdrawal of eligibility certificate. We are concerned with the consequences that have been enumerated in clause (b) of11 of Rule 28A which clearly stipulates that in case of violation of clause 11 (a) (i) of Rule 11, the assessee shall be liable for making, in addition to the full amount ofavailed of by it during the period of exemption/deferment, with interest chargeable under the Act. Thus, reliance placed by the High Court on the said decision is misconceived and inappropriate.16. The hub of the matter is whether production of two different units can be combined together to meet the requirement of the postulate enshrined under the Rule. The production of the beneficiary unit had failed to fulfil the stipulation incorporated in11 (a)(i) of Rule 28A of the Rules. It is also the undisputed position that the production of the expanded unit has been computed and clubbed with the first unit to reflect the meeting of the criterion. The competent authority has come to a definite conclusion that the expanded capacity had been created to show that the rate of production is maintained but it is fundamentally a subterfuge. The authority has also taken into consideration the different items produced and how there has been loss of production of EPBT in the first unit. The High Court has failed to appreciate the relevant facts and, without noticing that thehad clubbed the production of the units, lancinated the orders passed by the forums below.He has laid immense emphasis on the termof the existing unit. The termhas been defined in clause (d) of(2) of Rule 28A which reads"expansion/diversification of industrial unit" means a capacity set up or installed during the operative period which creates additional productions/manufacturing facilities for manufacture of the same product/products as of the existing unit (expansion) or different products (diversification) at the same or new location –(i) in which the additional fixedcapital investment made during the operative period exceeds 25% of the fixed capital investment of the existing unit, and(ii) which results into increase in annual production by 25% of the installed capacity of the Existing Unit in case ofa careful reading of the aforesaid provisions, it is quite clear as day that they deal with the eligibility to get the benefit of exemption/deferment from the payment of tax. On a studied scrutiny of clause (f) (i) (I), it is manifest that it is incumbent on the unit to obtain certificate of registration under the Act. The submission of Mr. Jain is that the second unit has obtained the registration certificate under the Act and, hence, the production of the said unit, being eligible, is permitted to be included. Needless to say, obtainment of registration certificate is a condition precedent to become eligible but that does not mean that the production of the said unit will be taken into account for sustaining the benefit of the first unit. They are independent of each other as far as11 of the Rule 28A is concerned. We are disposed to think so as the grant of exemption has a sacrosanct purpose. The concept of exemption has been introduced for development of industrial activity and it is granted for a certain purpose to a unit for certain types of good. Exemption can be granted under the Rules or under a notification with certain conditions and also ensure payment of taxes post the exemption period. The concept of exemption is required to be tested on a different anvil, for it grants freedom from liability. In the case at hand, as we understand, it isspecific. The termhas not been defined. The grant of exemption unit wise can be best understood by way of example. An entrepreneur can get an exemption of a unit and thereafter establish number of units and try to club together the production of all of them to get the benefit for all. It would be well nigh unacceptable, for what is required is that each unit must meet the condition to avail the benefit.19. We will be failing in our duty if we do not address to a submission, albeit the last straw, of Mr. Jain that any provision relating to grant of exemption, be it under a rule or notification, should be considered liberally. In this regard, we may profitably refer to the decision in Hansraj Gordhanadas v. H.H. Dave, Assistant Collector of Central Excise and Customs, Surat and others [AIR 1970 SC 755 ] wherein it has been held asis well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If theis within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different...In Commissioner of Sales Tax v. Industrial Coal Enterprises [(1999) 2 SCC 607] , after referring to CIT v. Straw Board Mfg. Co. Ltd. [(1989) Supp (2) SCC 523] and Bajaj Tempo Ltd. v. CIT [(1992) 3 SCC 78] , the Court ruled that an exemption notification, as is well known, should be construed liberally once it is found that the entrepreneur fulfills all the eligibility criteria. In reading an exemption notification, no condition should be read into it when there is none. If an entrepreneur is entitled to the benefit thereof, the same should not be denied.