Supreme Court of India
STATE OF JHARKHAND & ORS.versusTATA STEEL LTD. & ORS.
- Citation
- 2016 INSC 160
- Decided
- 12 February 2016
- Disposal
- Disposed off
- Bench
- DIPAK MISRA
Holding
The repayment of deferred tax must be completed within five years after the eligibility period, ending no later than 31 August 2013, i.e., within 13 years from the original start of deferment, and only interest at 12 % per annum, not penalty, is payable.
Summary
Tata Steel Ltd. had been granted an eight‑year sales‑tax exemption under the Bihar Industrial Policy (1995‑2000) and enjoyed the benefit from August 2000 to March 2006. When the Jharkhand Value Added Tax Act, 2005 came into force, the exemption was withdrawn and the company applied to convert the remaining exemption period into a deferment of tax. The High Court granted deferment but the repayment period was contested. The Supreme Court examined Section 95(3)(ii) of the JVAT Act and the 1995 notification, holding that the repayment of the deferred tax must be completed within five years after the eligibility period, and that this five‑year window must end no later than 13 years from the original start of deferment (i.e., by 31 August 2013). The Court also ruled that no penalty under Rule 66 should be imposed, but interest at 12 % per annum is payable. Consequently, the appeal was dismissed and the repayment schedule and interest liability were confirmed.
Issues considered
- The proper interpretation of Section 95(3)(ii) of the Jharkhand Value Added Tax Act, 2005 and the related notification regarding the repayment period for deferment of tax
- Whether the 13‑year period for repayment is calculated from the original start of deferment (2000) or from the date deferment actually commenced (2006)
- Whether penalty under Rule 66 of the Jharkhand VAT Rules is applicable
- Whether the withdrawal of the exemption and conversion to deferment is constitutionally valid
Legislation cited
- Bihar Finance Act, 1981s. 23A, s. 49
- Central Sales Tax Act, 1956s. 8(5)(a)
- Jharkhand Value Added Tax Act, 2005s. 95(3)(ii)
- Jharkhand Value Added Tax Rules, 2006s. Rule 64, s. Rule 66
Subjects
Jharkhand Value Added Tax Actdeferment of taxsales tax exemptionrepayment schedulestatutory interpretationinterest liabilitypenalty exemptionindustrial policypromissory estoppel
Judgment
[2016] 1 S.C.R. 931
STATE OF JHARKHAND & ORS. A
v.
TATA STEEL LTD. & ORS.
(Civil Appeal No. 4285 of2007)
FEBRUARY 12, 2016 B
[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
c
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
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
E
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 F
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
G
- 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
HELD: 1.1 Section 95(3)(ii) of the Jharkhand Value Added H
931 -
932 SUPREME COURT REPORTS [2016] I S.C.R.
A 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]
B
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
c 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
D 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
E 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
F 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
G 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
H
STATE OF JHARKHAND v. TATA STEEL LTD. 933
repayment has to be done in equal six monthly instalments and A
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
B
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 c
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
D
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 E
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
F
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" G
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
H
934 SUPREME COURT REPORTS [2016] I S.C.R.
A 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]
B 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
c 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]
D 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
E 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:
F 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.
G 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.
H
STATE OF JHARKHAND v. TATA STEEL LTD. 935
Case Law Reference A
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
B
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 c
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
D
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.
E
Dushyant A. Dave, Nandini Gore, Kartik Bhatnagar, Arjun Sharma,
Khushboo Bari, Manik Karanjawala, Devashish Bharuka, Aasia Hasan,
Sanjay Jain, Vishwajit Singh, Gopal Prasad for the Respondents.
The following Order of the Court were delivered by
DIPAK MISRA, J. I. M/s. Tata Steel Limited, the I" respondent F
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 G
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.
H
936 SUPREME COURT REPORTS [2016] 1 S.C.R.
A 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
B
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
c 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
D
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.
E 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
F 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
Taxes Department exempting the new units which also included the unit
0 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
H product is HR product, the CR product is totally" different, both in its
STATE OF JHARKHAND v. TATA STEEL LTD. 937
fDIPAK MISRA, J.]
metallurgical components and the end-use, and the two products were A
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
B
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 ofA.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
c
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 D
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 E
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 F
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 G
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 J1 sec 242 H
938 SUPREME COURT REPORTS [2016] I S.C.R.
A 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
B
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
c 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
D
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
E 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."
F 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
G 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
H
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 B
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 c
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 D
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:- E
"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
F
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 G
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. H
940 SUPREME COURT REPORTS (2016] I S.C.R.
A (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
B 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.
c (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
D 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
E 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
F 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
G
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,
H after making such enquiry as he may deem fit & proper."
STATE OF JHARKHAND v. TATA STEEL LTD. 941
[DIPAK MISRA, J.l
9. In pursuance of the statutory provision and the rules framed A
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 B
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
c
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 D
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.
E
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 F
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 G
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.
H
/
942 SUPREME COURT REPORTS [2016] I S.C.R.
A 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
B
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
c 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
D
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
p 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 oftax 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 Iis is benefit of deferment and the
period of repayment.
H
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 A
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." B
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:- C
"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 G
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.
H
944 SUPREME COURT REPORTS (2016] I S.C.R.
A 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
B 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
c 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."
H [Emphasis added]
STATE OF JHARKHAND v. TATA STEEL LTD. 945
fDIPAK MISRA, J.l
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 c
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 D
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
E
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:- F
'
"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 G
.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
H
946 SUPREME COURT REPORTS [2016) I S.C.R.
A 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
B
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
c 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
D
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)
E 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
F 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.
G 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
H '(1975)JAllERl6,21,18
STATE OF JHARKHAND v. TATA STEEL LTD. 947
fDIPAK MISRA, J.l
servants not our masters. They are aids to construction, A
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 B
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:- c
"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 D
not be given effect to. See Chandavarkar S.R. Rao v. Asha/ara·
s
approving 44 Hals bury 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. E
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 F
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 • G
'(1987) 3 sec 279
'r 1988) 2 sec 299
'(1986) 4 sec 447, 476
'1940 AC 1014, 1022
'(1990J 2 sec 231 H
948 SUPREME COURT REPORTS [2016] l S.C.R.
A 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
B
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
c 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
D 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.
E 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,
F 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
G provision must be so construed, if possible, that absurdity and
" (1991) 4 sec 560
" (2001) 3 sec 359
"(1986)3SCC91
"11981) 4 sec 113
H " ( 1964) 54 ITR 692 : 1963 AC 557 (HL)
STATE OF JHARKHAND v. TATA STEEL LTD. 949
fDIPAK J\1ISRA, J .l
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
B
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 c
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
D
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 E
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 F
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 G
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 H
950 SUPREME COURT REPORTS [2016] I S.C.R.
A 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
B
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
c repayment commences after completion of eligibility period ofdeferment
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
D
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
E 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
F
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
G 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
H
STATE OF JHARKHAND v. TATA STEEL LTD. 951
fDIPAK MISRA, J.]
completion of the eligibility period, will become totally otiose and, in a 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
B
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. c
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 D
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 E
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. F
There shall be no order as to costs.
Nidhi Jain Appeal disposed of.
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