STATE OF BIHAR AND ORS.versusM/S SUPRABHAT STEEL LTD. AND ORS.

                           STATE OF BIHAR AND ORS.                                     A
                                           v.
                   MIS SUPRABHAT STEEL LTD. AND ORS.

                               NOVEMBER 17, 1998

                   [S.P. BHARUCHA, G.B. PATTANAIK AND                                  B
                           S. RAJENDRA BABU, JJ.]


          Sales Tax :

           Bihar Finance Act, 1981 : Section 7-Jndustrial Policy of 1993- C
     Clause 10.4(1)-Sales Tax exemption on purchase of raw materials-
     Notification dated 4.4.1994-Denial of sales tax exemption to old units
     started prior to 1.4.1993-High Court quashed the said notification to the
     extent it denied the exemption to old industrial units-On appeal, held,
     under sub-clause (b) of clause I 0.4(i) of the Industrial Policy, even old units
     started production prior to I .4. I 9!)3 whose investment does not exceed Rs. D
     I 5 crores are entitled to sales tax exemption-Thus High Court fully justified
     in striking down that part of notification which is repugnant to clause
     J0.4(i)(b) of the Industrial Policy.

           The appellant-State with the object to promote industrial growth in the
     State, introduced Industrial Policy of 1993. Clause I0.4(i)(b) of the policy      E
     deals with the sales tax exemption on purchase of raw materials. The State
     Government after introducing the industrial policy issued the notification
     dated 4th April 1994 in exercise of the powers under section 7 of the Bihar
     Finance Act, 1981. The said notification denied the facility of sales tax
     exemption to such old industries which had started production prior to 1.4.93     p
     but whose investment on plant and machinery did not exceed fifteen crores
     on 1.4.1993. The respondent-industrial units which had come into production
     prior to 1.4.93, approached the High Court for quashing the said notification
     to the extent it makes the old industrial units like respondents ineligible for
,,   the facility of sales tax exemption and for a direction to the State to extend
     the facility to them in terms of clause I0.4(i)(b). The said petition having      G
     been allowed the appellant-State has preferred the present appeal.

          On behalf of the appellant-State it was contended that clause 10.4(i)(b)
     must be read subject to clause l(a) and industrial policy of 1993 which in
     no uncertain terms declares that the industrial policy will be applicable to
                                          699                                          If
    700                        SUPREME COURT REPORTS [1998] SUPP. 2 S.C.R.

A   those industrial units which had come into production from 1.4.93 to 31.3.98
    and thus High Court committed an error in holding that th~ respondents'
    old industrial units are entitled to the facility of sales tax exemption.

          Dismissing the appeals, the Court

B         HELD : I. The High Court was fully justified in striking down that part
    of the Notification dated 4th April 1994 which was repugnant to sub-clause
    (b) of clause 10.4(i) of the industrial policy and committed no error in
    granting the benefit of the clause 10.4(i) of the industrial policy to the
    respondents' industrial units. [705-B-C)

C         2. In exercise of its powers under section 7 of the Bihar Finance Act,
    1981, the State Government is not permitted to deny any benefit which is
    otherwise available to an industrial unit under the Industrial Incentive Policy.
    The Industrial Incenth e Policy is issued by State Government after it is
    approved by the Cabinet. The issuance of notification under section 7 of the
    Act is by the State Government in the Finance Department to carry out the
D   objectives and policy decisions taken in the industrial policy. Thus any
    notification issued by the Government order in exercise of power under
    section 7 of the Act, if found to be repugnant to the industrial policy, then       ..
    the said notification must be held to be bad to that extent. In the instant case,
    the notification dated 4th April 1994 has been examined by the High Ctmrt
E   and has been rightly found to be contrary to clause 10.4(i)(b) of the Industrial
    Policy. (705-D to H; 706-A]

          3. Under sub-clause (a) of clause 10.4 of the Industrial Policy, the
    Industrial units which had come into production between 1.4.93 to 31.3.98
                                                                                        -
    whose investment on plants and machinery does not exceed Rs. 15 crores
F   were entitled to the facility of exemption on the purchase of raw material for
    a period of seven years from the date of production. However under sub-
    clause (b ), even the old industrial units whose investment on plant and
    machinery does not exceed Rs. 15 crores on 1.4.93 would be entitled to the
    said facility of sales tax exemption for a period of seven years from 1.4.93.
G   Thus it is clear that generally the incentive under the 1993 policy would be
    available to the industrial units coming into production between 1.4.93 to
    31.3.98, but so far as sales tax exemption on purchase of raw material is
    concerned, even the old units which have started production prior to 1.4.93
    but whose investment on plant and machinery does not exceed Rs. 15 crores
    on l.4.93 would also be entitled to the facility of sales tax exemption.
H                                                           [704-E-F; 705-A-B-C]
            STATEv. SUPRABHAT STEEL LTD. [G.B. PATTANAIK,J.)              701

        CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 28-30 of               A
1996.

     From the Judgment and Order dated 19.2.96 of the Patna High Court in
C.W.J.C. No. 671 of 1996.

        Rakesh Dwivedi and Mr. B.B. Singh for the Appellants.                   B
      Pawan Kumar, A.K. Sinha, Gopal Prased, M.S. Mittal, K. Pandeya, B.V.
Desai, D.K. Garg, D.P. Mukherjee, Rudreshwar Singh, R.P. Wadhwani and S.B.
Upadhyay for the Respondents.

        The Judgment of the Court was delivered by                              c
     G.B. PATTANAIK, J. Leave granted in the Special Leave Petitions
which have been tagged on tci the Civil Appeals.

       In these appeals, the Judgment of the Division Bench of Patna High
Court in Civil Writ Jurisdiction Case Nos. 7063, 7068 and 7467 of 1994 and the D
other Judgments following the same are under challenge. The short question
for consideration is whether the Industrial Units which have started production
prior to 1.4.93 and whose investment on plant and machinery do not exceed
Rs. 15 Crores on 1.4.93 would be entitled to the facilities of sales tax exemption
on the purchase of raw material for a period of seven years from 1.4.93 in E
accordance with Clause 10.4(i){b) of the Industrial Incentive Policy, 1993
(hereinafter referred to as 'the Industrial Policy') and whether the notification
issued by the Government of Bihar dated 2nd of April, 1994 in exercise of
power under Section 7 of the Bihar Finance Act to the extent it indicates "who
has not availed of any facility or benefit under any Industrial Promotion
Policy" is invalid as being contrary to the Policy Resolution of 1993. The High F
Court by the impugned Judgment came to the conclusion that the old industrial
units whose investment on plant and machinery did not exceed Rs. 15 Crores
on 1.4.93 would be entitled to the sales tax exemption on the purchase of raw
material for a period of seven years from 1.4.93 as provided under Clause 10.4
(i)(b) of the Industry Policy of 1993. Examining the notification dated 2nd of G
April, 1994, issued by the Government of Bihar in exercise of power conferred
by Clause (b) of sub-section (3) of Section 7 of the Bihar Finance Act, 1981,
the High Court further came to the conclusion that the notification so far as
it imposes a condition that the facility of sales tax exemption on purchase of
raw material will be available only to those industrial units who have not
availed of any facility/benefit on the earlier incentive policy is bad and struck H
    702                         SUPREME COURT REPORTS [1998] SUPP. 2 S.C.R.
A down that part of the notification.
           It is not necessary to state the facts in detail. Suffice it to say that the
     State of Bihar with the object of accelerating the industrial progress in the
     State have been declaring the industrial policies from time to time and prior
    to 1993 Policy, had announced the Policy on 1.9.86. Being of the opinion that
B   the incentives given under 1986 Policy have not achieved the desired industrial
    progress in all the Districts of the State and to achieve balanced industrial
    growth in a planned manner, the industrial incentives require new dimensions,
    the State Government introduced the new Industrial Policy of 1993. Clause
     10.4(i)(b) of the Policy deals with the facility of sales tax exemption on the
C   purchase of raw material with which provision we are concerned in the
    present appeals. There is no dispute that the respondents in each of these
                                                                                          I
    appeals are old industrial units which have come into production prior to
    1.4.93 but whose investment on plant and machinery did not exceed Rs. 15
    crores on 1.4.93. The State Government after introducing the new Industrial
    Policy of 1993, issued the exemption notification on 4th of April, 1994 in
D   exercise of the power under Section 7 of the Bihar Finance Act under which
    the old industrial units like the respondents who had started production prior
    to 1.4.93 but whose investment on plant and machinery did not exceed Rs.
    15 crores on 1.4.93 were denied the facility of sales tax exemption on the
    purchase of raw materials as those units had availed of some facilities under
E   the prior Policy of 1986. Being aggrieved by the said notification, the
    respondents approached the High Court of Patna for quashing the said
    notification dated 4th of April, 1994 to the extent it makes the old industrial
    units of the respondents ineligible for the facility of sales tax exemption on
    purchase of raw materials and for a direction to the State of Bihar to extend
    the facility to such old units of sales tax exemption on raw materials in terms           ....
F   of Clause 10.4(i)(b) of the Policy Resolution of 1993. Those writ petitions
    having been allowed, as stated earlier, the State has preferred these appeals.

        Mr. Rakesh Dwivedi, learned Senior Counsel appearing for the appellant-
  State contends that the Policy Resolution of 1993 having been made applicable
G to those industrial units which came into production from 1.4.93 to 31.3.98 as
  provided in Clause !(a) and to those entrepreneurs who have invested capital
  for the establishment of industry on the basis of previously announced
  incentives before 1.4.93 but could not begin production till 31.3.93 subject to
  exercising their option within 30 days from the date of the issue of the 1993
  Policy Resolution, indicating whether they would avail of the benefits under
H the previous incentive policy or the benefit of the new industrial policy, the
          STATE v. SUPRAB HAT STEEL LTD. [G.B. PATTANAIK, J.]             703
respondents being the old industrial units who have started producing prior A
to l.4.93 would not be entitled to the benefit of the exemption from sales tax
on the purchase of raw material, even if their investment on plant and machinery
did not exceed Rs. 15 crores on 1.4. 93 as indicated in Clause 10.4(i)(b) of the
Policy. According to Mr. Dwivedi, said Clause 10.4(i)(b) must be read subject
to Clause 1(a) which in no uncertain terms declares that the Industrial Policy
of 1993 will be applicable to those industrial units which would come into B
production from 1.4.93 to 31.3.98. In this view of the matter, Mr. Dwivedi
contends that the High Court was in error to hold that the respondents' old
industrial units are entitled to the facility of sales tax exemption on the
purchase of raw material even if their production haye started prior to 1.4.93
since undisputedly their investment on plant and machinery did not exceed C
Rs. 15 crores on 1.4.93 in terms of Clause 10.4(iXb) of the Policy of 1993. Mr.
Dwivedi, learned Senior Counsel further argued that even if it is construed
that the old industrial units like the respondents are entitled to the facility of
sales tax exemption on the purchase of raw materials in terms of Clause
 I0.4(iXb) of the Policy of 1993 but no such exemption can be claimed until
and unless the State Government issues notification of exemption in exercise D
of power under Section 7 of the Bihar Finance Act. The Government having
issued such a notification on 4th of April, 1994 and the said notification
having made it clear that the respondents will not be entitled to the benefit
of Clause 10.4(iXb) of the Policy, as such industrial units have already availed
of the facilities and incentives under the old Policy of 1986, the High Court E
committed error in striking down the said notification of the State Government
issued on 4th of April, 1994. According to Mr. Dwivedi the power of the State
Government for issuing notification of exemption under Section 7 of the Bihar
Finance Act having authorised the State Government to issue such notification
subject to such conditions and restrictions as it may impose and the State
Government under the impugned notification dated 4th of April, 1994 having F
imposed such conditions, the notification was within the powers conferred on
the State Government under sub-section (3) of Section 7 of the Bihar Finance
Act and the High Court, therefore, was not justified in striking down the same
to the extent already indicated.
                                                                                G
     We have carefully considered both the contentions raised by the learned
counsel for the appellant, but we do not find force in any one of them. It is
no doubt true that ~lause (a) of the Policy clearly indicates that the policy
would be applicable to those industrial units which would come into production
from 1.4.93 to 31.3.98. But in enumerating the benefits which would be available

                  .
under the Policy, the policy makers hav:e indicated different heads of the H
    704                         SUPREME COURT REPORTS [1998] SUPP. 2 S.C.R.

A benefit dealing with subsidy, financial assistance, exemption in sales tax/
    defennent facility so on and so forth. Clause ( 10) deals with facility of sales
    tax defennent. Clause I 0.4 deals with the heading 'Sales tax exemption on the
    purchase of raw material'. It would be appropriate to extract Clause 10.4 in
    extenso since the interpretation of this Clause is involved in these appeals.

B         "10.4. Sales Tax exemption on the purchase of raw material:

            (i)    This facility will be admissible to the industrial units mentioned
                   in Annexure-V in the following manner:

            (a)    Industrial Units coming into production between 1.4.93 to 31.3.98
c                  whose investment on plant & machinery does not exceed Rs.
                   15 .00 Crores shall be entitled for this facility for a period of
                   seven years from the date of production.                              (




            (b)    Such old industrial units whose investment on plant & machinery
                   do not exceed Rs. 15.00 Crores on 1.4.93 shall be entitled for this
D                  facility for a period of seven years from 1.4.93.

            (ii)   All other industrial units shall continue to enjoy the existing
                   facility of purchase of raw material on concessional rate of tax
                   as announced and made applicable by the Sales Tax Department
                   as before."
E
          A bare look at the aforesaid Clause makes it crystal clear that under
    sub-clause (a), while the industrial units coming into production between
    1.4.93 to 31.3.98 whose investment on plant & machinery does not exceed Rs.
    15 crores would be entitled to the facility of exemption on the purchase of
    raw material for a period of seven years from the date of production, under
F   sub-clause (b) the old industrial units whose investment on plant & machinery
    does not exceed Rs. 15 crores on 1.4.93 would be entitled to the said facility
    of sales tax exemption on the purchase of raw material for a period of seven
    years from 1.4.93. In view of the clear and unambiguous language of sub-
    clause (b) of Clause 10.4, it is difficult to accept the contention of Mr.
G   Dwivedi, learned Senior Counsel, appearing for the State that even said sub-
    clause (b) would be subject to the tenns indicated in the beginning of the
    Resolution that the Policy would be applicable only to those industrial units
    which would come into production from 1.4.93 to 31.3.98. While considering
    the benefits and incentives given to the several industrial units under the
    Policy Resolution of 1993, it would not be appropriate to exclude those
H   industrial units who would be otherwise entitled to the sales tax exemption
           STATEv. SUPRABHATSTEELLTD. [G.B.PATTANAIK,J.)                      705
on the purchase of raw material under Clause 10.4(i)(b) of the Policy. Reading        A
the Policy as a whole, the only conclusion which can be arrived at is while
generally the incentives under the 1993 Policy would be available to the
industrial units coming into production between 1.4. 93 and 31.3. 98, but so far
as sales tax exemption on the purchase of raw material is concerned which
is provided under Clause 10.4, even though the old industrial units have              B
started production prior to 1.4.93, but whose investment on plant and machinery
does not exceed Rs. 15 crores on 1.4.93 would be entitled to the facility for
a period of seven years from 1.4.93. We are entirely in agreement with the
conclusion arrived at by the High Court in this regard and we do not find any
error committed by the High Court in granting the benefits of the said Clause
10.4(i)(b) of the Policy t.o the respondents' industrial units. We accordingly        C
have no hesitation to affirm the conclusion of the High Court on this score
and reject the submission of Mr. Dwivedi, the learned Senior Counsel, appearing
for the appellant.

        Coming to the second question, namely the issuance of notification by
the State Government in exercise of power under Section 7 of the Bihar                D
Finance Act, it is true that issuance of such notifications entitles the industrial
units to avail of the incentives and benefits declared by the State Government
in its own industrial incentive policy. But in exercise of such power it would
not be permissible for the State Government to deny any benefit which is
otherwise available to an industrial unit under the Incentive Policy itself. The      E
Industrial Incentive Policy is issued by the State Government after such
Policy is approved by the Cabinet itself. The issuance of the notification
under Section 7 of the Bihar Finance Act is by the State Government in the
Finance Department which notification is issued to carry out the objectives
and the policy decisions taken in the Industrial Policy itself. In this view of
the matter, any notification issued by the Government Order in exercise of            F
power under Section 7 of the Bihar Finance Act, if is found to be repugnant
to the Industrial Policy declared in a Government Resolution, then the said
notification must be held to be bad to that extent. In the case in hand, the
notification issued by the State Government on 4th of April, 1994 has been
examined by the High Court and has been found, rightly, to be contrary to             G
the Industrial Incentive Policy; more particularly the Policy engrafted in Clause
                                                            • irti striking down
 I0.4(i)(b). Consequently, the High Court was fully justified
that part of the notification which is repugnant to sub-clause (b) of Clause
 I 0.4(i) and we do not find any error committed by the High Court in striking
down the said notification. We are not persuaded to accept the contention
of Mr. Dwivedi that it would be open for the Government to issue a notification       H
    706                       SUPREME COURT REPORTS [1998) SUPP. 2 S.C.R.

A   in exercise of power under Section 7 of the Bihar Finance Act, which may
    over-ride the incentive policy itself. In our considered opinion the expression
    "such conditions and restrictions as it may impose" in sub-section (3) of
    Section 7 of the Bihar Finance Act will not authorise the State Government
    to negate the incentives and benefits which any industrial unit would be
    otherwise entitled to under the general Policy Resolution itself. In this view
B   of the matter, we see no illegality with the impugned judgment of the High
    Court in striking down a part of the notification dated 4th of April, 1994.

          We, accordingly do not find aay force in these appeals, which are,
    therefore, dismissed but in the circumstances there will be no order as to
C costs.
    S.V.K.1.                                                  Appeals dismissed.




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