Supreme Court of India
STATE OF TAMIL NADU AND ANR.versusINDIA CEMENTS LTD. AND ANR.
- Citation
- 2011 INSC 322
- Decided
- 21 April 2011
- Disposal
- Dismissed
- Bench
- D K JAIN
Holding
The sales‑tax deferral benefit is available from the date the manufacturer reaches either the base production volume or the base sales volume, whichever occurs earlier, and the clarifying circular is binding on the revenue department.
Summary
The State of Tamil Nadu introduced an interest‑free sales‑tax deferral scheme for expansion or diversification units under GO No. 119 dated 13 April 1994, requiring manufacturers to meet a Base Production Volume (BPV) and a Base Sales Volume (BSV) before enjoying deferral. India Cements Ltd. claimed the benefit after reaching the BSV but not the BPV, and the Taxation Special Tribunal held that both BPV and BSV must be reached, a view reversed by the Madras High Court. On appeal, the Supreme Court examined the wording of clauses 3(i) and 3(ii) of the GO and paragraph 5.3 of the eligibility certificate, and held that the benefit accrues from the date either BPV or BSV is reached, whichever is earlier, in line with a circular dated 1 May 2000 issued under Section 28A of the Tamil Nadu General Sales Tax Act. The Court also affirmed that such circulars are binding on departmental authorities. Consequently, the appeal by the State was dismissed.
Issues considered
- The respondent's entitlement to sales‑tax deferral when the Base Sales Volume is reached but the Base Production Volume is not yet achieved.
- Whether the circular dated 1 May 2000 clarifying the scheme is binding on the revenue authorities despite any alleged inconsistency with the statute.
- The proper interpretation of clauses 3(i) and 3(ii) of GO No. 119/1994 and paragraph 5.3 of the eligibility certificate.
Legislation cited
- Central Sales Tax Act, 1956s. 9(2)
- Tamil Nadu General Sales Tax Act, 1959s. 17A, s. 28A
Subjects
sales tax deferralbase production volumebase sales volumeinterpretation of statutescirculars bindingSection 17ASection 28Aeligibility certificateexpansion/diversificationrevenue law
Judgment
[2011] 7 S.C.R. 395
STATE. OF TAMIL NADU AND ANR. A
v.
INDIA CEMENTS LTD. AND ANR.
(Civil Appeal No. 4233 of 2007)
APRIL 21, 2011
B
· [D.K. JAIN AND H.L. DATTU, JJ.]
Sa/es Tax - Tamil Nadu General Sa/es Tax Act, 1959 -
ss. 17A and 28A -Interest free sales tax deferral scheme
introduced by the State of Tamil Nadu under G. 0. Ms. No. H 9 C
dated 1jth April, 1994 for manufacturing units undertaking
expansion/diversification - Scheme providing for deferral of
sales tax based on increased volume of production/sales -
Interpretation of the scheme - Held: The benchmark for
availing the benefit of the sales tax deferral scheme having D
been fixed both with reference to the production as a/so to the
sales, it was immaterial whether the unit concerned reached
base production volume (BPV) or the base sales volume
(BSV) earlier- Any other interpretation of the said GOM would
frustrate the. object of the scheme - Benefit of sales tax E
deferral sch.eme would be available to a dealer from the date
of reaching of BPV or BSV, whichever is earlier -
Interpretation of Statutes.
Circulars /Notifications - Revenue Circulars - Binding
effect of - Held: Circulars issued by the revenue are binding F
on the departmental authorities and they cannot be permitted
to repudiate the same on the plea that it is inconsistent with
the statutory provisions or it mitigates the rigour of the law.
The State of Tamil Nadu vide G.0.Ms.No.119 dated G
13th April, 1994 introduced interest free sales tax deferral
scheme for manufacturing units undertaking expansion/
diversification. The said G.O.M. provided that deferral of
sales tax will. only be on the increased volume of
395 ' H
396 SUPREME COURT REPORTS [2011] 7 S.C.R.
A production/sales and for the purpose of determining such
increased volume, the base figure would be the highest
of the volume of production/sale in any year during the
last three years prior to expansion.
The first respondent, which was engaged in the
8
manufacture and marketing of cement in the State of
Tamil Nadu and Andhra Pradesh, claimed entitlement to
the benefit of deferral of sales tax. The Taxation Special
Tribunal held that before the first respondent could claim
deferral of sales tax, it was required to reach both the
C base production volume (BPV) and base sales volume
(BSV); in other words, if the BSV had been reached
earlier but BPV had not been reached, the first
respondent will not be entitled to get the deferral facility,
till it achieved BPV. Being aggrieved, the first respondent
D preferred Writ Petitions before the High Court which
allowed the petitions and set aside the order passed by
the Tribunal.
In the instant appeal, the question which arose for
E consideration was whether the first respondent would be
eligible for sales tax deferral in any financial year for the
sales made in that year in excess of the base sales
volume (BSV) as soon as they exceed the BSV or only
when their production also exceeds the base production
F volume (BPV) in that year.
Dismissing the appeal, the Court
HELD: 1. The source of the sales tax deferral scheme
is traceable to Section 17A of the Tamil Nadu General
G Sales Tax Act, 1959 (TNGST Act) which enables the
Government to notify deferred payment of tax for new
Industries, etc. subject to such restrictions and
conditions as may be deemed fit. Therefore, the scheme
in question has a statutory flavour. From a comparative
H reading of G.O.P.No.92 dated 22nd February, 1991 and
STATE OF TAMIL NADU AND ANR. v. INDIA 397
CEMENTS LTD. AND ANR.
G.O.Ms.No.376 dated 27th October, 1992 on the one hand A
and G.O.Ms.No.119 dated 13th April, 1994, the eligibility
certificate issued thereunder to the first respondent as
also the consequential agreement entered between the
parties on the other hand, it is evident that G.O.P.No.92
and G.O.Ms.No.376 is the source of power to grant B
exemption and G.O.Ms.No.119 lays down the
methodology and the machinery to implement the
scheme. These are complementary to each other.
Therefore, the terms and conditions stipulated in the
schemes; the eligibility certificate as also the c
consequential agreement, between the first respondent
and the revenue, having the statutory force, undoubtedly
violation of any one of the terms and conditions thereof
would disentitle the beneficiary of the benefit of the sales
tax deferral scheme. [Para 15] [410-C-F] D
· Commissioner of Customs (Preventive), Mumbai Vs. M.
Ambala/ &Company (2011) 2 SCC 74: 2010 (15) SCR 937
- referred to.
2. A conjoint reading of clauses 3(i) and (ii) of E
G.O.Ms.No.119 dated 13th April, 1994, and paragraph 5.3
of the eligibility certificate dated 13th February, 1998
issued to the first respondent would show that the object
of the conditions with reference to reaching of BPV is to
ensure that the concerned unit achieves the highest F
production and sale of the existing unit in the last three
years prior to the commencement of the commercial
production in the expansion unit, resulting in higher
revenue on higher sales. The benchmark for availing the
benefit of the sales tax deferral scheme having been fixed
both with reference to the production as also to the sales, G
it is immaterial whether the unit concerned reaches BPV
or the BSV earlier. The word "when" employed in clause
3(ii) of G.O.Ms.No.119, whether read as "·if' or "after" only
signifies that in order to avail of the benefit of sales tax
deferral for sales made in the year in excess of the BSV, H
398 SUPREME COURT REPORTS f2011] 7 S.C.R.
A the industry must achieve in that year the BPV, which is
the highest production of the last three years prior to the
expansion, for every assessment year of the total number
of years, viz., 12 years, besides reaching BSV in that
particular year. It is obvious that by insisting that the BSV
B should also be reached, the revenue of the State gets
protected in every assessment year during the entire
period of deferral and, in fact, the industry gets the benefit
of deferral only on sales which are in excess of the BSV.
It is pertinent to note that if for any reason the beneficiary
c ultimately fails to achieve the BPV during the financial
year, the benefit of deferral of sales tax availed of by it
on achieving BSV becomes refundable forthwith along
with interest thereon. lri light of the intention behind the
schemes, clause 3(ii) of the G.O.Ms.No.119 cannot be
construed to mean that the benefit would flow only from
0
the date of reaching the BPV and not from the date of
reaching the BSV, particularly when the main object of
the schemes is to increase the productivity without
compromising with the revenue of the State. Any other
E interpretation of the said GOM would frustrate the object
of the scheme. It is now well established principle of law
that if a plain meaning given to the provision for the
purpose of considering as to whether the applicant had
fulfilled the eligibility criteria as laid down in the
notification or not is found to be clear, purpose and
F object the notification seeks to achieve must be given
effect to. [Para 16] [411-8-H; 412-A-C]
G. P. Ceramics Private Limited v. Commissioner, Trade
Tax, Uttar Pradesh (2009) 2SCC 90: 2008 (16) SCR 315 -
G relied on.
3. In any event, the decision of the High Court cannot
be flawed with in, light of the circular dated 1st May, 2000
issued by the office of the Principal Commissioner and
Commissioner of Commercial Taxes, Chennai, in exercise
H
STATE OF TAMIL NADU AND ANR. v. INDIA 399
CEMENTS LTD. AND ANR.
of power conferred on him under Section 28A of the A
TNGST Act. It is manifest from the circular that as per the
clarification issued by the Commissioner of Commercial
Taxes, in exercise of the power conferred on him under
Section 28A of the TNGST Act, the benefit of sales tax
deferral scheme would be available to a dealer from the e
date of reaching of BPV or BSV, whichever is earlier, as
is pleaded on behalf of ~he first respondent. It is trite law
that circulars issued by the revenue are binding on the
departmental authorities and they cannot be permitted to
repudiate the same on the plea that it is inconsistent with C
the statutory provisions or it mitigates the rigour of the
law. In the present case, it is not the case of the revenue
that circular dated 1st May, 2000 is in conflict with either
any statutory provision or the deferral schemes
announced under the afore-mentioned gover.nment
orders. The said circular is. binding in law on the D
adjudicating authority under the TNGST Act. [Paras 17;
18, 23] [412-D; 413-D-E; 415-E-F]
Paper Products Ltd. v. Commissioner of Central Excise
(1999) 7 SCC 84; Collector of Central Excise, Vadodara v. E
Dhiren Chemical Industries (2002) 2 SCC 127: 2001 (5)
Suppl. SCR 607; Commissioner of Customs, Calcutta & Ors.
v. Indian Oil Corpn. Ltd. & Anr. (2004) 3 SCC 488: 2004 (2)
SCR 511 and Commissioner of Central Excise, Bolpur v.
Ratan Melting & Wire Industries (2008) 13 SCC 1: 2008 (14) F
SCR 653 - referred to.
Case Law Reference:
2010 (15) SCR 937 referred to Para 13
2008 (16) SCR 315 relied on Para 16
G
(19~9) 1 sec 84 referred to Para 19
2001 (5) Suppl. SCR 607 referred to Para 20, 21,
22
H
400 SUPREME COURT REPORTS (2011) 7 S.C.R.
A 2008 (14) SCR 653 referred to Para 21
2004 (2) SCR 511 referred to Para 22
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
4233 of 2007.
B
From the Judgment & Order dated 22.12.2006 of the High
Court of Madras in W.P. Nos. 13697 & 13698 of 2002
Rajiv Dutta, M. Chandrasekharan, S.K. Bagaria, R.
Nedumaran, Dushyant Kumar Singh, C. Thiruppathi, Hari
C Shankar K., Vikas Singh Jangra, Kavin Gulati, Praveen Kumar,
Kumar Rajesh Singh, Ruby Singh Ahuja, Ruchikra Gupta,
Deepti Sarin, Siddhanth Kochhar, Manu Agarwal for the
appearing parties.
D The Judgment of the Court was delivered by
D.K. JAIN, J. 1. This appeal is directed 2gainst the final
judgment and order dated 22nd December, 2006 rendered by
the High Court of Judicature at Madras in W.P.Nos.13697 and
13698 of 2002. By the impugned judgment, while setting aside
E the order dated 19th April, 2002 passed by the Taxation
Special Tribunal (for short "the Tribunal") in O.P. Nos. 322 and
351 of 2002, the High Court has held that the first respondent
viz. M/s India Cements Ltd. is entitled to the benefit of deferral
of sales tax as claimed by them under the interest free sales
F tax deferral scheme, introduced by the State of Tamil Nadu
under G. 0. Ms. No .119 dated 13th April, 1994 issued by the
Commercial Taxes & Religious Endowments Department of the
State.
G 2. Before we traverse the facts, which have given rise to
the present appeal, in order to appreciate the issue involved,
it would be expedient to refer to the relevant State Government
orders/memorandum notified from time to time, in exercise of
powers conferred under Section 17A of the Tamil Nadu
General Sales Tax Act, 1959 (for short "the TNGST Act") and
,H
STATE OF TAMIL NADU AND ANR. v. INDIA 401
CEMENTS LTD. AND ANR. [D.K. JAIN, J.]
Section 9(2) of the Central Sales Tax Act, 1956 (for short "the A
CST Act").
2.1 With a view to promote industrialisation, the
Government of Tamil Nadu had declared 105 taluks of the State
as industrially backward for the purpose of grant of interest free B
sales tax loan, interest free sales tax deferral, state capital
subsidy etc. In furtherance thereof and to correct regional
imbalances in industrialisation, vide G.0.Ms. No.500 dated
14th May, 1990, the Government declared 30 taluks from
amongst the 105 industrially backward taluks to be industrially c
most backward taluks, offering them further incentives. It was
directed that the new industries to be set up in these 30 most
backward taluks as also in the three industrial complexes of
State Industries Promotion Corporation of Tamil Nadu (for short
"the SIPCOT") at three named places, in addition to the existing D
concessions, would be entitled to full waiver of sales-tax dues
for a period of five years upto a ceiling of the total investment
made in the fixed assets. It was also stipulated that existing
units in these areas/complexes undertaking expansion/
diversification shall also be entitled to deferral of sales tax for E
nine years, limited to 80% of the additional investment made
in fixed assets. However, the benefit of sales tax deferral to the
new units was to the full extent of the total investment made in
the fixed assets. The scheme was subject to the sales tax
payable on products manufactured by the capacity created by
expansion/diversification units only. F
2.2 Subsequently, certain clarifications were issued vide
G.O.P.No.92 CT dated 22nd February, 1991 and
G.O.P.No.396 dated 10th September, 1991 whereby benefit
of deferral of payment of sales-tax payable was extended to G
all industries to be set up anywhere in Tamil Nadu having an
investment of '100 crores and above on sale of the products
manufactured by the industry for a period of twelve years from
the date of commencement of production on or after 18th July,
1991 upto a ceiling of 100% of the value of fixed assets, after H
402 SUPREME COURT REPORTS [2011] 7 S.C.R.
A deducting the quantum of tax under the CST Act for the same
period-and subject to production of eligibility certificate. to be
issued by SIPCOT. By G.O.Ms.No.376, dated 27th October,
1992, in exercise of powers conferred by clause (a) of sub-
section 5 of Section 8 and sub-section 2 of Section 9 of the
B CST Act, the Government extended the benefit of remission/
deferral of tax payable under the CST Act, as similar to
G.O.P.No.92 dated 22nd February 1991, to the new industries
as well as to the existing industries, on the same conditions
prescribed under G.O.P.No.92. These government orders were
c followed by another G.O.M.No.43, Industries (MIG-II)
Department,· dated 13th December, 1992 whereby special
incentives were introduced for mega industries, subject to
fulfilment of the prescribed conditions.
2.3 It appears that with a view to protect the revenue and
D also to increase the production level of industries which were
lnterested in availing concessions of deferral of sales ta~; the
State Government vide G.O.Ms:No.119, dated 13th April, 1994,
imposed certain conditions and issued directions that were
required to be complied with by the expansion/diversification
E units for availing sales tax benefits. For the sake of ready
reference, the relevant portion of the said G.O. is extracted
below:
."3. The Government .after careful examination, have
F ·decided to accept' the suggestions of the special
Commissioner and Commissioner of Commercial Taxes
as they protect the Revenue and also help to increase the
production level of the industries availing the concession.
Accordingly, the Government direct that -
G (i) The industry will be eligible for sales tax deferral
only if in a financial year production exceeds the
base production volume which is the highest annual
production in the 3 years prior to expansion.
H (ii) When the actual production in the industry in any
STATE OF TAMIL NADU AND ANR. v. INDIA 403
CEMENTS LTD. AND ANR. [D.K. JAIN, J:] • •
financial year exceeds the base production volume, A
.. ' '. thEHndi.istry would be eligible:·for'deferral'of.sales '
··· " '~- · i: •· lax for ·sales made in that yeatir'Cext:ess' of the base
' .,.:~ ... ,.,. sales ~olume under Tamil Nadu General Sales Tax,
' . which is the highest of t~e actual annual sales in the
· · ' last 3 years prior to expansion. B
·•· (iii) The above conditions are applicable in cases
where expansion unit is a separate,unit ·located
. ,.., elsewhere or a part o~ the existing'plant.· · · .,
. 1· . (iv) . The specifications of base production/sales C
•1 volumes are applicable even ,in the ca.se of
allegedly new unit having been started by the same
. management or ownership or where the substaritial
·controlling capital is put in by the same group of
companies. D
· ·" t ·(v) The t»ase,.production \tolunie ahd the'"'base''$a'1~s ·
.. ~ '· ,~.., .. volume'will have to '6e 'workeci oU.t and incorporat~d
in the eligibility certific~tes .at the tim~ of iSSUE! by
SIPCOT and District Industries Centres.n
. . . E
_, . 3. The firat respondent, engaged in the manufacture and
marketing of eement in the States of Tamil Nadu and Andhra
Pradesh was having manufacturing units at Sankari and Sankar
Nagar. By.their letters dated 13th March, 1996, 4th Mardi, 1997
."and 24lh September;' 1997 ttie'y1'1>'roposed $et· up' an F to
"expanded unit at ·Dalavoi village, Sendurai taluk to avaii the
benefit of sales tax deferral scheme under G.O.Ms.No.119,
. dated 13th April 1994. On being approached, on 13th February,
~.1998, SIPCOT issued the requisite eligibility .certificate. to the
·first respondent, inter-alia, mentioning that:. (i) the first G
· respondent will be eligible for deferral of sales tax not exceeding . ·
· '205.13 crores (later on revised to '270.21 crores), interest free
·for a period of twelve years from the month in which the first
.respondent's unit commenced its commercial production i.e.
·from 1st July,,1997 to 31st May, 2009 (cl.3); (ii) deferral of H
404 SUPREME COURT REPORTS [2011) 7 S.C.R.
A sales tax will only be on the increased volume of production/
sales; (iii) for the purpose of determining the increased volume
of production, the base figure would be the highest of the volume
of production/sale in the company in any one of the year during
the last three years; (iv) till reaching the volume of production/
B sale specified earlier, the company would continue to pay tax
and any liability in excess of the production/sale specified
therein alone will be eligible for deferment (cl.5.3); (v) the
deferral scheme will be applicable to the unit/company only as
long as it manufactures products for which the essentiality
c certificate had been issued (cl.6) and (vi) violation of any of the
conditions as stipulated in the eligibility certificate and the
connected government orders will result in withdrawal of
deferral facility in entirety (cl.7). In compliance of clause 5.2 of
the eligibility certificate, on 12th April, 2000, the first respondent
entered into an agreement with the Zonal Assistant
0
Commissioner, Commercial Taxes, undertaking to comply with
the Base Production Volume and Base Sales Volume
(hereinafter referred to as "BPV" and "BSV" respectively) as
indicated in the essentiality certificate.
E 4. The first respondent continued to remit the sales tax until
they reached the level of BSV, viz. the highest of the actual
annual sales in the last three years prior to the expansion,
stating that they had also reached, in the financial year, BPV,
viz. the highest production in the last three years prior to the
F expansion and submitted its return claiming the deferral of tax
on the sale in excess of BSV.
5. The Assistant Commissioner of Commercial Taxes,
issued a notice dated 19th March, 2002, inter alia, informing
the first respondent that once the BSV is reached, then the
G eligibility for availment of deferral under the eligibility certificate
dated 13th February, 1998 would be available only for the unit
at Dalavoi and the deferral could not be stretched to include
the production of other units and accordingly, directed the
respondent to pay a sum of '5322.14 lakhs which had been
H availed, in excess, as deferral of sales tax. The respondent was
STATE OF TAMIL NADU AND ANR. v. INDIA 405
CEMENTS LTD. AND ANR. [D.K. JAIN, J.]
also informed that they could avail of deferral of sales tax after A
reaching the BSV/BPV for all the units whichever is earlier and
then they could avail deferral for expansion unit at Dalavoi only.
On 21st March, 2002 the Assistant Commissioner issued an
erratum to the earlier notice dated 19th March, 2002 to the
effect that the words 'units whichever is earlier and then they B
can avail deferral for expansion unit' should be read as 'units
whichever is later and then they can avail deferral for expansion
unit'.
6. In its reply to the notice dated 19th March, 2002, as
quoted in the impugned judgment, the first respondent C
submitted that:- (i) G.O.Ms.No.119 dated 13th April, 1994
cannot be read as completely nullifying the purpose, purport and
effect of G.O.P.No.92 dated 22nd February, 1991; (ii) the aim
of G.O.Ms.No.119 was to ensure that the entrepreneur
maintains the tax payment obligation prior to the new industry D
so that only incremental sale volume is entitled to deferral and
(iii) the new industry which is a separate industrial undertaking,
with the sole investment infrastructure utilities, management and
work force already determined, had suffered by treating this as
an expansion and even if it were an expansion, logically tax can E
only be collected on the base sale volume and further sale
volume beyond the base volume should be treated as a result
of the expansion investment.
7. In the meanwhile, consequent to the erratum issued in F
notice dated 21st March, 2002, the Assistant Commissioner
issued a revised notice dated 22nd March, 2002, informing the
first respondent that they had availed deferral before they had
reached the Bl?V, which is violative of the conditions laid down
in the eligibility certificate. The respondent was thus, informed G
that they were liable to pay an amount of '5873.51 lakhs as
excess availment of deferral of sales tax for the period from
1998-1999 to 2001-2002.
8. Aggrieved by the said demand notice, the first
respondent filed O.P. No.322 of 2002 before the Tribunal H
406 SUPREME COURT REPORTS [2011) 7 S.C.R.
A seeking quashing of the said notice. Subsequently, they filed
another O.P.No.351 of 2002 to declare clause 5.3 of the
eligibility certificate dated 13th February, 1998 as ultra vires
the Notification No.11(1)/CTRE/158/91 in G.O.P.No.396 dated
10th September 1991 and Notification No.11(1)/CTRE/213/92
B in G.O.Ms.No.376 dated 27th October, 1992. In both the said
petitions, it was contended that clauses 3(i) and (ii) of
G.O.Ms.No.119 dated 13th April, 1994 as well as the
consequential qualification prescribed in the eligibility certificate
dated 13th February, 1998 in paragraph 5.3 would offend the
c spirit and object of the sales-tax deferral scheme, if the
conditions in agreement dated 12th April, 2000 are construed
to mean that the holder of the eligibility certificate would be
eligible for the benefit of deferral scheme only when they achieve
both the BPV/BSV levels together and not otherwise.
D 9. Relying on an earlier decision of the High Court dated
5th December, 2001, in the case of Madras Cement Limited,
wherein it was held that the Government Order makes it clear
that even if the sales of the unit had reached the BSV, they
would be eligible for deferral of sales tax on sales made in that
E year only when they reached the BPV, the Tribunal dismissed
both the original petitions. Thus, the Tribunal held that before
the first respondent could claim deferral of sales tax, both the
BPV and BSV shall have to be reached. In other words, if the
BSV had been reached earlier but BPV had not been reached,
F the said respondent will not be entitled to get the deferral facility,
till they achieve BPV.
10. Being aggrieved, the first respondent preferred Writ
Petitions No.13697 and 13698 of 2002 before the High Court.
G As afore-stated, the High Court has allowed the writ petitions.
Reversing the decision of the Tribunal, the High Court observed
thus:
"21.5 A combined reading of clauses 3(i) and (ii) of
G.O.Ms.No.119, Commercial Taxes and Religious
H Endowments Department, dated 13-4-1994 and
STATE OF TAMIL NADU AND ANR. v. INDIA 407
CEMENTS LTD. AND ANR. [D.K. JAIN, J.]
paragraph 5.3 of Eligibility Certificate dated 13-2-1998 in A
the case of Mis. India Cements Ltd., and para 10 of the
Eligibility Certificate dated 22-12-1998 in the case of M/
s. Hindustan Motors Limited and the terms and conditions
incorporated in the consequential agreements in both the
·cases, would go to show that the word "when" mentioned B
in clause 3(ii) of G.O.Ms.No.119, Commercial Taxes and
Religious Endowments Department dated 13-4-1994, if
read as "iF or "after" whatever the case may be, the BPV
which is the highest production of the last three years prior
to the expansion should be achieved by the holder of the c
eligibility certificate for every assessment year of the total
number of years, viz., 12 years in the case of deferral and
5 years in the case of waiver, besides reaching BSV in
that particular year. By insisting that the BSV .should also
be reached, the Revenue of the State gets protected in
0
every assessment year during the entire period of deferral
or waiver.
21.6. To determine the date from which such benefit of
deferral or waiver would follow, viz., from the date of
reaching BPV or from the date of reaching BSV, or E
whichever is earlier or whichever is later, in the light of the
intention behind the schemes, clause 3(ii) of
G.O.Ms.No.119, Commercial Taxes and Religious
Endowments Department, dated 13-4-1994 cannot be
construed to mean that the benefit would flow only from the F
date of reaching the BPV, not from the date of reaching
the BSV, as the object of the schemes is to increase the
productivity, but without compromising with the revenue of
the State.
21. 7. As per the rules of interpretation applicable to the G
case of fiscal laws, the words must say what they mean
and nothing should be presumed or implied. Applying the
said plain interpretation and reading the word "when" even
plainly as "when", the blending of two clauses 3{i) and 3(ii)
as suggested by us above, by way of harmonized and H
408 SUPREME COURT REPORTS [2011] 7 S.C.R.
A reasonable construction, is inevitable, as the same cannot
be ruled out keeping in mind the intention behind the
schemes and the goal to achieve the same in the public
interest, viz. to improve the production in the most
Backward and backward Areas, certainly without
B compromising with the revenue of the State, in whatever
manner, the word "when" found in clause 3(ii) is read
whether as "when" of "ir or "after" as the case may be. The
above interpretation is, in our considered opinion,
unavoidable because any other construction would lead to
c absurdity frustrating the object behind the scheme. n
11. Hence the instant appeal by the State of Tamil Nadu,
in which SIPCOT has been arrayed as proforma respondent
No.2.
0 12. Mr. Rajiv Dutta, learned senior counsel appearing for
the State strenuously urged that the only interpretation that could
be given to clause 3(ii) of G.O.Ms.No.119 dated 13th April,
1994, which is also reflected in the eligibility certificate and the
agreement entered into by the first respondent, is that both the
E base production volume (BPV) and base sales volume (BSV)
had to be reached before the first respondent could claim
deferral of sales tax. According to the learned counsel, it was
only after the BPV was reached that the right of deferral accrued
and therefore, if the BSV had been reached earlier, even then
the first respondent was not entitled to get the deferral facility
F till the BPV had been reached. In other words, whichever
condition is reached later it is at that stage that industry
concerned will get the right to defer the payment of sales tax,
pleaded the learned counsel. Referring to para 5.3 of the
Eligibility Certificate, which provides that "the company is
G eligible for deferral of sales tax only on the increased volume
of production/sale", learned counsel submitted that the SLASH
in between the words production and sale shows that till both
the BPV and BSV were achieved, the first respondent could
not claim the benefit of deferral of sales tax scheme. It was
H submitted that the word "when" employed in clause 3(ii) of
STATE OF TAMIL NADU AND A.NR. v. INDIA 409
CEMENTS LTD. AND ANR. [D.K. JAIN, J.]
G.O.Ms.119 also shows that only in the year where the industry A
reaches both the BPV and BSV, that it would be eligible for
the benefit of sales tax deferral.
13. Per contra, Mr. M. Chandrasekharan, learned senior
counsel appearing for the first respondent submitted that 8
clause 3(i) of G.O.Ms.No.119 prescribes the qualification for
availing the sales tax deferral and clause 3(ii) of the said G.O.
enables the expansion/diversified unit, of the existing industry
to avail the benefit of sales tax deferral either from the date of
achieving the BSV or BPV, whichever is earlier, in that financial C
year. It was contended that if BSV is achieved earlier and BPV
is reached later in the financial year, the benefit of sales tax
deferral should date back to the earlier date of achieving BSV
and similarly if the BPV is achieved earlier and BSV is
achieved later, it should date back to the earlier date of
achieving BPV and only then the object of deferral scheme can D
be achieved. According to the learned counsel, any other
interpretation would frustrate the object of the scheme. Learned
counsel also urged that even if the word "when" as appearing
in clause 3(ii) is read as "after" even then the first respondent
would be eligible for deferral of sales tax on the sales in excess E
of BSV after the actual production of the unit in the financial year
exceeds the BPV and the benefit should date back to the date
of reaching the BSV. Learned counsel also argued that in light
of the Circular dated 1st May, 2000 issued under Section 28A
of the TNGST Act, clarifying the position as to when the benefit F
of deferral of sales tax scheme would follow, the revenue cannot .
be permitted to contend that in order to avail of the benefit of
sales tax deferral the industry must reach both BPV and BSV
and no·t when either of the two is reached earlier, as
contemplated in the circular. In support of the proposition that G
a beneficial and promotional exemption should be liberally
construed, reliance was placed on a decision of this Court in
Commissioner .of Customs (Preventive), Mumbai Vs. M.
Amba/al & Company1.
1. c2011) 2 sec 74. H
410 SUPREME COURT REPORTS [2011] 7 S.C.R.
A 14. Thus, the short question which falls for consideration
is whether the first respondent would be eligible for sales tax
deferral in any financial year for the sales made in that year in
excess of the base sales volume (BSV) as soon as they exceed
the BSV or only when their production also exceeds the base
B prod'-lction volume (BPV) in that year?
15. The source of the sales tax deferral scheme is
traceable to Section 17A of the TNGST Act which enables the
Government to notify deferred payment of tax for new industries,
C etc. subject to such restrictions and conditions as may be
deemed fit. Therefore, the scheme in question has a statutory
flavour. From a comparative reading of G.O.P.No.92 dated
22nd February, 1991 and G.O.Ms.No.376 dated 27th October,
1992 on the one hand and G.O.Ms.No.119 dated 13th April,
1994, the eligibility certificate issued thereunder as also the
D consequential agreement entered between the parties on the
other hand, it is evident that G.O.P.No.92 and G.O.Ms.No.376
is the source of power to grant exemption and G.O.Ms.No.119
lays down the methodology and the machinery to implement the
scheme. These are complementary to each other. Therefore,
E the terms and conditions stipulated in the schemes; the eligibility
certificate as also the consequential agreement, between the
first respondent and the revenue, having the statutory force,
undoubtedly violation of any one of the terms and conditions
thereof would disentitle the beneficiary of the benefit of the sales
F tax deferral scheme. With this background, we may now advert
to the core issue viz. the interpretation of clauses 3(i) and 3(ii)
of G.O.Ms.No.119 dated 13th April, 1994, extracted above. At
this juncture, it will also be expedient to refer to paragraph 5.3
of the eligibility certificate issued to the first respondent, to
G which reference was made by learned counsel for the ·state. It
reads as follows :
"5.3. The company is eligible for deferral of sales tax only
on the increased volume of production/sale. For the
purpose of determining the increased volume of
H production, the base figure would be the highest of the
STATE OF TAMIL NADU AND ANR. v. INDIA 411
CEMENTS LTD. AND ANR. [D.K. JAIN, J.]
volume of production/sale in the company in any one of the A
year during the last 3 years. Till reaching the volume of
production/sale specified earlier the company would
continue to pay tax and any liability in excess of the
production/sale specified above alone will be eligible for
deferment." B
16. A conjoint reading of clauses 3(i) and (ii) of
G.O.Ms.No.119 dated 13th April, 1994, and paragraph 5.3 of
eligibility certificate dated ~3th February, 1998 would show that
the object of the conditions with reference to reaching of BPV
is to ensure that the concerned unit achieves the highest C
production and sale of the existing unit in the last three years
prior to the commencement of the commercial production in the
expansion unit, resulting in higher revenue on higher sales. The
benchmark for· availing the benefit of the sales tax deferral
scheme having been fixed both with reference to the production D
. as also to the sales, in our opinion, it is immaterial whether the
unit concerned reaches BPV or the BSV earlier. In our view,
the word "when" employed in clause 3(ii) of G.O.Ms.No.119,
whether read as "if' or "after" only signifies that in order to avail
of the benefit of sales tax deferral for sales made in the year in E
excess of the BSV, the'industry must achieve in that year the
BPV, which is the highest production of the last three years prior
to the expansion, for every assessment year of the total number
of years, viz., 12 years, besides reaching BSV in that particular
year. It is obvious that by insisting that the BSV should also be F
reached, the revenue of the State gets protected in every
assessment year during the entire period of deferral and, in
fact, the industry gets the benefit of deferral only on sales which
are in excess of the BSV. It is pertinent to note that if for any
reason the beneficiary ultimately fails to achieve the BPV during G
the financial year, the benefit of deferral of sales tax availed of
by it on achieving BSV becomes refundable forthwith along with
interest thereon. In our opinion, in light of the intention behind
the schemes, clause 3(ii) of the G.0.Ms.No.119 cannot be
construed to mean that the benefit would flow only from the date H
412 SUPREME COURT REPORTS [2011] 7 S.C.R.
A of reaching the BPV and not from the date of reaching the BSV,
particularly when the main object of the schemes is to increase
the productivity without compromising with the revenue of the
State. Any other interpretation of the said GOM would frustrate
the object of the scheme. It is now well established principle of
B law that if a plain meaning given to the provision for the purpose
of considering as to whether the applicant had fulfilled the
eligibility criteria as laid down in the notification or not is found
to be clear, purpose and object the notification seeks to
achieve must be given effect to. (See: G.P. Ceramics Private
c Limited Vs. Commissioner, Trade Tax, Uttar Pradesh. 2 )
17. In any event, we feel that the decision of the High Court
cannot be flawed with in light of the circular dated 1st May, 2000
issued by the office of the Principal Commissioner and
Commissioner of Commercial Taxes, Chennai, in exercise of
D power conferred on him under Section 28A of the TNGST Act.
For the sake of ready reference, the relevant portion of the
circular is extracted below:
"As per GOMs No.119, CT & RE/13.4.1994 as regards
expansion cases it was decided that the past revenue shall
E be protected obtained prior to expansion. The BPV/BSV
is fixed on the basis of highest annual production/sales in
the 3 years prior to expansion. Thus the industries will have
to pay the taxes due upon the turnover and until the Base
Production Volume/Base Sales volume mentioned in the ·
F Eligibility Certificate is achieved. The BPV/BSV shall have
to be worked out and incorporated in the Eligibility
Certificate by SIPCOT and other district centres as per
above Government order. Hence if the details are not
available the particulars of production/sales for prior three
G years shall be ascertained from the books of the dealers
and Eligibility Certificate got amended to incorporate the
particulars to avoid any dispute. As per decision of Tamil
Nadu Taxation Special Tribunal in O.P.1229/1230/1231/98
dated 23.11.1998. Mercury Fittings (P) Ltd. It was held that
H 2. c2009) 2 sec 90.
STATE OF TAMIL NADU AND ANR. v. INDIA 413
CEMENTS LTD. AND ANR. [D.K. JAIN, J.]
GOM No. 119/CTRE/13. 4. 1994 (sic) contemplate the A
liability to pay tax with reference to Base Production
Volume or Base Sales Volume whichever is reached
earlier and the liability for deferral is only with reference
to volume of Sales and not with reference to taxes paid
on sales for the base year. Thus all Deputy B
Commissioners and Assistant Commissioners shall
thoroughly verify all expansion cases and satisfy
themselves that taxes have been paid until the BPV/BSV
has been achieved."
(Emphasis supplied by us) C
18. It is manifest from the highlighted portion of the circular
that as per the clarification issued by the Commissioner of
Commercial Taxes, in exercise of the power conferred on him
under Section 28A of the TNGST Act, the benefit of sales tax D
deferral scheme would be available to a dealer from the date
of reaching of BPV or BSV, whichever is earlier, as is pleaded
on behalf of the first respondent. It is trite law that circulars
issued by the revenue are binding on the departmental
authorities and they cannot be permitted to repudiate the same E
on the plea that it is inconsistent with the statutory provisions
or it mitigates the rigour of the law.
19. In Paper Products Ltd. Vs. Commissioner of Central
Excise, 3 while interpreting Section 37-B of the Central Excise
Act, 1944, which is in pari materia with Section 28A of the F
TNGST Act, this Court had held that the circulars issued by the
·Central Board of Excise & Customs are binding on the
department and the department is precluded from challenging
the correctness of the said circulars, even on the ground ofthe
same being inconsistent with the statutory provision. It was G
further held that the department is precluded from the right to
file an appeal against the correctness of the binding nature of
. the circulars and the department's action has to be consistent
with the circular which is in force at the relevant point of time.
3. (1999) 7 sec 84. H
414 SUPREME COURT REPORTS [2011] 7 S.C.R.
A 20. In Collector of Central Excise, Vadodara Vs. Dhiren
Chemical Industries, 4 a Constitution Bench of this Court had
held that if there are circulars issued by the Central Board of
Excise & Customs which place a different interpretation upon
a phrase in the statute, the interpretation suggested in the
B circular would be binding upon the revenue even regardless of
the interpretation placed by this Court.
21. Similarly, in Commissioner of Customs, Calcutta &
Ors. Vs. Indian Oil Corpn. Ltd. & Anr., 5 dealing with the circular
issued by the Board under Section 151-A of the Customs Act,
c 1962, which is again in pari materia with Section 28A of the
TNGST Act, Ruma Pal, J., had opined that the circular will be
binding primarily on the basis of the language of the statutory
provisions buttressed by the need of the adjudicating officers
to maintain uniformity in the levy of tax/duty throughout the
o country. Although in the same judgement, while concurring with
the view expressed by Ruma Pal, J., on the facts of that case,
P. Venkatarama Reddi, J., entertaining certain doubts as to the
correctness of the proposition laid down by the Constitution
Bench in Dhiren Chemical Industries (supra}, had observed
E that there was a need to redefine succinctly the extent and
parameters of the binding character of the circulars of the
Central Board of Direct Taxes or Central Excise etc., by another
Constitution Bench, yet the learned Judge did not disagree with
the proposition that it is not open to the revenue to file an appeal
F against the order passed by an appellate authority which is in
conformity with a departmental circular. In fact, His Lordship
went on to observe that when there is a statutory mandate to
observe and follow the orders and instructions of CBEC in
regard to specified matters, that mandate has to be complied
with. It is not open to the adjudicating authority to deviate from
G those orders or instructions which the statute enjoins that it
should follow. If any order is passed contrary to those
instructions, the order is liable to be struck down on that very
ground.
4. (2002) 2 sec 121.
H 5. (2004) 3 sec 488.
STATE OF TAMIL NADU AND ANR. v. INDIA 415
CEMENTS LTD. AND ANR. [D.K. JAIN, J.)
22. In Commissioner of Central Excise, Bolpur Vs. Ratan A
Melting & Wire Industries, 6 a Constitution Bench of this Court
has clarified the confusion created on account of the view
expressed in para 11 of Dhiren Chemical Industries (supra),
on the question of binding effect of judgment of this Court vis-
a-vis State and Central Government circulars thus: B
"7. Circulars and instructions issued by the Board are no
doubt binding in law on the authorities under. the respective
statutes, but when the Supreme Court or the High Court
declares the law on the question arising for consideration,
it would not be appropriate for the court to direct that the C
circular should be given effect to and not the view
expressed in a decision of this Court or the High Court.
So far as the clarifications/circulars issued by the Central
Government and of the State Government are concerned
they represent merely their understanding of the statutory D
provisions .. They are not binding upon the court. It is for the
court to declare what the particular provision of statute says
and it is not for the executive. Looked at from another
angle, a circular which is contrary to the statutory provisions
has really no existence in law." E
23. In the present case, it is not the case of the revenue
that circular dated 1st May, 2000 is in conflict with either any
statutory provision or the deferral schemes announced under
the afore-mentioned government orders. We, therefore, hold that
the said circular is binding in law on the adjudicating authority F
under the TNGST Act.
24. For the reasons afore-mentioned, we do not find any
merit in this appeal and the same is dismissed accordingly.
25. However, in the facts and circumstances of the case, G
the parties are left to bear their own costs.
B.B.B. Appeal dismissed.
e. (2008) 13 sec 1.
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