Holding

The eligibility certificate granting sales‑tax exemption could not be cancelled by the Commercial Tax authorities; the DCCT lacked jurisdiction, and the interpretation of ‘manufacture’ in the Government Order was erroneous.

Summary

Mis. Vadilal Chemicals Ltd. set up a small‑scale unit in Medak to produce liquor ammonia and to refill anhydrous ammonia into cylinders. It obtained a final eligibility certificate under the 1993 Government Order granting a five‑year sales‑tax holiday. The Deputy Commissioner of Commercial Taxes (DCCT) later issued pre‑revision show‑cause notices under the Central Sales Tax Act, 1956 and the Andhra Pradesh General Sales Tax Act, 1957, withdrawing the exemption on the ground that the refilling activity did not constitute ‘manufacture’. The company contended that the DCCT lacked jurisdiction to cancel the certificate and that ‘manufacture’ in the Government Order must be given a liberal construction. The High Court dismissed the writ petition. The Supreme Court held that the eligibility certificate, once duly granted after exhaustive consideration by the State Industries Department and approved by the Commissioner of Sales Tax, could not be cancelled by the Commercial Tax authorities; the DCCT had no jurisdiction under Section 20 of the Andhra Pradesh General Sales Tax Act, and its interpretation of ‘manufacture’ by importing the excise definition was incorrect. Consequently, the appeal was allowed, the High Court order set aside, and the show‑cause notices quashed.

Issues considered

The Deputy Commissioner of Commercial Taxes had jurisdiction under Section 20 of the Andhra Pradesh General Sales Tax Act to withdraw a sales‑tax exemption granted by the State Industries Department.
Whether the term ‘manufacture’ in the 1993 Government Order should be interpreted broadly to include the refilling of anhydrous ammonia into cylinders.
Whether an eligibility certificate issued under the tax‑holiday scheme can be cancelled by the Commercial Tax Department after it has been approved by the Commissioner of Sales Tax.

Legislation cited

Subjects

sales tax exemptiontax holidaymanufacture definitioneligibility certificatejurisdictionAndhra Pradesh General Sales Tax ActCentral Sales Tax Actindustrial incentive schemegovernment order interpretation

Judgment

•

MIS. VADILAL CHEMICALS LTD. A
V.

THE STATE OF ANDHRA PRADESH AND ORS.

AUGUST 2, 2005

[MRS. RUMA PAL AND TARUN CHATTERJEE, JJ.] B

Central Sales Ta< Act, /9j6-Section 9(2)-Andhra Pradesh General
Sales Tux Act, 1957-Section 20-State Industries Departn1ent granting
Eligibility Certificate to company for claiming Sales Ta. &emption/or five
years under Tax Holiday Incentive Schen1e introduced for new industrial C
units set up in notified Districts-Deputy Con1n1issioner Conunercial .Ia,\:
issuing pre-revision shou·cause notices/or n·ithdrawal a/Sales Tax Exen1ption
on the ground that the activity of the company carried out does not amount
to 'manufacture '--Writ Petition filed before 1-ligh Court by the company for
quashing the shov.-' cause notices lvas disn1issed----Correctness of-Held, the D
Deputy Con1missioner does not ha1.:e jurisdiction under the A.ct to cancel the
Sales Tax exe111ption granted by Stale Industries Department-On facts, the
co11;pany 1ras granted e/ig;bi/ity certificate by State Industries Department
• after consideration of entit/e1nen1 under the Scheme and no ma la tides has
been alleged against the company.
E
State Industries Department issued a Government Order notifying
Tax Holiday Incentive Scheme granting various incentives and rebates
for new industrial units set up in different districts of the State. Appellant-
company set up a small scale industrial unit for production of Liquor
Ammonia and for refiliing of Anhydrous Ammonia into cylinders and F
applied for an eligibility certificate under the Scheme. The Industries
Department granted an eligibility certificate to the appellant for sales tax
_exemption for a period of five years, and the same was communicated
to the State Commercial Tax Department by the State Industries
Department.
G
The Deputy Com1nissioner of Commercial Taxes issued pre-revision
show cause notices to the appellant for different assessment years under
section 9(2) of the Central Sales Tax Act, 1956 read with section 20(2)
of the Andhra Pradesh General Sales Tax Act, 1957 for withdrawal of
the sales tax exemption granted under the Scheme on the ground that the H
I
2 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A process of refilling anhydrous ammonia into cylinders did not amount
to 'manufacture' as no new commodity emerged and that such activity
was also not recognised as 'manufacture' under the Central Excise Act.
The appellant replied to the show cause notices questioning the jurisdiction
of the Deputy Commissioner to issue such notices since the Sales Tax
Exemption had been granted by the State Industries Department under
B the Government Order and clarifying that the activity of the appellant
had been treated as •manufacture' by the Central Excise Department
and had been paying Central Excise Duty on both Ammonia and Liquor
Ammonia manufactured by it under the Central Excise Tariff Act, 1985. . .

c The appellant filed a Writ Petition before High Court for a
declaration that the appellant was entitl~d to .the benefits notified by the
Government Order and that the pre-revision notices issued by the Revenue
were illegal, void and unenforceable. The High Court dismissed the Writ
Petition.

D Jn appeal, the appellant contended that the eligibility certificate
under the Scheme was granted by the State Industries Department after
exhaustive consideration; that the word "manufacture" as used in the
Government Order must be given a liberal construction and must be •
understood in the context of the incentive scheme and the objects sought '
J--
E to be fulfilled thereby; and that the Andhra Pradesh General Sales Tax
Act, 1957 does not contain the definition of 'manufacture' and that the
Act is not concerned with whether goods sold were manufactured or not.

The respondents contended that 'manufacture' for the purpose of
sales tax does not include repackaging, rebottling etc. and that if the
F commodity remains the same irrespective of the process, it would not
amount to manufacture; that the patent error of giving sales tax exemption t

under the Scheme to the appellant could be corrected under section 20
of the Andhra Pradesh General Sales Tax Act, 1957; that the language
in the Scheme should be given a strict interpretation.
G Allowing the appeal, the Court

HELD : 1.1. The grant of the eligibility certificate by the State
Industries Department was not the outcome of an unconsidered decision
based on extraneous considerations. The matter WPS considered in depth ,l ..
H and sanctioned by the District Level Committee of which the Deputy
MIS. VADILAL CHEMICALS LTD. v. STATE 3

Commissioner of Commercial Taxes was a part. The appellant had made A
a full disclosure of the process undertaken in respect of which sales tax
exemption was granted. No ma/a fides has been alleged against the appellant
nor is it the case of the respondents that the appellant had taken any
unfair advantage of the Government Order. [10-B-CI

1.2. The interpretation of the word 'manufacture', as used in the B
Government Order, by the Deputy Commissioner was wholly incorrect.
The Deputy Commissioner has imported the definition of 'manufacture'
from the la\v relating to Excise, \Vhich was· uncalled for having regard
to the fact that the word had been used in a different context altogether.
The Andhra Pradesh General Sales Tax_ Act, 1957 contains no provision
relating to 'manufacture'. The concept only finds place in the Government
c
order issued by the Department of commerce & Industries. What the
State Government \Vanted w_as investment and industrial activity. It is i~
this background that the Government Order must be interpreted.
[10-D-E; 11-D-E)
D
Commissioner of Sales Tax v. Industrial Coal Enterprises. [1992[ 2
sec 607, referred to .
• 1.3. The exemption was granted in terms of the Government Order,
the thrust of which was to increase the industrial development in the
State. The Commissioner of Commercial Tax had accepted the E
interpretation put by the Industries Department on the Government
Order and written to the Deputy Commissioner to permit sales tax
exemption to the appellant in accordance with the Government Order.
The Conclusion of the Deputy Commissioner was based on an incorrect
factual premise that the appellant had not paid excise duty on the bottled F
ammonia. The Deputy Commissioner ignored the appellant's statement
in its reply to the show cause notices that the bottled ammonia had been
subjected to Excise duty and that it had paid the levy as prescribed under
the Central Exdse Tariff Act, 1985. [11-F-H; 12-Aj

1.4. The Department of Commerce & Industries having exercised its G
mind, and having granted tire final eligibility certificate, the Commercial
Taxes Department could not go beyond the same. When the Commissioner
of Sales Tax had accepted the Eligibility Certificate issued to the appellant

• and h~d separately notified the appellant's eligibility for exemption under
the Government Order, the Deputy Commissioner certainly could not H
4 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A assume that the exemption was wrongly granted nor did he have the
jurisdiction under section 20 of the Andhra Pradesh General Sales Tax
Act, 1957 to go behind the eligibility certificate and embark upon a fresh
enquiry with regard to the appellant's eligibility for the grant of the benefits.
The eligibility certificates, issued by the State Industries Department, could
not be cancelled by the Sales Tax Authorities. [12-C-E]
B
Apollo Tyres v. CIT Kochi, [2002] 9 SCC I, referred to.

1.5. The Department of Commerce & Industries, which was
responsible for the issuance of the Government Order, accepted the
C appellant as an eligible industry for the benefits. The State Industries
Department was in the best position to construe its own order. The State,
which is represented by the Departments, can only speak with the one
voice. Having regard to the language of the Government Order, the view
expressed by the Department of Commerce & Industries must be taken
to be that voice. [12-G-H; 13-A]
D
CIVIL APPELLATE JURISDICTION Civil Appeal No. 1905 of
2004.

From the Judgment and Order dated 2.7.2003 of the Andhra Pradesh
E High Court in W.P. No. 210 of 2003.

D.A. Dave, Anshul Singhal, Tarak Kapadia and Ms. Meenakshi Arora
for the Appellant.

Rakesh Dwivedi, M.N. Rao, Manoj Saxena, S.K. Mitra, Debojit
F Borkakati, Gaurav Liberham, Mohanprasad Meharia, T.V. Ratnam, A.V.
Rangam, A. Ranganadhan and Buddy A. Ranganadhan for the Respondents.

The Judgment ofthe Court was delivered by

RUMA PAL, J. : The issue in this appeal is whether the appellant is
G entitled to exemption from payment of sales tax under the Andhra Pradesh
General Sales Tax Act l 957 as notified by G.O.M.S. No.117 dated 17th
March, 1993 (referred to in brief as the '1993 G.O.').

The 1993 G.O. was issued by the Government of Andhra Pradesh, . •
H Industries and Commerce Department to effectuate the liberalized State
M/S. VADILAL CHEMICALS LTD. v. STATE [RUMA PAL, J.] 5

incentive scheme for setting up new industries as introduced by the A
Government in 1989. The package of incentives already granted by the State
Government was reviewed whereafter the State Government decided to
introduce certain modifications in order to accelerate industrial development
in the State. The incentives were granted on the basis of Districts according
to their grouping under areas I, II and III. We are concerned with District
Medak, falling within area IL
B

Apart from an investment subsidy, rebate on electricity charges and a
deferment/tax holiday on sales tax for specified periods on products
manufactured in the new industrial units were granted in Clauses 5( c) and
5(b) respectively of the 1993 G.O. Medium and large scale industries were C
given sale_s tax defennent, whereas tiny and small scale industries were given
a sales tax (holiday) exemption. The appellant falls within the latter category.
In terms of the 1993 G.O. units like the appellant's were given a 5 years sales
tax holiday subject to a ceiling of hundred percent of fixed capital costs or
Rs. 35 lakhs whichever was less during the entire holiday period.
D
The procedure prescribed for availing of the benefits of 1993 G.O.
envisaged the setting up of State Level and District Level Committees. The
District Level Committees included within its members, the Deputy
•· Commissioner of Commercial Taxes. Clauses JO and II of the 1993 G.O.
read as follows:- E
"IO. The above Committee shail scrutinize and sanction the claims
of the units of the concerned District involving eligible capital
investment of Rs. 7.5 lakhs and below:

1I. The decisions of the State Level Committee shall be final in F
scrutinizing/deciding the eligible investment and sanctioning
the incentives condoning the delays in filing of applications
for registration and claims for eligible industries."

Clause 16 records that the 1993 G.O. which was issued in the name
of the Governor of the State was with the concurrence of the Finance and G
Planning (Financial Wing) Department. Annexure-1 to the 1993 G.O.
provides for a list of ineligible industries. We will have the occasion to refer
to this in greater detail at a subsequent stage.

• In 1994 the appellant set up a small scale industrial unit in Medak in H
6 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A the State of Andhra Pradesh and invested a sum of Rs. 93.99 lakhs for
production of Liquor Ammonia and for refilling of Anhydrous Ammonia.
On 6th June, 1994 the appellant commenced commercial production. Its
application to the Industries Department for an eligibility certificate mentioned
the nature of the activities carried on by the unit and also gave details of
B .the investments made. The application was returned by the Industries
Department on 18th May, 1995; because the Commissioner (Industries) was
of the opinion that "refilling" activities were not eligible for incentives under
the scheme. However, the· matter was re-examined at the instance of the
appellant. Since instructions had already been issued by the Department to ;.
the effect that refilling of LPG Gas was considered eligible for incentives, i.

C filling of anhydrous ammonia into cylinders was also held to be entitled to
the grant of the same benefit.

Accordingly, on 7th of August, 1996 the appellant's unit was inspected
by the Industries Department for verification of the appellant's application.
A recommendation was made by the Industries Department for grant of the
D
benefit, however limited to 50% of 15% investment subsidy and sales tax
exemption of Rs. 35 lakhs under the Scheme. A temporary eligibility
certificate was then issued to the appellant on 22nd August, 1995 by the
District Industries Centre. This was made conditional on the SSI unit not
collecting Sales Tax from its consumers during the period of exemption. If
E it did, it would be liable to remit the sales tax collected to Government.

Under cover of a letter from the Commissioner oflndustries dated 10th
August 1996, a final eligibility certificate was granted to the appellant
certifying the eligibility of the appellant for sales tax exemption. It may be
F mentioned here that the final eligibility certificate was issued with the
sanction accorded by the State Level Committee/District Level Committee.
A copy of the covering letter was forwarded to the Commissioner of
Commercial Taxes, the concerned Commercial Tax Officer and the Deputy
Commissioner Commercial Taxes, Hyderabad.

G The Commissioner of Commercial Taxes in his turn wrote to the
Deputy Commissioner Commercial Taxes Hyderabad, the respondent No. 4
before us, (referred to in brief as DCCT) requesting him to permit Sales Tax
exemption by the appellant in accor~ance with the 1993 G.O. saying that
the eligibility certificate would be operative from 6th June, 1994 for a period
H of five years for an amount of Rs. 35 lakhs. The appellant was thereafter
MIS. VADILAL CHEMICALS LTD. v. STATE [RUMA PAL, J.] 7

granted exemption from payment of sales tax on the products sold from its A
unit upto a limit of Rs. 35 lakhs for five years from 1994 to 1999.

Between the period from 30th September, 2002 to 3rd October, 2002
about four years after the period of exemption expired, 9 pre-revision show
cause notices under Section 9(2) of the Central Sales Tax Act., 1956 read
with Section 20(2) of the Andhra Pradesh General Sales Tax Act, 1957 were B
issued by the DCCT to the appellant. It was said in the notices that upon
verification it was noticed that the Assessing Authority had allowed irregular
sales tax exemption on the first sales of anhydrous liquefied ammonia
amounting to Rs. 33,98,287.00 and adjusted the tax against the tax exemption
granted under the Tax Holiday Incentive Scheme. The DCCT noticed that c
the commodity that was purchased and sold were one and the same and that
there was no new commodity that had emerged and that the activity of
manufacture as it was understood in common parlance had not taken place.
According to the DCCT, "manufacture" envisaged a commercially distinct
and different commodity or a finished product with a separate identity from
its raw material. It was said that:-
D

"The activity ofbottlit'\g/packing of cases into a unit containers from
bulk quantities was not recognized as manufacture even under
• Central Excise Act. It was also ascertained from the concerned
Central Excise Authorities. that the said units were not registered E
under Central Excise Act and not paying Central Excise Duty on
the gases cleared i~ cylinders to the consumers.

In view of the foregoing conclusions, the granting of deferment/
exemption of sales tax to the said units is incorrect and the same
is to be withdrawn." F

The nine show cause notices are materially identical except that each
related to different assessment years during the period of the sales tax
holiday.
G
The appellant replied to the show cause notices in which the jurisdiction
of the DCCT to issue the notices was questioned. It was clarified that the
appellant was liable to duty under the Central Excise Tariff Act 1985 and
that the appellant had been paying 16% Excise Duty on both Anhydrous
Ammonia and Liquor Ammonia manufactured by it in accordance with the
H
'
8 SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A procedure prescribed under that Act. The details of the processes undertaken
in producing the products were also given. It was also drawn to the attention
of the DCCT that the authority to determine the eligibility under the G.O.
Ms. was not the Commercial Taxes Department, but the Departi:nent of
Industries & Commerce.

B Subsequently, the appellant filed a writ petition in the Andhra Pradesh
High Court for a declaration that the appellant was entitled to the benefits
notified by the 1993 G.O. and that the pre-revision show cause,notices issued
by the DCCT forth·e years 1995-1996 up to the 1999-2000, were illegal, void
. and unenforceable.
c
During the pendency of the writ proceedings on 21st January, 2003 the
DCCT passed an order confirming the demand proposed to be raised in the
show cause notices. The DCCT held that process of refilling anhydrous
ammonia into cylinders did not amount to a manufacturing activity. He held
that the State Government had issued a Memo dated 8.2.2000 declaring that
D
LPG bottling units were not eligible for any Sales Tax incentive as no
manufacturing activity was involved. Accordingly the DCCT issued demand
notices for recovery of sales tax for the period between 1995-96 to 1999-
2000. .

E The High Court dismissed the writ petition on the basis of an earlier
Division Bench pronouncement in SHV Energy South East Limited and Anr.
v. State Investment Promotion Board, Hyderabad and Anr. 1 Being aggrieved
by the dismissal of the writ petition the appellant filed a special leave petition
challengi!Jg the decision of the High Court before this Court under Article
F 136.

Mr. Dushyant Dave, learned senior counsel appearing on behalf of the
appellant submitted that the decision relied upon by the High Court was
distinguishable. Apart from reiterating the appellant's stand as taken in the
reply to the impugned show cause notices it was also submitted that in this
G particular case the appellant had been granted the benefit under the 1993
G.O.' after an exhaustive consideration of the appellants' case. It was stated
that the appellant had made a full disclosure of the process of manufacture
undertaken by the appellant. It was also submitted that the word "manufacture"

H I. (2003] 2 ALD 665 (D.B.)
•
M/S. VADILAL CHEMICALS LTD. v. STATE [RUMA PAL, J.] 9

as used in the 1993 G.O. must be understood in the context of the incentive A
scheme and the objects sought to be fulfilled thereby. The emphasis was on
Industrial development and not on the manufacture. It was submitted that the
words used in the 1993 G.0. must be given a liberal construction since it
is part of a packet of incentives. As far as sales tax law was concerned, the
State Act neither defined manufacture nor was it concerned with whether
goods sold were manufactured or not. According to the learned counsel there
B
was intrinsic evidence in the 1993 G.O. to show that the word "manufacture"
was used in a wide sense and that this was apparent from Annexure I to the
1993 G.O. which contained a list of ineligible industries. These included
widely disparate industries such as powder of chilly, turmeric, masala spices,
kari, sambhar etc.; manure mixing industries and hotels except (a) Motels c
(b) hotels set up in State Government approved tourist centers of Districts.
Finally and in the alternative it was contended that if the issue was decided
against the appellant, having regard to the circumstances of the case, the
respondent State should not be permitted to recover the amount as the
appellant had not collected any sales tax from its consumers, not only
D
. because of the prohibition under the State Sales Tax Act, but also because
of the conditions under which the eligibility certificates both temporary and
final had been issued.

Mr. Rakesh Dwivedi, learned senior counsel appearing on behalf of the
respondents has said that manufacture for the purpose of the sales tax does E
not include repackaging, rebottling etc. This has been so held in Deputy
Commissioner of Sales Tax (Law) Board of Revenue {Taxes) v. Mis. PIO
Food Packers, [1980] Suppl. SCC 174. Therefore, it was contended, if the
commodity remains the same then irrespective of the process, it would not
amount to manufacture. This was· a patent error which was correctible under F
Section 20 of the State Sales Tax Act. Countering the appellants' submission
for a liberal construction, it is argued that since an exemption was sought
to be claimed, the language would have to be strictly construed. The list of
ineligible industries in Annexure I to the 1993 G.0. did not, according to
the respondents, give rise to any presumption that the process carried on by
the industries excluded, indicated what was manufacture for the1Jurpose of G
the 1993 G.O. The list merely excluded certain industries altogether to avoid
controversy. The learned counsel conceded that as far as the production of
liquor ammonia was concerned; it could reasonably be said that it had
undergone a process of manufacture but as far as the bottling of the
anhydrous ammonia was concerned, the process could not amount to H
IO SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A manufacture.

In our opinion, the appeal must be allowed. At the outset we may note
that the earlier decision of the Division Bench relied upon by the High Court
is clearly distinguishable. It dealt with a different Government order and the
Court based its decision to a large extent on the fact that the eligibility
B certificate which had been granted to the assessee unit in that case was not
only temporary but had also been ·cancelled. In the present case, the grant
of the eligibility certificate was not the outcome of an unconsidered decision
based on extraneous considerations. The matter was considered in depth and
sanctioned by the District Level Committee of which, as we have already
c noted, the DCCT was a part. The appellant had made a full disclosure of the
process .undertaken in respect of which sales tax exemption was granted. No
malafides has been alleged against the appellant nor is it the case of the
respondents that the appellant had taken any unfair advantage of the 1993
G.O.

D Doubtless the 1993 G.0. which was issued by the Industries &
Commerce Department had granted the sales tax holiday on products
manufactured in industrial units set up by the State Government. But the
interpretation of the word 'manufacture' as used in the 1993 G.O. by the
DCCT was wholly incorrect. For one, the DCCT appears to have imported
E the definition of 'manufacture' from the law relating to excise. That was
uncalled for having regard to the fact that the word had been used in a
different context altogether. (See Ashirwad /spat Udyog & Ors. v. State Level
Committee & Ors.) Reliance by the respondents on Mis.PIO Food Packers
(supra) is misplaced. In that case, sales tax was sought to be levied under
the Kerala General Sales Tax Act, 1974 on the ground that the pineapples
F
purchased by. the assessee had been consumed in the manufacture of canned
pineapple, pineapple jam and pineapple squash within the meaning of the
phrase 'consumes such goods in the manufacture of the goods' used in
Section 5A(l)(b) of the Act. It was in the context of that phrase that this Court
said:-
G
"Commonly manufacture is the end result of one more processes
through which the original commodity is made to pass. The nature
and extent of processing may vary from one case to another, and
indeed there may be several stages of processing and perhaps a
H different kind of processing at each stage. With each process
M/S. VADILAL CHEMICALS LID. v. STATE [RUMA PAL, J.] 11

suffered, the original commodity experiences a change. But it is A
only when the change, or a series of changes, take the commodity
to the point where commercially it can no longer be regarded as the
original commodity but instead is recognized as a new and distinct
article that a manufacture can be said to take place. Where there is
no essential difference in identity between the original commodity B
and the processed article it is not possible to say that one commodity
has been consumed in the manufacture of anothe~. Although it has
undergone a degree of processing, it must be regarded as still
retaining its original identity".

In the result it was held: c
"that when pineapple fruit is processed into pineapple slices for the
purpose of being sold in sealed cans there is no consumption of the
original pineapple fruit for the purpose of manufacture. The case
does not fall within Section 5-A(l)(a) of the Kerala General Sales D
Tax Act".

In this case the State Sales Tax Act contains no provision relating to
'manufacture'. The concept only finds place in the 1993 G.O. issued by the
Department of Commerce and Industries. It appears from the context of the
other provisions of the 1993 G.0. that the word 'manufacture' had been used E
to exclude dealers who merely purchased the goods and resold the same on
retail price. What the State Government wanted was investment and industrial
activity. It is in this background that the 1993 G.O. must be interpreted. (See:
Commissioner of Sales Tax. v. Industrial Coal Enterprises, [I 992] 2 SCC
607). The Departmeqt of Commerce and Industries had by its letters dated F
3rd June 1995 and 20th August 1996 clarified the issue. The exemption was
granted in terms of the 1993 G.O. the thrust of which was to increase the
industrial development in the State. The Commissioner, Commercial Tax had
also in no uncertain terms aceepted the interpretation put by the Industries
Department on the 1993 G .0. and written to the DCCT to permit sales tax G
exemption to the appellant in accordance with the 1993 G.O. for a period
of five years upto a limit of Rs. 35 lakhs.

Besides the conclusion of the DCCT was based on an incorrect factual
premise that the appellant had not paid excise duty on the b~ttled ammonia.
12 SUPREME COURT REPORTS [2005) SUPP. 2 S.C.R.

A The DCCT ignored the appellant's clear statement in its reply to the show· ._
cause notices that the bottled ammonia had been subjected to excise duty and
that it had paid the levy as prescribed under the Central Excise Tariff Act,
1985.

Furthermore, under the incentfve scheme in question, there was only
B one method of verifying the eligibility for the various incen.tives granted
including sales tax exemption. The procedure was for the matter to be
scrutinized and recommended by the State Level Committee and District
Level Committee and the certification by the Department of Industries &
Commerce by issuing an Eligibility Certificate. There was no other method
c prescribed under the scheme for determining an industrial unit's eligibility.
for the benefits granted. The Department of Industries & Commerce having
exercised its mind, and having granted the final eligibility certificate (which
was valid at all material times), the Commercial Taxes Department could not
go beyond the same. More so when the Commissioner, Sales Tax had
accepted the Eligibility Certificate issued to the appellant and had separately
·D
notified the appellants eligibility for exemption under the 1993 G.O. In these
circumstances the DCCT certainly could not assume that the exemption was
wrongly granted nor did he have the jurisdiction under Section 20 of the State
Act to go behind the eligibility certificate and embark upon a fresh enquiry
with regard to the appellant's eligibility for the grant of the benefits. The
E counter affidavit filed by the respondents-sales tax authorities is telling. It
is said that the Sales Tax Department had decided to cancel the eligibility
certificates for sales tax incentives. As we have said the eligibility certificates
were issued by the Department of Industries and Commerce and could not
be cancelled by the Sales Tax Authorities. (See in this connection: Apollo
F Tyres v .. CIT Kochi, [2002) 9 SCC I).

There is another reason why the action of the DCCT cannot be upheld.
The primary facts relating to the processes undertaken by the appellant at
its unit were known to the Department of Industries and Commerce and the
DCCT. The only question was what was the proper conclusion to be drawn
G from these. The Department of Industries and Commerce which was
responsible for the issuance of the 1993 G.O. accepted the appellant as an
eligible industry for the benefits. Apart from the fact that it can be assumed
that the Department of Industries was in the best position to construe its own
order, we can also assume that in framing the scheme and granting eligibility .
H
M/S. VADILAL CHEMICALS LTD. v. STATE (RUMA PAL, J.] 13

to the appellant all the departments of the State Government involved in the A
process had been duly consulted. The State, which is represented by the
Departments, can only speak with one voice. Having regard to the language
of the 1993 G.O. it was the view expressed by the Department of Industries
which must be taken to be that voice.

It is true that on 17th March 2000, the Commissioner of Industries B
issued a circular cancelling Eligibility Certificates issued to Industrial Gases
bottling units, Mineral Water and Sand Benefication units. But the
Commissioner of Industries had also directed the cancellation of the
Temporary/Final Eligibility Certificates issued to such industries with effect
from 30th March 2000 and to inform the units to pay sales tax with effect C
from 3 lst March 2000 to the Commercial Taxes Department. The cancellation
was, therefore, given prospective effect. If the DCCT wanted to rely on .the
circular, it had to give effect to it completely, and indisputably by 31st
March, 2000 the period of sales tax exemption was over for the appellant.

Since we are with the appellant on the merits, it is unnecessary to D
consider the alternative argument relating to the recovery of the sales tax
from the appellant.

The appeal is for the reasons stated allowed and the decision of the High
Court is set aside. The show cause notices and the impugned order of the E
DCCT is quashed. There will be no order as to costs.

B.S. Appeal allowed .

•