Holding

A unit that was already availing any tax‑deferment facility on the effective date of the Jharkhand Industrial Policy, 2001, is not eligible for the set‑off benefit under Clause 28.1.

Summary

Tata Cummins Ltd, a diesel engine manufacturer, obtained an eight‑year exemption from sales tax on raw material purchases under the Bihar Industrial Policy, 1995, valid until 31‑Dec‑2003. After the creation of Jharkhand, the state introduced the Jharkhand Industrial Policy, 2001, effective 15‑Nov‑2000, whose Clause 28.1 allowed a set‑off of sales tax for units that were not already enjoying any tax‑deferment facility. The company applied for the set‑off benefit from 1‑Jan‑2004, received no response, and filed a writ petition which the Jharkhand High Court dismissed. On appeal, the Supreme Court examined whether the company, still availing the earlier tax‑deferment on the policy’s effective date, could claim the new benefit. Relying on the plain meaning of the clause and the literal rule of construction, the Court held that the company was ineligible because it was already receiving tax‑deferment on 15‑Nov‑2000. Consequently, the appeal was dismissed.

Issues considered

Whether Tata Cummins Ltd is entitled to the set‑off of sales tax under Clause 28.1 of the Jharkhand Industrial Policy, 2001, given that it was already availing tax‑deferment under the earlier Bihar Industrial Policy.

Legislation cited

Bihar Finance Act, 1981s. 22

Subjects

sales taxtax defermentset‑offindustrial policyliteral rule of constructionstate reorganisationexemptionClause 28

Judgment

A TATA CUMMINS LTD.
V.

STATE OF JHARKHAND AND ORS.

AUGUST I, 2006

B [ASHOK BHAN AND MARKANDEY KA TJU, JJ.)

Jharkhand Industrial Policy, 2001; Clause 28:

Assessee claiming benefit of exemption of Sales Tax in terms of an
C Industrial Policy-Clause 28 of the Policy-Interpretation of-Held: In terms
of provisions in the policy, the benefit of set-off of sales tax on the purchase
of raw material could be availed by the assessee subject to the condition that
benefit of tax deferment not availed of by it in terms of earlier policy/
Notification--The assessee in question had already availed of such benefit,
D hence not entitled to the benefit under Clause 28. l of the Policy-Interpretation
of Statutes.

The then State of Bihar issued an Industrial Policy known as "Bihar
Industrial Policy, 1995". In terms thereof, benefit of exemption of sales
tax on purchase of raw materials and on sale of finished goods has been
E granted to the industrial units of the State. Assessee-company had been
manufacturing diesel engines and components since l. l.1996. It was
granted exemption of sales tax on purchase of raw materials and on sale
of finished goods for a period of eight years, up to 31.l2.2003. In the
meantime, the State of Bihar was reorganized and the State of Jharkhand
F was created. The appellant fell within the Territorial Jurisdiction of the
State of Jt.arkhand. The State of Jharkhand announced its first Industrial
Policy, "Jharkhand Industrial Policy, 2001 ", which commenced from
15.11.2000. It allowed certain benefits of sales tax deferment to the eligible
industrial units. The assessee applied for availing of such benefit, but the
benefit was not allowed to it. Aggrieved, assessee preferred a writ petition,
G which was dismissed by the High Court. Hence the present appeal.

The appellant-assessee contended that the Industrial Units which
were actually availing of the facility of Tax-deferment as on 15.11.2000,
would not be provided with the benefit under Clause 28.l of the Jharkhand
Industrial Policy, the consequence would be that hardly any unit will get
l{ 194 .
TATA CUMMINS LTD. v.STATEOF JHARKHAND[MARKANDEYKATJU,J.] J95

the benefit of Clause 28.1 because almost all the units of State of A
Jharkhand were enjoying the benefit of Sales Tax-deferment in terms of
earlier policy, therefore, such an interpretation should be avoided.

Dismissing the appeal, the Court

HELD:l.1. On the effective date i.e. 15.11.2000, when the first ever B
Industrial Policy of the newly created State of Jharkhand commenced, the
assessee-company was actually availing the facility of Tax-deferment under
the Notification announced earlier. Hence, on a plain reading of Clause
28.1 of the Jharkhand Industrial Policy, the appellant-Industry is not
entitled to the benefit under Clause 28.1 of the Policy. (198-B)
c
1.2. In the instant case, Clause 28.1 is clear. The words used therein
are "not availing any facility of Tax-deferment". The present continuous
tense has been used in Clause 28.1. Thus, Clause 28.1 means that the
benefit therein will be available only if the facility of Tax-deferment is not
actually being availed Qf on the date of the Notification of the Industrial D
Policy. It is well settled when the meaning of a provision is clear, one
cannot depart from the literal rule of construction. Since the appellant
was already availing the facility of Tax-deferment on 15.11.2000, he was
not entitled to the benefit under Clause 28.1 of the Policy.
(198-E-F; 199-A)
E
Hiralal Ratan Lal v. Sales Tax Officer, Section Ill, Kanpur & Anr., AIR
(1973) SC 1034, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7559 of2004.

From the Judgment and Order dated 8.8.2005 of the High Court of F
Jharkhand at Ranchi in W.P. (Tax) No. 3037 of 2004.

S. Ganesh, Pallav Sisodia, S. Sukumaran and K. Rajeev for the Appellant.

Sunil Gupta, and Gopal Prasad for the Respondents.
G
The Judgment of the Court was delivered by

MARKANDEY KATJU, J. This Appeal has been filed against the
impugned judgment of the Jharkhand High Court dated 08.8.2005 passed in

- Writ Petition (Tax) No.3037 of 2004 in Tata Cummins Ltd v. State of
Jharkhand & Ors. H
196 SUPREME COURT REPORTS [2006] SUPP. 4 S.C.R.

A We have heard learned counsel for the parties.

The writ petition was filed by the petitioner-appellant seeking a
declaration that the petitioner is entitled to avail the benefit of set-off of Sales
Tax w.e.f. 1.1.2004 in terms of the Jharkhand Industrial Policy, 2001 read
with S.O. Nos.65, 66 and 67 all dated 12.1.2002 issued under the Bihar
B Finance Act, 1981 with other consequential benefits.

To determine the issue, it is necessary to notice the relevant facts, laws,
Jharkhand Industrial Policy, 2001 and Circulars/guidelines issued by the
respondents from time to time which are as under.

C The then State of Bihar issued an Industrial Policy in the year 1995,
known as "Bihar Industrial Policy, 1995", whereunder provision was made
to grant benefit of exemption of sales tax on purchase of raw materials and
on sale of finished goods to industrial units. Two Notifications bearing S.O.
No.478 and 479, both dated 22.12.1995 were issued by the then State of
D Bihar providing the benefit of exemption of sales tax on purchase of raw
materials and on sale of finished goods to new industrial units.

The petitioner company, which is a manufacturer of diesel engines and
components, started its commercial production since 1.1.1996. On 22.1.1996
it applied for exemption of sales tax on purchase of raw materials and on sale
E of finished goods for a period of eight years i.e. upto 31.12.2003, which was
ultimately allowed.

In the meantime, the State of Bihar was reorganized under the Bihar
Reorganization Act, 2000 and two successor States of Bihar and Jharkhand
were created, The petitioner-Tata Cummins Ltd. having its office at
F Jamshedpur, fell within the Territorial Jurisdiction of the State of Jharkhand.
The State of Jharkhand announced its first Industrial Policy on 25.8.2001,
known as "Jharkhand Industrial Policy, 200 l" making it applicable from the
"effective date", which was 15.11.2000, for a period of about five years i.e.
upto 31.3.2005. Under the Jharkhand Industrial Policy, 2001, the benefit of
G exemption of sales tax on purchase of raw materials and on sale of finished
goods has not been provided, but the benefit of 'set-off of sales tax has been
provided to ''new" as well as "existing industrial units". The State of Jharkhand, -
thereafter, issued Notifications being S.O.No.65, 66 and 67 all dated 12.1.2002
in exercise of power under Section 22 of Bihar Finance Act, 1981, (Bihur Act
of 1981) and allowed the benefits in terms of the provisions of the Jharkhand
H Industrial Policy, 2001. -
TATA CUMMINS LTD. v.STATEOF JHARKHAND [MARKANDEYKATJU,J.] J97

After the first Jharkhand Industrial Policy, 200 I was given effect to A
vide Notification being S.O. Nos.65, 66 and 67 all dated 12.1.2002, the
petitioner applied for and requested to 'set-off the sales tax w.e.f. 1.1.2004.
When no reply was received, the petitioner of its own approached the authority
and filed its detailed submission explaining to .the authority as to how it is
entitled to such benefit, but no decision having been taken by the respondent B
and the benefit of 'set-off of sales tax' having not allowed for the period
from 1.1.2004 to 31.3.2005, the petitioner preferred the writ petition, out of
which this appeal arises.

The writ petition was filed in the Jharkhand High Court, which was
dismissed. Hence this appeal. C.
The copy of the Jharkhand Industrial Policy, 2001, which was announced
on 5.8.2001, has been annexed as Annexure-Pl to the Special Leave Petition.
In this Industrial Policy the effective date has been defined to mean 15.11.200
from which date the new State of Jharkhand was created, and it is also the
date on which this policy came into force. The Industrial Policy defines an D
existing Industrial Unit to mean an industrial unit which has gone into industrial
production before the effective date. The Policy also defines a New Industrial
Unit to mean an Industrial Unit which has come into commercial production
between 15.11.2000 and 31.3.2005".
E
The Industrial Policy mentions the Commercial Tax Reforms in Clause
28 on the said Policy. Clause 28.1 reads as under :

"28.1 New Industrial Units as well as existing units which are not
availing any facility of Tax-deferment or Tax free purchases of tax
free sales under any notification announced earlier, shall be allowed F
to opt for set off, of Jharkhand Sales Tax paid on the purchases of
raw materials within the State of Jharkhand only against Sales Tax
payable either JST or CST on the sale, excluding stock transfer or
consignment sale outside the state, of finished products made out
from such raw materials subject to limitation of six months or the G
same financial year from the date of purchase of such raw materials."

The question in this case is whether the appellant is entitled to the
benefit of Clause 28. I.

Admittedly, the appellant had been granted the benefit of Sales Tax- H

-
198 SUPREME COURT REPORTS (2006] SUPP. 4 S.C.R.

A deferment for a period of eight years from 1995 to 31.12.2003 under the Old
Bihar Industrial Policy, 1995 read with Notification S.O. No.478 and 479
both dated 22.12.1995.

Thus, it is an admitted case that on the effective date i.e. 15.11.2000 the
appellant was actually availing the facility of Tax-deferment under the
B Notification announced earlier. Hence in our opinion on a plain reading of
Clause 28.1 of the Industrial Policy, which was introduced on 15.11.2000 in
the State of Jharkhanc!, the appellant is not entitled to the benefit under
Clause 28.1.

C Learned counsel for the appellant contends that if we hold that Units
which were actually availing the facility of Tax-deferment on 15.11.2000,
will not be given the benefit under the Clause 28.1, the consequence will be
that hardly any unit will get the benefit of Clause 28.1 because almost all the
units of State of Jharkhand were enjoying the Sales Tax-deferment on
15.11.2000. Hence he submitted that such an interpretation should be avoided.
D
We are afraid we cannot accept this plea. It is well settled that when
the plain and grammatical meaning of the provisions in an Act or Notification
are clear then the literal rule of interpretation has to be applied. In the present
case, in our opinion, Clause 28. I is clear. The word used there are "not
E availing any facility of Tax-deferment". Thus the present continuous tense
has been used in Clause 28.1. In our opinion, Clause 28. I means that the
benefit therein will be available only if the facility of Tax-deferment is not
actually being availed of on the date of the Notification of the Industrial
Policy, which is 15.11.2000. It is well settled when the meaning of a provision
is clear, we cannot depart from the literal rule of construction.
F
In Hirata/ Ratan Lal v. Sales Tax Officer, Section Ill, Kanpur & Anr.,
AIR (1973) SC I034, the Supreme Court observed :

"In construing a statutory provision the first and foremost rule of
construction is the literary construction. All that the Court has to see
G at the very outset is what does the provision say. If the provision is
unambiguous and if from the provision the legislative intent is clear,
the Court need not call into aid the other rules of construction of
statutes. The other rules of construction are called into aid only when
the legislative intent is not clear."
H
-
TATA CUMMINS LTD. v.STATEOF JHARKHAND[MARKANDEY KATJU, J.] 199
Since the appellant was availing the facility of Tax-deferment on A
15.11.2000, in our opinion, he was not entitled to the benefit under Clause
28.1. Hence we agree with the view taken by the High Court. The appeal is
dismissed.

S.K.S. Appeal dismissed.

--