Case: State Of Jharkhand  Vs. Tata Cummins Ltd.

case of exemptions from tax liability under the taxing statute. 10. Applying the above tests to the facts of the present case, the object behind enactment of the Industrial Policy, 1995 was to confer incentives on industries set up in the State. As part of the incentives, the Industrial Policy envisaged allotment of land/building in growth centres to companies for setting up industrial units on lease for 99 years with an option for renewal. As a part of the incentives, it was also envisaged under clause 16 that sales tax benefit/exemption shall be granted to attract investments in order to sustain industrial development in the State. It is in this background, that we have to consider clause 16.1 and clause 16.2 of the Industrial Policy, 1995. The two notifications are merely instruments giving effect to the policy envisaged under the Industrial Policy, 1995. 11. Under clause 16.1 of the Policy, all new units were given the facility of set off or exemption on purchase of raw-material within the State. The period of exemption was 10 years for industries situated in category A districts and 8 years for industries situated in category B districts. Under clause 16.2, new units were given an option to choose deferment or exemption of sales tax on sale of finished goods for a period of 10 years for category A districts and 8 years for category B districts from the date of production of the unit with a ceiling of 100% of the fixed investment made by the unit. However, those industries which were considered as Thrust Industries located in A category backward districts, the ceiling of exemption or the deferment envisaged was 150% of the fixed investment. 12. Thus, investment constituted the basis of clause 16 of the Industrial Policy. That, the eligibility criterion for conferment of tax incentive was the Fixed Investment by the assessee which is clear if one reads the two notifications dated 22.12.1995 in the context of clause 16 of the Industrial Policy 1995 and which criterion is satisfied by Tata Cummins Ltd. in this case, namely, that, it is the owner of the building in which its factory is situated. The underlying rational behind the notification(s) is that the assessee must deploy funds in the ownership of the building in which the factory is located or by deployment of funds in the building(s) taken on lease for the minimum period of 15 years so that bogus companies without fixed investments are not set up only with the intention of getting tax exemptions. SCOPE OF THE NOTIFICATION NOS.478 & 479: 13. At the outset we reiterate that if one reads the notification(s) in the light of the incentive policy it is clear that incentive is admissible to the unit which is the owner of the building in which it is located from which the industrial production commences or it (unit) is located in a leasehold premises (building or land or both), provided that the lease shall be of the minimum period of 15 years. As stated above, the eligibility criterion is that of a fixed investment by a genuine investor. In the present case, as stated above, we have to go by the interpretation of the notification(s) in the light of the policy. However, even if one goes by the strict interpretation of the notification(s) we are in agreement with the view expressed by the High Court that the first part of the notification(s), as distinct from the second part, does not refer to the land. If the argument of the department is accepted that the first part of the notification would apply only if Tata Cummins Ltd. is the owner of the land and building in which its factory is located then we are not only giving a narrow interpretation to the notification which would defeat the object underlying the incentive policy but also it would be against the very text of the said notification(s) which omits the word land from the first part of the notification. 14. Before concluding, we may reiterate that at one stage of the matter the department had taken the position that Tata Cummins Ltd. was not entitled to the benefit as the Head lease in favour of TISCO was pending renewal by the State Government and till such time as the State renews the lease in favour of TISCO, Tata Cummins Ltd. was not entitled to the benefit of concession. We are now informed that the State Government has renewed the Head lease in favour of TISCO who in turn has sub-leased a portion thereof to TELCO, which has 50% interest in the joint venture, namely, Tata Cummins Ltd. In the circumstances, we are not required to consider whether the above two notifications are repugnant to the incentive policy. We have, however, noted the ratio of the decision of this court in the case of State of Bihar & others etc. v. Suprabhat Steel Ltd. & others etc. reported in (1999) 1 SCC 31 , in which it has been held that the notifications meant for implementing the Industrial Policy of the State government, cannot override the incentive policy. 15. On the facts of the present case, we need not examine the question as to whether the said two notifications no.478 and 479, quoted hereinabove, are repugnant to the incentive policy. Before concluding, we may point out that vide order dated 26.3.2004, this court, by way of interim measure, directed the appellant herein to adjust the refundable amount of Rs.40 crores, for the accounting year commencing from 1.4.2004, the balance amount was ordered to be refunded to Tata Cummins Ltd. who undertook to pay back to the appellant the balance payment with interest at the rate of 9% in the event of the State succeeding in this civil appeal. However, since we are dismissing the appeal filed by the State, the question of refund by Tata Cummins Ltd. to the State, of the balance amount i.e. Rs.14.5 crores with interest, does not arise. 16.

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

Explanation:
0[ds]Before analyzing the above Policy read with the notifications, it is important to bear in mind the connotation of the word tax. A tax is a payment for raising general revenue. It is a burden. It is based on the principle of ability or capacity to pay. It is a manifestation of the taxing power of the State. An exemption from payment of tax under an enactment is an exemption from the tax liability. Therefore, every such exemption notification has to be read strictly. However, when an assessee is promised with a tax exemption for setting up an industry in the backward area as a term of the industrial policy, we have to read the implementing notifications in the context of the Industrial Policy. In such a case, the exemption notifications have to be read liberally keeping in mind the objects envisaged by the Industrial Policy and not in a strict sense as in the case of exemptions from tax liability under the taxing statuteApplying the above tests to the facts of the present case, the object behind enactment of the Industrial Policy, 1995 was to confer incentives on industries set up in the State. As part of the incentives, the Industrial Policy envisaged allotment of land/building in growth centres to companies for setting up industrial units on lease for 99 years with an option for renewal. As a part of the incentives, it was also envisaged under clause 16 that sales tax benefit/exemption shall be granted to attract investments in order to sustain industrial development in the State. It is in this background, that we have to consider clause 16.1 and clause 16.2 of the Industrial Policy, 1995. The two notifications are merely instruments giving effect to the policy envisaged under the Industrial Policy, 1995Before concluding, we may reiterate that at one stage of the matter the department had taken the position that Tata Cummins Ltd. was not entitled to the benefit as the Head lease in favour of TISCO was pending renewal by the State Government and till such time as the State renews the lease in favour of TISCO, Tata Cummins Ltd. was not entitled to the benefit of concession. We are now informed that the State Government has renewed the Head lease in favour of TISCO who in turn has sub-leased a portion thereof to TELCO, which has 50% interest in the joint venture, namely, Tata Cummins Ltd. In the circumstances, we are not required to consider whether the above two notifications are repugnant to the incentive policy. We have, however, noted the ratio of the decision of this court in the case of State of Bihar & others etc. v. Suprabhat Steel Ltd. & others etc. reported in (1999) 1 SCC 31 , in which it has been held that the notifications meant for implementing the Industrial Policy of the State government, cannot override the incentive policyOn the facts of the present case, we need not examine the question as to whether the said two notifications no.478 and 479, quoted hereinabove, are repugnant to the incentive policy. Before concluding, we may point out that vide order dated 26.3.2004, this court, by way of interim measure, directed the appellant herein to adjust the refundable amount of Rs.40 crores, for the accounting year commencing from 1.4.2004, the balance amount was ordered to be refunded to Tata Cummins Ltd. who undertook to pay back to the appellant the balance payment with interest at the rate of 9% in the event of the State succeeding in this civil appeal. However, since we are dismissing the appeal filed by the State, the question of refund by Tata Cummins Ltd. to the State, of the balance amount i.e. Rs.14.5 crores with interest, does not arise.