STATE OF JHARKHAND & ORS. versus TATA STEEL LTD. & ORS.
[2016] 1 S.C.R. 931, Supreme Court of India, 2016
Outcome: Disposed off
Segment: Ratio
[2016] 1 S.C.R. 931 
STATE OF JHARKHAND & ORS. 
v. 
TATA STEEL LTD. & ORS. 
(Civil Appeal No. 4285 of2007) 
FEBRUARY 12, 2016 
[DIPAK MISRA AND N.V. RAMANA, JJ.] 
Jharkhand Value Added Tax Act, 2005 - s. 95(3)(ii) -
Deferment/Exemption of tax - Benefit of - For industrial units -
Units of I" responde/1/ granted benefit of exemption from payment 
of sales tax for 8 years - Units availed tax exemption from 
01.08.2000 to 31.03.2006. for 6 years - Thereafter. JVAT Act 
withdrew exemption but allowed deferment of tax for the remaining 
period from 01.04.2006 to 31.07.2008 - Application by ]" 
respondent for conversion from exemption of tax to deferment of 
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tax for the remaining period as also challenging the withdrawal of D 
exemption - Application rejected - In appeal, the High Court 
granted deferment of tax, however. upheld the withdrawal of 
exemption - On appeal, held: Notifica(ion lays a clear postulate 
that repayment of total deferred amount shall have to be done in 
ten equal six monthly instalments in such a manner so as to be 
completed within 13 years from the date of start of deferment -
Words "from the date of start of deferment" have to have nexus 
with the policy stated in the beginning'_ In the instant case. period 
of exemption has been converted to period of deferment of tax - It 
is for 8 years - Repayme/1/ schedule is 5 years from the expiry of 
eligibility period of deferment - Period of 5 years has to be so 
arranged that it does not go beyond 13
years from the date of 
deferment- Thus, the repayment schedule has to end on 31.08.2013 
within a span of 5 years from the expiration of the eligibility period 
- Owing to special features, no penalty imposed - Assessee had 
· already deposited the amount in pursuance of the order of this Court 
- As such the assessee to pay 12% inrerest per annum - Bihar 
Finance Act, 1981 - s. 23A - Jharkhand Value Added Tax Rules. 
2006 - rr. 64, 66. 
Disposing of the appeal, the Court 
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HELD: 1.1 Section 95(3)(ii) of the Jharkhand Value Added 
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SUPREME COURT REPORTS 
[2016] I S.C.R. 
Tax Act, 2005 envisages that a registered dealer who was enjoying 
the benefit of exemption of tax is allowed to convert the facility 
of exemption from payment of tax under the JVAT Act into the 
facility of deferment of payment of tax for the unexpired period. 
The assessee-company has availed the deferment and paid the 
amount of tax. [Para 15][943-F] 
1.2 Benefit of deferment of tax is granted under certain 
terms and conditions. One of the terms and conditions pertains 
to repayment of deferment of tax amount by the industrial unit. 
The first part of sub-para (1) of para 5 stipulates that the repayment 
of deferred tax amount shall have to be done after the completion 
of eligibility period of deferment or the prescribed percentage 
limit of fixed capital investment, whichever reaches earlier. In 
the instant case, the period of exemption has been converted to 
period of deferment of tax. It is for 8 years. The assessee had 
availed the exemption for a period of 6 years and he is entitled to 
deferment of tax for the rest of the period which commenced in 
2006. [Para 27][949-E-F] 
1.3 The notification lays a clear postulate that repayment 
of total deferred amount shall have to be done in ten equal six 
monthly instalments in such a manner so as to be completed within 
13 years from the date of start of deferment. The words "from 
the date of start of deferment" have to have nexus with the policy
stated in the beginning. The policy would apply if the unit has 
commenced between 01.09.1995 and 31.08.2000; that it has a 
registration certification from the prescribed authority and that, 
most importantly, it has been given an eligibility certificate for 
the said purpose. The policy would come into play only if these 
conditions are satisfied and then the assessee will be allowed to 
have the benefit of deferment of sales tax on the sale of 
manufactured finished goods for a prescribed period. Therefore, 
the authority has been given the power to lay down the prescribed 
period for grant of deferment. In the beginning, the l" respondent 
was granted exemptioP. The concept of exemption is distinct from 
the concept of deferment of tax. After the JVAT Act came into 
force, under the statutory provisions, there was no exemption 
and beneficiaries were entitled to convert to the scheme of 
deferment. The period remains intact, that is, 8 years. The
STATE OF JHARKHAND v. TATA STEEL LTD. 
repayment has to be done in equal six monthly instalments and 
that period is 5 years. The repayment commences after 
completion of eligibility period of deferment or the prescribed 
percentage limit of fixed capital investment, whichever is earlier. 
The prescribed authority can grant an eligibility certificate but 
he has to keep in view the terms and conditions stipulated in the 
notification. The said authority cannot travel beyond the 
stipulations of the notification. The language employed in the 
notification conveys that the grant of certificate has to be such 
that after expiration of the eligibility period, the amonnt has to 
be paid back within a span of 5 years but the gap cannot exceed 
13 years from the date of start of deferment. It does not flow 
from the notification that if a benefit is granted for 8 years or for 
a lesser period, the assessee cannot claim that the repayment 
has to be completed within 13 years from the date of grant. In the 
case at hand, the claim of the assessee that the repayment 
schedule has to continue for a period of 13 years from 2006, for 
the deferment commenced only in 2006. Such an interpretation 
not only causes serious violence to the language employed in 
the notification but if it is allowed to be understood in such a 
manner, it shall lead to an absurd situation. That apart, the 
intention can be gathered from the notification that it has to relate 
bacl< to the date of eligibility
with a maximum limit of 13 years. It 
cannot be construed to mean 13 years from the date of completion 
of the eligibility period. The repayment schedule is 5 years from 
the expiry of eligibility period of deferment. The period of 5 years 
has to be so arranged that it does not go beyond 13 years from 
the date of deferment. Language employed in para 5(1) has to be 
understood in this manner to give it an appropriate meaning. 
Otherwise, the interpretation propounded on behalf of the 
assessee would lead to an anomalous situation because as regards 
fixation of schedule of repayment within 5 years from thedate of 
completion of the eligibility period, will become totally otiose and, 
in a way, irrelevant. Words "from the date of start of deferment" 
cannot be conferred a meaning in the manner suggested by the 
c"ounsel for the assessee. It is a well-known principle of statutory 
interpretation thatif an interpretation leads to ·absurdity, the same 
is to be avoided. If the notification is read as a whole, the intention, 
purpose and wo.rking of it is absolutely clear. The ingenious 
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[2016] I S.C.R. 
interpretation placed on the words are really beyond the context. 
Thus analysed, the irresistible conclusion is that the repayment 
schedule has to end on 31.08.2013 within a span of 5 years from 
the expiration of the eligibility period. [Para 27](949-G-H; 
950-A-H; 95~-A-C] 
1.4 Rule 66 of the Rules provides for payment for breach 
of the Rules. The question of levy of penalty as envisaged under 
Rule 66 of the Rules should not be made applicable to the case at 
hand, because the instant case projects special features. Regard 
being had to the special features of the case and taking note of 
the fact that the assessee-1" respondent had already deposited 
the amount in pursuance of the order of this Court and regard 
being had to the nature of litigation, it is directed that the 1 '' 
respondent-assessee would pay 12% interest per annum and the 
said amount shall be deposited with the competent authority of 
the revenue within three months. [Paras 28) (951-D-F] 
Telangana Steel Industries v. State of A.P. 1994 Supp. 
(2) SCC 259:1994 (2) SCR 324; Tata Iron & Steel Co. 
Ltd. v. State of Jharkhand and others (2004) 7 SCC 
242;Ha11sraj Gordhandas v. H.H. Dave, Assistant 
Collector of Central Excise & Customs, Surat and 1\vo 
ors. (1969) 2 SCR 252; Utkal Contractors and Joinery 
Pvt. Ltd. and others v. State of Orissa and others (1987) 
3 SCC 279: 1987 (3) SCR 317; Mis Doypack Systems 
Pvt. Ltd. v. Union of
India & others (1988) 2 SCC 299: 
1988 (2) SCR 962 ; Keshavji Ravji and Co. and others 
vs. Commissioner of Income Tax (1990) 2 SCC 231: 
1990 (1) SCR 243; Mahadeo Prasad Bais (Dead) vs. 
Income-Tax Officer 'A ' Ward. Gorakhpur and another 
( 1991) 4 SCC 560: 1991 (I) Suppl. SCR 9; Oxford 
University Press v. Commissioner of Income Tax (2001) 
3 SCC 359: 2001 (1) SCR 574; State of T.N v. 
Kodaikanal Motor Union (PJ Ltd. (1986) 3 SCC 91: 1986 
(2) SCR 927; K.P. Varghese v. ITO (1981) 4 SCC 
173: 1982 (1) SCR 629 - referred to. 
Maunse// v. Olins (1975) I All ER 16; Luke v. !RC (1964) 
54 ITR 692:1963 AC 557 (HL) - referred to.
STATE OF JHARKHAND v. TATA STEEL LTD. 
Case Law Reference 
19?~ (2) SCR 324 
Referred to. 
Para2 
c2004) 1 sec 242 
Referred to. 
Para4 
(1969) 2 SCR 252 
Referred to. 
Para 18 
191!7: (3) SCR 317 
Referred to. 
Para 22 
191!8 (2) SCR 962 
Referred to. 
Para 23 
19?Q (1) SCR 243 
Referred to. 
Para 23 
1991 (1) Suppl. SCR 9 
Referred to. 
Para 24 
20Ql (1) SCR 574 
Referred to. 
Para 25 
198~ (2) SCR 927 
Referred to. 
Para25 
191!2 (1) SCR 629 
Referred to. 
Para 25 
CIVIL APPELLATE JURISDICTION: CIVIL APPEAL No. 
42850F2007 
From the Judgment and Order dated 18.01.2007 of the High 
Court of Jharkhand at Ranchi in Writ Petition (T) No. 2664 of2006 with 
Writ Petition (T) Nos. 2829, 2845, 3744, 3912, 3617, 3416, 3420, 3733, 
5747, 5600, 5603 & 5130 of2006 
Ajit Kumar Sinha, Krishnanand Pandeya, Jayesh Gaurav, Shashank 
Singh, Amrendra Kr. Cl10ubey for the Appellants. 
Dushyant A. Dave, Nandini Gore, Kartik Bhatnagar, Arjun Sharma, 
Khushboo Bari, Manik Karanjawala, Devashish Bharuka, Aasia Hasan, 
San jay Jain, Vishwajit Singh, Gopal Prasad for the Respondents. 
The following Order of the Court were delivered by 
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DIPAK MISRA, J. I. M/s. Tata Steel Limited, the I" respondent 
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herein, had established a manufacturing unit for production of HRP, 
rounds, structural and other iron and steel products in Dhanbad situated 
in erstwhile Bihar. The State ofBihar had on 22.12.1995 formulated an 
industrial policy for tax exemption and/or deferment to such
industrial 
units which started production between 01.09.1995 and 31.08.2000. The 
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said policy was issued in exercise of power conferred by Section 23A of 
the Bihar Finance Act, 1981 (for short, "the 1981 Act") and the purpose 
of framing the policy was industrial growth of the State. The policy 
stipulated that such industrial units should have.the registration certificate 
indicating that the unit was eligible to have the benefits of the policy. 
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The policy was issued with a view to create an atmosphere conducive 
for growth of industries and optimum utilisation of the natural resources 
available in the designated/stipulated area. As is evident, by the said 
policy, the Government intended to attract investors from various parts 
of the country to invest in the identified areas. The major incentive 
under the policy, apart from others, included eight years sales tax 
exemption on sale and purchase of material from the date of 
commencement of production as stipulated in the policy. Keeping in 
view the purpose incorporated in the policy, exemption notification under 
the 1981 Act was issued. The appellant expressed its willingness to install 
a cold rolling mill in Jamshedpur by investing Rs. 2000 crores. After a 
final decision was taken upon due deliberation, the l" respondent sought 
a confinnation from the State of Bihar to assure the commitment to 
grant sales tax exemption as stated in the policy as an incentive. Number 
of meetings took place between the authorities of the State ofBihar and 
the l" respondent and in pursuance of the discussion, certain amendments 
in the policy took place, as a consequence of which a communication 
was made to the l" respondent for setting up a cold rolling mill with 
production capacity of 1.02 million tonnes requiring investment of Rs. 
·1874.04 crores on the project. Regard being had to the discussion and 
the
communication, the l" respondent invested nearly Rs. 2000 crores 
on its own and the commercial production commenced from 01.08.2000. 
2. When the matter stood thus, the Bihar Reorganisation Act, 
2000 came into existence on 15.11.2000 as a result of which Jamshedpur 
became part of a newly carved out State, namely, Jharkhand. After 
coming into force of the new State, on 15 .12.2000, the Governor of 
Jharkhand by notification ordered that the 1981 Act, the Central Sales 
Tax (Bihar) Rules, 1956 and the notifications m11de thereunder, etc. 
amongst other Acts, Rules and Regulations, shall be deemed to be in 
force in the entire State of Jharkhand w.e.f. 15.4 1.2000. On 21.12.2000, 
the successor State issued an exemption certificate as contemplated in 
earlier notification issued by the Bihar State Finance and Commercial 
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Taxes Department exempting the new units which also included the unit 
established by the 1" respondent, from the purchase tax as well as the 
sales tax on purchase and sales made in regard to the cold rolling mill. 
Be it stated that the said certificate was issued after holding proper 
enquiry by the concerned Joint Commissioner. After due enquiry, he 
had opined that though the raw materials for the manufacture of CR 
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STATE OF JHARKHAND v. TATA STEEL LTD. 
fDIPAK MISRA, J.] 
metallurgical components and the end-use, and the two products were 
commercially recognised as different products. Hence, the cold-rolled 
products manufactured by the new unit being different from the hot-
rolled product manufactured by the old unit, the appellants were entitled 
to exemption of sales tax as provided under the industrial policy. On that 
score, he had approved issuance of the certificate. However, the 
Commissioner of Commercial Taxes, Jharkhand initiated a suo 1110111 
revision under Sectfon 46(4) of the 1981 Act and placing reliance on 
Te/angana Steel Industries v. State of A.P.' held that the two products 
must be treated as the same commodity and the products not being 
different commodities, the benefit of exemption was not available, 
3. Being aggrieved by the order passed by the Commissioner, the 
l" respondent filed a writ petition before the High Court of Jharkhand 
which ultimately remanded the matter to the competent authority to 
examine whether HR product and CR product manufactu·red by the two 
units of the company are one and the same or two different' products. 
4. The aforesaid order came to be assailed before this Court in 
Tata Iron & Steel Co. Ltd. v. State of Jlwrkfta11d am/ others'. The 
Court, taking note of various aspects and the submissions raised at the 
bar, held as follows:-
"20. We are unable to accept this argument either. First of all, as 
noticed above, it is not
the case of the State that the product 
manufactured by the appellant in its new unit is not CRM. It is not 
the case of the State that the existing unit either by its machinery 
or by its process is capable of making HRM and not CRM or is 
capable of manufacturing both. Of course, if such an issue were 
to be raised the burden would have been on the appellant to 
establish the same. When such an issue is not raised it is not 
necessary for the appellant to establish that fact by any such 
intrinsic evidence. The material produced before the Joint 
Commissioner was in our opinion sufficient to decide whether the 
product manufactured by the appellant is CRM or not and the 
said Joint Commissioner having given a positive finding and that 
finding having not been interfered with by the Commissioner, we 
think the High Court erred in remanding the matter for fresh inquiry. 
1 f994 Supp. (2) sec 259 
'(2004 J 1 sec 242 
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21. It is true that normally as against an order of remand this 
Court hesitates to interfere since there is always another opportunity 
for an aggrieved party to establish its case. But in this case we 
should notice that the decision to establish an industrial unit was 
initiated by the appellant as far back as in the year 1997. Based 
on a promise made in the industrial policy of the State ofBihar, at 
every stage the appellants tried to verify and confirm whether 
they are entitled to the benefit of exemption or not and they were 
assured of that exemption. It is based on these assurances that 
the appellant invested a huge sum of money which according to 
the appellant is to the tune of Rs 2000 crores but the State says it 
may be to the tune of Rs 1400 crores. Whatever may be the 
figure, the fact still remains thatthe appellants have invested huge 
sums of money in installing its new industrial unit. At every stage 
of the construction, progress and installation of the machineries, 
the Government/authorities concerned were infonned and at no 
point of time it was suspected that the new unit was going to 
manufacture HRM. The process of manufacturing HRM and 
CRM as could be seen from the experts' opinion is totally different 
and the material on record also shows that the plant design for a 
new unit is for the purpose of manufacturing CRM. These factors 
coupled with the fact that at no stage of the
proceedings which 
culminated in the judgment of the High Court, the respondent State 
had questioned this fact except for the technical ground taken by 
the Commissioner which is found to be erroneous, we find the 
ends of justice would not be served by remanding the matter for 
further inquiry." 
5. After so stating, this Court allowed the appeal and set aside the 
order of the High Court and restored the proposal made by the Joint 
Commissioner for grant of exemption certificate to the company and 
also the exemption certificate granted subsequently. 
6. In pursuance of the aforesaid judgment, the I" respondent 
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company availed the benefit of exemption. As the facts would unveil, 
on 01 .04.2006, Jharkhand Value Added Tax Act, 2005 (for brevity, "JVAT 
Act") came into force. Prior to that, through a notification SO no. 202 
dated 30.03.2006 issued under Section 7(3) of the I 981 Act, the State of 
Jharkhand had withdrawn notification nos. 4 78 and 4 79 dated 22.0 I. I 995 
and SO nos. 57 and 58 dated 02.03.2000 with immediate effect, as a 
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STATE OF JHARKHAND v. TATA STEEL LTD. 
939 
fDIPAK MISRA, J.l 
result of which the facility of exemption from payment of sales tax on 
A 
the purchase ofraw materials and also facility of exemption of sales tax 
on its finished products was withdrawn. On 30.03.2006, a notification 
bearing SO no. 202 under Section 8(5)(a) of the Central Sales Tax Act, 
1956 was issued withdrawing notification no. 481 dated 22.12.1995. 
7. At this juncture, it is relevant to refer to Section 95(3) (ii) of the 
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JVAT Act which reads as under:-
"95. Transitional Provisions -
(3)(ii) Where a registered dealer was enjoying the facility of 
exemption for payment of tax extended to him under the provisions 
of adopted Bihar Finance Act, 1981 for his having established 
new industrial unit in the State or undertaken expansion, 
modernization or diversification in such industrial units immediately 
before the appointed day, may be allowed to convert the facility 
of exemption from payment of tax under the Act into getting the 
facility of deferment of payment of tax for the un-expired period 
or percentage of value of fixed asset as determined, as might 
have been allowed to such dealerunderthat Act, by a notification 
published in Official Gazette by the State Government." 
8. Rule 64 of the Jharkhand Value Added Tax Rules, 2006 (for 
short "the Rules") deals with deferment. The said rule reads as under:-
"64. Deferment.-(I)(a) All such Industrial units, which were 
availing the benefit of
deferment of tax under the provisions of 
the Repealed Act and notifications issued there-under, immediately 
before the Appointed Day, and who are continued to be so eligible 
on such Appointed Day under the Act, may be allowed to continue 
the benefit of such deferment of payment of tax, for the balance 
un-expired period or un-availed percentage of gross value of fixed 
assets, provided such Industrial units file an application in Form 
JVAT 121 for grant of fresh eligibility Certificate, for the balance 
un-expired period or un-availed percentage of gross value of fixed 
assets, before the In-charge of the Circle, in which such unit is 
registered. 
(b) All the procedure and provisions issued for availing 
deferment in the Repealed Act shall continue to be in operation . 
and shall be deemed to have been adopted for the purpose of the 
Act. 
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(c) The In-charge of Circle, on receipt of such 
application mentioned in sub-rule (a) shall issue a revised eligibility 
certificate, indicating therein the balance un-expired period or un-
availed percentage of gross value of fixed assets. 
Provided such Industrial Unit shall file an application 
mentioned in sub-rule (a) within a period of fifteen days from the 
date, on which the Act comes into operation. 
Provided further the In-charge of the circle, shall issue 
a revised eligibility certificate, for the remaining un-expired period 
within fifteen days, from receipt of such application. 
(2) All such industrial units, which were availing the benefit of 
exemption from payment of tax on the sales of their finished 
products, granted under clause (b) of sub,section (3) of Section 7 
of the Repealed Act, and who have not availed of their full 
entitlement as on Appointed Day, may be allowed to opt for 
deferment of payment of tax for the balance unexpired period or 
unveiled percentage of value of fixed assets as determined, 
whichever is earlier, in accordance with sub-section (J)(ii) of 
Section 95 of the Act. 
Provided no dealer eligible for deferment under sub-rule (2), shall 
be allowed to defer his tax liability under the Act, unless he applies 
to the concerned Registering Authority of the Circle in Form JVAT 
121, and upon receipt of such application, the concerned Registering 
Authority of the
circle shall issue a certificate of eligibility in Form 
JVAT408. 
Provided further such deferment as mentioned in sub-rule (2) shall 
be allowed in accordance with the notification issued for this 
purpose by the State Government in accordance with the provisions 
of sub-section (3)(ii) of Section 95 of the Act. 
Provided also that, if such notification is issued by the State 
Government, the Industrial Unit opting to changeover to deferment 
the tax for the remaining unexpired pe.riod or unveiled percentage 
of value of fixed assets, shall apply within fifteen days of 
publication of such notification before the Jn-charge of the circle 
in which such unit is registered, and thereafter the In-charge of 
the Circle shall issue revised eligibility certificate for the balance 
unexpired period or unveiled percentage of value of fixed assets, 
after making such enquiry as he may deem fit & proper."
STATE OF JHARKHAND v. TATA STEEL LTD. 
[DIPAK MISRA, J.l 
9. In pursuance of the statutory provision and the rules framed 
thereunder, the l" respondent on April 15, 2006 submitted an application 
forregistration under deferment of payment of tax. In the said application 
it has been stated thus:-
"With the enactment of "The Jharkhand Value Added Tax Act, 
2005", effective from 01.04.2006, exemptions have been converted 
to the deferment of payment of tax. We expressed our strong 
protest for withdrawing the said exemption of Tata Steel and 
replaced by deferment of payment of Tax provision. We also 
pray you to review the provision of the said deferment of payment 
of tax and allow us to continue availing the existing Sales Tax 
exemption on purchase of raw materials and other goods for 
production of CR products as well as on selling the CR Products 
as per the Bihar Industrial Policy, 1995 and the Notification made 
thereundertill 3 I" July, 2008. 
In pursuance to the VAT Act and Rules, we have to file the 
application by 15'" April, 2006 for converting the exemption to 
deferment and we are applying for the same under protest, as per 
the enclosed prescribed format JVAT 121." 
The said application seeking deferment of tax was rejected vide 
order dated 05.05.2006. 
10. Though the l" respondent filed the said application, it moved 
the High Court in W.P.(T) No. 2664 of2006 challenging the constitutional 
validity of Section 95(3)(ii) and Section 96(3) of the JVAT Act. It
also 
challenged the withdrawal of the notification and asserted that the 
company was entitled to get the benefit of exemption that had already 
been granted and thatthere was no justification for withdrawal of the 
same. The Division Bench of the High Court took up the said petition 
along with others and came to hold thus:-
"55. After holding that the principle of promissory estoppels is 
enforceable in the present case, the question arises what relief 
the petitioners were entitled to. As observed by us, even if the 
impugned notifications had not been issued, the exemption 
notifications were otherwise to die in view of Section 96(3) of the 
VAT Act and the petitioners were not entitled to the benefit of 
exemption thereafter. We have declined to strike down the 
provisions of VAT Act, including Section 96(3) of the VAT Act. 
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Therefore, we are unable to uphold the exemption benefits to the 
petitioners on account of the provisions of Section 96(3) of the 
VAT Act. However, the State cannot justify the issuance of the 
impugned notifications inview of our findings on various aspects, 
upholding the enforceability of doctrine of promissory/equitable 
estoppel when it is intended to even deny legitimate tax defennent 
benefit under Sec. 95(3) of the VAT Act. We, therefore, quash 
the impugned notifications S.Os. 201 and 202 both dated 30'h 
March, 2006 as also order dated 5'h May, 2006 rejecting claim for 
deferment of tax under Section 95(3) of VAT Act and as a natural 
corollary the petitioners will be and are entitled to the benefit of 
defennent of tax in terms of Section 95(3) of the VAT Act. We, 
thus, allow these writ petitions and direct the respondent-State to 
allow the benefit of deferment of tax to the petitioners for the 
remaining period under 1995 Industrial Policy read with the 
notifications S.Os. 478,479 and 481 all dated 22"' December, 1995 
and S.Os. 57 and 58 both dated 2'' March, 2000, in accordance 
with the provisions ofSection 95(3) of the VAT Act." 
The aforesaid order is the subject matter of assail in this civil 
appeal by special leave. 
11. We have heard Mr. Ajit Kumar Sinha, learned senior counsel 
E forthe appellants and Mr. Dushyant A. Dave, learned senior counsel for 
the I" respondent. 
I 2. At the very
outset, it is necessary to state that the 1" respondent 
had enjoyed the benefit of exemption from payment of sales tax on cold 
rolling mills products w.e.f. 01.08.2000 to 31.03.2006. Initially, the 
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exemption was granted from 0 I .08.2000 to 31.07.2008. It is not in dispute 
that the I" respondent had applied for conversion from exemption of tax 
to defennent of tax for the remaining period i.e. 01.04.2006 to 31.07.2008. 
The High Court, as is manifest, while quashing the notification nos. 201 
and 202 had directed the State to grant defennent of tax to the I" 
respondent under Section 95(3) (ii) of the JVAT Act. It is pertinent to 
G mention here as exemption was claimed and not granted, the I" 
respondent had preferred an appeal by special leave but the same has 
already been disposed of. It has been fairly stated at the Bar that the 
issue that is seminal to the present I is is benefit of deferment and the 
period of repayment. 
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STATE OF JHARKHAND v. TATA STEEL LTD. 
943 
[DIPAK MISRA, J.l 
13. When the special leave petition was listed on 04.05.2007, the 
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following interim order was passed:-
"Till the hearing and final disposal of the matter the assessee will 
open a separate account and the tax which is being deferred from 
today will be shown in that account which will be subject to the 
result of the petition." 
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14. It is the admitted position that the assessee had collected the 
tax from the consumers for the period 01.04.2006 to 31.07.2008 and 
stopped collecting tax after 3 l .07.2008. It is pertinent to n"ote here that 
on !2.07.2013, in IA No. l of2013, the following order came to be 
passed:-
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"After hearing learned counsel for the parties to the !is, we are of 
the opinion that the respondent no.1 herein should be directed to 
pay a sum ofRs.25 crores each in six monthly instalments till the 
entire amount ofRs.186.70 crores is paid to the appellant-applicant, 
excluding the amountofRs.20 crores already paid to the appellant-
D 
applicant. The first instalment of Rs.25 crores shall be paid by 
31.8.2013." 
15. We have been appraised at the Bar that the said amount has 
been paid. We may repeat at the cost of repetition that the issue of 
exemption is not alive and it has been fairly accepted by Mr. Dave, 
E 
learned senior counsel for the l" respondent. The singular issue that 
arises for consideration is the interpretation of the deferment policy in 
the context of provisions
enumerated under the JVAT Act. Section 95(3) 
(ii) envisages that a registered dealer who was enjoying the benefit of 
exemption of tax is allowed to convert the facility of exemption from 
payment of tax under the JVAT Act into the facility of deferment of 
F 
payment of tax for the unexpired period. The assessee-company has 
availed the deferment and paid the amount of tax. The gravamen of the 
grievance pertains to the period within which the amount was liable to 
be paid. Submission of Mr. Sinha, learned senior counsel appearing for 
the State is that the deferment of tax has to be computed in such a 
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manner so that the period of thirteen years as provided in the notification 
is calculated from the year 2000 ending with the year 2013. In essence, 
his argument is, as the assessee had failed to make the repayment of 
deferred tax within the prescribed period, the assessee is obligated to 
pay th~ interest for the delayed period. 
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16. The aforesaid being the fulcrum of cavil, we are obliged to 
refer to the relevant paragraphs of SO No. 480 dated 22.12.1995. They 
read as follows:-
"S.0. No. 480, dated 22-12-1995:- In exercise of powers conferred 
by Section 23A of the Bihar Finance Act, 198I(Bihar Act No. 5 
of 1981) Part I, the Governor of Biharon being satisfied that it is · 
necessary to do so in the interest of industrial growth, is pleased 
to permit those new units which started production between 01-
09-1995 to 31-0.8-2000 and which have the registration certificate 
issued from the prescribed authority and been given eligibility 
certificate for this purpose, are allowed to defer the payable sales 
tax on the sale of manufactured finished goods for a prescribed 
period under the following terms and conditions: 
x 
x 
x 
x 
x 
5. Repayment of deferred tax amount by industrial units:-
D 
Repayment of deferred tax amount by industrial units:-
( I) The repayment of deferred tax amount sh al I have to be done 
after the completion of eligibility period of deferment or the 
prescribed percentage limit of fixed capital investment, whichever 
reaches earlier. Repayment of total deferred amount shall have 
E 
to be done in ten equal six-monthly instalments in such a manner 
so as to be completed within 13 years· ftom the date of start of 
deferment. 
(2) In case of non-payment of the deferred amount after the expiry 
of the prescribed period as
stated in part (I), a simple interest at 
F 
the rate of 2.5 percent per month on repayable amount shall be 
payable till the month in which payment is made. For the purpose 
of this part, a part of month will be treated as full month. 
(3) If any unit defaults in repayment of the deferred amount within 
the prescribed period, then for the recovery of due amount 
G 
alongwith interest as stated in part(2) above, all the suitable 
provisions of the Bihar Finance Act, 1981 Part I related to recovery 
of tax, realization bf dues and imposition of penalty alongwith 
prosecution under Section 49 shall be applicable without adversely 
affecting other actions taken under the Act." 
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[Emphasis added]
STATE OF JHARKHAND v. TATA STEEL LTD. 
fDIPAK MISRA, J.l 
945 
17. Relying on the language employed in the notification, it is 
A 
submitted by Mr. Sinha, learned senior counsel for the appellant that 
deferment of tax as contemplated in the said notification has to 
commence from 31.08.2000 for the purpose of computation of 13 years. 
The words used in para 5( 1} "from the date of start of deferment" are 
not to be interpreted to convey to be determinative on the foundation of B 
individual case of deferment but they have to be understood that the 
grant of benefit of deferment is associated with the repayment of deferred 
tax and in that context it has to be so done that the period of repayment 
is completed within 13 years, that is, 31.08.2013. 
18. Refuting the said submission, it is canvassed by Mr. Dave, 
learned senior counsel appearing for the assessee that the date of start 
of deferment has to be the date when deferment commences and the 
span of 13 years has to be computed from that date. On that basis, it is 
urged by him that the period of repayment will come to end only after 
expiry of13 years from 2006, the year in which the deferment of the tax 
commenced as per the order of the High Court. Learned senior counsel 
has emphasised that when the language employed in the notification is 
absolutely plain and clear, the meaning has to be attributed to the clear 
words for the words employed therein. For the said purpose, he has 
placed reliance on the authority
in Hansraj Gordlwndas v. H.H. Dave, 
Assistant Collector of Central Excise & Customs, Surat and Two 
19. We have already reproduced the relevant paragraphs of the 
notification. Regard being had to the language employed therein, we 
have to appreciate what has been laid Clown in Hansraj Gordlumdas 
(supra). The passage from which Mr. Dave, learned senior counsel has 
drawn inspiration reads as follows:-
' 
"It was contended on behalf of the respondent that the object of 
granting exemption was to encourage the formation of cooperative 
societies which not only produced cotton fabrics but which also 
consisted of members, not only owning but having actually 
operated not more than four power-looms during the three years 
.immediately preceding their havingjoined the society. The policy 
was that instead of each such member operating his looms on his 
own, he should combine with others by forming a society which, 
3 (1969) 2 SCR 252 
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through the cooperative effort should produce cloth. The intention 
was that the goods produced for which exemption could be claimed 
must be goods produced on its own behalf by the society. We are 
unable to accept the contention put forward on behalf of the 
respondents as correct. On a true construction of the language of 
the notifications, dated July 31, 1959 and April 30, 1960 it is clear 
that all that is required for claiming exemption is that the cotton 
fabrics must be produced on power-looms owned by the 
cooperative society. There is no further requirement under the 
two notifications that the cotton fabrics must be produced by the 
Co-operative Society on the power-looms "for itself'. 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 authoritv. If such intention 
can be gathered from the construction of the words of the 
notification or by necessary implication therefrom, the matter is 
different, but that is not the case here." 
[Underlining is ours) 
20. Thus, the aforesaid decision makes it quite clear 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. It has also been held by the 
Constitution Bench, if the tax-payer is within the plain terms of the 
exemption, it cannot be denied its benefits by calling in aid any supposed 
intention of the exempting authority. That apart, it has also been stated 
therein that if different intention can be gathered from the construction 
of the words of the notification or by necessary implication therefrom, 
the matter is different. The larger Bench has not applied the said principle 
to the case involved therein. 
21.ln this context, we may recapitulate the words of Lord Reid in 
Maunsell v. O/ins' wherein it has been observed as follows:-
"Then rules of construction are relied on. They are not rules in 
the ordinary sense of having some binding force. They are our 
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'(1975)JAllERl6,21,18
STATE OF JHARKHAND v. TATA STEEL LTD. 
fDIPAK MISRA, J.l 
servants not our masters. They are aids to construction, 
presumptions or pointers. Not infrequently one 'rule' points in one 
direction, another in a different direction. In each case we must 
look at all relevant circumstances and decide as a matter of 
judgment what weight to attach to any particular 'rule'." 
22. The said passage has been referred with approval by the 
Court in Utk11/ Contr11ctors £111tl Joinery Pvt. Ltd. 1111d others v. St11te 
of Oriss11 mid others; 
23. In Mis Doyp11ck Systems Pvt. Ltd. v. Union of Indill & 
others' a two-Judge Bench while emphasising on the concept of 
interpretation opined thus:-
"58. The words in the statute must, prima facie, be given their 
ordinary meanings. Where the grammatical construction is clear 
and manifest and without doubt, that construction ought to prevail 
unless there are some strong and obvious reasons to the contrary. 
Nothing has been shown to warrant that literal construction should 
not be given effect to. See Chandavarkar S.R. Rao v. Asha/ara· 
approving 44 Hals bury s Laws of England, 4th Edn., para 856 
at page 552, Nokes v. Doncaster Amalgamated Collieries 
Limited'. It must be emphasised that interpretation must be in 
consonance with the Directive Principles of State Policy in Article 
39 (b) and (c) of the Constitution. 
59. It has to be reiterated that the object of interpretation· of a 
statute is to discover the intention of the Parliament as
expressed in the 
Act. The dominant purpose in construing a statute is to ascertain the 
intention of the legislature as expressed in the statute, considering it as a 
whole and in its context. That intention, and therefore the meaning of 
the statute, is primarily to be sought in the words used in the statute 
itself, which must, if they are plain and unambiguous, be applied as they 
stand .... " 
The aforestated principle has been reiterated in Keshavji Ravji 
and Co. am/ others vs. Commissioner of Income Tax9• 
'(1987) 3 sec 279 
'r 1988) 2 sec 299 
'(1986) 4 sec 447, 476 
'1940 AC 1014, 1022 
'(1990J 2 sec 231 
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24. In this regard, reference to Mllfwdeo Pmslld Bllis (Delld) 
vs. Income-Tax Officer 'A' Ward, Goraklrpur and another'° would 
be absolutely seemly. In the said case, it has been held that an 
interpretation which will result in an anomaly or absurdity should be 
avoided and where literal construction creates an anomaly, absurdity 
and discrimination, statute should be liberally construed even slightly 
straining the language so as to avoid the meaningless anomaly. 
Emphasis has been laid on the principle that if an interpretation leads to 
absurdity, it is the duty of the court to avoid the same. 
25. In Oxford University Press v. Commissioner of Income 
Tax" Mohapatra, J. has opined that interpretation should serve the intent 
and purpose of the statutory provision. ln that context, the learned Judge 
has referred to the authority in State ofT.N. v. Kot/11ikmutl Motor Union 
(P) Ltd." wherein this Court after referring to K.P. Varghese v. ITO" 
and Luke v. /RC" has observed:-
"The courts must always seek to find out the intention of the 
legislature. Though the-courts must find out the intention of the 
statute from the language used, but language more often than not 
is an imperfect instrument of expression of human thought. As 
Lord Denning said it would be idle to expect every statutory 
provision to be drafted with divine prescience and perfect clarity. 
As Judge Learned fland said, we must not make a
fortress out of 
dictionary but remember that statutes must have some purpose or 
object, whose imaginative discovery is judicial craftsmanship. We 
need not always cling to literalness and should seek to endeavour 
to avoid an unjust or absurd result. We should not make a mockery 
oflegislation. To make sense out of an unhappily worded provision, 
where the purpose is apparent to the judicial eye 'some' violence 
to language is permissible." 
26. Sabharwal, J. (as His Lordship then was) has observed thus:-
" .. : It is well-recognised rule of construction that a statutory 
provision must be so construed, if possible, that absurdity and 
" (1991) 4 sec 560 
" (2001) 3 sec 359 
"(1986)3SCC91 
"11981) 4 sec 113 
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" ( 1964) 54 ITR 692 : 1963 AC 557 (HL)
STATE OF JHARKHAND v. TATA STEEL LTD. 
fDIPAK J\1ISRA, J .l 
949 
mischief may be avoided. It ~as held that construction suggested · A 
on behalf of the Revenue would lead to a wholly unreasonable 
result which could never have been intended by the legislature. It 
was said that the literalness in the interpretation of Section 52(2) 
must be eschewed and the court should try to arrive at an 
fn1erpretation which avoids the absurdity and the mischief and 
makes the provision rational, sensible, unless of course, the hands 
of the court aretied and it cannot find any escape from the tyranny 
of! iteral interpretation. It is said that it is now well-settled rule of 
· construction that where the plain literal interpretation ofa statutory 
provision produces a manifestly absurd and unjust result which 
could never have been intended by the legislature, the court may 
modify the language used by the legislature or even "do some 
violence" to it, so as to achieve the obvious intention of the 
legislature and produce a rational construction. In such a case the 
court may read into the statutory provision a condition which, though 
not expressed, is implicit in construing the basic assumption 
underlying the statutory provision .... " 
· ' 
27. Keeping in view the aforesaid principle, the language employed 
in the notification has to be appreciated. Benefit of deferment of tax is 
granted under certain terms and conditions. One of the terms and 
conditions pertains to repayment of
deferment of tax amount by the 
industrial unit. The first part of sub-para (I) of para 5 stipulates that the 
repayment of deferred tax amount shall have to be done after the 
completion of eligibility period of deferment or the prescribed percentage 
lill\it of fixed capital investment, whichever reaches earlier. In the case 
at hand, the period 'of exemption has been converted' to period of 
deferment of tax. It is for 8 years. There is no dispute that the assessee 
had itvailed the exemption for a period of 6 years and he is entitled to 
deferment oftax forthe rest of the period which commenced in 2006. It 
is the next part of the said sub-para which requires to be understood. 
The notification lays a clear postulate that repayment of total deferred 
amount shall have to be done in ten equal six monthly instalments in such 
a manner so as to be completed within 13 years from the date of start 
of deferment. The words "from the date of start of deferment" have to 
have nexus with the policy stated in the beginning. The "policy would 
apply if the unit has commenced between 01.09.1995 and 31.08.2000; 
that it has a registration certification from the.prescribed authority and 
that,_ most importantly, it has been given an eligibility certificate for the 
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said purpose. The policy would come into play only if these conditions 
are satisfied and then the assessee will be allowed to have the benefit of 
deferment of sales tax on the sale of manufactured finished goods for a 
prescribed period. Therefore, the authority has been given the power to 
lay down the prescribed period for grant of defenpent. In the beginning, 
the l" respondent was granted exemption. The concept of exemption is 
distinct from the concept of deferment of tax. After the JVAT Act 
came into force, under the statutory provisions, there was no exemption 
and beneficiaries were entitled to convert to the scheme of deferment. 
The period remafns intact, that is, 8 years. The repayment has to be 
done in equal six monthly instalments and that period is 5 years. The 
repayment commences after completion of eligibility period of deferment 
or the prescribed percentage limit of fixed capital investment, whichever 
is earlier. The prescribed authority can grant an eligibility certificate but 
he has to keep in view the terms and conditions stipulated in the 
notification. The said authority cannot travel beyond the stipulations of 
the notification. The language employed in the notification conveys that 
the grant of certificate has to be such that after expiration of the eligibility 
period, the amount has to be paid back within a span of 5 years but the 
gap cannot exceed 13 years from the date
of start of deferment. The 
postulate enshrined therein has to be appositely appreciated. It does not 
flow from the notification that if a benefit is granted for 8 years or for a 
lesser period, the assessee cannot claim that the repayment has to be 
completed within 13 years from the date of grant. In the case at hand, 
the claim of the assessee that the repayment schedule has to continue 
for a period of 13 years from 2006, for the deferment commenced only 
in 2006. Such an interpretation not only causes serious violence to the 
language employed in the notification but if it is allowed to be understood 
in such a manner, it shall lead to an absurd situation. That apart, the 
intention can be gathered from the notification that it has to relate back 
to the date of eligibility with a maximum limit of 13 years. It cannot be 
construed to mean 13 years from the date of completion of the eligibility 
period. The repayment schedule is 5 years from the expiry of eligibility 
period of deferment. The period of 5 years has to be so arranged that it 
does not go beyond 13 years from the date of deferment. Language 
employed in para 5( 1) has to be understood in this manner to give it an 
appropriate meaning. Otherwise, the interpretation propounded on behalf 
of the assessee wi II lead to an anomalous situation because as regards 
fixation of schedule of repayment within 5 years from the date of
STATE OF JHARKHAND v. TATA STEEL LTD. 
fDIPAK MISRA, J.] 
completion of the eligibility period, will become totally otiose and, in a 
way, irrelevant. Words "from the date of start of deferment" cannot be 
conferred a meaning in the manner suggested by the learned senior 
counsel for the assessee. It is a well-known principle of statutory 
interpretation that if an interpretation leads to absurdity, the same is to 
be avoided. And we have no hesitation here to say that if the notification 
is read as a whole, the intention, purpose and working of it is absolutely 
clear. The ingenious interpretation placed on the words are really beyond 
the context and, therefore, we are not disposed to accept the same. 
Thus analysed, the irresistible conclusion is that the repayment schedule 
has to end on 31.08.2013 within a span of5 years from the expiration of 
the eligibility period. 
28. Having said that, we may proceed to deal with the imposition 
of interest and penalty under the NAT Act. Rule 66 of the Rules provides 
for payment for breach of the Rules. We may immediately make it clear 
that the question of levy of penalty as envisaged under Rule 66 of the 
Rules should not be made applicable to the case at hand. We say so as 
the present case projects special features. It is submitted by Mr. Sinha, 
learned senior counsel for the State that the revenue is entitled to 2.5% 
interest per month as per sub-para 2 of paragraph 5 of the notification. 
It is argued on behalf of the
assessee that it is not a case for levy of 
interest. Regard being had to the special features of the case and taking 
note of the fact that the assessee-1" respondent had already deposited 
the amount in pursuance of the order of this Court and regard being had 
to the nature of litigation, we direct that the l" respondent-assessee 
shall pay 12% interest per annum and the said amount shall be deposited 
with the competent authority of the revenue within three months hence. 
29. Resultantly; the appeal stands disposed of in above terms. 
There shall be no order as to costs. 
Nidhi Jain 
Appeal disposed of. 
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