Holding

An assessee who has opted for the 1989 scheme is estopped from claiming the 100% exemption of the 1987 scheme, and the assessing authority may rectify its mistake and recover the tax without waiving interest or penalty.

Summary

The State of Rajasthan introduced two sales‑tax incentive schemes, a 1987 scheme offering 100% exemption and a 1989 scheme offering 75% exemption, and allowed entrepreneurs to opt for one. Vividh Marbles Pvt Ltd chose the 1989 scheme and obtained an eligibility certificate, but the assessing authority mistakenly granted exemption under the 1987 scheme. Upon discovering the error, the State issued a notice for the recovery of the 25% tax that should have been payable under the 1989 scheme. The appellant argued that it was eligible for both schemes and should receive the 100% exemption, seeking a waiver of interest and penalty. The Supreme Court held that having elected the 1989 scheme, the appellant is estopped from claiming the benefit of the 1987 scheme, and the assessing authority is entitled to rectify its mistake and recover the tax; no waiver of interest or penalty was warranted. The appeal was dismissed.

Issues considered

Whether an assessee who has elected a particular sales‑tax incentive scheme is estopped from later claiming the benefit of another scheme.
Whether the assessing authority can rectify a mistake in granting exemption under the wrong scheme and recover the tax.
Whether interest and penalty can be waived in such circumstances.

Legislation cited

Subjects

sales taxexemptionindustrial policyestoppelmistake rectificationinterestpenaltyRajasthanassessmenteligibility certificate

Judgment

MIS VIVIDH MARBLES PVT. LTD.
).> ..
A
v.
COMMERCIAL TAX OFFICER

FEBRUARY 23, 2007
B [S.B. SINHA AND MARKANDEY KA TJU, JJ.]

r
Taxation--Sales tax-Exemption-Pursuant to Industrial Policy-Two
schemes exempting payment of sales tax-Option to the entrepreneur to opt
c for any one scheme-Assessee opting/or later scheme getting 75% exemption-
Assessing Authority by mistake granted exemption under former Scheme
granting 100% exemption-On realization of mistake, demand made for
recovery of 25% tax-Challenged in Writ Petition-Dismissal thereof-On
appeal, held: Assessee having opted for one Scheme, is estoppedfrom opting
D for another Scheme,-Assessee cannot be permitted to derive benefit of the
mistake of Assessing Authority-Statutory Authorities are entitled to rectify
their mistake.
'r

State Government, pursuant to its industrial policy, formulated two ;,

Schemes exempting payment of Sales tax, one in the year 1987 (granting
E 100% exemption) and another in 1989 (granting 75% exemption). Both the
Schemes provided for different nature of incentives 1989 .Scheme not given
retrospective effect and entrepreneurs were given a choice to opt for either
of the two Schemes. Appellant herein opted for 1989 Scheme. Eligibility
Certificate was granted in terms whereof 1989 Scheme was applied. In order
F of assessment exemptions were stated to have been granted in terms of 1987
Scheme. When the mistake of the Assessing Authority was discovered, a show
cause notice was issued to the appellant for payment of balance sales tax.
Appellant filed a Writ Petition thereagainst on the grounds that it being
eligible for grant of exemption under both the Schemes, it preferred to avail
of 100% exemption under 1987 Scheme; that notices seeking recovery of
G the balance tax was contrary to assessment order; and that respondent having
granted exemption under 1987 Scheme, could not be permitted to change its
opinion to allow exemption under 1989 Scheme. The Writ Petition was f·
dismissed by High Court. Hence the present appeal.

H
140
Vl'llDH MARBLES PVL LTD. v. COMMERCIAL TAX OFFICER 141

Dismissing the appeal, the Court A
" HELD: I.I. It may be true that the Assessing Authority committed a
mistake in referring to the 1987 Scheme in its order of assessment, but
thereby the appellant cannot be permitted to derive any benefit to which it was
not entitled under the law. Appellant indisputably was eligible for grant of
exemption in terms of both the Schemes. Having opted for the 1989 Scheme, B
now the appellant cannot be permitted to turn round and contend that it should
have been granted the benefit of 1987 Scheme, only because at a later stage
it found the same to be more beneficial. [Para 10) [145-G-H; 146-A)

Indian Cement and Ors. v. State ofAndhra Pradesh and Ors., (1988) 1 c
sec 743; West Bengal Hosiery Association and Ors. v. State of Bihar and
Anr., [1988) 4 SCC 134 and British Physical Lab India Ltd. v. State of
Karnataka and Anr., (1999) l SCC 170, distinguished.

Maharashtra State Seeds Corporation Ltd. v. Hariprasad Drupadrao
Jhadao and Anr., (2006) 3 SCC 690, referred to. D

1.2. If the Assessing Authority committed a mistake in referring to 1987
Scheme and allowed 100% exemption in terms thereof, the State cannot suffer
7 thereby. The statutory authorities are entitled to rectify their mistake. When
such mistakes are apparent on the face of the records even no opportunity of E
' hearing is necessary. [Para 13) (146-E, F]

2. In a case of this nature, a direction to the effect that the appellant is
not liable to pay any interest or any penalty, cannot be issued. Appellant herein
knew the actual state of affairs. It at all material times was aware of the extent
of its entitlement thereto, which was confined to the benefits under the 1989 F
Scheme. However, despite such knowledge if it had not recovered any tax, it
must thank itself therefor. (Para 19) (147-D, E)
~

Shree Cement Ltd. and Anr. v. State of Rajasthan and Ors., (2000) 1
sec 765; Indian Cement and Shree Digvijay Cement Co. Ltd. and Ors. v. G
State of Rajasthan and Ors., (2000) 1 SCC 688 and State of Rajasthan and
Anr. v. J.K. Udiapur Udyog Ltd. and Anr., (2004) 7 SCC 673, distinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 926 of2007.
"t
From the Final Common Judgment and Order dated 6.2.2006 of the High H
142 SUPREME COURT REPORTS [2007] 3 S.C.R.

A Court of Judicature for Rajasthan at Jodhpur in SB STCRP No. 49/2004.
M.L. Verma and P.K. Manohar for the Appellant.
,. -
Sushi! Kumar Jain, Puneet Jain, Christe Jain and Abhishek Gupta for the
Respondent.
B
The Judgment of the Court was delivered by

S.B. SINHA, J. I. Leave granted.
~
2. The State of Rajasthan pursuant to its industrial policy formulated
c 'Sales Tax Incentive Scheme, 1987' (for short, '1987 Scheme') and 'Sales Tax
New Incentive Scheme for Industries, 1989' (for short, '1989 Scheme). In terms
of 1987 Scheme exemption from payment of sales tax of 100% was provided.
1989 Scheme which was notified in the Official Gazette on or about 06.07 .1989
was given retrospective operation with effect from 05.03.1987. It was to remain
D in force upto 31.03.1998. Sub-clause (b) of Clause(!) of 1989 Scheme r·eads
as under :

(b) An industrial Unit, other than the new industrial unit covered by
1985 Dispensation, being covered by the Sales Tax Incentive Scheme
...
for Industries, 1987 (hereinafter referred to as the Old Incentive Scheme)
E shall have an alternative option to seek the benefits under the New
!

Incentive Scheme."

3. Clause 4 of the said Scheme which is relevant for our purpose, reads
as under :
F "4. Exemption from tax on sales - (a) An industrial unit, which is
granted eligibility certificate under this notification shall be exempted
from payment of tax on sales made within the State of the goods
manufactured by it in accordance with the parameters incorporated in
Annexure "C" to this notification.
G

(b) for the purpose of arriving at the limit of tax exemption as provided
in Annexure "C" the aggregate of the following shall be considered-

(i) Aggregate amount of tax which would have been leviable under the
H
provisions of the RST Act 1954;
VIVIDH MARBLES PVT LTD. r. COMMERCIAL TAX OFFICER [S.B. SINHA,J.] 143

... (ii) Aggregate amount of tax on inter-State sales which would have
been leviable under the provisions of the CST Act, 1956; and
A

(iii) Aggregate amount of tax, as and when levied, on consignments.

(d) When the limit of tax exemption prescribed in Annexure "C" is B
exhausted, all sales thereafter shall be subject to tax under the Act by
the assessing authority concerned .
. ¥

(e) The Incentive available under this Scheme shall be subject to the
condition that the beneficiary industrial unit after having availed of
any benefit under this Scheme shall not make sales outside the State c
including branch transfers of the goods manufactured by it exceeding
60% in case of SSI, Medium and Large units and 80% in case of
Pioneering and Prestigious units and 90% in case of Very Prestigious
Units of its total production.

4. Appellant herein was eligible to obtain the benefits of the said
D
Industrial Policy both under 1987 and 1989 Schemes. It, however, opted for
-t I 989 Scheme, wherefor an application for grant of sanction of eligibility
- _\ certificate was filed before the Manager, District Industries Centre, Rajsamand
on 01.04.1995. Indisputably, the eligibility certificate was to be granted by the
Industries Department of the State. The said certificate was granted on E
07.12.1996, pursuant whereto exemption from tax liability was limited to 75%.

5. Contending, however, that it had altered its position on a
representation made by the State that 1987 Scheme would be applicable in its
case, the appellant alleged that it had not realized sales-tax from its customers.
In support of the said contention, it inter-alia relied upon an order of sanction F
of eligibility for grant of exemption/deferment issued by the Member Secretary
of the Department to the Commercial Taxes Officer, Rajsamand, which is in the
following terms :

"The application has been prima-facie found eligible for the benefit of
exemption from tax/deferment of tax on the basis of 'A Industrial Unit'/ G
' a New Unit covered by 1985 dispensation/a sick Industrial Unit/
-\- Expansion/ Diversification I under sales tax Incentive/ Deferment
Scheme 1987/1989 under PST and I or C.S.T. Act' on the sale of Marble
Slabs.
H
144 SUPREME COURT REPORTS [2007] 3 S.C.R
A Hence a formal eligibility certificate as per law be granted to the said
jll
applicant. The application filled by the unit was completed in all
respect on 6.5.95.

The eligible fixed capital Investment as determined by the committet:
which is subject to verification as per law is as follows :-
B
a. Cost of land

b. Cost of new building 9.49

c. Cost of new plant and
machinery or imported second 57.00
c land machinery

d. Installation expenditure capitalized
for P & M ---
e. Capitalized interest during construction
D not exceeding 5% of the total fixed
capital investment

f. Technical know-how fees or drawin ,_
fees paid Laboratories recognized by I.

the State Govt. or the
E Central Government

Total 66.49

A copy of eligibility certificate issued by you may also please be sent
to this office."
F
6. Reliance has also been placed on the order of assessment passed by
the Assessing Authority of the Commercial Taxes Department, wherein also
exemption had been stated to have been granted in terms of 1987 Scheme, a
sample copy whereof reads as under :

G "5. Sale under Incentive Scheme
From 6.5.95 to 5.5.2003 under the Incentive Scheme, 1987 the
assessee has already been allowed a heavy tax exemption of -{-
Rs. 3, 11,250.00. Eligibility Certificate No. 1/354 has been issued to
the assessee.
H
VIVIDH MARBLES PVT. LTD. v. COMMERCIAL TAX OFFICER [S.B. SINHA, J] J45

Under the Incentive Scheme, 1987 the assessee has made a sale A
of marbles slab of Rs. 5,42,063. On this sales tax@ 16 percent
of Rs. 86,730 is being imposed and being deducted from eligible
amounts received under the Incentive Scheme."

7. The mistake of the Assessing Authority, however, having been B
discovered, the appellant was issued with a notice to show cause as to why
it should not pay the balance sales-tax on 25% of its turnover. A writ petition
filed thereagainst by the appellant has been dismissed by reason of the
impugned judgment.

8. Mr. M.L. Verma, the learned Senior Counsel appearing on behalf of C
the appellant, would submit that in view of the representation made by the
respondent, pursuant whereto or in furtherance whereof the appellant had not
collected any tax from the customers, the impugned order cannot be sustained.
In any event, it was urged that no penalty or interest should be levied on the
said amount. D
9. The learned counsel appearing on behalf of the respondent, however,
supported the impugned judgment.

10. It is not in dispute that the State formulated two Schemes; one in
the year 1987 and another in 1989. The said Schemes provided for different E
nature of incentives. Although 1989 Scheme was framed during pendency of
1987 Scheme, as noticed hereinbefore, the same was given a retrospective
operation in terms whereof the entrepreneurs were given a choice to opt either
for 1987 Scheme or 1989 Scheme. Appellant was aware thereabout. It opted
for 1989 Scheme. The sanction of eligibility provided that a formal eligibility p
certificate as per law would be granted to the appellant. The investment for
capital, however, was determined at Rs.66.49 lacs. The said sanction did not
amount to a grant of a certificate. The eligibility certificate, as indicated
hereinbefore, was granted only on 07.12.1996, in terms whereof clearly 1989
Scheme was applied. It was so explicitly stated in the eligibility certificate also. G
It may be true that the Assessing Authority committed a mistake in referring
to th~ 1987 Scheme in its order of assessment, but thereby the appellant
cannot be permitted to derive any benefit to which it was not entitled under
the law. Appellant indisputably was eligible for grant of exemption in terms
of both the Schemes. It had opted for the latter Scheme. While doing so, it
must have taken into consideration the benefits under both the Schemes H
146 SUPREME COURT REPORTS [2007] 3 S.C.R.

A separately. Having opted for the 1989 Scheme, in our opinion, now the appellant
cannot be permitted to tum round and contend that it should have been -,,..
granted the benefit of 1987 Scheme, only because at a later stage it found the
same to be more beneficial.

11. A contention was raised that the eligibility certificate dated 07.12.1996
B was communicated on 02.07.2003. No. such contention was raised before the
High Court. Before the High Court, the principal contentions raised on behalf
of the appellant were : (i) It being eligible for grant of exemption under both
the Schemes, it preferred to avail of I 00% exemption under 1987 Scheme; (ii)
Notices seeking recovery of 25% tax liability was contrary to the order of
C assessment; and (iii) Respondent cannot now be pennitted to change its
opinion to allow only 75% exemption under 1989 Scheme, because for all
practical purposes it had availed and had been granted exemption under 1987
Scheme.

D 12. There had been no representation whatsoever on behalf of the
respondent that the appellant would be entitled to exemption under 1987
Scheme. The eligibility certificate was to be granted and in fact granted by
the Industries Department. The Sales Tax Authorities, therefore, were merely
to pass an order of assessment on the basis thereof.

E 13. The order of sanction being in a printed proforma rderred to both ,i..

the 1987 and 1989 Schemes. It was issued only for the purpose of detennination
of the fixed capital investment. It had nothing to do with the grant of eligibility
certificate. If the Assessing Authority committed a mistake in referring to 1987
Scheme and allowed I00% exemption in terms thereof, the State cannot suffer
p thereby. The statutory authorities _are entitled to rectify their mistake. When
such mistakes are apparent on the face of the records even no. opportunity
of hearing is necessary., [See Maharashtra State Seeds Corporation Ltd. v.
Hariprasad Drupadrao Jhadao & Anr., [2006] 3 SCC 690]

14. Appellant having opted for grant exemption under 1989 Scheme, the
G respondent was bound to accept the same and, thus, it had not committed
any illegality in doing so. In that view of the matter, in our considered view,
the appellant who is estopped and precluded from raising a contention contrary
to or inconsistent with its assertion for grant of exemption.

H 15. Reliance has been placed by Mr. Verma on Indian Cement and Ors.
VIVIDH MARBLES PVT.LTD. r. COMMERCIAL TAX OFFICER [S.B. SINHA. l) J47

,. v. State ofAndhra Pradesh and Ors.. (1988] I SCC 743, West Bengal Hosie1y A
Association and Ors. v. State of Bihar and Anr., [ 1988] 4 SCC 134 and British
Physical Lab India Ltd. v. State of Karnataka and Anr., (1999] 1 SCC 170.

16. In West Bengal Hosiery Association (supra), the question which
arose for consideration was as to whether the levy of sales-tax on goods
imported into one State from another may affect the free flow of trade and B
commerce and, thus, attract Article 301 of the Constitution of India. Such a
question does not arise herein.
f
17. In Indian Cement (supra) preference to local manufacturers was held
to be ultra vires Part XIII of the Constitution of India. c
18. In British Physical Lab India Ltd. (supra), it was opined that it was
just and equitable not to permit the State to collect the differential amount.
The said decision again has no application in the instant case.

19. Mr. Verma then submitted that at least a direction should be issued D
that the appellant is not liable to pay any interest or any penalty. We do not
see as to how in a case of this nature such a direction can be issued.
'1
Appellant herein knew the actual state of affairs. It at all material times was
aware of the extent of its entitlement thereto, which was confined to the
' benefits under the 1989 Scheme. However, despite such knowledge if it had
E
not recovered any tax, it must thank itself therefor.

20. Furthermore, the question as to whether the appellant did show it
bona fide or not is a question of fact. Such a contention can be raised only
in an appropriate proceeding and not before us for the first time. Reliance
placed on Shree Cement Ltd. and Anr. v. State of Rajasthan and Ors., (2000] F
I SCC 765 is misplaced. Therein, again dicta in Indian Cement (supra) and
Shree Digvijay Cement Co. Ltd. and Ors. v. State of Rajasthan and Ors.,
[2000] I SCC 688 was followed. In this case, there is no direction to the
respondent-State to recover the difference in tax.
G
21. In State of Rajasthan and Anr. v. JK. Udiapur Udyog Ltd. and Anr.,
(2004] 7 SCC 673, whereupon again strong reliance has been placed, the Court
held that no penalty or interest should be charged, as the said proceeding
~"I
had been remained pending. Such a direction was issued by this Court in
exercise of its jurisdiction under Article 142 of the Constitution of India,
having regard to the fact that the lis was finally determined by this Court. The H
148 SUPREME COURT REPORTS (2007) 3 S.C.R.

A fact of the present case, in our opinion, is completely different, as applicability
of the Schemes in question depended upon the volition of the appellant,
wherewith the respondent had nothing to do.

22. For the reasons aforementioned, there is no merit in this appeal,
which is dismissed accordingly, with costs. Counsel's fee is assessed at
B Rs. I 0,000/- (Rupees ten thousand only).

K.K.T. Appeal dismissed.