Case: Eveready Industries India Ltd Vs. State of Karnataka

specified in Notification No. FD 239 CSL 90(I) dated 19th June 1991 issued under Section 8-A of the Karnataka Sales Tax Act, 1957 for claiming exemption under that notification shall mutatis mutandis apply to a industrial unit claiming exemption under notification.? 6. Reading of the aforesaid definition clearly suggests that ?a new industrial unit? is given the same meaning which is assigned in the notification dated 19.06.1991. For this purpose, one needs to look into the meaning that is given to ?a new industrial unit? in the notification dated 21.06.1991. A scan through the said notification leads us to the definition given to a ?new industrial unit?. We reproduce this Explanation in its entirety: ?Explanation I. ? (a) For the purpose of this Notification; (i) A ?Tiny Industrial Unit? or ?Small Scale Industrial Unit? or ?Medium Scale Industrial Unit? or ?Large Scale Industrial Unit? means a unit which is registered as such with the Director of Industries and Commerce or the Ministry of Industries, Government of India. (ii) A Khadi and Village Industrial Unit as defined under the Karnataka Khadi & Village Industries Act, 1956 from time to time. [See Note 3] (b) ?A New Industrial Unit? means any of the units described in Clause (a) above, which are certified to be eligible for exemption under this Notification, by the authorities mentioned in Clauses (a) and (b) of Para (1) under ?Procedure? below.? 7. In order to qualify to be ?A New Industrial Unit?, the following conditions need to be fulfilled: (i) It has to be either a Tiny Industrial Unit or Small Scale Industrial Unit or Medium Scale Industrial Unit or Large Scale Industrial Unit of the type of industries mentioned in Table contained in notification dated 21.06.1991 or else it has to be a Khadi or Village Industrial Units as defined under the Karnataka Khadi & Village Industries Act, 1956. (We are not concerned with this later category in the present case.) (ii) Such a Unit has to be registered with the Director of Industries and Commerce or the Ministry of Industries, Government of India. (iii) Such a Unit has to be certified to be eligible for exemption under the said notification by the authorities mentioned therein. 8. What is significant for our purposes is that such a Unit has to be certified to be eligible for exemption under the notification dated 21.06.1991. That is an essential requirement for a Unit to fall within the definition of ?A New Industrial Unit? under the notification dated 31.03.1993 as it is assigned the same meaning as contained in the notification dated 21.06.1991. Notification dated 31.03.1993 further makes it clear that this notification is not to apply to a Unit to which notification dated 19.06.1991 does not apply. So much so, the procedure prescribed in the notification dated 19.06.1991 for claiming exemption is also made applicable to the Industrial Units seeking exemption under the notification dated 31.03.1993. In the instant case, it was admitted by the appellant itself that the Department of Industries and Commerce issued eligibility certificate in terms of industrial policy G.O. No. CI 30 SPC 96 dated 15.03.1996 and notification dated 15.11.1996 issued under Section 19-C of the KST Act. Such eligibility certificate would not be of any consequence in as much as, in order to get the benefit of the notification dated 31.03.1993, the appellant was required to get certification under the notification dated 19.06.1991. Obviously, therefore, the appellant does not fulfill the requirement of the notification dated 31.03.1993 as well. 9. It is trite that exemption notifications require strict interpretation. In order to get benefit of any exemption notification, assessee has to satisfy that it fulfills all the conditions contained in the notification This is so held by this Court in Rajasthan Spinning and Weaving Mills, Bhilwara, Rajasthan v. Collector of Central Excise, Jaipur, Rajasthan (1995) 4 SCC 473 ), wherein this principle was stated in the following manner: ?16. Lastly, it is for the assessee to establish that the goods manufactured by him come within the ambit of the exemption notification. Since, it is a case of exemption from duty, there is no question of any liberal construction to extent the term and the scope of the exemption notification. Such exemption notification must be strictly construed and the assessee should bring himself squarely within the ambit of the notification. No extended meaning can be given to the exempted item to enlarge the scope of exemption granted by the notification.? 10. In Novopan India Ltd. v. CCE and Customs (1994 Supp. (3) SCC 606), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. CCE and Customs (1969) 2 SCR 253 : AIR 1970 SC 755 ) held that (Novopan India Ltd. Case, SCC p. 614, para 16): ?16...such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption.? 11. It is a different matter that once the conditions contained in the exemption notification are satisfied and the assessee gets covered by the exemption notification, for the purpose of giving benefit notification has to be construed liberally. However, in the present case, the appellant has not been able to cross the threshold and to find entry under notification dated 31.03.1993 for the reasons mentioned above. Therefore, we have no option but to hold that the appellant was not entitled to exemption from entry tax.

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

Explanation:
0[ds]Though, various arguments have been discussed by the High Court in the impugned judgment, a perusal of the judgment of the High Court would reflect that these arguments were advanced by the appellant to contend that it was not liable to pay entry tax under the Entry Tax Act and was entitled to exemption in terms of general Notification dated 31.03.1993. The High Court has rejected the plea by holding that due to amendment of notification dated 19.06.1991 by notification dated 31.03.1993, the appellant was excluded from getting the benefit of general Notification. In this behalf, it has concluded that subsequent insertion of clause (g) to Explanation III of notification dated 19.06.1991 was applicable to the general exemption issued under Sectionof Entry Tax Act. While so holding, the High Court has made a distinction between legislation by reference and legislation by incorporation and has held that in case of legislation by reference of subsequent amendments to the legislation referred to will become applicable whereas in case of legislation by incorporation, subsequent amendments to the legislation referred to do not apply. As per the High Court, in the present case, there was legislation by reference and not by incorporation and, therefore, the newly inserted clause (g) to Notification dated 19.06.1991 would be applicable while implementing general exemption notification dated 31.03.1993. The aforesaid principle stated by the High Court in the impugned judgment was severely criticised and attacked by the learned counsel for the appellant on the ground that in the present case there was legislation by incorporation and not by reference. However, we feel that it may not even be necessary to go into this aspect, having regard to the discussion that follows hereinafter.4. As pointed out above, the order dated 25.06.1997 was passed granting exemption to the appellant from payment of entry tax on raw materials and component parts for a period of six years from the date of commencement of commercial products. However, it was subject to the condition that the appellant should make an investment in the sum of Rs.111 crores in order to enable itself to claim the benefit of the aforesaid notification. It is an admitted fact that due to certain reasons, the appellant could not fulfill this condition as it did not invest Rs.111 crores in the project, as envisaged in the notification dated 25.06.1997. Therefore, insofar as exemption notification dated 25.06.1997 which was issued specifically in the case of the appellant, the appellant cannot be held entitled to the benefit thereof as it failed to fulfill the conditions.5. The appellant, however, still claims the exemption by virtue of general Notification dated 31.03.1993 issued under the Entry Tax Act. This notification was issued under Section 11A of the Entry Tax Act. Vide this notification, the Government of Karnataka exempted the tax payable under the Entry Tax Act on the entry of raw materials, component parts and inputs and machinery and its parts into a local area for use in the manufacture of an immediate or finished product by the new industrial units. This notification contains a Table which enlists type of industries and location of industries which are entitled to exemption as well as the period of exemption. It is not in dispute that the appellant industry stands covered by one such category of industry the description whereof is given in the notification. It is also located at a place which is stipulated in the said notification. However, the exemption was available to the new Industrial Units.Reading of the aforesaid definition clearly suggests that ?a new industrial unit? is given the same meaning which is assigned in the notification dated 19.06.1991. For this purpose, one needs to look into the meaning that is given to ?a new industrial unit? in the notification dated 21.06.1991. A scan through the said notification leads us to the definition given to a ?new industrial unit?.What is significant for our purposes is that such a Unit has to be certified to be eligible for exemption under the notification dated 21.06.1991. That is an essential requirement for a Unit to fall within the definition of ?A New Industrial Unit? under the notification dated 31.03.1993 as it is assigned the same meaning as contained in the notification dated 21.06.1991. Notification dated 31.03.1993 further makes it clear that this notification is not to apply to a Unit to which notification dated 19.06.1991 does not apply. So much so, the procedure prescribed in the notification dated 19.06.1991 for claiming exemption is also made applicable to the Industrial Units seeking exemption under the notification dated 31.03.1993. In the instant case, it was admitted by the appellant itself that the Department of Industries and Commerce issued eligibility certificate in terms of industrial policy G.O. No. CI 30 SPC 96 dated 15.03.1996 and notification dated 15.11.1996 issued under Sectionof the KST Act. Such eligibility certificate would not be of any consequence in as much as, in order to get the benefit of the notification dated 31.03.1993, the appellant was required to get certification under the notification dated 19.06.1991. Obviously, therefore, the appellant does not fulfill the requirement of the notification dated 31.03.1993 as well.It is a different matter that once the conditions contained in the exemption notification are satisfied and the assessee gets covered by the exemption notification, for the purpose of giving benefit notification has to be construed liberally. However, in the present case, the appellant has not been able to cross the threshold and to find entry under notification dated 31.03.1993 for the reasons mentioned above. Therefore, we have no option but to hold that the appellant was not entitled to exemption from entry tax.